Apple Slapped with €13 Billion Tax Bill, Cook Promises Appeal
In “Apple Grilled Over Tax Practices” (24 May 2013), we reported on the controversy surrounding Apple’s practice of using Irish loopholes to minimize its tax bill. Now, it appears that those chickens have come home to roost, since the European Commission has concluded that Ireland illegally gave Apple up to €13 billion (roughly $14.5 billion) in tax benefits that the country must now recover.
Apple CEO Tim Cook is none too pleased with the ruling. In an open letter, he 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 opinion issued on August 30th alleges that Ireland gave Apple a special deal on our taxes. This claim has no basis in fact or in law. We never asked for, nor did we receive, any special deals. We now find ourselves in the unusual position of being ordered to retroactively pay additional taxes to a government that says we don’t owe them any more than we’ve already paid.
In the letter, Cook cited Apple’s long-lasting commitment to Ireland, dating back to 1980, and the many people it employs there. “Beyond the obvious targeting of Apple, the most profound and harmful effect of this ruling will be on investment and job creation in Europe,” he said.
Apple and Ireland both plan to appeal the ruling. “We are confident that the Commission’s order will be reversed,” Cook wrote.
The news might make tax repatriation a topic of discussion in the U.S. presidential race. The two major party candidates have differing views on bringing that money to the United States: Republican candidate Donald Trump has proposed a drastically lower corporate tax, which would theoretically discourage offshoring of profits, while Democratic candidate Hillary Clinton has proposed a series of measures to discourage companies from offshoring profits in the first place.
The U.S. government, often at odds with Apple over issues like encryption, is not happy with the EU’s decision. The White House and the Treasury Department both warned that it could damage U.S.-EU relations. The Business Roundtable called it an “act of aggression.” “Above all, this is yet another reason why we need to fix our tax code,” said Republican House Speaker Paul Ryan. High-ranking Democratic Senator Chuck Schumer echoed Ryan’s sentiments. But while both parties might agree on the concept of tax reform, we’ll see if they can work together sufficiently to enact real reform.
Here's an interesting article about Ireland's dim view of this situation (since they don't want to scare away foreign companies).
It's also important to note here that the rate of 12.5% is perfectly legal and the EU has no objection towards the Irish setting the rate that way. What the EU does object to is Ireland setting the rate at 12.5% for everybody, but then letting a few sweethearts (e.g. Apple) off the hook with way less. That's considered an illegal government subsidy and rightly so. Apple doesn't need the Irish government's help to make money as we all know.
Just yesterday Tim Cook was quoted in an interview saying that in 2014 Apple paid $400M in corporate taxes in Ireland according to their 12.5% corporate tax rate.
But here's my problem. If Apple made only $3.2B profit (not revenue!) in all of the EU (they have chosen to account for all of their EU profits in Ireland) in 2014 then $400M would amount to 12.5%. Only, I remember they made substantially more than $3.2B in the EU in 2014 - by a large margin. It appears to me they are indeed not paying their fair share (12.5%).
According to the EU-Commission Apple is paying 0.005% taxes on the EMEA countries and Asia.
Apple profits because of their use of:
- educated workforce
- and much government supported research
And do they return to the societies they profit from?
And there is talk of an Irexit. Time to re-visit the long proposed economic association/union of these United States, Canada, the UK, Ireland, Australia, New Zealand and other English-speaking countries. Let Germany & France subjugate the smaller European countries. They both failed trying to do it by themselves over the last 225 years; together they just might succeed.
This kind of heavy handedness is one very big reason why the UK is leaving the EU. The EU has no business meddling in the tax laws of member states. The Irish are fine with the amount of taxes they collected. It simply is no business of the EU. They are going to lose more and more countries if they don't pull back on their desire for power of total control of the member countries. They are sovereign countries and the EU needs to remember this.
Those sovereign governments signed an agreement with each other. So, no, it's not the EU randomly coming in and causing problems. And if IREXIT/BREXIT happens, how long before Apple pulls out because its Irish branch no longer has access to the European market?
The EU isn't meddling in "tax laws". Ireland cannot offer Apple a deal no other Irish tax payer can get. That's an illegal government subsidy. And that's what the EU is after.