news Following a lengthy investigation, the European Commission (EC) has ruled that Apple must pay back up to €13 billion plus interest after Ireland gave the tech firm “illegal tax benefits”.
The Commission concluded that Ireland allowed Apple to pay far less tax than other businesses, which is illegal under EU state aid rules.
“Ireland must now recover the illegal aid,” said the EC in a statement.
Commissioner Margrethe Vestager, who heads EC competition policy, commented: “Member States cannot give tax benefits to selected companies – this is illegal under EU state aid rules.”
“The Commission’s investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years,” she said.
This gave Apple a “significant advantage” over other Ireland-based businesses subject to the same national taxation rules, according to the statement.
Ireland’s selective treatment allowed Apple to pay an effective corporate tax rate of 1% on its European profits in 2003, dropping to 0.005% in 2014.
Following an in-depth investigation commenced in June 2014, the EC concluded that two tax rulings issued by Ireland to Apple have “substantially and artificially lowered the tax paid by Apple in Ireland since 1991”.
The rulings provided a way to establish the taxable profits for two Ireland-incorporated Apple companies of the Apple group that “did not correspond to economic reality”, the statement said
Almost all sales profits recorded by the two firms were internally attributed to a “head office”. However, the EC found that the head offices existed only on paper and “could not have generated such profits”.
The profits allocated to the head offices were not subject to tax in any country under specific provisions of the Irish tax law, which are no longer in force, the EC explained.
Due to Apple’s decision to record all sales in Ireland rather than in the countries where the products were sold, Ireland enabled Apple to avoid taxation on almost all profits generated by sales of its products in the entire EU Single Market.
The Commission said it can order recovery of illegal state aid for a 10-year period preceding its first request for information – in this case, in 2013.
Ireland must now recover the unpaid taxes in Ireland from Apple for the years 2003 to 2014.
Apple CEO Tim Cook has said his company will appeal the ruling and has released an open letter, saying: “At its root, the Commission’s case is not about how much Apple pays in taxes. It is about which government collects the money.”
“It is effectively proposing to replace Irish tax laws with a view of what the Commission thinks the law should have been,” he said. “This would strike a devastating blow to the sovereignty of EU member states over their own tax matters, and to the principle of certainty of law in Europe.”
Irish Finance Minister, Michael Noonan, said his government would also appeal against the ruling, according to The Guardian.
“This is necessary to defend the integrity of our tax system, to provide tax certainty to business and to challenge the encroachment of EU state aid rules into the sovereign member state competence of taxation,” he said.
Image credit: Apple