Europe hits Apple with $14.6 billion tax bill

Andrew Cummings
September 1, 2016

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 USA technology giant had paid next to no tax across the bloc's 28 countries for over 11 years.

The White House and the Treasury Department, which enforces federal tax policy, warned that U.S. -EU economic relations could be affected by the European Commission's ruling that Apple had received illegal state aid under its agreement with Ireland.

Online retailer Inc (AMZN.O) and fast-food company McDonald's Corp (MCD.N) already face probes over taxes in Luxembourg, while coffee chain Starbucks Corp (SBUX.O) has been ordered to pay up to 30 million euros ($33 million) to the Dutch government.

Apple paid tax at 1%, or less, on profits attributed to its subsidiaries in Ireland, well below the 35% top rate in the United States and even well below Ireland's 12.5% rate.

The multinational corporation is said to have secured a tax advantage not available to other companies, which ultimately amounted to state aid and breached European Union antitrust law.

Apple was found to be holding over $181 billion offshore, more than any U.S. company, in a study published past year by two left-leaning nonprofit groups: Citizens for Tax Justice and the U.S. Public Interest Research Group Education Fund.

For Ireland, a country of barely 4.6 million people, the sum would be a huge windfall - equivalent to over 2,800 euros ($3,150) for every man, woman and child.

The Business Roundtable, which represents USA chief executives, called the decision "an act of aggression" against a law-abiding US company and a sovereign government.

Even the European Commission voiced indirect criticism of the US tax code, suggesting that Washington could require Apple's Irish operations to pay larger amounts of money to the USA parent to finance research and development, which would increase Apple's USA tax bill. "Ireland does not do deals with taxpayers".

The bill for tax benefits, plus interest, covers 2003 to 2014. Apple has 5,500 workers in Ireland, making it one of the biggest private-sector employers.

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.

Lewis Crofts, global chief correspondent at antitrust trade publication Mlex, explained that the USA is anxious that Apple's cash won't make it back to the US.

The US stepped up its fight last Wednesday against the commission's crackdown on tax avoidance by Apple and other multinational companies, accusing it of unilateralism and overstepping its mandate.

It said the ruling upended the worldwide tax system and would damage jobs and investment in Europe.

Both companies have appealed the decisions.

Republicans and Democrats in the Senate have discussed plans to encourage the repatriation of US profits overseas. Shame on Apple for dodging USA taxes. In recent weeks, the Obama administration warned European officials that their investigations seemed to be unfairly singling out US companies.

While the ruling would ultimately benefit Irish government coffers, Mr Crofts says Ireland will also appeal against the EU Commission's decision.

"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.

A special cabinet meeting is due this morning to consider whether Ireland should appeal the Apple tax ruling.

Peter Vale, a Dublin-based corporate tax expert for the accounting firm Grant Thornton, calculated that Tuesday's decision, if upheld, could ultimately cost Apple 19 billion euros ($21 billion) because the European Union order also includes interest for unpaid taxes going back more than a decade.

The EU decision will require the Irish tax collection agency to issue a demand soon to Apple for payment, Vale said.

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