Apple pays €14.3 billion Irish tax bill amid ongoing appeal over EU tax grab

“Ireland has collected €14.3bn in disputed back taxes and interest from Apple, more than two years after Brussels decided that the tech giant’s sweetheart tax deal with the country violated EU law,” Rochelle Toplensky reports for The Financial Times. “Paschal Donohoe, Ireland’s finance minister, announced on Tuesday that his government had recovered €13.1bn in back taxes and €1.2bn in interest from the iPhone maker. The money will be held in an escrow account pending Dublin’s appeal against the ruling.”

“Mr Donohoe said: ‘The government fundamentally disagrees with the [European] Commission’s analysis in the Apple state aid decision and is seeking an annulment of that decision in the European courts,'” Toplensky reports. “He said that as a committed EU member Ireland had ‘always confirmed that we would recover the alleged state aid.'”

“EU competition commissioner Margrethe Vestager concluded in 2016 that the iPhone maker’s tax arrangements, which she said resulted in a tax rate of less than 1 per cent, were illegal under the bloc’s state-aid rules. Brussels ordered Dublin to recover the back taxes with interest,” Toplensky reports. “The original Apple decision attracted claims of anti-American bias and the final payment comes amid transatlantic tension over trade and a proposed EU tax on digital services. Both Ireland and Apple deny the charge and have appealed Ms Vestager’s decision to the European courts.”

Read more in the full article here.

MacDailyNews Take: This EU clawback travesty should be overturned.

Last November, Apple released the following facts about Apple’s tax payments:

Apple believes every company has a responsibility to pay its taxes, and as the largest taxpayer in the world, Apple pays every dollar it owes in every country around the world. We’re proud of the economic contributions we make to the countries and communities where we do business.

We’re presenting the facts on this page in response to reporting by the International Consortium of Investigative Journalists. Among the inaccuracies in these reports:

• The changes Apple made to its corporate structure in 2015 were specially designed to preserve its tax payments to the United States, not to reduce its taxes anywhere else. No operations or investments were moved from Ireland.

• Far from being “untouched by the United States,” Apple pays billions of dollars in taxes to the US at the statutory 35 percent rate on investment income from its overseas cash.

• Apple’s effective tax rate on foreign earnings is 21 percent — a figure easily calculated from public filings. This rate has been consistent for many years.
Last month, in response to questions from the ICIJ, the New York Times and others, Apple provided the following statement:

The debate over Apple’s taxes is not about how much we owe but where we owe it. As the largest taxpayer in the world we’ve paid over $35 billion in corporate income taxes over the past three years, plus billions of dollars more in property tax, payroll tax, sales tax and VAT. We believe every company has a responsibility to pay the taxes they owe and we’re proud of the economic contributions we make to the countries and communities where we do business.

Under the current international tax system, profits are taxed based on where the value is created. The taxes Apple pays to countries around the world are based on that principle. The vast majority of the value in our products is indisputably created in the United States — where we do our design, development, engineering work and much more — so the majority of our taxes are owed to the US.

When Ireland changed its tax laws in 2015, we complied by changing the residency of our Irish subsidiaries and we informed Ireland, the European Commission and the United States. The changes we made did not reduce our tax payments in any country. In fact, our payments to Ireland increased significantly and over the last three years we’ve paid $1.5 billion in tax there — 7 percent of all corporate income taxes paid in that country. Our changes also ensured that our tax obligation to the United States was not reduced.

We understand that some would like to change the tax system so multinationals’ taxes are spread differently across the countries where they operate, and we know that reasonable people can have different views about how this should work in the future. At Apple we follow the laws, and if the system changes we will comply. We strongly support efforts from the global community toward comprehensive international tax reform and a far simpler system, and we will continue to advocate for that.”

More Information About Apple’s Tax Payments

Throughout its history, Apple has designed new products — and established entirely new industries — by focusing on innovation. That hard work and dedication has led to the creation of revolutionary products and services that have profoundly improved people’s lives and created millions of jobs around the world.

