Apple’s response to European Commission decision Aug 2016

The European Commission has concluded that Ireland gave Apple (see below) “state aid” via favourable tax rulings that were unlawful under EU law.  Ireland is now required by the European Commission to recover the taxes that ought to have been paid by Apple, from 2003 to now, figured at some €13 billion, plus interest. Note that although the Commission believes the improper conduct commenced in 1991, it is only empowered to demand back-taxes for the ten year period preceding the commencement of its investigations, which was, in this case, 2013.

The Commission explains that it “concluded that the tax rulings issued by Ireland endorsed an artificial allocation of Apple Sales International and Apple Operations Europe’s sales profits to their “head offices”, where they were not taxed. As a result, the tax rulings enabled Apple to pay substantially less tax than other companies, which is illegal under EU state aid rules.”

As for the Commission’s requirement that Ireland recover the unlawful “state aid” from Apple, it says, “[a]s a matter of principle, EU state aid rules require that incompatible state aid is recovered in order to remove the distortion of competition created by the aid. There are no fines under EU State aid rules and recovery does not penalise the company in question. It simply restores equal treatment with other companies.”

“Apple”, is “Apple Sales International and Apple Operations Europe … two Irish incorporated companies that are fully-owned by the Apple group, ultimately controlled by the US parent, Apple Inc. They hold the rights to use Apple’s intellectual property to sell and manufacture Apple products outside North and South America under a so-called ‘cost-sharing agreement’ with Apple Inc.”

Apple responded with two public statements: A letter to European Apple Customers, and an Investor Q&A.  Apple denies the EC’s findings in strong terms: “The European Commission states that Apple paid an effective tax rate of .005% on the profits of one of its Irish entities in 2014. Is this accurate? Absolutely not. The number quoted by the European Commission is extremely misleading and deceptive. We paid $400 million in corporate income taxes in Ireland in 2014 — considerably more than the Commission’s figure suggests. We were certainly one of the largest corporate taxpayers in Ireland that year, if not the largest.”  Apple fails to provide its own effective tax rate figure to counter the 0.005% allegation.