Meanwhile, Apple said in a statement it will appeal the ruling and is “confident the decision will be overturned”.
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The US stepped up its rhetoric ahead of the decision, accusing the European Commission of unilateralism and overstepping its mandate. After Apple pays tax in the country profits are then shifted to a tax haven overseas, accoording to a EC diagram (below).
Just last week, the United States treasury department released a report criticising any efforts to claw back taxes from American companies. Ireland, however, has indicated it will appeal the ruling.
The European Commission states that it can only recover “illegal state aid” for 10 years preceding the first request for information, which stated in 2013. “Apple now has to repay the benefits”.
The tech giant paid a tax rate on European profits of between 0.005 and 1 percent, the Commission said.
Apple employs almost 6,000 people in Ireland.
In a letter addressed to customers and published Tuesday, Apple says the EU’s decision will have “serious, wide-reaching implications”.
The ruling, issued in light of the Commission’s investigation of the issue in June 2014, determined that Ireland’s issuance of two tax rulings in favor of Apple led to lower taxes paid by the firm to the country since 1991.
European Union regulators announced the long awaited ruling earlier today, saying the tax arrangement between Apple and the Irish government is illegal and gives Apple an unfair advantage over its competitors.
“Member states can not give tax benefits to selected companies – this is illegal under EU state aid rules”, said Margrethe Vestager, Commissioner in charge of European Union competition policy, in a statement.
“The commission said that the sales profits recorded by Apple were internally attributed to a “head office” which existed only on paper”.
Further, “profits allocated to these “head offices” were not subject to tax in any country under specific provisions of the Irish tax law, which are no longer in force”. “This selective treatment allowed Apple to pay an effective corporate tax rate of 1 percent on its European profits in 2003, down to 0.005 percent in 2014”, Vestager said at a press conference in Brussels on Tuesday.
A huge tax bill is likely to make all the wrong headlines ahead of early September’s expected unveiling of Apple’s latest iPhone.
“I think it’s on very tenuous grounds”, says Irish Finance Minister Michael Noonan.
However, Apple and the Irish government immediately said they would appeal against the European Commission ruling, while the U.S. Treasury said it could undermine its economic partnership with the EU.
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The commission denied that it is targeting US businesses, and instead said that EU rules ban member states from offering tax breaks that are not available in other European countries.