Taxes for multinational companies are complex, yet a fundamental principle is recognized around the world: A company’s profits are taxed based on where value is created. The Organisation for Economic Co-operation and Development, Ireland, the United States and others all agree on this principle.

1. Apple is the largest taxpayer in the world, paying over $35 billion in corporate income taxes in the last three years. Apple pays taxes in every country where we sell our products.

When a customer buys an Apple product outside the United States, the profit is first taxed in the country where the sale takes place. Then Apple pays taxes to Ireland, where Apple sales and distribution activity is executed by some of the 6,000 employees working there. Additional tax is then also due in the US when the earnings are repatriated.
Apple’s worldwide effective tax rate is 24.6 percent, higher than average for US multinationals.

2. The vast majority of the value in Apple products is created in the United States, where design, development, engineering work and more are accomplished. So under the current international tax system, the majority of Apple taxes are owed to the US.

In a white paper last year, the US Treasury expressed concern over European regulators’ attempts to tax money that is owed to the US. “To the extent that such foreign taxes are imposed on income that should not have been attributable to the relevant Member State, that outcome is deeply troubling, as it would effectively constitute a transfer of revenue to the EU from the US government and its taxpayers.”

3. Apple has cash overseas because that’s where it sells the majority of its products. Under the current tax system, post-tax earnings from foreign sales are subject to US tax. Apple has earmarked more than $36 billion to cover US deferred taxes. This is in addition to the $35 billion the company paid in corporate income taxes over the past three years.

4. Apple has been operating in Ireland since 1980 when Steve Jobs looked for a base to expand outside the US. The facility in Cork, Ireland started with 60 employees and now has over 6,000. Apple’s innovation and investment supports a further 12,000 jobs across Ireland. And across Europe, Apple supports more than 1.5 million jobs.

When Ireland changed its tax laws in 2015, Apple made changes to its corporate structure to comply. Since then, all of Apple’s Irish operations have been conducted through Irish resident companies. Apple pays tax at Ireland’s statutory 12.5 percent.

As part of these changes, Apple’s subsidiary which holds overseas cash became resident in the UK Crown dependency of Jersey, specifically to ensure that tax obligations and payments to the US were not reduced. Since then Apple has paid billions of dollars in US tax on the investment income of this subsidiary. There was no tax benefit for Apple from this change and, importantly, this did not reduce Apple’s tax payments or tax liability in any country.

5. Apple believes comprehensive international tax reform is essential, and for many years has been advocating for simplification of the tax code. Reform that allows a free flow of capital will accelerate economic growth and support job creation. A coordinated legislative effort internationally will remove the current tug of war between countries over tax payments and ensure certainty of law for taxpayers.

Read Fortune’s independent explanation of Apple’s tax payments and how they illustrate the complexity of the international tax system.

Source: Apple Inc., November 6, 2017

SEE ALSO:
Apple $1.8 billion tax arrears payment eases EU pressure on Ireland – May 18, 2018
Apple declines invite to EU hearing, cites appeal against EU tax clawback – June 1, 2018
Apple $1.8 billion tax arrears payment eases EU pressure on Ireland – May 18, 2018
Apple to fight EU Irish tax clawback without U.S. support role – May 17, 2018
Ireland, Apple appeal over EU tax clawback gets timeframe – April 24, 2018
EU says Ireland’s Apple complaint will only be dropped if it takes the full $16 billion in tax clawbacks – February 27, 2018
Ireland expects final disputed Apple bill remaining around $16 billion – February 22, 2018
EU court rejects U.S. government intervention in Apple’s Irish $15 billion tax case – December 15, 2017
EU sues Ireland over $15.3 billion tax clawback from Apple – October 4, 2017
Ireland opposes EU’s 13 billion euro Apple tax grab, calls it unjustified – August 17, 2017

43 Comments

  1. The approximate $15 billion given to Ireland could have been invested in the United States to create a new industry: maybe the long term production of the A series chips.

