EU orders Apple to pay $14.5 billion in back taxes

By , Aug 30, 2016

EU Ireland Apple ruling infographic 001

At a press conference Tuesday, the European Commission’s competition commissioner Margarethe Vestager announced that the European Union has ordered the government of Ireland to collect up to €13 billion, or about $14.5 billion, in back taxes from Apple. The sum represents Europe’s largest tax penalty and a significant increase over the 1 billion figure floated around ahead of the ruling.

Apple will appeal the decision.

“Ireland has been instructed by the European Commission to recover up to €13 billion of alleged state aid from the company covering a ten year period,” reads the ruling.

Ireland’s position remains that the full amount of tax was paid in this case and no state aid was provided. “Ireland did not give favorable tax treatment to Apple,” country officials noted. “Ireland does not do deals with taxpayers.”

“The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process,” wrote Apple’s boss Tim Cook in an open letter published on Apple’s Irish website.

Entitled “A Message to the Apple Community in Europe,” it lays out the company’s official position in this controversial  case. “The opinion issued on August 30 alleges that Ireland gave Apple a special deal on our taxes. This claim has no basis in fact or in law,” the CEO wrote.

Cook is “confident” that the huge tax bill will be reversed.

In what it called “illegal stated aid,” the Commission has determined that Ireland’s sweetheart tax deal with Apple basically gave the Cupertino company preferential tax treatment. “Member states cannot give tax benefits to selected companies—this is illegal under EU state aid rules,” Vestager said.

In some years, Apple’s deal with Ireland allowed it to pay a tax rate of as low as two percent on its global income, compared to 35 percent in the United States.

“The easy days of single-digit tax rates are going to be over,” University of Southern California law professor Edward Kleinbard said yesterday in an interview with CNBC’s “Closing Bell.”

The EU’s website provided infographic seen top of post which illustrates how Apple was able to unfairly reduce its tax bill in a way not available to other companies.

Apple’s so-called head office in Ireland had no employees and no premises, Vestager highlighted. “This was possible under Irish law, which until 2013 allowed for so-called stateless companies,” she said.

Apple, of course, begs to differ.

“Apple follows the law and pays all of the taxes we owe wherever we operate. We will appeal, and we are confident the decision will be overturned,” said the Cupertino firm in a statement released to media, adding this:

The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws, and upend the international tax system in the process. The commission’s case is not about how much Apple pays in taxes—it’s about which government collects the money. It will have a profound and harmful effect on investment and job creation in Europe.

Ireland’s finance minister, Michael Noonan, said in a statement that the Commission’s decision “leaves me with no choice but to seek Cabinet approval to appeal the decision before the European courts.”

Though the ruling requires Ireland to recover the tax sums, the Commission is also acknowledging that the sums may in fact be taxable in other jurisdictions.

The amount of unpaid taxes to be recovered by the Irish authorities would be reduced if:

  • Other countries were to require Apple to pay more taxes on the profits recorded by Apple Sales International and Apple Operations Europe for this period.
  • US authorities were to require Apple to pay larger amounts of money to their US parent company for this period to finance research and development efforts.

Apple shares were down 1.6 percent in premarket trading following EU’s ruling.

Source: EU

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  • Ara Rezaee

    Serves them right for hiding their money overseas

    • AwesomeSauce

      Serves them nothing, they will appeal.

    • 9to5Slavery

      Then stop accepting cash and avoiding taxes my man. Pay with credit card so the businesses get extra hurt with taxes that they’re suppose to be when you go out to eat.

  • n0ahcruz3

    Hahahaha can’t innovate my ass!

  • So in summary… The EU has determined that the government of Ireland cut Apple an illegal tax deal. Now you may be tempted to think that the government should be held accountable for this atrocity instead of the people that did exactly what the government told them to do, but you’d be forgetting this one important principle of government (the people in power are always right). After all, Ireland publicly claims Apple has paid them every cent they were owed so clearly Apple duped them and is responsible for everything.

    The EU has determined that Apple pays less than 2% in taxes to them on its global income. So by that “logic” if Apple paid all 97 countries it operates in 2% of it’s global profit in taxes they would owe 194% of their income in collective taxes. But since 2% is so low this should really be raised to double digits in the interest of fairness right? Putting their taxes to a mere 970% of their global income. See? Much more reasonable.

    So if the EU is to be taken seriously (and as a government organization they most certainly are), we are to assume that it’s OK to turn a blind eye to corrupt and shady government dealings as long as there is a scape goat to pin everything on and that allows them to make lots of money in the process.

    After all, when the government gave Apple a good deal it was back when Apple was the underdog struggling for existence under the tyranny of super companies like IBM right? And who doesn’t like supporting the underdog? Unfortunately in an act of clear betrayal Apple surpassed IBM and obviously needs to be punished for taking clear advantage of the good intentions of the governments they so clearly betrayed.

    All in all I’d say it’s a win! In fact 13 billion is a small price to pay to teach Apple a lesson for doing what the government asked of them. Here’s to hoping these politicians (or should I say warriors of justice) stay around for a good long time to come.

    • 9to5Slavery

      warriors of justice my ass. they are corrupt.

      • Couldn’t agree more. This whole scenario is amazing to me. Personally I find this whole thing so laughably dumb that I couldn’t help but turn it into satire.