U.S. technology giant, Apple, must pay Ireland up to a record 14.5 billion dollars in illegally granted tax benefits, the European Commission ruled on Tuesday.
After the eagerly awaited landmark decision, Ireland now plans to appeal the ruling.
The EU Competition Commissioner, Margrethe Vestager, said in her ruling that “Ireland granted illegal tax benefits to Apple which enabled it to pay substantially less tax than other businesses over many years.
“This selective treatment allowed Apple to pay an effective corporate tax rate of one per cent on its European profits in 2003, down to 0.01 per cent in 2014’’.
The Apple case, which the commission has been looking into since mid-2013, is one of several high-profile probes into tax deals that EU member-states granted multi-nationals, including Starbucks, Amazon and McDonald’s.
The European Union’s executive found that Apple’s sales profits in Ireland, where the company has its European headquarters, were allocated in a way that “did not correspond to economic reality’’.
“Most of the profits generated in Europe were allocated to head offices that “existed only on paper” and did not have to pay taxes anywhere,’’ the commission said in a statement.
It demanded that Ireland recoup unpaid taxes from 2003 – 10 years before the start of its inquiry – until 2014, when Apple changed its structure in Ireland.
Dublin immediately announced plans to appeal the decision before European courts.
“This is necessary to defend the integrity of our tax system, to provide tax certainty to business.
“To also challenge the encroachment of EU state aid rules into the sovereign member-state competence of taxation,” Irish Finance Minister, Michael Noonan, said.
Taxation is usually a national competence in the 28-country EU, but the commission believes it can intervene because these tax arrangements constitute state aid, an area it regulates.
Unfair state aid could give companies a competitive advantage.
However, the Irish government said that the approach is “not appropriate’’.
“That expressed `very real concerns’ that the commission is undermining the international consensus, impeding reform and creating uncertainty for business and investment in Europe.”
In 2015, the commission ordered Netherlands and Luxembourg to recoup taxes from the Starbucks coffee chain and a Fiat subsidiary.
Inquiries are still under way into benefits granted to online retailer Amazon and the McDonald’s restaurant franchise.
The U.S. Treasury lashed out last week at the commission’s approach, arguing that it is “inconsistent” with international norms and undermines the global fight against tax avoidance.
Washington said member-states should not be forced into recovering unpaid taxes, warning that it was considering “potential responses” to the commission’s approach, in a Treasury publication.
In another development, the technology giant, Apple, in a statement issued in Brussels, decried the ruling by the EU’s competition commissioner ordering it to repay Ireland billions in taxes.
It claimed that the bloc was interfering in the company’s business in Europe.
“The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and alter the international tax system in the process,” Apple said.
It said that the company would appeal the decision, which “will have a profound and harmful effect on investment and job creation in Europe’’.