    I say bomb them until they give us the 15B back. I’m thinking about 6 B-2 sorties and the “check will be in the mail”. 🙂

    1. Ok, who are you going to bomb?

      A. Ireland, which has the money but doesn’t want it, and is on Apple’s side in the lawsuit; or

      B. The European Commission (the executive branch of the EU) which does not have the money and has no prospect of getting any of it, but is Apple’s adversary in the lawsuit.

      This has always been about tax policy, and has never been about the money. Apple can deduct its Irish taxes from what it owes the US, so it doesn’t actually have as much at stake as the Irish Republic. That government thinks that preserving its power to enter deals like this is worth losing $15B over.

      1. It’s ALLWAYS “about the money”.

        Who am I going to bomb? Well there is two chioces- 1) the Irish government to deprive them of their “power” that you say they are trying to “preserve” or 2) if I really wanted to hurt them about 100 Irish Pubs. 🙂

        I’m kind of shocked that y’all took the second part of my comment seriously which was TOTALLY in jest. But the real shocking thing to me is y’all seem to discount the first part that I’m DEADLY serious about. There is absolutely NO reason that Apple could not create a series of industries to manufacture the ENTIRE iPhone (and ALL their products) here in the US to compete with ANYONE in the world on both quality, quanity, and PRICE. That you’re all conditioned to think what I just said is NOT possible is the real problem. Think different.

      2. Rp,

        What you say about US manufacture may be true, but it is irrelevant to this dispute. The income the EU wants to tax was earned from SELLING devices in Europe, not from making them there. The taxes due Ireland from selling phones made in the US would probably be even higher than the tax on China-made phones.

        1. It’s Apple’s money.

          What I’m saying is it would be better for Apple to invest in Americans than to pay Irish taxes. Better for Apple, better for Americans, better for Apple customers and, yes, better for the Irish people too. At some point, it will be important for productive capacity to be in countries that are representative republics based capitalist economic systems. I believe we are at this point now. The job of politicians should be to recognize this and adopt policies that make this happen. In a broad sense governments should protect life and property and facilitate commerce. It the Apple/Irish tax dispute the (non) actions US government has violated two of those. A minor violation of the third one of those would quickly rectify the situation. (That’s a joke, son, I said a joke). 🙂

          1. Again, there isn’t a dispute between Apple and Ireland. They are on the same side. The other side is the European Commission, which is not seeking any of Apple’s money for itself. The US government and politicians have no role in the dispute, aside from general support for an American company. Neither Ireland nor the USA have taken any actions relative to this dispute that fail to protect life and property or facilitate commerce.

            The only way to avoid non-American income taxes would be to avoid making money outside the US, where Apple currently earns 60% of its income. The location of its manufacturing capacity, whether in the US or China, makes no difference to Ireland, the EU, or any other third country, so long as Apple pays appropriate Irish taxes on the income attributable to its Irish operations.

            Ireland has no duty—or ability—to tell Apple where to make its devices. The US has no right—or ability, aside from bombing or bullying—to dictate the Irish tax system or the EU rules under which it operates. Apple cannot avoid paying taxes on its sales by relocating its production. Please explain why you seem to disagree.

            1. It’s Apple’s money. It isn’t ANY European government’s money. They can dream up ANY “tax” they want, it’s still extortion.

              A better use of the money would to bring it home and invest it in Americans.

              Maybe some bombing and/or bullying IS required to get the point across, there seems to be some slow learners.

            2. Tax grab “extortion” is exactly what is going on here. They know where the money is, those greedy capitalist big companies not paying their “fair share”…

            3. Rp, This is the sort of Ugly American behavior that the rest of the world hates. Hell, any decent American hates the criminal arrogance of thinking that an American company has the right to make 60% of its income in other countries without paying a dime towards the government services that make it possible to do business there. If the Apple headquarters in Cork catches fire, who do think is going to put it out, the local fire brigade or some American pissing on the flames?

