“Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years”, said Competition Commission Margrethe Vestager, whose crackdown on mainly US multinationals has angered Washington which accuses Brussels of protectionism.
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Under its current arrangement, Apple treats virtually all sales of iPhones and other goods and services in the EU’s 28 nations as revenue generated by its Irish subsidiaries.
For Ireland, a country of barely 4.6 million people, the sum to be recovered would be a huge windfall – equivalent to over 2,800 euros ($3,150) for every man, woman and child. Bill Dodwell, head of tax policy at consultancy Deloitte LLP, said the U.K.’s mix of low tax rates and its tough line on avoidance is “a sensible strategy”. “But the question is whether the mismatch of all of those rules is something these multinationals can arbitrage, and if they are, then we would say on balance that’s not fair even if it’s legal”.
APPLE employs about 5,500 workers in CORK, IRELAND, where it is the largest private sector employer. But Apple’s leaders saw a community rich with talent, and one they believed could accommodate growth if the company was fortunate enough to succeed. It has helped create and sustain more than 1.5 million jobs across Europe – jobs at Apple, jobs for hundreds of thousands of creative app developers who thrive on the App Store, and jobs with manufacturers and other suppliers.
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.
But it was not clear what Washington could do to counter the regulatory order, which ruled that Apple had received illegal state aid under its tax agreement with Ireland and must pay back the taxes plus interest.
Apple and Ireland said they would appeal the decision. But others applauded the crackdown on what they described as a “race to the bottom” by individual nations offering lower tax rates than their neighbors.
“To its credit, the European Union understands that when member nations act as tax havens, as Ireland has, there are casualties far beyond the borders of Ireland”, said Matthew Gardner, executive director of the Institute on Taxation and Economic Policy, a liberal research group in Washington.
U.S. Representative Kevin Brady, Republican chairman of the House Ways and Means Committee, called the decision “a predatory and naked tax grab”.
“The scheme of USA multinationals parking money offshore indefinitely, taxed at zero, may be coming to an end”, said Steven Rosenthal of the Tax Policy Center research group.
Such a measure wouldn’t be fair to United States taxpayers, he said.
Ireland’s low corporate tax rate has been a cornerstone of the country’s economic policy for decades, drawing investors from multinational companies whose staff account for nearly one in 10 of the country’s workers. “Our tax system is founded on the strict application of the law, as enacted by the Oireachtas (Irish parliament), without exception”, he added.
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Apple shares were down 0.6 percent in NY, a modest drop that reflects expectations that Apple can afford the settlement, should it stand. Apple made $10.5 billion in the first three months this year alone.
