EU demands Apple pay massive $14.5 billion in taxes plus interest

“EU antitrust regulators ordered Apple on Tuesday to pay up to 13 billion euros ($14.5 billion) in taxes plus interest to the Irish government after ruling that a special scheme to route profits through Ireland was illegal state aid,” Foo Yun Chee reports for Reuters. “The massive sum, 40 times bigger than the previous known demand by the European Commission to a company in such a case, could be reduced, the EU executive said in a statement, if other countries sought more tax themselves from the U.S. tech giant.”

“‘Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years,’ said Competition Commission Margrethe Vestager, whose crackdown on mainly U.S. multinationals has angered Washington which accuses Brussels of protectionism,” Chee reports. “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.”

“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,” Chee reports. “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.'”

“Apple employs 5,500, or about a quarter of its Europe-based staff, in the Irish city of Cork, where it is the largest private sector employer. It has said it paid Ireland’s 12.5 percent rate on all the income that it generates in the country,” Chee reports. “Ireland’s low corporate tax rate has been a cornerstone of economic policy for 20 years, drawing investors from multinational companies whose staff account for almost one in 10 workers in Ireland.”

Read more in the full article here.

MacDailyNews Take: There were no “illegal tax benefits” granted to Apple by Ireland.

The EU is playing with fire.

Newsflash: Corporations don’t pay taxes, you do. “Corporate taxes” are simply passed along to the consumer. It’s how the government sneakily double-taxes its citizens. You’re taxed on your income and then again on what’s left via higher prices across the board.MacDailyNews Take, December 4, 2015

There was no special deal that we cut with Ireland. We simply followed the laws in the country over the 35 years that we have been in Ireland. If the question is, was there ever a ‘quid pro quo’ that we were trying to strike with the Irish government – that was never the case. We’ve always been very transparent with the Irish government that we wanted to be a good corporate citizen.Apple CFO Luca Maestri, September 2014

SEE ALSO:
Apple CFO Maestri: Despite EU tax ruling, we will continue to invest in Ireland – August 30, 2016
Apple CEO Cook blasts European Commission for ‘ignoring Ireland’s tax laws, upending the international tax system’ – August 30, 2016
European Commission to rule Ireland’s tax arrangement with Apple illegal – August 29, 2016
Ireland prepares for a fight with EU over Apple tax clawback – August 29, 2016
U.S. government warns EU: Do not hit Apple with a massive back tax bill – or else – August 25, 2016
European Commission denies anti-U.S. bias after U.S. Treasury intervention over Apple, Amazon tax probes – August 25, 2016

31 Comments

    1. Apple sold hundreds of thousands of products worldwide from a subsidiary in Ireland – making *billions* of Euros.

      It then transferred all that money to a head office which was physically located *nowhere* – which Ireland allowed. Being nowhere, it paid *no* corporation tax.

      The only corporation tax paid was on a declared 50 million euros – of which 10 million euros were paid in tax – which amounted last year to a corporation tax rate of 0.005%.

      1. You need some remedial math classes Josh. Your numbers indicate a profit of 2 billion euros in the applicable taxing zone last year. Care to back that up? You claim Apple only paid tax on 50 million euros at a rate of 20%. Then you through out your claim of a .005% real rate. You are missing all back up and have zero facts (in your comment) that validates your rant. Additionally, there is no office “nowhere” and no such thing as revenue not routed through a geographic location.

        Additionally, You seem to know next to nothing with respect to tax domiciles and the geographic assignment of revenues. Also, nothing Apple did was contrary to any laws and the options taken by Apple are available to and in use by just about any other multi-national corporation. If the EU has a legitimate beef, it is with the Irish government, not Apple.

  1. The EC knows Apple has vulnerable, lightweight leadership. They would have never pulled this stunt on Jobs.

    That why you should NEVER allow a political pansy to run the show.

    1. Really? If, as the article said, Apple paid 0.005 in taxes in 2014 and 1 percent in 2003 I suspect God, never mind Steve Jobs, wouldn’t have been able to get out from under.

  2. Ah here it is. Great, fire is one of the things that brought the cave man out of the cave. Torture on the other hand is one of the things that brings you back into the cave.

    Nice to know who is playing with what.

      1. It’s an analogy. There is the investigation run by the European Commission into Apple and Ireland’s taxes. Both are expressing themselves in the respective courts of law, fine and dandy.

        There are those expressing their opinions on the subject, again fine and dandy. One of the opinions expressed is that the EU is playing with fire that what they are doing might be harmful, or beneficial depending on how you see fire but in the context given playing with fire is detrimental. It is however a detriment of their own choosing, free will so to speak.

        The not so fine and dandy is the third party, that nation that has recently returned to torture that has threatened the whole justice system. The treasury of that nation has made the following proposal “It urged the EU to give up on its pursuit of the companies, saying it’s considering unspecified “potential responses” if Brussels doesn’t change course.”

        That’s a threat, a threat against having any investigation whatsoever. It’s not surprising seeing as justice denied is part and parcel of their approach.

        With the analogy, those who play with fire risk destroying their house, but it’s their free will to do so. On the other hand, those who play with torture risk destroying the house of others, removing the free will of others.

        I hope that helps.

