On Tuesday it was announced that following a three-year investigation the European Commission had concluded the Irish tax benefits enjoyed by Apple were illegal.
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The European Commission ruling has angered Apple, which says it never asked for special tax deals from Ireland.
“Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years”, said Competition Commission spokesperson Margrethe Vestager, whose crackdown on mainly U.S. multinationals has angered Washington, which accuses Brussels of protectionism.
Apple and Dublin said the U.S. company’s tax treatment was in line with Irish and European Union law and they would appeal the ruling, which is part of a drive against what the EU says are sweetheart tax deals that usually smaller states in the bloc offer multinational companies to lure jobs and investment. Apple stock declined by less than 1 percent Tuesday.
The commission’s assessment showed that these “head offices” existed only on paper and could not have generated such profits.
European Union states wanting to secure investment by helping companies avoid tax will in future be more careful about leaving a paper trail which could suggest a tax ruling is a sweetheart deal.
No. The Commission’s case against Ireland was helped by its ability to secure access to documents in which Irish officials were unusually frank about the agreement they made with Apple.
Stating that Apple “follows the law and we pay all the taxes we owe”, Cook noted that his company is also “the largest taxpayer in Ireland, the largest taxpayer in the United States, and the largest taxpayer in the world”.
However, the Irish tax authority agreed only 50 million euros of this was taxable in Ireland, the European Commission said.
Without evidence of an “extreme” deviance from accepted norms, the Commission would likely be reluctant to initiate a tax case.
Apple and the Irish government have said that they will appeal the decision.
They directly pay Ireland more than Euro 2 billion annually in tax, a figure dwarfed by their much larger investment in salaries (EUR 6 billion), infrastructure and research (EUR 3 billion) and Irish goods and services (EUR 4 billion). “It is effectively proposing to replace Irish tax laws with a view of what the Commission thinks the law should have been”.
But New Zealand was already working with the OECD to make sure multinationals were paying their fair share of tax and he did not know whether the ruling would add anything new, he said.
Online retailer Amazon.com Inc and hamburger group McDonald’s Corp face probes over taxes in Luxembourg, while coffee chain Starbucks Corp has been ordered to pay up to 30 million euros (US$33 million) to the Dutch state.
He said overturning the cash award would be essential “to defend the integrity of our tax system, provide tax certainty to business, and. send a strong message that Ireland remains an attractive and stable location of choice for long-term substantive investment”. “This claim has no basis in fact or in law”, he said.
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 worldwide sales totalling billions.
The EU believes sweetheart tax deals help divert investment and jobs away from countries where it would normally go.
Steve Jobs opened Apple’s Ireland office in 1980.
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Theyre going after Apple, which means a big name and big dollars, said Brad Badertscher, a corporate tax expert at the University of Notre Dames Mendoza College of Business. Apple chief financial officer Luca Maestri decried the effective tax rate cited by Vestager as “a completely made-up number”.
