Apple also promises an appeal. According to the EU, Ireland gave Apple preferential tax treatment, allowing the American company to avoid taxes other businesses would have to pay.
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“In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1 per cent on its European profits in 2003 down to 0.005 per cent in 2014”, Vestager added.
For Apple, whose earnings of US$18 billion (S$24.5 billion) past year were the biggest ever reported by a corporation, finding several billion dollars should not be an insurmountable problem.
“ARTIFICIAL” ARRANGEMENT The EU’s ruling challenges the way that Ireland agreed to tax the profits of Irish-registered Apple subsidiaries, through which most of its non-U.S. profits flowed. The Cupertino company raked in a record $US18.4 ($25) billion in profits in the first quarter of 2016 and now has $US232 ($309) billion in cash ($US214 ($285) billion of that is held offshore).
The country has for years offered low corporate tax rates to multinationals to benefit from the jobs they create locally.
Apple employs about 5,500 workers in Cork, Ireland, where it is the largest private sector employer.
Apple Chief Executive Tim Cook published an open letter to state that “Apple follows the law and we pay all the taxes we owe”.
But a 2013 investigation by a U.S. Senate panel said that Apple had made a deal with Ireland to lower its corporate tax rate even further. The company will appeal the decision.
The EC says that is unfair and that Apple must pay Ireland the tax it would have paid if normal tax rules were applied.
Following the raid, a spokesperson for McDonald’s said: “From 2010-2014, the McDonald’s companies paid more than €2bn (£1.7m) just in corporate taxes in the European Union, with an average tax rate of nearly 27%”.
The U.S. Treasury released a white paper last week on European Union state aid investigations and accused the Commission of disproportionately targeting American companies and using an approach that is “inconsistent with global norms and undermines the worldwide tax system”. Our tax system is founded on the strict application of the law. without exception.
The EU’s fine is the highest ever demanded under the EU’s longstanding state-aid rules that forbid corporations from achieving advantages over competitors because of crony government help.
Apple said it would challenge the ruling, paving the way for an worldwide political and financial dispute over the Commission’s authority.
Last year, the commission told the Netherlands to recover as much as $43.74 million from Starbucks, while Luxembourg was ordered to claw back a similar amount from Fiat.
The company’s finances have been under investigation since 2015 following claims it struck a deal with Luxembourg authorities to significantly reduce its tax bill on European sales. The EU says it believes Ireland’s tax arrangement amounts to government aid for Apple.
The Treasury had previously warned that making U.S. companies pay back taxes in Europe could hit the United States’ own coffers because tax payments overseas can be deducted against USA taxes.
Vestager argued that Ireland violated European Union rules by essentially giving favorable subsidies to selected companies. The offset reduces such companies’ USA tax payments.
Depending on how any order is worded, U.S. companies that are forced to make additional payments in Europe might be able to credit them against their USA tax bills.
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Why does the USA government care?
