Apple, Ireland Balk at EU’s Bill for Back Taxes

Apple and the government of Ireland are fighting what some view as a European Union tax grab. The two recently filed a formal appeal of the EC’s decision ordering Apple to pay nearly US$14 billion in back taxes, based on its finding that Ireland had given Apple several illegal tax breaks.

The commission this summer found that Ireland had allowed Apple to determine its tax based on the activities of its subsidiary firms, Apple Sales International and Apple Sales Europe, which are incorporated in Ireland.

That tax approach allowed Apple to pay a much lower tax rate than other firms doing business in Europe, according to the EC.

Irish Eyes

The Irish government “profoundly disagrees with the commission’s analysis, and had no alternative than to file an appeal to have the entire decision overturned, according to David Byrne, a spokesperson for the Department of Finance in Ireland.

“Ireland did not give favorable tax treatment to Apple,” he told the E-Commerce Times. “Ireland does not do deals with taxpayers.”

No fine or penalty has been levied against the Irish state, Byrne said, noting that the EC explicitly stated that the decision does not call into question Ireland’s general tax system or its corporate tax rate.

“The commission will defend its decision in court,” EC spokesperson Ricardo Cardoso told the E-Commerce Times.

The U.S. Treasury Department disagreed with the EC’s findings, suggesting that the commission retroactively applied a new “State Aid” theory opposing established legal principles, challenging individual countries’ tax rules, and threatening to undermine the European business climate.

The ruling threatens to erode America’s tax base, according to the DoJ.

The department considers tax avoidance a serious problem around the world, and it will continue to work with the commission and other international partners, such as the OECD, toward the shared goal of preventing the erosion of corporate tax bases.

Apple Bites

Apple’s Irish presence dates back to 1980, when it opened its first factory in Cork, Ireland, with 60 employees, noted CEO Tim Cook in an open letter to the Apple community written this summer, after the EC handed down its decision. The company eventually expanded to a nationwide presence of 6,000 people across Ireland, the vast majority of them still working in Cork.

Apple’s presence in Cork has helped sustain more than 1.5 million jobs across Europe, Cook pointed out, held by Apple employees, app developers, smaller manufacturers and suppliers.

Apple has never asked for or received any special deals from Ireland, he insisted.

The EC’s claim that Apple paid an effective tax rate of .005 percent is “extremely misleading and deceptive,” Apple said in a note sent to investors this summer.

Apple paid $400 million in corporate income taxes to Ireland in 2014, making it one of the largest corporate taxpayers in the country, according to the note to investors. Apple paid $400 million of its current U.S. taxes on those profits, bringing the company’s total taxes paid to $800 million.

Apple’s total global corporate income tax rate that year was 26.1 percent, the company claimed.

The EC in 2013 began investigating the tax treatment of multiple companies, and early this year ruled that 35 multinational firms had received selective tax treatment that it considered illegal. Investigations into the tax treatment of McDonald’s and Amazon are pending.

David Jones is a freelance writer based in Essex County, New Jersey. He has written for Reuters, Bloomberg, Crain's New York Business and The New York Times.

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