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Apple must pay back taxes

August 30, 2016

The European Union has ordered Ireland to recover 13 billion euros in back taxes from Apple in one of its largest anti-trust rulings aimed at curbing sweetheart tax deals for multinational corporations.

EU-Fahne vor dem Ratsgebäude in Brüssel
Image: picture-alliance/ dpa

The US technology giant Apple must pay Ireland up to 13 billion euros ($14.5 billion) in illegally granted tax benefits, plus interest, the European Commission ruled Tuesday.

"Ireland granted illegal tax benefits to Apple which enabled it to pay substantially less tax than other businesses over many years," said EU Competition Commissioner Margrethe Vestager. "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 percent in 2014," she added.

Brussels launched an inquiry three years ago into tax breaks that Ireland offered iPhone-maker Apple, in the latest of a series of anti-trust cases targeting major US corporations that have also included Starbucks, McDonald's and Amazon.

Taxation is a national competence in the 28-country bloc, but the European commission holds the view that the sweetheart tax deals struck by Apple and other with countries such as Ireland, the Netherlands and Luxembourg constitute illegal state aid, an area it regulates.

Apple has had a base in the southern city of Cork since 1980, where it employs more than 5,000 people and through which it routes international sales, avoiding billions in corporation taxes.

Apple and Ireland are both expected to appeal against any decision which rules that the highly competitive tax breaks that Dublin offered to the Silicon Valley giant amounted to illegal state aid.

"Our tax system is founded on the strict application of the law," said Irish Finance Minister Michael Noonan, adding that he disagrees "profoundly" with the ruling by the European Union's executive.

And Apple said in a statement after the decision that it merely "follows the law" and was paying all of the taxes it owed wherever the company operates.

"We will appeal and we are confident the decision will be overturned," the company said, adding that the ruling would have a "profound and harmful effect on investment and job creation in Europe."

Last week, the US Treasury lashed out at the commission's approach, arguing that it is "inconsistent" with international norms and undermines the global fight against tax avoidance.

The EU has made taxation a core issue since the LuxLeaks scandal in which it was revealed that Luxembourg gave companies huge tax breaks while Jean-Claude Juncker, now the Commission's president, was prime minister.

In October, Brussels ordered US coffee giant Starbucks and Italian automaker Fiat to each repay up to 30 million euros ($34 million) in back taxes to the Netherlands and Luxembourg respectively.

uhe/cjc (Reuters, AFP)