The key questions Apple’s Irish connection

Q Why is Apple being ordered to pay an £11 billion tax bill to Ireland? A The European Commission has ruled that Apple made a deal with Ireland, where it had an offshoot, that enabled the US company to pay tax on profits of its sales in Europe, the Middle East and Africa at a rate of as little as 0.005 per cent.

Q What is wrong with the tax deal?

A The commission says the deal, first struck in 1991 and renewed in 2007, amounts to illegal state aid under EU competition rules, giving the US multinational an unfair advantage over its competitors.

Q How does Apple’s structure work?

A iPhones, iPads and other Apple products sold in Europe, Africa, the Middle East and India are registered by Apple Sales

International, a subsidiary in Cork. The commission says that almost all the profits from this were then allocated to a “head office” with no physical location or staff, that is not based in any country, meaning no tax was paid on its income.

Q So how much tax does Apple pay in Ireland?

A Under the terms of the deal with Ireland, Apple Sales International paid in 2011, for example, less than £9 million in corporation tax on taxable profits of under £43 million. The commission says the real profits were £14 billion that should have been taxed by Ireland at a corporation tax rate of 12.5 per cent. Q What does Apple say? A Tim Cook, the chief executive, issued an open letter to customers accusing the commission of ‘ignoring’ Irish tax laws and trying to replace them with its own. The company says

its profits are created in California, where its research and development takes place, and that is where it does - and should - pay its taxes.

Q How has the Irish government reacted?

A Despite being in line for an £11 billion windfall, the Irish government is also furious at the commission ruling and plans to appeal. Apple employs 6,000 people in Ireland – about a quarter of its European workforce – and those jobs could be in jeopardy. Apple opened its first factory in Cork in 1980 long before the tax deal was in place.

Q Will Apple settle the bill?

A It can certainly afford the tax bill, having £150 billion stockpiled in cash. But it will contest the commission ruling, which it claims is unjustified, and take its appeal to the European Court, which is likely to take years.