Apple, which has long been accused of dodging its corporate tax responsibilities, has been ordered by the European Union to pay billions in back taxes.
A three-year investigation by the European Commission concluded that the Silicon Valley-based tech giant had paid just $55 in tax for every $1.12 million it made in European profits, meaning its effective tax rate was just 0.0005 percent in 2014, dropping from an effective 1 percent tax rate in 2003. Now, Apple has to pay €13 billion ($14.5 billion USD), plus interest, to the European Union.
According to NBC News, Apple engaged in a complex agreement with Ireland to shift its profits there on products sold in other countries, where the tax rate is 12.5 percent. From Ireland, profits were shifted to a “head office” not incorporated in any country, with essentially no economic activity, allowing Apple to pay an even lower rate than Ireland’s nominal corporate tax rate. The European Commission’s investigation found that a vast majority of Apple’s profits in Europe were “taxed nowhere.”
This “head office” was not based in any country and did not have any employees or own premises. Its activities consisted solely of occasional board meetings. Only a fraction of the profits of Apple Sales International were allocated to its Irish branch and subject to tax in Ireland. The remaining vast majority of profits were allocated to the “head office”, where they remained untaxed.
The EU claims that the tech giant was given an unfair competitive advantage over other companies, who pay the nominal tax rate on profits made in each separate EU member state.
“Member States cannot give tax benefits to selected companies – this is illegal under EU state aid rules,” said Margrethe Vestager, an EU commissioner in charge of competition policy. “This is not a penalty, it is an unpaid tax.”
Both Apple and the Irish government have announced plans to appeal the decision, with CEO Tim Cook calling the ruling “unprecedented,” and said it had “serious, wide-reaching implications.”
“We are confident that the commission’s order will be reversed,” Cook said in a public statement.
Irish finance minister Michael Noonan said he would seek cabinet approval to appeal the EU’s ruling on Apple’s taxes, saying it was “”important that we send a strong message that Ireland remains an attractive and stable location of choice for long-term substantive investment.”
Tom Cahill is a writer for US Uncut based in the Pacific Northwest. He specializes in coverage of political, economic, and environmental news. You can contact him via email at [email protected], or friend him on Facebook.