Daily Management Review

Up to 13 Billion euros in Tax Demanded by EU from Apple to be Paid to Ireland


08/30/2016




Up to 13 Billion euros in Tax Demanded by EU from Apple to be Paid to Ireland
After ruling that a special scheme to route profits through Ireland was illegal state aid, Apple has been ordered to pay up to 13 billion euros ($14.5 billion) in taxes plus interest to the Irish government by the EU antitrust regulators.
 
If other countries sought more tax themselves from the U.S. tech giant, the EU executive said in a statement that the massive sum could be reduced. The huge back taxes slapped on Apple is 40 times bigger than the previous known demand by the European Commission to a company in such a case.
 
The Commission said that taxes to the tune of just 0.005 percent in 2014 and 1 percent in 2003 of the European profits on sales of its iPhone and other devices and services were paid by Apple. Meanwhile Ireland and Apple, which with Ireland, said it will appeal the decision.
 
"Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years," said Competition Commission Margrethe Vestager. Washington accuses Brussels of protectionism due to the crackdown on mainly U.S. multinationals by Vestager.
 
While coffee chain Starbucks Corp has been ordered to pay up to 30 million euros ($33 million) to the Dutch state, online retailer Amazon.com Inc and hamburger group McDonald's Corp face probes over taxes in Luxembourg.
 
The current record for such taxes is a bill of 300 million euros this year for Swedish engineer Atlas Copco AB to pay Belgian tax. Figures have not been disclosed by other companies ordered to pay back taxes in Belgium, many of them European.
 
Finding several billion dollars should not be an insurmountable problem for Apple whose earnings of $18 billion last year were the biggest ever reported by a corporation. About 6 percent of the firm's cash pile is represented by the 13 billion euros.
 
92.8 percent, or $214.9 billion of Apple’s $231.5 billion in cash equivalents and marketable securities were held in foreign subsidiaries, as of June, the company reported. According to company filings, it is left with net income of $7.8 billion after paying $2.67 billion in taxes during its latest quarter at an effective tax rate of 25.5 percent.
 
By letting Apple shelter profits worth tens of billions of dollars from tax collectors in return for maintaining jobs, Ireland was accused of dodging international tax rules by the European Commission in 2014. Apple and Ireland rejected the accusation.
 
"I disagree profoundly with the Commission. The decision leaves me with no choice but to seek cabinet approval to appeal. This is necessary to defend the integrity of our tax system; to provide tax certainty to business; and to challenge the encroachment of EU state aid rules into the sovereign member state competence of taxation," Irish Finance Minister Michael Noonan said in a statement.
  
The decision had no effect on Ireland's 12.5 percent corporate tax rate or on any other company with operations in the country and the disputed tax system used in the Apple case no longer applied, Ireland also said.
 
Apple said in a statement it was confident of winning an appeal.
 
"The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process. The Commission’s case is not about how much Apple pays in taxes, it’s about which government collects the money. It will have a profound and harmful effect on investment and job creation in Europe," said the Apple statement.
 
(Source:www.reuters.com) 






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