Apple Ordered To Pay Up To $14.5 Billion In EU Tax Clampdown

Apple Ordered To Pay Up To $14.5 Billion In EU Tax Clampdown

The European Commission has concluded that Ireland granted undue tax benefits of up to 13 Billion Euros to Apple. This is illegal under EU state aid rules, because it allowed Apple to pay substantially less tax than other businesses. Ireland must now recover the illegal aid.

In charge of the competition policy Commissioner Margrethe Vestager said: “Member states cannot give tax benefits to selected companies – this is illegal under EU state aid rules. The Commission’s investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years. In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1% on its European profits in 2003, down to 0.005% in 2014.”

Ireland May Have The Last Laugh

In response to the Apple decision, Tom Wesel (Partner at tax consultancy Milestone) added: “On the one hand, the EU Commission is acting as a white knight for international tax justice. On the other, it is using EU law to bully Ireland and other smaller EU countries in not competing on taxes in ways the Commission would never have dared to try with the UK in the past.

“Formally, the success of any appeal by Apple or the Irish government will depend on whether Ireland’s claims that there was no selectivity involved in enabling companies to pay almost no tax on their profits is true.

“In reality, the fight is about the EU Commission trying to prevent multinationals from being given tax breaks by smaller EU countries that deprive other EU states of their ability to tax profits they see as having been earned in their countries. The Commission is pushing the limits of EU law to give itself more clout.

“But it looks as though Ireland may have the last laugh. The Irish have already come up with a new form of tax break – The Knowledge Development Box – which will leave knowldege based multinationals such as Apple paying just 6.25% tax in Ireland on much of their profit earned throughout the EU, complying both with the EU state aid rules and the latest OECD anti-avoidance rules.

“Perhaps the Irish government will therefore end up with a one-off windfall of 13 billion Euros ad still get to keep its US multinationals.”

 

From the October 2016 issue of International Accountant

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