Apple questions $19.2 B EU tax ruling, warns of serious implications on investment, job creation in Europe

Apple Inc. said it will appeal the European Commission’s decision compelling the American tech giant to pay €13 billion (AU$19.2 billion) for allegedly skirting Irish tax laws as it warned of the ruling’s serious and wide-reaching implications to investment and job creation in Europe.

Apple CEO Tim Cook maintained that the company does not owe Ireland additional taxes more than it has already paid, contrary to the European Commission’s claim that country has granted Apple undue tax benefits since 1991.

In concluding an investigation that started in June 2014, the European Commission has ordered Apple to retroactively pay €13 billion (AU$19.2 billion) worth of taxes to Ireland where Apple has set up a factory in October 1980. According to European Commission, Ireland’s selective tax treatment of Apple is illegal under EU state aid rules as it gives the company a significant advantage to other businesses.

“The European Commission has concluded that Ireland granted undue tax benefits of up to €13 billion to Apple. This is illegal under EU state aid rules, because it allowed Apple to pay substantially less tax than other businesses. Ireland must now recover the illegal aid.

“The Commission can order recovery of illegal state aid for a ten-year period preceding the Commission's first request for information in 2013. Ireland must now recover the unpaid taxes from Apple for the years 2003 to 2014 of up to €13 billion, plus interest,” the EC said in a press release.

But Cook maintained that the European Commission’s claim has no basis.

“Over the years, we received guidance from Irish tax authorities on how to comply correctly with Irish tax law — the same kind of guidance available to any company doing business there. In Ireland and in every country where we operate, Apple follows the law and we pay all the taxes we owe.

“We never asked for, nor did we receive, any special tax deals. We now find ourselves in the unusual position of being ordered to retroactively pay additional taxes to a government that says we don't owe them any more than we've already paid,” Cook said in a statement.

Apple vows to appeal EU ruling

The Apple executive retaliated and accused the European Commission of ignoring Irish tax laws and upending the international tax system with its Aug. 30 ruling.

“The Commission’s move is unprecedented and it has serious, wide-reaching implications. It is effectively proposing to replace Irish tax laws with a view of what the Commission thinks the law should have been. This would strike a devastating blow to the sovereignty of EU member states over their own tax matters, and to the principle of certainty of law in Europe,” he said.

While Cook said Apple will maintain its operation and investment in Ireland, he warned that the European Commission’s decision will create harmful effects on investments and job creation across 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.

“Apple has long supported international tax reform with the objectives of simplicity and clarity… And as with any new laws, they should be applied going forward — not retroactively.”

All European Commission decisions can be appealed by any Member State. However, Ireland has to recover the taxes and place it under escrow pending the outcome of the EU court’s procedures.

“Ireland has said they plan to appeal the Commission’s ruling and Apple will do the same. We are confident that the Commission’s order will be reversed,” Cook said.

Aside from Apple, multinational companies Fiat and Starbucks have earlier been charged for getting tax advantage from Luxemburg and Netherlands, respectively. The Brussels-based European Commission has also declared as illegal the tax perks Belgium has granted to at least 35 multinational companies. The European Commission has ongoing investigation into tax-related issues involving Amazon and McDonald’s.