Apple has had a base in the southern city of Cork since 1980 and employs almost 6,000 people in Ireland, through which it routes its global sales totalling billions. Ireland’s tax favors for the computer giant, Apple, may not have broken its own country’s laws, but they do violate European competition regulations.
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“Member states can not give unfair tax benefits to selected companies, no matter if European or foreign, large or small”, EU Competition Commissioner Margrethe Vestager said.
Over 30 years, Apple had followed guidance from Irish tax authorities on how to comply with the law, “and we pay all the taxes we owe”.
In 2011, Apple Sales International made 16 billion euros in profits.
But the European Commission found that Ireland allowed Apple – which has two companies incorporated in Ireland, Apple Sales International and Apple Operations Europe – to pay far less in taxes than other companies did.
“Companies need to understand now more than ever that the world is becoming more complicated and reaching tax rulings with specific countries won’t stay in force forever”.
“It is effectively proposing to replace Irish tax laws with a view of what the Commission thinks the law should have been”, said Cook about the ruling in an open letter.
Even the European Commission voiced indirect criticism of the US tax code, suggesting that Washington could require Apple’s Irish operations to pay larger amounts of money to the USA parent to finance research and development, which would increase Apple’s USA tax bill.
Ireland has for years offered low corporate tax rates to multinationals, a common strategy among Europe’s smaller nations, including Luxembourg and Holland. It should have done so when it made the profits. “Apple has been in Ireland since the 1980s and employs thousands of people in Cork”.
The findings come amid growing tensions between Washington and Brussels over a series of European Union anti-trust investigations targeting other giant United States companies such as Google, Amazon, McDonald’s, Starbucks and Fiat Chrysler.
“The Irish government agreed a deal with Apple in 1991 to only tax a certain bracket of its earnings, giving it a dramatically lower tax rate than it would have to pay in the US”.
He declined to comment specifically on the ruling as the Government has signalled its intention to appeal, but said there were “important principles at stake” in the EU’s approach to these types of investigations.
A U.S. TREASURY DEPARTMENT spokesperson said the agency is “disappointed” with the EU’s ruling. An EU investigation into tax agreements between Amazon and Luxembourg is still awaiting a final decision.
“It will have a profound and harmful effect on investment and job creation in Europe”, the company added.
The U.S.is trying to protect its revenue, explained Alan Auerbach, an economics professor at the University of California, Berkeley and former deputy chief of staff on the U.S. Joint Committee on Taxation.
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“We are committed to Ireland and we plan to continue investing there, growing and serving our customers with the same level of passion and commitment”, he said in a two-page statement. “Even after enjoying special tax arrangements for years, they are likely to find themselves facing demands for dramatic changes in their payments”, Perlmutter said.
