Apple were effectively paying taxation on nearly all their profits in Europe by routing the payments for their products through Ireland where the tiny tax rate based on givebacks and special deals were allowed.
Advertisement
“The Commission’s investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years”, European Commissioner Margrethe Vestager, who is in charge of competition policy, said in a statement from Brussels.
“The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and up-end the worldwide tax system in the process”, Apple said.
Should the US government decide to change its tax rules so that Apple owes more tax in the USA on its European Union profits, then the sum to be repaid in Ireland could be reduced by a corresponding amount, she said. The Commission’s case is not about how much Apple pays in taxes, it’s about which government collects the money. In 2014 Apple employed around 4,000 workers in Ireland, meaning the past two years has seen a significant increase in the number of Irish workers in the company. The EU, like other global regulators, has targeted firms that sidestep taxes by moving around profits and costs to wherever they are taxed most advantageously – exploiting loopholes or special deals granted by friendly governments.
“I disagree profoundly with the Commission”, Irish Finance Minister Michael Noonan said in a statement. “Our tax system is founded on the strict application of the law, as enacted by the Oireachtas (parliament), without exception”, Noonan said. Vestager suggested that the money may have to be put in an escrow account where it would sit until appeals are exhausted.
Apple CEO Tim Cook, in a WashingtonPost interview published August 13, said he hoped to “get a fair hearing” on the matter.
May 2013: Apple says it had paid an effective tax rate of less than 2 per cent in Ireland over the previous 10 years.
In the letter, Cook says Apple expects the EU’s ruling to be reversed after its appeal. In a worst-case scenario, Apple could have faced a $US19 billion bill, according to JPMorgan Chase & Co. analyst Rod Hall.
Easily, given that the company’s cash hoard exceeds $200 billion. Whereas Ireland taxes only a multinational company’s profits on sales within Ireland a country of barely 4.6 million and representing a tiny fraction of those companies’ global business the United States often seeks to recoup tax on a US -headquartered company’s profits worldwide. “The decision leaves me with no choice but to seek cabinet approval to appeal”.
The real problem emerged when it became clear the activities outside Ireland were not taxed at all.
Both Apple and Ireland have insisted that they believe they were operating within the law.
Apple said in a statement that it had followed the law and paid every cent of the taxes it owed.
The massive sum, 40 times bigger than the previous known demand by the European Commission to a company in such a case, could be reduced, the EU executive said in a statement, if other countries sought more tax themselves from the USA tech giant.
But it can order recovery only of “illegal state aid” – which is what the European Union considers those tax breaks to be – from 2003 to 2014.
Apple sets up a manufacturing centre in Cork.
The commission also continues to investigate Amazon.com Inc. and McDonald’s Corp. over their tax arrangements in Luxembourg.
Last year, the commission ordered the Netherlands and Luxembourg to recoup taxes from the Starbucks coffee chain and a Fiat subsidiary.
“Ireland’s position remains that the full amount of tax was paid in this case and no state aid was provided”, the government in Dublin said in a statement.
Advertisement
That means nations deemed to have granted illegal tax breaks can end up with massive, unwanted tax windfalls if court appeals ultimately fail.