              If you don’t like taxes, don’t pay them. In fact, write a letter to the IRS telling them that you intend to break the US tax laws. Perhaps you will get an invitation to the White House to thank you for accepting the protection of government your whole life at the expense of other citizens who don’t expect something for nothing. I doubt it, just as I doubt that any other country is going to let Apple consume services and make money off its citizens without paying taxes.

    2. Apple got a sweatheart tax deal from Ireland, which was illegal. Just as illegal as if the government in the US gave an individual person 95% off their income tax rate, yet other didn’t get the same.

      You cannot violate the Tax Act and expect nothing will happen. Apple and Ireland colluded and now they’re paying. It’s a simple case, and fanboys can’t wrap their heads around this.

      If this was Alex Jones’ company or Microsoft or Facebook or Google you’d all be going crazy and screaming for them to pay up.

      1. If you’re so right, then why is this case still in appeal?

        My understanding is that profits on Irish income is taxed at Ireland’s corporate tax rate of 12%. It’s the profits that are coming from other countries that pass thru Ireland that are considered “stateless” and are not taxed by Ireland. That’s what led to the low overall tax rate.

        Those profits, are presumably taxed by the US Treasury, and now that US tax reform has passed, they are. That’s why Apple is paying $35B to the US Treasury. That income has now been taxed. Apple has accounted for that tax for years on their books.
        What the EU Competition Committee did was to pretend that the US tax on foreign income did not exist, even though Apple had already set aside taxes for it. It was all grandstanding to make Apple and other US tech companies look bad. That’s why the US gov’t supported Apple. When Apple pointed out those facts, the EU said, since the taxes were deferred and not yet paid, they could pretend they would never be paid.

        Well, alot has changed since then. Tax reform has passed and Apple is on the books for paying $35B. Do you think the EU will change some of their more inflammatory comments about taxes and tax rates paid?

      2. “Apple got a sweatheart tax deal from Ireland, which was illegal.”

        That’s for the courts to decide and according to law may be correct.

        Back in my home state international companies make low tax deals that last decades to relocate and create jobs in huge industrial parks.

        No, not every company is offered the same deal, but it perfectly legal and the programs touted by local politicians and approved by state government laws. Guess the EU is behind the times.

        I do agree the hypocrisy of leftist fanboys is absolutely stunning in their double standard SILENCE. But then again, we all know it is their daily MO …

        1. My guess is that your home State hasn’t seen a war on its own soil since at least 1865. The men who have directed the EU over the last 70 years mostly saw WW II first hand. The founders saw WW I first hand as well. They were of the opinion that competition between businesses is a very good thing, but that competition between nations could get tens of millions of people killed.

          Therefore, they put limits on the sort of state aid that members could offer individual companies, and further promoted a level playing field by dropping barriers to international commerce. That promoted capitalism and free enterprise while reducing the inducements to international conflicts that could lead to another war. It’s a different set of priorities than the set in which tax incentives operate in the US.

    3. Escrow, it’s in escrow, not “given” to Ireland to use. It’ll stay in escrow until the appeal and any subsequent legal action is settled. The EU competition committee spokesperson just declared victory and went home, not because they won the case, but because they want it to appear that way. The case is far from settled. Apple just put the money in escrow, after Ireland took an age to find an appropriate manager for the account.

      This story is much ado about nothing. It’s just another step in the legal process. Further, this means little to Apple, as that money would either go to the US Treasury or to the Irish Treasury.

  2. “which she said resulted in a tax rate of less than 1 per cent, were illegal under the bloc’s state-aid rules” –EU competition commissioner Margrethe Vestager

    Of course, that was never the case since Apple’s US tax on foreign income was deferred. Now that tax reform has passed, Apple will be paying $35B on its foreign income. Do you think Margrethe will restate her false arguments, based upon the present facts? No, didn’t think so.

    1. The EU does not care, and never has, how much tax anybody pays the US. It does not even care how much they pay within the EU; a 0% rate, applied uniformly, would be perfectly OK. Their only concern is whether one member state is using its tax laws to effectively subsidize individual companies in ways that give them an unfair advantage against companies elsewhere in the Union. Such state aid would violate the basic principle—of a free international market in goods, services, capital, and labor—that has guided the EU and its predecessor organizations for nearly 70 years.

