European Union Demands that Apple Pay Significant Tax Bill to Ireland

Antitrust regulators have ruled that Ireland gave illegal tax benefits to the company

Gavel with Dollar Sign / European Union Demands that Apple Pay Significant Tax Bill to Ireland
Image: Pixabay
August 30, 2016

European Union (EU) antitrust regulators have ordered Apple to pay the Irish government up to $14.5 billion in taxes and interest after finding that the country granted it illegal state aid by providing it with certain tax benefits.

In 2014 the European Commission accused the Irish government of allowing Apple to shelter tens of billions of dollars' worth of profits from tax collectors, thereby dodging international tax regulations, in return for keeping jobs in the country. Both Apple and Ireland dismissed this accusation.

The amount in question is 40 times larger than the previous known demand made by the Commission to a company in a similar case, according to Reuters. The EU executive stated that it could be reduced if other countries sought to charge the company more tax.

Apple and Ireland intend to appeal the ruling.

"I disagree profoundly with the Commission," Irish Finance Minister Michael Noonan stated. "The decision leaves me with no choice but to seek cabinet approval to appeal. This is necessary to defend the integrity of our tax system; to provide tax certainty to business; and to challenge the encroachment of EU state aid rules into the sovereign member state competence of taxation."

Apple is confident that it will win the appeal.

"The European Commission has launched an effort to rewrite Apple's history in Europe, ignore Ireland's tax laws and upend the international tax system in the process," the company stated. "The Commission's case is not about how much Apple pays in taxes, it's about which government collects the money. It will have a profound and harmful effect on investment and job creation in Europe."

Roughly one quarter of Apple's Europe-based staff—a total of 5,500 people—are located in Cork, Ireland. The company is the largest employer in the private sector in that city.

According to the Commission, the tax rates that Apple paid on European profits from sales of the iPhone and other devices and services fell between 0.005 percent in 2014 and one percent in 2003.

"Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years," said Competition Commissioner Margrethe Vestager.

Ireland claims that the tax system used in the Apple case is disputed and no longer applies and that the ruling did not affect either the country's 12.5 percent corporate tax rate or any other multinational company operating in Ireland.

Vestager has angered many in Washington by cracking down mainly on U.S. multinational companies. Amazon and McDonald's are facing probes in Luxembourg due to taxes, while Starbucks has been ordered to pay the Dutch state $33 million.

$14.5 billion would comprise only about six percent of Apple's assets, which in June the company reported to total $231.5 billion. 92.8 percent of this—i.e. $214.9 billion—were held in foreign subsidiaries at that time. The company paid taxes of $2.67 billion in its latest quarter, which company filings estimate leaves the company with $7.8 billion in net income.

In a white paper published last week, the U.S. Treasury Department stated that the Commission's tax investigations were not within the norms of international taxation and would disproportionately impact U.S. companies. The Commission stated that it treats all companies equally.

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