The European Union ordered Apple on Tuesday to pay $14.5 billion to Ireland in back taxes, plus interest, after finding that the Irish government provided the us company with 11 years of illegal tax benefits. Google in January agreed to pay more than $180 million in back taxes to the British Treasury. But, like an actual explanation-not silly name calling from a Twitter account of a wannabe NY house music DJ with a website that doesn’t exist and a handful of Mixcloud mixes from years ago (To be fair, the mixes are alright-but the most recent one is from mid-2013). But European officials say Ireland’s arrangements with Apple gave the company such a huge financial advantage over its competitors that it constituted illegal state aid.
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Cook also says almost all research and development for Apple takes place in California, with “the vast majority” of profits taxed in the U.S.
“It is important that we send a strong message that Ireland remains an attractive and stable location of choice for long-term substantive investment”, said Irish Finance Minister Michael Noonan.
The EU found Tuesday that the USA technology company received illegal tax benefits over 11 years. As an average citizen, though, I see a couple flaws in this defense from Apple. Apple has had a presence in Ireland since 1980, when it opened a factory in Cork.
The European Commission accused Ireland in 2014 of dodging global tax rules by letting Apple shelter profits worth tens of billions of dollars from tax collectors in return for maintaining jobs.
Cook said in his letter, “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”.
It focuses on two incorporated companies run by Apple and based in Ireland: Apple Sales International and Apple Operations Europe. The initial setup described above shifted Apple’s income from big, relatively high-tax markets such as France (33.3 percent corporate tax rate) and Germany (a 15 percent official rate with a bunch of surcharges and municipal taxes that bring the effective rate somewhere between 30 percent and 33 percent) to low-tax Ireland (12.5 percent).
“Ireland has said they plan to appeal the Commission’s ruling and Apple will do the same”. That defense does not seem to hold water.
They do. The European Commission says it’s not interfering with members’ rights to set their corporate tax rates, but that it should help protect countries from unfair tax competition.
“The Commission’s actions could threaten to undermine foreign investment, the business climate in Europe, and the important spirit of economic partnership between the US and the European Union”, a US Treasury spokesperson said on Tuesday.
It’s hard to imagine MA taxpayers voting to send every GE headquarters employee a $9,000 annual check, of course, or for Irish voters to agree to send everyone at Apple a cool $220,000.
Peter Vale, a Dublin-based corporate tax expert for accountancy firm Grant Thornton, calculates that Tuesday’s judgment if upheld on appeal will cost Apple 19 billion euros ($21 billion) because the order includes interest for unpaid tax going back more than a decade.
Apple reorganized its Irish structure past year. Critics in Congress denounced the move as a predatory money grab that would encroach on U.S. government jurisdiction and ultimately add to the federal deficit.
“It appears the European Commission has issued an extraordinary decision that targets United States business by rewriting already existing tax policies”, the Republican said in a statement. And Ireland, which has long used low taxes to attract foreign businesses, said it will stand with Apple.
“We now find ourselves in the unusual position of being ordered to retroactively pay additional taxes to a government that says we don’t owe them any more than we’ve already paid”, Apple complained in a statement.
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It’s a measure of how topsy-turvy the relationship between national governments and multinational corporations is that it is considered good statecraft to appeal a ruling that gives your country $14.6 billion. But as a tax resident of Ireland, all royalties or fees paid to the first company are deductible expenses under Irish law.
