Earlier this week, the European Commission, which administers EU law, ruled that the Irish government has been granting illegal state aid to American tech giant Apple for more than 20 years by artificially lowering its tax bill. As a result, Apple must pay Ireland 13 billion euros ($14.6 billion) in unpaid taxes. It is the biggest ruling the EU has ever made regarding a single company.
The European Commission’s decision refers to an arrangement where Apple paid taxes at 1% or less on profits attributed to its subsidiaries in Ireland-much lower than Ireland’s 12.5% corporate tax rate. (For comparison, the top rate of corporate tax in the United States is 35%.) The $14.6 billion bill covers unpaid taxes from the years 2003 to 2014.
Apple CEO Tim Cook responded by stating that the ruling had “no basis in fact or law” and that it was an effort on the part of the European Commission to “rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process.” He also noted that Apple had helped to create more than 1.5 million jobs across Europe.
Ireland, meanwhile, plans to appeal the decision, stating that Apple has paid what it owed to the Irish government. The country boasts one of the lowest corporate tax rates in all of Europe, making it an especially popular location for international companies to operate. Any major tax regime changes and Ireland could be seeing many fewer companies who are willing to invest there.
The European Commission’s decision has not been so readily accepted here in the U.S., either. The decision has been especially divisive here in the U.S. because of many claims that it represents obvious overseas targeting of an American company. According to one U.S. Treasury spokesperson, retroactive tax assessments by the EU are unfair, and the decision could even threaten to undermine foreign investment, the business climate in Europe, and the overall economic partnership between the U.S. and the EU. White House press secretary Josh Earnest added that the decision was essential “a transfer of revenue from U.S. taxpayers to the EU,” and that the Obama administration would fight for American taxpayers and businesses overseas for being treated unfairly.
Apple isn’t the only American corporation to go under scrutiny for its European tax affairs. Last October, the EU asked the Netherlands to recover $34 million in unpaid taxes from coffee giant Starbucks. In addition, it asked Luxembourg to recover $34 million from Fiat Chrysler. Both companies have since appealed these decisions.