According to the European Commission, Apple was paying a 1 percent corporate tax rate instead of Ireland’s 12.5 percent.
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Apple CEO Tim Cook addressed the ruling, which he says the company will appeal, on Tuesday.
Apple has operated a factory in Cork, Ireland since 1980 and employs nearly 6,000 people in Ireland. In recent weeks, the Obama administration warned European officials that their investigations seemed to be unfairly singling out US companies.
The EU decision is already being met with a strong condemnation from Apple and from the United States government, which both say Ireland’s tax scheme is entirely legal.
“We are concerned about a unilateral approach”, Earnest said, adding that it “threatens to undermine progress that we have made collaboratively with the Europeans to make the global taxation system fair” for both taxpayers and companies.
A U.S. Treasury Department White Paper last week said “it continues to consider potential responses should the Commission continue its present course”.
The EU Competition Commission said that Apple paid a 0.005 percent corporate tax rate on its European profits in 2014 thanks to its agreements with Ireland. “Apple now has to repay the benefits”.
But House Republicans hope to move broader legislation next year that would cut the US corporate tax rate from 35 percent to 20 percent and adopt a “territorial” system that would exempt the overseas earnings of USA companies from US taxation.
It has argued it is “simply untrue” Ireland provided favourable treatment to Apple.
Cook added that he is “confident that the Commission’s order will be reversed”.
The harsh tax ruling – 40 times larger than the previous record ordered by the commission – ended a two-year investigation in which Apple and Ireland were found to be in cahoots. “Ireland must now recover the unpaid taxes from Apple for the years 2003 to 2014 of up to €13 billion, plus interest”, the EC said in a press release.
European Union officials say the 13-billion euro assessment could be reduced if other countries sought more tax themselves from the USA tech giant.
U.S. Representative Kevin Brady, Republican chairman of the House Ways and Means Committee, called the decision “a predatory and naked tax grab”.
While Apple disputed her figures, Vestager argued that Ireland violated European Union rules by essentially giving subsidies to selected companies. Only a small fraction of Apple’s profits was allocated to its “Irish branch” so only those profits were taxed by Ireland.
Although the case pertains exclusively to Apple, the tax practices of other Dublin-headquartered multinationals such as Google and Facebook have been heavily criticised internationally in recent years.
Finance Minister Michael Noonan said he disagreed “profoundly” with Brussels while Apple chief Tim Cook warned the ruling threatened jobs and investment in Europe. He is then taking steps to appeal the decision with the support of the Irish Cabinet.
The EU had used three lines of text in the 2009 Lisbon agreement, which provides the constitutional basis for the union, to overrule “a substantial body of national and global tax law”, Wardell-Johnson said.
“I have no doubt this will cause significant reputational damage to the country and that is why the government must appeal this decision”, Irish MEP Hayes told national broadcaster RTE.
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The commission denied that it is targeting USA businesses, and instead said that EU rules ban member states from offering tax breaks that are not available in other European countries. “The Commission itself has shown a clear selective bias, in targeting small Member States and U.S. companies”.
