Apple’s love-in with Ireland has come to bitter end after the European Commission ruled that the US firm’s Irish tax benefits are illegal and that Ireland should recover up to €13bn (£11bn) from Apple in back taxes.
After a three-year investigation, the Commission ruled that Ireland enabled the company to pay substantially less than other businesses, in effect paying a corporate tax rate of no more than 1%.
Ireland and Apple both said they disagreed with the record penalty and would appeal against it.
“Member states cannot give tax benefits to selected companies – this is illegal under EU state aid rules,” said Commissioner Margrethe Vestager. “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,” she added.
The standard rate of Irish corporate tax is 12.5%. The Commissions’s investigation concluded that Apple had effectively paid 1% tax on its European profits in 2003 and about 0.005% in 2014.
In response, Apple said: “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.
“Apple follows the law and pays all of the taxes we owe wherever we operate. We will appeal and we are confident the decision will be overturned.”
Louise Gracia, a professorial teaching fellow in the Accounting Group of Warwick Business School reckons the ruling sends a warning to countries that facilitate hard-edged corporate tax minimisation strategies.
She added: “It raises some bigger issues beyond the tax practices of Apple, not least the tension created by EU encroachment into the tax practices of individual member states.
“It also shines a spotlight on the paltry levels of corporate tax that large multinationals are actually paying. Even if we accept the job and wealth creation arguments put forward by multinationals as mitigation against tax liability, this has to be within reason.”
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