      Everyone, including Apple and Ireland, accepts that principle. The dispute is not over the law embodied in the European treaties, but over the fact question of whether the specific breaks enjoyed by Apple are lawful under that principle. That is the question being litigated in the EU judicial system. I hope Apple wins, but whether it does or does not, this is primarily a policy dispute between Europeans and not some sort of attack on America or American companies like Apple. The best evidence of that is that Apple’s closest ally in the litigation, the Republic of Ireland, has the most to lose financially if it wins in court.

      1. Everything can be construed, and has been, as an attack on America. China, the European Union, North America, Antarctica, all anti-American. It doesn’t gibe with what I was taught in school or what I learn from news reports, but that’s probably because textbooks and publishers, along with reporters and media moguls, are corrupt. I’m probably anti-American myself since I possess dual citizenship, a suspect who could jump ship at any moment – which could be good or bad depending on my party affiliation. If I moved to Ireland and stopped voting in U.S. elections, as a democrat it would be good riddance, as a republican it would be a betrayal, as an independent it would be cowardly. Guess I’ll stick around.

        1. TxUser: Thanks for your perspective. That is the issue as I understand it as well. That’s why I’m waiting. Apple will appeal it to the end, maybe settle but it’s an internal situation with the EU and Apple. Apple after all is a global entity.

          Herself: Everything can be construed by just about anyone but everything is being construed by Americans as an attack, as opposed to say constructive criticism.

          You know my beef, you sign the UN Human Rights thingie and you go ahead and torture, circumvent the Geneva convention and WTF are you doing in Iraq? That can be construed as an attack, sure be as paranoid as possible. However it can also be construed as the observation of an attack as part of an ensemble of a constructive critique.

          For the rest of it, yeah stick around, the chump is having a field day. You could not write a better soap opera. I can’t wait to see “Tweeting Trump” coming soon to a theatre near you.

          1. It’s the ultimate reality show, better than television reality shows like Survivor or The Apprentice that need to be rigged, like pro wrestling, in order boost ratings.

            It’s still a reality show but one that is pretty hard to rig, when you keep firing the talent and ignore your producers, and the fake news media keep screwing with your ratings.

            Also, when the Ross ice shelf breaks off from Antarctica, it’s construed as part of an attack by leftist scientists promoting climate change, a known Chinese Communist hoax to undermine the primacy of American industry.

            1. Herself,

              You got that right, but your country is famous for its whines, insults and baseless accusations so it’s not too hard to keep that show going if one wants to and hey your country’s government certainly is portraying that lack of integrity and morality.

              The chump exudes that, and he can make the country rich in material goods but it doesn’t change the fact that he doesn’t have what it takes to close Gitmo or stop the genocide in Iraq. It provides a field day for your fake news and nothing burgers and a venue to continue your country’s terroristic acts against humanity.

              When it comes to climate change, well go ahead, bad mouth the world, at your risk. Frankly you should consider changing your terrorist nation’s name from US to VS cause you appear to be set on being against everyone, except those who you wish to emulate. Tyrants come to the forefront and it’s an excellent continuation of your post 9-11 fall down the rabbit hole.

              It’s going to be a hard fall when you hit rock bottom but don’t worry, those from the free and civilized world will be there to help you when and if the time comes. After all we aren’t from a terrorist nation.

              Gaia! Gaia! Gaia!

            2. “The chump exudes that, and he can make the country rich in material goods but it doesn’t change the fact that he doesn’t have what it takes to close Gitmo or stop the genocide in Iraq.”

              If anyone is a “chump” here it is YOU the elitist chump from a deadbeat nation that does not pay its fair share of NATO. Worse, you have no problem with that sitting on your throne Mr. Morality King sneering down your nose at the USA.

