Apple hit with record-breaking £11bn EU tax bill


By Kathryn Higgins

31 August 2016 at 09:07 BST


The European Commission is ordering Apple to pay back years' worth of tax and interest in Ireland, sending Apple, Ireland and US authorities into uproar.

Songquan Deng

The European Commission has instructed Ireland to recover a record-breaking £11bn of tax and interest from global consumer technology giant Apple after ruling that a ‘sweetheart tax deal’ between the pair was in violation of EU law. ‘Member states cannot give tax benefits to selected companies – this is illegal under EU state aid rules,’ said EU competition commissioner Margarethe Vestager, who has overseen the three-year investigation into Apple’s tax dealings in Europe.

‘Sweetheart deal’

According to the Commission’s findings, an arrangement between Apple and Irish tax authorities between 1991 and 2015 allowed Apple to attribute the bulk of its sales to a ‘head office’ which only existed on paper, and could never have physically accounted for the turnover. While Ireland’s corporate taxation rate sits at 12.5 per cent, its arrangement with Apple allowed the company to pay tax of no more than 1 per cent in 2013, and as little as 0.005 per cent the following year. While the ordered £11bn is the largest ever recorded in the EU, it shouldn’t be a stretch for Apple – the company made a global net profit of £53bn last year and reportedly sits on a cash and securities reserve worth more than £176bn.  

Appeals planned

Apple chief executive Tim Cook has come out swinging against the ruling, accusing the EC of overriding Irish law and disrupting the international tax system. ‘We never asked for, nor did we receive, any special deals. We now find ourselves in the unusual position of being ordered to retroactively pay additional taxes to a government that says we don’t owe them any more than we’ve already paid,’ he said, adding that the company was preparing to appeal. Ireland too is pushing back hard against the ruling, keen to preserve its status as a tax haven for large multinationals operating in Europe. ‘The decision leaves me with no choice but to seek cabinet approval to appeal,’ said Irish finance minister Michael Noonan. ‘This is necessary to defend the integrity of our tax system, to provide certainty to business, and to challenge the encroachment of EU state aid rules into sovereign member state competence of taxation.’ 

US/EU relations 

Apple’s claim that the ruling is a threat to international investment in Europe has been backed by the US Treasury, which last week warned that the EC was at risk of becoming a ‘supranational tax authority’. Democratic senator Charles Schumer has slammed the decision, labeling it a ‘cheap money grab… targeting US companies and the US tax base’ that undermines the competitiveness of US companies in the European marketplace while hoarding tax revenues that ‘should go towards investment [in] the United States.’ Global Markets Advisory Group senior market strategist Peter Kenny warned The Guardian that the EC ruling is ‘just the tip of the spear’ in what is likely to be a large-scale disruption of the many multinationals that currently use EU tax arrangements to circumvent higher corporate tax rates in the United States.

Sources: The Guardian; BBC(1); BBC(2)Evening Standard

 
   
 
 
 

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