Nearly all of Apple’s tax bill is due to the fact that Ireland attributed most of the company’s European profits to the “so-called head office” rather than to Apple’s Irish branch office, Vestager said.
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He said the Apple money was big enough to clear Ireland’s gridlocked waiting list for welfare housing and eliminate a growing trend of homelessness.
It meant that one subsidiary, Apple Sales International, paid a tax rate of just 1% in 2003, declining to 0.005% by 2014.
The European Commission yesterday ordered the Irish government to recover €13B ($15B) in taxation from Apple after it was ruled to have offered the company illegal tax breaks.
As well as Apple, Starbucks Corp was ordered to pay more Dutch taxes and Amazon.com Inc and McDonald’s Corp are still being investigated; a series of European Union accusations that Google, part of Alphabet Inc, has abused its market power have also fuelled complaints from U.S. President Barack Obama’s administration that Europe is out to punish American success.
The tax bill was also reduced as Apple’s Irish subsidiaries sent money to the USA that financed “more than half of all research efforts by the Apple group in the U.S.to develop its intellectual property worldwide”, the commission said.
Apple will work out a payment mechanism to the Revenue Commissioners for the €13bn.
Earnest said the United States shares the goal articulated by the European Union of preventing unfair erosion of the tax base. Apple has had a presence in Ireland since 1980, when it opened a factory in Cork.
As a result, the bloc slapped Europe’s biggest ever tax penalty on Apple. The EU, like other global regulators, has targeted firms that sidestep taxes by moving around profits and costs to wherever they are taxed most advantageously – exploiting loopholes or special deals granted by friendly governments. It will have a profound and harmful effect on investment and job creation in Europe. The commission’s actions could threaten to undermine foreign investment, the business climate in Europe, and the important spirit of economic partnership between the USA and the EU.
The EU commission recently ruled that Apple had received illegal tax benefits from Ireland, which was contrary to EU laws.
The EC’s tax crackdown on multinationals has prompted criticism in Washington, which accuses it of targeting U.S. companies.
Cook said that Apple plans to appeal, and said he was confident the Commission’s order will be reversed.
“The IRS has failed to stake a claim for U.S. taxes on those revenues for a decade or more”, Levin said. Apple posted a profit of $7.8 billion in its most recent quarter.
The commission also continues to investigate Amazon.com Inc. and McDonald’s Corp. over their tax arrangements in Luxembourg.
“The scheme of US multinationals parking money offshore indefinitely, taxed at zero, may be coming to an end”, said Steven Rosenthal of the Tax Policy Center research group. “EU reforms will require income to be taxed where generated through, among other things, new restrictions on use of controlled foreign companies”, wrote Bloomberg Intelligence analyst Sarah Jane Mahmud.
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If the Independent Alliance refused to back an appeal and pulled out of government, Fine Gael would no longer have sufficient support in parliament to pass legislation and the government could collapse.
