Apple is facing a bill of €13 billion (around $14.5 billion) after the European Commission ruled that Ireland granted the company illegal tax benefits. Ireland permitted Apple to pay "substantially less tax than other businesses", and the Commission has decided that not only is this illegal, but the money must be recovered.
A three-year investigation concluded that Apple was paying corporation tax of just 1 percent in Ireland. The tax arrangement meant that Apple's tax bill was "artificially lowered" -- down to as low as 0.005 percent in 2014. Ireland is used by many technology companies for its favorable tax rates, but the European Commission's ruling could have implications not just for Apple, but for its rivals and contemporaries.
The investigation into Apple found that the company's Irish operations had been structured in such a way to make it appear that the vast majority of sales profits were generated by 'head offices' that, in the Commission's view, existed only on paper. Channeling money through fictitious head offices in this way meant that these profits were not subject to any tax whatsoever.
In a statement, Commissioner Margrethe Vestager, in charge of competition policy, 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 percent on its European profits in 2003 down to 0.005 per cent in 2014.
The Commission has decided that Apple must repay the missing taxes. "Ireland must now recover the unpaid taxes in Ireland from Apple for the years 2003 to 2014 of up to €13 billion, plus interest".
Ireland, however does not agree with the decision. The country's finance minister, Michael Noonan, said:
I disagree profoundly with the Commission. 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.