Apple must pay Ireland €13bn in back taxes plus interest, the European Commission has ordered. The Commission found that a bespoke deal with the Cupertino company was illegal state aid.
In 2007 Apple paid only 1% of tax on its profits in the block, a rate which sank to 0.005% in 2014. At a press conference this morning in Brussels, the EU’s competition commissioner, Margrethe Vestager 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 per cent on its European profits in 2003 down to 0.005 per cent in 2014.
Apple has two registered companies in Ireland, Apple Sales International and Apple Operations Europe. Both were found to be fantasy companies created purely for exploiting the tax deal with Ireland. Nearly every sale within these two companies were assigned to a fictional head office.
The profits assigned to this head office were excluded from taxation in any country due to specific Irish laws which are no longer on the books.
The EU takes a dim view of deals like this. In 2015 the French electricity giant EDF was forced to pay €1.4 billion in fines on similar grounds. Fiat Finance and Trade, Amazon, and Starbucks are other companies with open cases.
This ruling constitutes the single largest verdict in the history of the European Union. It seems unlikely that it will not be appealed.