Apple has to pay up to 13 billion euros ($14.5 billion) – plus billions more in interest – in back taxes to Ireland after the European Union found Tuesday that the US technology giant contributed nearly no tax across the bloc’s 28 countries for 11 years.
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“Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years”, said Competition Commissioner Margrethe Vestager, whose crackdown on mainly US multinationals has angered Washington which accuses Brussels of protectionism. It said Apple got a tax rate as low as 0.005pc some years, although this is disputed by Apple.
Vestager ordered Ireland to recover the unpaid taxes for the years 2003 to 2014, plus interest, which one analyst said could amount to an additional 6 billion euros.
The European Commission accused Ireland in 2014 of dodging worldwide tax rules by letting Apple shelter profits worth tens of billions of dollars from tax collectors in return for maintaining jobs.
Because the Government believes that Ireland’s reputation among inward investors such as Apple, Google, Microsoft and others is more important than a single €13bn windfall. Apple is based in the state of California, where the tax rate exceeds 40%, but paid an effective rate of 26%. “Ireland does not do deals with taxpayers”. If the US reformed its tax code, the $2 trillion or so stashed overseas in corporate accounts would come flooding back, creating thousands and thousands of jobs. Apple has 5,500 workers in Ireland, making it one of the biggest private-sector employers. Apple follows the law and pays all of the taxes we owe wherever we operate.
Abercrombie & Fitch suffered a 20 per cent drop in share price, while other clothing retailers had smaller declines: Gap fell 4.3 per cent, Urban Outfitters lost 2.5 per cent and Guess was down 4.4 per cent.
In 1980, Apple established its first operations in Europe by opening a factory in Cork, Ireland with 60 employees.
Tax avoider Apple’s £11billion fine must be only the start of the fightback against giant corporations evading their public dues in Britain and Europe. Both Ireland and Apple have said they will appeal.
The tech giant accused the EU Commission of threatening future investment and job creation in Europe, where it now employs 22,000 people.
“Personally, I’d love to see the United States deal with its corporate tax law and see some of that trillion dollars sitting overseas come back to the USA”, he said.
Technology investor Jeff Richards, managing partner at GGV Capital, said he hoped the decision would “shine a light” on the U.S. corporate tax system’s problems.
Facebook paid just $43,000 tax in New Zealand, according to its most recent financial statements filed with the Companies Office.
The U.S. Treasury is likewise angry, accusing the European Union of trying to turn itself into a global tax regulator – imposing taxes on U.S. companies it really has no jurisdiction over, in the name of “competition”.
What’s more, the US government agency warned that the ruling “could threaten to undermine foreign investment, the business climate in Europe and the important spirit of economic partnership between the USA and the European Union”.
A U.S. Treasury Department White Paper last week said “it continues to consider potential responses should the Commission continue its present course”.
Irish Finance Minister Michael Noonan said he profoundly disagreed with the decision and in order to preserve Ireland’s attractiveness for investment he would appeal.
That will likely take two years or more and Apple may make legal challenges and is also likely to be able to fight any demands from Ireland’s Revenue Commissioners in Irish courts, tax lawyers say.
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Apple Inc licences the rights to technology designed in the United States to Irish subsidiaries. Any money handed over by the company will be placed in a hands-off escrow account pending what could be years of litigation before the European Court of Justice in Luxembourg, he said.