        1. The confusion is that there is no threat. Apparently Apple was virtually paying no tax in Ireland, which is why the that metaphor of playing with fire isn’t a particularly good one.

          And I have read your response, and still don’t get the whole ‘torture’ thing.

          1. Thanks for being persistent, I can respect that. I’ll give it another shot.

            There is a threat, that’s the premise.

            The treasury of Apple’s home nation has made the following proposal “It urged the EU to give up on its pursuit of the companies, saying it’s considering unspecified “potential responses” if Brussels doesn’t change course.”

            That’s different than a warning. A warning is more like “if you play with fire the fire might burn you.” You are pointing out the consequences, that’s it. That’s a lot different than saying “if you play with fire we’ll come torture you.” This latter situation is a threat. Now I use torture as an analogy because of it’s unique characteristic with the country that Apple calls home (most countries evolve or have evolved away from torture whereas that country is devolving to it.)

            It’s a threat, if you don’t see it, then that’s OK, consider it a difference of opinion.

            Either way, have a great day.

  3. This seems right and appropriate to me. Apple had made a deal with Ireland to pay an absurdly-low tax rate. Ireland was part of the EU, which has regulations to prevent some member countries from ‘poaching’ corporations away from other countries by offering internally legal tax rates, but rates which violate EU provisions. The EU is now demanding that Apple pay a reasonable back tax rate.

    I don’t see the problem. National sovereignty isn’t sacred; it’s just a legacy from the eighteenth century. The EU seems an effective and valuable counterpoint to what some coverage of this issue identifies as U.S. corporations being “masters of tax avoidance.”

    1. Exactly. I don’t see what all the whining is about here. Assuming Apple sought out a favorable tax scheme with Ireland, and they were called on it by the EU.

      Corporations have to pay their taxes, whether it’s here, or in Europe.

      1. Corporations benefit from being ‘individuals’ under the law since 1870. This works to their advantage in numerous ways, such as in their ability to own copyrighted intellectual property. MDN believes, however, that they shouldn’t be taxed as individuals (since then the people who own shares are also taxed). But it seems reasonable to me.

        Apple paid tax rates on European profits of 0.005 percent in 2014, and 1 percent in 2003. That seems … er … problematically low. No?

        1. I agree. The law, tax and otherwise, is often skewed toward corporations, but if Apple paid so little on taxes that’s a problem.

          And it accurate, it’s a reason why I take issue with the people who are quick to say that corporations in this country pay too little in taxes when it’s apparent that (If the EU is accurate, and there’s no reason to think that they aren’t) they will do whatever they can to get out from paying their fair share.

    2. I think you might have it wrong here… The agreement Apple made with Ireland was in 1991. This agreement pre-dates the EU, which was established in 1993.

      Therefore, only those who understand the difference between the taxation law of the predecessor to the EU – the ‘EEC’ – will know if the taxation put upon Apple in 2016 is, in fact, legal.

      My guess, based on TC’s response, is that the EU has shaky grounds for this ruling and they had Better be ready for some painful lessons.

      14.5 Billion dollars is approx. 10,500 employees @ $55K per year to be removed from the EU for the next 25 years… That is one way Apple can reasonably (and I mean reasonably) – recover it’s unjust penalty from the EU thieves… Or simply put – tack on $37 to every iPhone sold in the EU for the next 10 years.

    3. Where you are wrong is Ireland did not “make a deal” with Apple. No special provision/exemption/law was made on Apple’s behalf. The Irish corporate tax code was there. They wrote to allow corporations to do this in the hopes they would be drawn to Ireland and then the economic benefits of that activity would accrue. The list of multi-national companies enjoying this situation is long. Your direct claim that Ireland made a deal with Apple is complete and total BS.

      1. And how could you possible know if Ireland did or didn’t make a deal with Apple?

        I assume that you weren’t part of it, so there’s no way that you would know that.

        And since you say that there’s supposedly this huge list of companies that are making out like fat cats in Ireland, how about furnishing this list because I have a sneaking suspicion that it’s either relatively small, or doesn’t exist.

  4. The EU is high Unemployment rate: 9.6% (Apr 2015) Eurostat
    Government debt: 87.4% of GDP (2013) Eurostat
    it needs money, so it finds away to make money before the US tax holiday. Irish government needs to speak up and defense for Apple.

  5. All the reaction here (well, most of it) seems based on the premise that Apple did not make any special deals with Ireland, as well as that Ireland’s tax code is in accordance with the EU regulation. If that is the case, there is no doubt both Apple and Ireland will be vindicated. However, we can’t be entirely sure that is in fact the case.

    Apple’s operations in Ireland actually pre-date the EU. It is quite likely that Jobs and Markkula chose Ireland for their Apple manufacturing plant (this was in 1980!) for Irish favourable taxation, but at the time, their primary concern was the logistic aspect of manufacturing and distribution. Making Apple (and later Mac) computers was cheaper in Ireland than in the US, and it allowed for easier distribution for the EMEA countries.

    Once the EU was formed (out of the old EEC) and taxation harmonised across the union, it is quite possible that Apple (and other foreign corporations) continued to be taxed at the old Irish rates, rather than the new, harmonised rates.

    The point of the story is, we’ll have to see how this ends, and there is a bit more to the story than what Apple (and Ireland) say, I’m sure.

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