The E.U. whacked Apple with a $14.5 billion dollar bill (plus interest) that it must pay to Ireland in back taxes.
The decree comes following an investigation by the European Commission that charged the iPhone maker with securing an illegal tax deal with Ireland wherein the company avoided nearly all corporate taxes for over a decade.
This $14.5 billion order is the largest sum ever charged to a company by the European Union, according to the Wall Street Journal.
The E.U. has state-aid rules that explicitly prohibit a company from getting an unfair or undue advantage (be it in tax relief or subsidies) over another firm or industry. Following the precedent set by said rules, the E.U. has come down hard on Apple.
Margrethe Vestager, the Commissioner in charge of competition policy, said in a press conference on Tuesday that “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. 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.”
In response, Ireland has come out in defense of its decision and its effective corporate tax rate. Irish Finance Minister, Michael Noonan, told the press “I disagree profoundly with the Commission’s decision,” and furthermore that the country intends “to defend the integrity of our tax system,” the Journal reports.
Shares in Apple Stock fell some 2 percent following the Tuesday decision by the European Commission.
An Apple representative told Business Insider that the 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.” Apple has noted that they followed every law and payed every dime of taxes they owed under the tax rate. The company’s rep concluded with “we will appeal, and we are confident the decision will be overturned.”
Tim Koch, CEO of Apple, told the Washington Post “The money that’s in Ireland … is money that is subject to US taxes. The tax law right now says we can keep that in Ireland or we can bring it back.”
Koch added that it is important to realize “The basic controversy at the root of this is, people really aren’t arguing that Apple should pay more taxes. They’re arguing about who they should be paid to. And so there’s a tug of war going on between the countries of how you allocate profits.”
The U.S. Treasury Department has been outraged with the E.U. probes into state-aid, and a representative told the press the Apple decision “could threaten to undermine foreign investment, the business climate in Europe, and the important spirit of economic partnership between the U.S. and the EU,” Bloomberg reports.
The Apple decision has the potential to be the precedent setting case for future E.U. probes into multinational corporations in Europe.
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