Europe hits Apple with a $15B tax bill
The European Union ordered Apple on Tuesday to pay nearly $15 billion in back taxes to Ireland, plus billions more in interest, in a move that dramatically escalates the fight over whether America’s biggest corporations are paying their fair share around the world.
While Apple could easily afford the bill, the tech giant said it will challenge the EU decision, which found that Ireland granted a sweetheart deal that let Apple pay almost no taxes across the European bloc for 11 years. And Ireland, which has long used low taxes to attract foreign businesses, said it will stand with Apple.
“We now find ourselves in the unusual position of being ordered to retroactively pay additional taxes to a government that says we don’t owe them any more than we’ve already paid,” Apple CEO Tim Cook complained in a statement.
The White House also blasted the ruling as unfair and disruptive to its own efforts at tax reform. But the decision was welcomed by groups that have long criticized the practices used by Apple and other large companies to legally reduce their tax obligations.
The ruling was the latest in a series of aggressive moves by European officials to hold U.S. businesses, particularly big tech companies, accountable under the EU’s rules on taxation, competition and privacy.
“They’re going after Apple, which means a big name and big dollars,” said Brad Badertscher, a corporate-tax expert at the University of Notre Dame’s Mendoza College of Business. “It’s a big shot across the pond to U.S. companies.”
California-based Apple reported more than $53 billion in profit in its last fiscal year on worldwide sales of more than $233 billion. It says it paid $13 billion in corporate income taxes globally.
But EU Competition Commissioner Margrethe Vestager said Ireland granted such lavish tax breaks to Apple that the company’s effective corporate tax rate on its European profits dropped from 1 percent in 2003 to a mere 0.005 percent in 2014.
While Apple disputed her figures, Vestager argued that Ireland violated EU rules by essentially giving subsidies to selected companies.
Under its current arrangement, Apple treats virtually all sales of iPhones and other goods and services in the EU’s 28 nations as revenue generated by its Irish subsidiaries.
Vestager ordered Ireland to recover the unpaid taxes for the years 2003 to 2014, plus interest, which one analyst said could amount to an additional 6 billion euros.
For Ireland, a country of barely 4.6 million people, the sum would be a huge windfall – equivalent to more than $3,150 for every man, woman and child. And yet the government said it will appeal the decision, arguing it granted no special treatment to Apple.
Ireland has for years offered low corporate tax rates to multinationals, a common strategy among Europe’s smaller countries, including Luxembourg and the Netherlands.
Multinationals have such huge revenue that these countries can reap big gains even from low taxes. They also benefit from the jobs created. Apple has 5,500 workers in Ireland, making it one of the biggest private-sector employers.
“It is important that we send a strong message that Ireland remains an attractive and stable location of choice for long-term substantive investment,” said Irish Finance Minister Michael Noonan. “Apple has been in Ireland since the 1980s and employs thousands of people in Cork.”