28th Oct 2016

Apple faces massive Irish tax bill

  • The US treasury threatened retaliation if the EU forces Apple to pay back taxes. (Photo: Jon Rawlinson)

The European Commission is expected on Tuesday (30 August) to order US tech giant Apple to pay back billions of euros to Ireland, two years after tax decisions taken in Dublin were deemed illegal state aid.

The commission will present a formula with which the Irish government will calculate the amount of taxes to be paid by Apple. Some analysts say the bill could reach €19 billion.

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In 2014, the commission said the tax arrangements between Ireland and the firm constituted illegal state subsidy.

"There is no indication that the contested measure can be considered compatible with the internal market," the EU executive said in a letter to the Irish government.

The case against Apple was opened in June 2014 over two tax rulings handed by Irish authorities in 1991 and 2007 that allowed the US firm to pay 2 percent tax on the profits made by two of its subsidiaries, instead of the official 12.5 percent corporate tax.

The scheme, the commission said, was "reverse engineered" so that Apple would pay less.

Last year the commission already ordered carmaker Fiat and coffee chain Starbucks to repay between €20 and €30 billion to Luxembourg and Netherlands in the same ground.

The forthcoming ruling, to be announced by EU competition commissioner Margrethe Vestager, will embarrass the Irish government. It has said it will fight the decision, which will amount to a refusal to accept a large sum of money.

The commission is "making up new rules for international tax”, an unnamed Irish minister was quoted as saying by the Irish Times.

“They are trying to make us tax Apple for stuff that doesn’t happen here. It’s nonsense.”

The ruling is also likely to irritate the US administration, which last week strongly criticised the commission's policies on state aids and tax rulings.

The US treasury said in a report: “The commission is charting a course that sets aside years of multilateral efforts.”

The department said it would "consider potential responses should the commission continue its present course".

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