The European Commission ordered Apple to pay €13 billion ($14.5 billion) in back taxes to Ireland.
The commission said the tax deal between Apple and the Irish tax authorities allowed Apple to pay a maximum tax rate of just 1%. Thus, the tech giant received illegal state aid in exchange for providing Irish people with jobs. This selective tax treatment of Apple in Ireland is illegal under EU state aid rules, because it gives Apple a significant advantage over other businesses that are subject to the same national taxation rules.
Under the European Commission’s ruling, the deal must be canceled and Dublin must set corporate tax rate at 12.5% for two Apple’s branches in Ireland - Apple Sales International and Apple Operations Europe. Following the commission's decision, Apple shares fell by 3%.
The commission also claimed that almost all sales profits recorded by the two subsidiaries were attributed to a head office in the United States, which existed only on paper and generated no profit.
In the meantime, Michael Noonan, Ireland's finance minister, said he will seek cabinet approval to appeal the decision before the European Courts.
The European Commission started to look into Apple's Irish tax rate in 2014.
The investigation “undermine” agreements on international tax law and could hurt US taxpayers, the Treasury Department said. "We believe that retroactive tax assessments by the commission are unfair, contrary to well-established legal principles, and call into question the tax rules of individual Member States. We will continue to work with the commission toward our shared objective of preventing the erosion of our corporate tax bases.”
The Obama administration has repeatedly objected to this investigation.
