EU Rules Apple Must Pay Up To $13 Billion In Back Taxes To Ireland
BRUSSELS (AP) -- Apple will have to pay up to 13 billion euros ($14.5 billion) plus interest in back taxes to Ireland after the European Union found Tuesday that the U.S. technology giant received illegal tax benefits over 11 years.
Peter Vale, a Dublin-based corporate tax expert for accountancy firm Grant Thornton, calculates that if Tuesday's judgment is upheld on appeal, it will cost Apple 19 billion euros ($21 billion) because the order includes interest for unpaid tax going back more than a decade.
Vale says the EU order will require the Irish tax collection agency to issue a demand soon for payment, and any money handed over by Apple would be placed in a hands-off escrow account pending years of litigation before the European Court of Justice in Luxembourg.
Vale says: "While the tax to be collected is hugely significant, this is unlikely to be made available for public expenditure purposes pending the appeal result.''
The ruling is the biggest salvo in the EU executive Commission's battle to have multinationals pay their fair share in the region. The EU alleges that many big companies struck deals with EU countries to pay unusually low tax in exchange for basing their EU operations there.
EU Competition Commissioner Margrethe Vestager said that a three-year investigation found Ireland granted such lavish tax breaks to Apple that the multinational's effective corporate tax rate on its European profits dropped from 1 percent in 2003 to a mere 0.005 percent in 2014.
That last tax rate meant that for each million euros in profits, Apple paid just 50 euros in taxes, Vestager told a news conference.
"Member states cannot give tax benefits to selected companies-this is illegal under EU state aid rules," Vestager said.
"Ireland must now recover the unpaid taxes in Ireland from Apple for the years 2003 to 2014 of up to 13 billion euros ($14.5 billion), plus interest," the Commission said in a statement.
Apple said in a statement that it had followed the law and paid every cent of the taxes it owed. It said it would challenge the EU action in the European courts, and predicted it would be vindicated.
The Irish government denied granting favorable fiscal treatment to the maker of the iPhone and other consumer electronics products, computer software and online services. "Ireland's position remains that the full amount of tax was paid in this case and no state aid was provided," the Irish statement said. "Ireland does not do deals with taxpayers."
Apple accused the EU executive body of engaging in efforts "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," the company said in a statement. "It will have a profound and harmful effect on investment and job creation in Europe. 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."
The Irish finance minister, Michael Noonan, said he would seek approval from the Irish Cabinet to legally challenge the EU Commission's ruling.
"It is important that we send a strong message that Ireland remains an attractive and stable location of choice for long-term substantive investment," Noonan said. "Apple has been in Ireland since the 1980s and employs thousands of people in Cork."
A statement from the U.S. government was expected later Tuesday.
In a white paper made public last week, the U.S. Treasury Department accused the European Union of using a different set of criteria to judge cases involving American companies, calling the potential penalties "deeply troubling."
Should Apple eventually pay the Irish that sum, it would represent about 2,825 euros ($3,150) per man, woman and child. In government coffers, that money would easily wipe out Ireland's 2016 deficit and put the country back in the black for the first time in a decade.
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