EU says Apple must repay € 13 bln over ‘illegal’ Irish tax deal

The European Commission said on Tuesday that US tech giant Apple must repay EUR 13 bln ($14.5 bln) in back taxes after ruling that a series of Irish tax deals were illegal, according to EurActiv.com.

“Two tax rulings granted by Ireland have artificially reduced Apple’s tax burden for over two decades, in bridge of EU State Aid rules,” EU Competition Commissioner Margrethe Vestager said at a press conference.

Vestager said that Apple’s “selective treatment” in Ireland gave the US tech giant a “significant benefit compared to other companies.”

Both rulings allocated the profits between Apple’s Irish branch, which is subject to the normal 12,5% Irish corporate tax, and the company’s head office, Vestager explained.

“Or I should say so-called head office,” she continued, “because it only existed on paper: it has no employees, it has no premises, and it has no real activities”.

This allowed Apple’s head office to subject to no tax, whether in Ireland elsewhere, Vestager said.

Indeed, until 2013, Irish law allowed for “stateless companies” which are not subject to taxation. And a “vast majority of profits” generated by Apple was attributed to the socalled head office.

“The effective tax rate fell to a bare 0.005% by 2014,” Vestager said, explaining that Apple only paid EUR 50 per million in profits.

The Irish government reacted straight after the announcement, saying that Ireland has “no choice” but to appeal against the European Union ruling.

“The decision leaves me with no choice but to seek cabinet approval to appeal the decision before the European Courts,” Finance Minister Michael Noonan said in a statement.

Apple also issued a statement, saying that they will “appeal and we are confident the decision will be overturned.“ be or

The European Commission had opened investigations against Apple in June 2014, alleging the company of having been given special tax benefits for setting up shop in Ireland. Both Apple and the Irish Department of Finance have denied the existence of a special tax deal which could potentially have violated EU state aid rules. Apple isn’t the only U.S. company under scrutiny for allegedly dodging taxes in the EU, which is why the U.S. Treasury Department has now weighed in on the matter. In a report published on Wednesday, the Treasury alleges the EU’s governing arm of initiating “disproportionately more investigations against U.S. companies” and expresses “strong concerns” about the Commission’s cases against Apple, Starbucks and other U.S. companies. Apple is currently holding more than $200 bln in foreign profits outside of the United States. Bringing that money back to the United States would require them to pay the corporate tax rate of 35% plus state taxes which would amount to more than $80 bln. Apple CEO Tim Cook has publicly spoken out against this rule, saying that his company wouldn’t repatriate any of its foreign cash until “there‘s a fair rate”. (Source: Statista)

Five years ago, on August 24, 2011, Tim Cook was appointed CEO of Apple after Steve Jobs had resigned due to his illness. So how did Tim Cook master the challenge of succeeding Apple’s charismatic co-founder and long-time CEO? After all, Jobs was one of the most iconic business figures of the past century and is still credited with Apple’s unprecedented rise following the iPhone’s release in 2007.

Given that the most obvious indicator of how a public company such as Apple has fared in the eyes of private and institutional investors is its share price, we decided to take a look at the company’s stock performance under Cook’s watch.

At first glance, Apple’s shareholders have nothing to complain about: adjusted for splits and dividends, anyone who invested in Apple stock the day of Cook’s appointment has more than doubled his initial investment. That’s only half of the story though, as our chart illustrates: investing in Apple’s competitors Google, Microsoft and Amazon yielded significantly larger returns over the same period. Considering that the Nasdaq Composite Index, a market- capweighted index of roughly 2,500 companies, also doubled since 2011, Apple just barely beat the market, which isn’t great for a company of Apple’s ambitions.

One thing that most experts agree on is that Apple’s extreme growth over the past decade wouldn’t have been possible without Tim Cook, who excels in logistics and supply chain management. Now that the iPhone business is slowing down though, he’s going to have to prove that he can do more than maintain and build on Steve Jobs’ legacy. He needs to find his own “one more thing”.