The European Union has said that US tech company Apple must repay a record 13bn euros ($14.5bn) in taxes after ruling that a special scheme to route profits through Ireland was illegal state aid, reports Aljazeera.
“Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years,” Margrethe Vestager, the EU competition commissioner, said on Tuesday.
Apple’s “selective treatment” by the Irish government meant it paid an effective tax rate of only 1 percent on its European profits in 2003, which then fell to a bare 0.005 percent by 2014.
EU orders Apple to repay $14.5bn in taxes
“The tax treatment in Ireland enabled Apple to avoid taxation on almost all profits generated by sales of Apple products in the entire EU single market,” Vestager said, according to Reuters news agency.
According to Reuters, A bill of 300 million euros this year for Swedish engineer Atlas Copco AB to pay Belgian tax is the current known record. Other companies ordered to pay back taxes in Belgium, many of them European, have not disclosed figures.
For Apple, whose earnings of $18 billion last year were the biggest ever reported by a corporation, finding several billion dollars should not be an insurmountable problem. The 13 billion euros represents about 6 percent of the firm’s cash pile.
As of June, Apple reported it had cash, cash equivalents and marketable securities of $231.5 billion, of which 92.8 percent, or $214.9 billion, were held in foreign subsidiaries. It paid $2.67 billion in taxes during its latest quarter at an effective tax rate of 25.5 percent, leaving it with net income of $7.8 billion according to company filings.
The European Commission in 2014 accused Ireland of dodging international tax rules by letting Apple shelter profits worth tens of billions of dollars from tax collectors in return for maintaining jobs. Apple and Ireland rejected the accusation.
“I disagree profoundly with the Commission,” Irish Finance Minister Michael Noonan said in a statement. “The decision leaves me with no choice but to seek cabinet approval to appeal.
“This is necessary to defend the integrity of our tax system; to provide tax certainty to business, and to challenge the encroachment of EU state aid rules into the sovereign member state competence of taxation.”
Ireland also said the disputed tax system used in the Apple case no longer applied and that the decision had no effect on Ireland’s 12.5 percent corporate tax rate or on any other company with operations in the country. Apple said in a statement it was confident of winning an appeal.
“The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process. The Commission’s case is not about how much Apple pays in taxes, it’s about which government collects the money. It will have a profound and harmful effect on investment and job creation in Europe.”