Apple is facing a huge tax bill in Ireland. The multi-billion dollar company was ordered this week to pay a record-breaking €13bn in back taxes to Ireland.
The European Commission made the ruling after a three-year investigation that found Apple had only paid $55 in taxes for ever $1.12 million it made in European profits. That essentially made its tax rate 0.0005 percent for the year 2014. The usual rate for corporation tax in Ireland is 12.5%. The €13bn owed equates to roughly $14.5 billion USD.
According to the commission, Apple and Irish tax authorities entered into an illegal tax deal that was allowing Apple to pay a minimum tax rate of just 1%. The deal violated rules on state aid.
The complex agreement had Apple shifting their profits on products sold in other countries, where the tax rate is 12.5 percent. Then from Ireland profits were shifted to a “head office” not based in any country, that did not have employees or own premises, and had no economic activity, so that Apple could pay an even lower tax rate. The “remaining vast majority of profits were allocated to the “head office”, where they remained untaxed.”
European Union commissioner Margarethe Vestager stated, ““Member States cannot give tax benefits to selected companies – this is illegal under EU state aid rules. This is not a penalty, it is an unpaid tax.”
Apple CEO Tim Cook was not happy about the news, stating that it has “serious, wide-reaching implications” for other companies:
“Beyond the obvious targeting of Apple, the most profound and harmful effect of this ruling will be on investment and job creation in Europe. Using the commission’s theory, every company in Ireland and across Europe is suddenly at risk of being subjected to taxes under laws that never existed.”
The US Treasury says the ruling could damage “the important spirit of economic partnership between the US and the EU.” Both Apple and the Irish government have vowed to appeal the decision.