Source: TheDrum
The European Commission has found that Apple was illegally given tax benefits amounting to some €13bn by the Irish tax authorities, which must now be recovered.
During a three-year investigation, The Commission found that selective treatment allowed Apple to pay an effective corporate tax rate of one per cent on its European profits in 2003. In other words, for every €1m in profit made from sales across Europe it paid €10,000 in tax.
This dropped even further to a rate of 0.005 per cent in 2014; or just €50 for every €1m in profit.
Apple was able to do so thanks to a tax agreement established in 1991.
The crux of the issue lies in the fact that Apple was given the green light to set up a ‘head office’ (which had no offices or employees) in Ireland through which “almost all sales profits” from Apple Sales International and Apple Operations were recorded.
The profits allocated to the ‘head office’ were not subject to tax in any country under specific provisions of the Irish tax law.
This selective tax treatment of Apple in Ireland is illegal under EU state aid rules.
While Apple is no longer able to take advantage from this tax benefit, the EU has concluded that Ireland must determine the exact amount the company owes and how it will pay it back.
EU regulators have also said that Apple’s tax bill could be cut if other countries, including the US, order the company to pay more.
Apple has challenged the rulling and denied it owes the Irish state €13bn in back tax.
“In Ireland and in every country where we operate, Apple follows the law and we pay all the taxes we owe,” said the company’s chief executive Tim Cook in a lengthy customer letter to combat the outcome of the three-year investigation.
In a scathing analysis of the EU’s position, Cook said that 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,” adding that the “claim has no basis in fact or in law. We never asked for, nor did we receive, any special deals”.
Furthermore, the move was branded “unprecedented” with “serious, wide-reaching implications” with claims such aggressive tax pursuit could harm “investment and job creation in Europe”.
Cook reminded that Apple has been in Cork since 1980 and said it now employs nearly 6,000 people across Ireland.
