Apple ordered to pay 13 billion euros in Irish taxes

  • Video report by ITV News Business Editor Joel Hills

The European Commission has ordered Ireland to recoup 13 billion euro from tech giant Apple over a sweetheart tax deal.

A three-year investigation by the EU Competition Commissioner found the arrangements dating back to the early 1990s were illegal under state aid rules.

Margrethe Vestager said it allowed Apple to pay substantially less tax than other businesses - 1% on its European profits in 2003 and 0.0005% in 2014.

"Member states cannot give tax benefits to selected companies - this is illegal under EU state aid rules," the commissioner said.

"The Commission's investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years."

Apple shares fell around 0.67% to 106.10 US dollars (£81.05) per share after the shock fine was announced on Tuesday.

Jasper Lawler, a market analyst at CMC Markets, said the news was having an effect on American equity markets.

"US stocks dropped in early trading as Apple's European tax problems weighed on broader sentiment," he said.

An Apple store on 5th Avenue, New York Credit: Reuters

Apple responded to the news by accusing the European Commission of threatening future investment and job creation on the continent.

The tech giant, which has had a base in Ireland since 1980 and employs around 5,500 people in the country, said it is confident of overturning an order.

Apple's chief finance officer Luca Maestri claimed that the company paid 400 million US dollars in 2014 in Ireland, and said the Commissioner's assessment of the money paid was "a completely made-up number".

His comments followed a lengthy message from CEO Tim Cook on Apple's website, in which he said Apple had "become the largest taxpayer in Ireland, the largest taxpayer in the United States, and the largest taxpayer in the world".

Meanwhile Ireland's Finance Minister Michael Noonan said the Republic does not do "deals" with taxpayers.

"Our tax system is founded on the strict application of the law ... without exception," he said.

The base of Apple Operations International, a subsidiary of Apple Inc, in Hollyhill, Cork. Credit: Reuters

The minister said he would seek Government support to challenge the commissioner's findings in the European courts.

Niall Cody, chairman of the Ireland's Revenue Commissioners, insisted that it collected the full amount of tax due from Apple under Irish law.

"Under Irish tax law, non-resident companies are chargeable to Irish corporation tax only on the profits attributable to their Irish branches by reference to the facts and circumstances," Mr Cody said.

The US Treasury has also responded critically, saying that the ruling may "undermine foreign investment, the business climate in Europe, and the important spirit of economic partnership between the US and the EU".

Starbucks has previously been investigated by the EU Commission. Credit: PA

  • What sort of arrangement did Apple have with Irish authorities?

The multinational corporation is said to have secured a tax advantage not available to other companies, ultimately amounting to state aid and breaching EU antitrust law - an accusation which both Irish authorities and Apple have repeatedly denied.

Almost all profits recorded by the Apple subsidiaries which managed its non-US sales were attributed to a "head office", yet the Commission found that such offices existed "only on paper".

"These profits allocated to the 'head offices' were not subject to tax in any country under specific provisions of the Irish tax law, which are no longer in force," the European Commission said.

  • Why does the EU's ruling on Apple matter?

In October, the EU Commission ordered Starbucks and Fiat to pay 20 to 30 million euro for benefiting from so-called sweetheart tax deals in the Netherlands and Luxembourg.

That is compared with the latest ruling, which is calling on Ireland to recoup 13 billion euros (£11 billion) in unpaid taxes from Apple.

The US Treasury is also irked - earlier this month it published a paper accusing EU authorities of unfairly targeting US companies in antitrust probes.

  • Which companies will be targeted next?

A case this size is unlikely to come up again, but there are other US companies in the firing line.

EU authorities are currently investigating Amazon and McDonald's for similar tax deals it deems illegal. Those rulings could be given out in the next six to 12 months.

But potentially any company that is deemed to have received a special deal from a European government could be investigated by antitrust watchdogs in the near future.