The EU’s Executive Commission just ordered Apple €13 billion ($14.5 billion) plus interest for back taxes it owes Ireland.
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Apple had been given illegal tax benefits by Ireland, where the company recorded all its profits from sales across Europe.
This morning, European Commissioner for Competition Margrethe Vestager announced that Apple had received illegal Irish tax benefits of up to €13 billion.
“The EC can order recovery of illegal state aid for a 10-year period preceding the EC’s first request for information in 2013”.
Apple Inc (NASDAQ:AAPL) shares are down close to 3% to about $105 in pre-market hours trading Tuesday following a European Commission ruling on Tuesday that said Ireland must recover more than $14 billion in “illegal tax benefits”- plus a significant amount of interest – from the US tech giant. The commissions’s investigation concluded that Apple had effectively paid 1 per cent tax on its European profits in 2003 and about 0.005 per cent in 2014.
Ireland is in big trouble with the European Commission (EC) over tax breaks that it gave Apple to lure the tech giant to set up shop in the country.
“The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the global tax system in the process”, Apple said.
Ms Vestager said that the tax agreement reached between Ireland and Apple meant that the company’s taxable profits “did not correspond to economic reality”. “The Commission’s actions could threaten to undermine foreign investment, the business climate in Europe, and the important spirit of economic partnership between the U.S. and the European Union”, a Treasury statement said.
The ruling, which will be contested by both Apple and the Irish government, may threaten Ireland’s ability to attract investment from global companies eager to limit their tax bill on overseas earnings. “We will appeal and we are confident the decision will be overturned”, the ruling further adds.
It was an arrangement that also suited the Irish government.
These profits were not subject to tax in any country under specific provisions of the Irish tax law, which are no longer in force.
A three year probe found the company was paying less tax than other businesses thanks to a sweetheart tax deal in Ireland from 2003 to 2014.
The EU decision is likely to aggravate trans-Atlantic tensions over the investigations into tax deals brokered between US multinational corporations and individual European countries, said the Journal. Apple has rejected the decision and said it will appeal.
The European Commission previously said tax benefits for selected companies amounted to illegal state aid.
The Commission concluded that Apple had avoided paying nearly all tax on hundreds of millions of euros in profits in Europe over the last decade. “These demonstrate that Revenue collected the full amount of tax due from Apple in accordance with Irish tax law”, Mr Cody said.
In October Brussels ordered USA coffee giant Starbucks and Italian automaker Fiat to each repay up to 30 million euros ($34 million) in back taxes to the Netherlands and Luxembourg respectively.
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Why is the European Union going after Apple for $14 billion in unpaid taxes?
