Apple has been hit with a substantial €13 billion tax bill following yesterday’s ruling by the European Commission.
Apple is accused of benefitting from substantial tax breaks in Ireland since 1991. It was uncovered that there was a secret deal brokered between Apple and the Irish Government that allowed the software giant to pay corporation tax at a rate as low as 0.005%.
Furthermore the arrangement also allowed Apple to avoid tax on almost all profits generated in the EU single market because Apple recorded the sales from Europe in Ireland rather than the country the products were sold. The sales were attributed to an Irish ‘Head Office’ that only existed on paper.
Speaking yesterday, the European Competition Commissioner, Margrethe Vestager spoke of how the Commission’s investigation concluded that Ireland granted tax benefits to Apple which as a member state it was not allowed to do. Vestager has suggested that other countries should now examine how Apple does business within their borders.
Apple’s chief executive, Tim Cook released a statement to Europe’s businesses and Apple consumers stating:
“Beyond the obvious targeting of Apple, the most profound and harmful effect of this ruling will be on investment and job creation in Europe. Using the commission’s theory, every company in Ireland and across Europe is suddenly at risk of being subjected to taxes under laws that never existed.”
The above statement has caused Downing Street to release a statement confirming that it “welcomes any company to the UK” and that “the UK is open for business.” The statement follows reference to Chancellor Philip Hammond’s fears that the decision may create a ‘European tax war’ and that it could dissuade other large corporations for setting up in the UK.
Apple has said the Commission’s decision was overriding Irish Law and disrupting the international tax system.
Interestingly Ireland, almost immediately following the ruling, confirmed they would launch an appeal to protect the rate that Apple pays in Ireland. This was met with protests that the tax bill (which is enough to fund Ireland’s Health System for a year) would go a long way to easing the country’s housing crisis. Ireland’s decision to appeal has also seen its integrity questioned surrounding its tax system which has at times been compared to tax havens similar to the Cayman Islands.
Apple now has 4 months to appeal the decision. Tim Cook is confident that Apple will win their appeal and has said that Apple “plan to continue investing there, growing and serving our customers with the same level of passion and commitment.”
Apple could well be seen as the first of many of the large corporations to be fined for their tax avoidance measures and strategies. The fine will undoubtedly be welcomed by consumer groups who have pressed for large corporate entities to be held to account on their tax payments in Europe.