Apple Inc. was ordered to repay a record 13 billion euros ($14.5 billion) plus interest after the European Commission said Ireland illegally slashed the iPhone maker’s tax bill.
The world’s richest company benefited from a “selective tax treatment” in Ireland that gave it a “significant advantage over other businesses,” the European Union regulator said Tuesday. It’s the largest tax penalty in a three-year crackdown on sweetheart fiscal deals granted by EU nations.
Apple and the Irish government have both vowed to fight the decision, which also risks stoking a fight with the U.S. over taxation policies — with the U.S. having already complained that Europe is unfairly targeting American companies and threatening global tax reforms.
“Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years,” EU Competition Commissioner Margrethe Vestager said in an e-mailed statement. “This selective treatment allowed Apple to pay an effective corporate tax rate of 1 percent on its European profits in 2003 down to 0.005 percent in 2014.”
Apple was one of the first companies caught up in the EU’s backlash against corporate tax-avoidance. The EU, like other global regulators, has targeted firms that sidestep taxes by moving around profits and costs to wherever they are taxed most advantageously — exploiting loopholes or special deals granted by friendly governments.
“I disagree profoundly with the commission’s decision,” said Irish Finance Minister Michael Noonan. Ireland’s tax system is founded on the strict application of the law “without exception,” he said.
The commission left him with “no choice” but to move toward an appeal before the EU courts. “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.
Apple said the EU regulator 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.”