“This is not a penalty, this is unpaid taxes to be paid”, Vestager added.
Advertisement
Following an in-depth state aid investigation launched in June 2014, the European Commission concluded that two tax rulings issued by Ireland to Apple have substantially and artificially lowered the tax paid by Apple in Ireland since 1991.
That internal company practice, as well as two favorable Irish tax rulings in 1991 and 2007, “enabled Apple to avoid taxation on nearly all profits generated by the sale of Apple products in the entire EU single market”, according to the European Commission.
EU competition commissioner Margrethe Vestager said Apple’s “selective treatment” in Ireland meant it paid an effective tax rate of just one percent on its European profits in 2003, which then fell to a bare 0.005 percent by 2014.
The U.S. Treasury released a white paper last week on European Union state aid investigations and accused the Commission of disproportionately targeting American companies and using an approach that is “inconsistent with global norms and undermines the worldwide tax system”.
Apple obviously doesn’t want to lose the money while Ireland doesn’t want to lose the jobs and investment.
The company has had a base in Ireland since 1980 and now employs 6,000 people. “A company’s profits should be taxed in the country where the value is created”.
Ms Vestager dismissed threatened court challenges from Apple and the Irish Government, saying she had a “very concrete case”.
Apple CEO Tim Cook, in a Washington Post interview published August 13, said he hoped to “get a fair hearing” on the matter.
In the letter, Cook says Apple expects the EU’s ruling to be reversed after its appeal. In government coffers, that money would easily wipe out Ireland’s 2016 deficit and put the country back in the black for the first time in a decade. The EU has made taxes a core issue since the LuxLeaks scandal in which it was revealed that European Commission President Jean-Claude Juncker’s native Luxembourg gave companies huge tax breaks while he was prime minister. And European authorities have accused the Netherlands of allowing Starbucks to avoid more than $30 million in taxes.
According to the investigation’s findings, Apple funnels its profits from sales in Europe into Ireland-based Apple Sales International.
“The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the worldwide tax system in the process”.
“Above all, this is yet another reason why we need to fix our tax code”, House Speaker Paul Ryan, the highest-ranking elected Republican, said in a statement.
Cody said Apple’s profits “that are not generated by their Irish branches such as profits from technology, design and marketing that are generated outside Ireland can not be charged with Irish tax under Irish tax law”.
In a statement, it also claimed the ruling “will have a profound and harmful effect on investment and job creation in Europe”.
The company was paying tax in Switzerland, according to the statement released by the EC. Supporters say the ruling is a step forward in harmonizing tax laws between European Union countries – rather than have them race to the bottom – and taking action across borders in a way that the European Union was meant to do. “The decision leaves me with no choice but to seek Cabinet approval to appeal the decision before the European courts”.
Advertisement
Vestager argued that Ireland violated European Union rules by essentially giving favorable subsidies to selected companies. Additionally, this case might take years to finalize.