              Now, please tell the rest of the class what your civilized superior moral country is doing to “stop the genocide in Iraq” and why the responsibility is 100% on the USA while you skate free? Let’s see, NOTHING except loud and proud cowards with no answer.

              Also, tell the class since when is it President Trump’s responsibility to close Gitmo?!? Obama vigorously campaigned on the issue and promised to close it down as one of his FIRST acts as president. Pay attention: Obama did NOTHING in eight years. I don’t recall one word of complaining from you or any other liberal here. I don’t recall one word of President Trump promising to close it down either. Possibly the president should look into expanding the facility to house the most dangerous ISIS criminals and other dangerous terrorists in the world. That makes perfect sense.

              Now for the broken record false accusation you won’t let go. “It provides a field day for your fake news and nothing burgers and a venue to continue your country’s terroristic acts against humanity.”

              You were asked politely dozens of times by countless commenters here to stop polluting this forum with INSULTING AD HOMINEM ATTACKS on USA citizens. Mr. tone-deaf you were asked politely to take it elsewhere and you don’t listen. So in return, don’t expect us to honor your fantasy requests or more importantly, listen to YOU …

              USA! 🇺🇸 USA! 🇺🇸 USA! 🇺🇸

            3. LOL, the arguing over climate change has nothing to do with whether it’s real or not. It’s to do with who pays for it. That’s what the politics of denial is about. Further, the Paris Accord is voluntary. Even if it weren’t, anyone who’s studied economics knows that countries will cheat, as well as the concept of “free riders”.

              And, even if the Paris Accord were agreed to, the climate wouldn’t get better, it’ll get worse, as it would only hopefully delay the temperature rise and cap further increases at 2 degrees C. It’s just a kick the can down the road agreement.

              Real action and change won’t happen until things get alot worse. Sadly. That’s the way of politics.

          2. I don’t appreciate you flipping off and dissing our hard working president who has turned the USA economy around and achieved RECORD numbers. If there are any “chumps” here, look in the mirror …

            1. You know GeoB, I can almost respect his spunkiness on trade matters.
              But if I need surgery, I don’t have it performed by a salesman.

              There is so much more to the Presidency than trade….
              First and formost, belief in our democratic institutions.

            2. I cringe at times of the words and actions of the president. But we had perfect behavior the last eight years and where did it get us? Economy and hope and change in the toilet. Could not care less about awarding PC style points. The man gets the job done and it is nothing short of remarkable…

    1. For at least the 25th time, this isn’t a “tax grab.” Ireland isn’t grabbing; it agrees that Apple should keep the money. The EU isn’t grabbing, either; under no scenario will this lawsuit result in the EU or its non-Irish member states (or any of their institutions, employees, or politicians) receiving a single euro aside from the reimbursement of their court costs.

          1. No, because you are still lying when you claim that the EU is grabbing billions. It isn’t grabbing, or trying to grab, a dime and you haven’t shown otherwise. Didn’t you learn in church that lying is a sin? It doesn’t become a virtue just because some politician has made it fashionable.

            1. I don’t like shouting, but…

              NOBODY HAS TAKEN THE PARTIES TO COURT TO GET THEIR HANDS ON THE MONEY!

              The EU has filed suit to force Apple to pay money to Ireland, which does not want it. If the EU wins. it will not “get its hands on the money;” Ireland will have it. Yes, Ireland is in Europe, but its money is no more “in the hands” of the EU than the money in Apple’s Irish bank account.

              If the EU loses. it will not “get its hands on the money;” Apple (or the US Treasury) will have it. They are the only ones who actually want the money.

              So, get a grip yourself. The lawsuit is fairly simple. Why can you not understand it?

            2. “The EU has filed suit to force Apple to pay money to Ireland”

              Yes, I know the details just enjoy driving you anal batsh*t after you insult me.

              Ireland does not want the money. So what business is it of the EU to nullify an agreement through a lawsuit? Awh, let me guess small island Ireland does a better creative job of attracting the world’s largest business than the snob high tax leader states of the EU. Too bad.

              That said, you want Apple to win and so do I …

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