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The European Union has said that US tech company Apple must repay a record 13bn euros ($14.5bn) in taxes after ruling that a special scheme to route profits through Ireland was illegal state aid.
“Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years,” Margrethe Vestager, the EU competition commissioner, said on Tuesday.
Apple’s “selective treatment” by the Irish government meant it paid an effective tax rate of only 1 percent on its European profits in 2003, which then fell to a bare 0.005 percent by 2014.
“The tax treatment in Ireland enabled Apple to avoid taxation on almost all profits generated by sales of Apple products in the entire EU single market,” Vestager said.
Brussels launched an inquiry into Apple’s tax arrangements in Ireland in 2014, one of a series of anti-trust cases targeting major US corporations that have angered the US administration.
The European Commission accused Ireland of dodging international tax rules by letting Apple shelter profits worth tens of billions of dollars from tax collectors in return for maintaining jobs.
Apple and Ireland rejected the accusation, with Michael Noonan, the Irish finance minister, calling the ruling “bizarre”, and a political exercise by the EU’s competition commission.
“As far as I am concerned there is no economic basis for this decision,” Noonan told state broadcaster RTE.
“It’s bizarre and its an exercise in politics by the Competition Commission,” he said, according to Reuters news agency.
Noonan also issued a statement saying he disagreed “profoundly with the Commission”, and would seek cabinet approval to appeal the ruling.
“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,” he said.
“It is important that we send a strong message that Ireland remains an attractive and stable location of choice for long-term substantive investment.”
Apple CEO Tim Cook said in a statement that 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.
“Beyond the obvious targeting of Apple, the most profound and harmful effect of this ruling will be on investment and job creation in 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,” Cook wrote.
For Apple, whose earnings of $18bn last year were the biggest ever reported by a corporation, finding several billion dollars to repay Ireland should not be an insurmountable problem, Reuters reported. The 13bn euros represents about 6 percent of the firm’s cash pile.