Apple to appeal EU tax decision
SILICON Valley tech titan Apple will fight an EU demand for a record 13 billion euros (US$14.5 billion) in back taxes in Ireland, a move Washington warned could damage transatlantic economic ties.
Brussels said Apple, the world’s most valuable company, avoided virtually all tax on its business in the bloc by illegal arrangements with Dublin which gave the company an unfair advantage over competitors.
Apple and the Irish government immediately said they would appeal against the European Commission ruling, with the iPhone maker warning it could cost European jobs.
The White House meanwhile cautioned against “unilateral” measures by the EU.
“This decision sends a clear message. Member states cannot give unfair tax benefits to selected companies, no matter if European or foreign, large or small,” EU competition commissioner Margrethe Vestager said.
“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,” she added.
Ireland has attracted multinationals over many years by offering extremely favourable sweetheart tax deals to generate much-needed jobs and investment.
But following a three-year-long investigation Brussels said the Apple arrangement broke EU laws on state aid.
The findings come amid growing tensions between Washington and Brussels over a series of EU antitrust investigations targeting other giant US companies such as Google, Amazon, McDonald’s, Starbucks and Fiat Chrysler.
Apple has had a base in the southern city of Cork since 1980 and employs nearly 6000 people in Ireland, through which it routes its international sales totalling billions.
Apple chief Tim Cook said he was “confident” the EU ruling would be overturned, adding that the company was the biggest taxpayer in Ireland, the US and the world.
“The most harmful effect of this ruling will be on investment and job creation in Europe,” he said.
Mr Cook warned that the ruling was a “devastating blow to the sovereignty of EU members over their own tax matters”, echoing the concerns of Dublin over the decision.
Ireland’s Finance Minister Michael Noonan described the European Union’s ruling as “bizarre” and “an exercise in politics by the Competition Commission”.
Dublin, which suffered from harsh austerity measures after it was bailed out during the eurozone debt crisis, has vigorously defended its low tax rates as a way of boosting the economy.
“If you look at the small print on an Apple iPhone, it says designed in California and manufactured in China and that means any profits that accrued didn’t accrue in Ireland and so I can’t see why the tax liability is in Ireland,” he said.
But Ms Vestager said Apple’s Irish operation was a sham – Apple’s “so-called head office in Ireland only existed on paper. It had no employees, no premises and no real activities.”
Apple paid an effective corporate tax rate of just 0.005 percent on its European profits in 2014 – equivalent to just 50 euros for every million, Ms Vestager said.
The Apple tax bill dwarfs the previous EU record for a state aid case – 1.3 billion euros for the Nurburgring race track in Germany.
While the $14.5 billion sum itself is unlikely to trouble Apple with its massive $600 billion of market capitalisation and $234 billion in revenue last year, the political ramifications are huge.
The US Treasury said the ruling “could threaten to undermine foreign investment, the business climate in Europe, and the important spirit of economic partnership between the US and the EU”.
The Apple decision may also complicate struggling EU-US talks on what would be the world’s biggest free trade deal, meant to be completed before US President Barack Obama steps down in January next year. –