Ap­ple must pay Ire­land £11bn in taxes

Two Ir­ish tax rul­ings con­sti­tuted il­le­gal state aid, rules the Euro­pean Com­mis­sion. Pe­ter Sayer re­ports

Macworld - - Contents -

Ap­ple’s tax ben­e­fits in Ire­land are il­le­gal, and the com­pany will have to pay up to €13 bil­lion (£11 bil­lion) in back taxes, plus in­ter­est. That’s the ver­dict Euro­pean Com­mis­sioner Mar­grethe Vestager de­liv­ered re­cently, wrap­ping up a two-year in­ves­ti­ga­tion of the com­pany’s tax af­fairs stretch­ing back to 2003.

The in­ves­ti­ga­tion found that Ap­ple’s ef­fec­tive tax rate on profit re­ported in Ire­land was just €500 per mil­lion eu­ros in profit, fall­ing to €50 per mil­lion in 2014. “I would have a feel­ing if my ef­fec­tive tax rate were 0.05 per­cent, fall­ing to 0.005 per­cent. I would feel that maybe I should have an­other look at my tax bill,” said.

The Com­mis­sion looked into tax rul­ings granted by the Ir­ish gov­ern­ment to two Ap­ple sub­sidiaries, Ap­ple Op­er­a­tions Europe, which makes some Ap­ple com­put­ers, and Ap­ple Sales In­ter­na­tional, which re­sells the com­pany’s prod­ucts through­out Europe, the Mid­dle East, Africa, and In­dia.

The lat­ter ac­counts for al­most all the un­paid taxes Ire­land now needs to re­cover, Vestager said.

Vestager said that the Ir­ish tax au­thor­i­ties had al­lowed Ap­ple to split profit from the two com­pa­nies, which were sub­ject to nor­mal taxes, with ‘head of­fice’ com­pa­nies that were sub­ject to no taxes, ei­ther in Ire­land or else­where.

“Split­ting the prof­its did not have any fac­tual or eco­nomic jus­ti­fi­ca­tion. The so-called head of­fice had no em­ploy­ees, no premises, no real ac­tiv­i­ties,” Vestager added. Those head-of­fice com­pa­nies were al­lo­cated al­most all the prof­its.

This se­lec­tive tax treat­ment in Ire­land is il­le­gal un­der Euro­pean Union state aid rules, she ar­gued, and dis­torts com­pe­ti­tion. To re­store fair com­pe­ti­tion, Ire­land must re­cover up to €13 bil­lion in back taxes from Ap­ple for the pe­riod from 2003 to 2014.

“It is for the Ir­ish au­thor­i­ties to de­ter­mine the ex­act amount and the modal­i­ties of pay­ment,” Vestager said. Ap­ple will have to pay up even if

the rul­ing is ap­pealed, with the money go­ing into an es­crow ac­count.

Should the US gov­ern­ment de­cide to change its tax rules so that Ap­ple owes more tax in the US on its EU prof­its, then the sum to be re­paid in Ire­land could be re­duced by a cor­re­spond­ing amount, Vestager added.

Ap­ple is not the only com­pany in the Com­mis­sion’s sights. It has also is­sued tax rul­ings against Star­bucks and Fiat, and is still in­ves­ti­gat­ing Ama­zon and McDon­alds in Lux­em­bourg.

“All com­pa­nies, big or small, should pay taxes where they make their prof­its. We need changes in cor­po­rate philoso­phies, and we need changes in leg­is­la­tion to ad­dress loop­holes and to en­sure trans­parency,” con­cluded Vestager.

Ap­ple CEO Tim Cook re­sponded with an open let­ter ded­i­cated to the “Ap­ple com­mu­nity in Europe,” ex­plain­ing how Ap­ple’s op­er­a­tions in Cork, Ire­land have boosted the lo­cal econ­omy and cre­ated roughly 1.5 mil­lion jobs across Europe. The com­pany claims to have al­ways com­plied with the law, and has “never asked for, nor did we re­ceive, any spe­cial deals”.

“Over the years, we re­ceived guid­ance from Ir­ish tax au­thor­i­ties on how to com­ply cor­rectly with Ir­ish tax law – the same kind of guid­ance avail­able to any com­pany do­ing busi­ness there. In Ire­land and in ev­ery coun­try where we op­er­ate, Ap­ple fol­lows the law and we pay all the taxes we owe.”

Both Ire­land and Ap­ple are plan­ning on ap­peal­ing the Com­mis­sion’s de­ci­sion, and Cook is “con­fi­dent that the Com­mis­sion’s or­der will be re­versed.”

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.