EU hits Apple with 13 billion euro Irish tax demand

31 Aug, 2016 9:17 am

BRUSSELS/DUBLIN – The European Commission ordered Apple Inc to pay Ireland unpaid taxes of up to 13 billion euros as it ruled the firm had received illegal state aid.

Apple and Dublin said the US company’s tax treatment was in line with Irish and European Union law and they would appeal the ruling, which is part of a drive against what the EU says are sweetheart tax deals that usually smaller states in the bloc offer multinational companies to lure jobs and investment.

The US feels its firms are being targeted by the EU and a US Treasury spokesperson warned the move threatens to undermine US investment in Europe and “the important spirit of economic partnership between the US and the EU.”

Starbucks Corp (SBUX.O) has been ordered to pay up to 30 million euros ($33 million) to the Dutch state, while Amazon.com Inc (AMZN.O) and McDonald’s Corp (MCD.N) are also under investigation by the Commission, the EU’s executive arm.

Apple’s stock fell less than 1 percent.

EU Competition Commissioner Margrethe Vestager questioned how anyone might think an arrangement that allowed Apple to pay a tax rate of 0.005 percent, as Apple’s main Irish unit did in 2014, was fair.

“Tax rulings granted by Ireland have artificially reduced Apple’s tax burden for over two decades, in breach of the EU state aid rules. Apple now has to repay the benefits,” Vestager told a news conference.


Analysts said the size of the claim underlined the Commission’s aggressive stance, but since each case involves different circumstances and tax rules, lawyers said it was hard to see if further big claims were any more or less likely.

Apple, which had more than $200 billion (152.91 billion pounds) in cash and readily marketable securities at the end of June, is likely to see the case drag out for years in EU and possibly Irish courts.

Apple warned investors in a July regulatory filing that the Commission’s investigation could lead to “material” liability for further tax payments, but that it could not estimate the impact. On Tuesday the company said it expects to place “some amount of cash” in an escrow account.

Tax experts say the European Commission faces a tough battle to convince courts to back up its stand. While the EU has found that certain tax regulations are anti-competitive, it has never before ruled whether countries have applied tax regulations fairly in the way it has with Apple, Starbucks and others.

As a result, some lawyers and accountants said they doubted Apple would end up paying back any tax. “I am not persuaded by the reasoning the EU has applied,” said Tim Wach, global managing director at international tax advisers Taxand. -Reuters




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