APPLE BRUISED

US tech giant, Irish govt vow to appeal

The EU orders the iPhone maker to pay a record € 13 billion in back taxes.

BRUSSELS: The European Union yesterday ordered Apple Inc to pay a record €13 billion ($14.5 billion) in back taxes in Ireland, saying deals allowing the US tech giant to pay almost no tax were illegal.

In the latest in a series of rulings that has angered Washington, Brussels said the world’s most valuable company avoided tax bills on virtually all its profits in the bloc under its arrangements with Dublin.

Apple and the Irish government immediately said they would appeal against the European Commission ruling, while the US Treasury said it could undermine its economic partnership with the EU.

Ireland has been seeking to attract multinationals by offering extremely favourable tax conditions, known as sweetheart deals, but EU Competition Commissioner Margrethe Vestager said Apple’s broke EU laws on state aid.

“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,” she said.

“This is not a penalty, this is unpaid taxes to be paid,” Vestager added.

The tax repayment order — by far the largest in EU history — follows a three-year inquiry into whether Dublin’s tax breaks for Silicon Valley titan Apple were against the law.

Apple has had a base at the southern city of Cork since 1980 and employs 5,000 people in Ireland, through which it routes its international sales, avoiding billions in corporation taxes.

But Vestager — who has launched a series of cases against US firms — said that Apple’s “so-called head office in Ireland only existed on paper. It had no employees, no premises and no real activities.”

Apple as a result paid an effective corporate tax rate of 0.005% on its European profits in 2014 — equivalent to €50 for every million, she added.

Tensions have been growing between Washington and Brussels over a series of anti-trust investigations targeting companies such as Apple, Amazon.com Inc, Starbucks Inc and Fiat Chrysler Automobiles.

“We will appeal and we are confident the decision will be overturned,” Apple said.

“It will have a profound and harmful effect on investment and job creation in Europe,” the company added.

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

The Apple tax bill dwarfs the previous EU record for a state aid, the €1.3 billion received by the Nurburgring race track from German authorities.

The US stepped up its rhetoric ahead of the decision, accusing the European Commission of unilateralism and overstepping its mandate.

The US Treasury said yesterday that the Apple ruling threatened the “spirit of economic partnership.”

“The commission’s actions could threaten to undermine foreign investment, the business climate in Europe, and the important spirit of economic partnership between the US and the EU,” a Treasury statement said.

The EU has made taxes a core issue since the LuxLeaks scandal in which it was revealed that European Commission president Jean-Claude Juncker’s native Luxembourg gave companies huge tax breaks while he was prime minister.

In October Brussels ordered US coffee giant Starbucks and Italian automaker Fiat to each repay up to €30 million ($34 million) in back taxes to the Netherlands and Luxembourg respectively.

The US has acknowledged the problems around the issue of tax breaks but says the deals were made under international treaties and accepted tax practices.

Vestager insisted that US companies were not being unfairly targeted.