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Europe hits Apple with $14.6 billion tax bill

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Posted at 6:47 AM, Aug 30, 2016
and last updated 2016-08-30 06:47:05-04

Ireland must recover up to 13 billion euros ($14.6 billion) in unpaid taxes from Apple, Europe’s top regulator ruled on Tuesday.

The tax ruling is by far the biggest the EU has ever made regarding a single company, and it could spark a huge transatlantic row over how Europe treats big U.S. companies.

The Commission said Ireland had granted illegal state aid to Apple by helping the tech giant to artificially lower its tax bill for more than 20 years.

“Member States cannot give tax benefits to selected companies — this is illegal under EU state aid rules,” said Commissioner Margrethe Vestager, Europe’s top antitrust official.

Apple paid tax at 1%, or less, on profits attributed to its subsidiaries in Ireland, well below the 35% top rate in the United States and even well below Ireland’s 12.5% rate.

That prompted complaints by both European and U.S. lawmakers, who argued the deal gave Apple an unfair advantage in exchange for creating jobs in Ireland. CEO Tim Cook was even called to testify on Apple’s tax deal before a Senate committee in 2013.

Apple has already said an unfavorable ruling may mean it has to make a “material” tax repayment.

The technology company had $231.5 billion in cash on its balance sheet as of June 25 to cushion the blow, according to its most recent earnings report.

Apple is not the only American company that has recently found itself under scrutiny over its European tax affairs.

The European Commission ordered Starbucks and Fiat Chrysler to repay millions in taxes last October.

Starbucks has to pay back up to 30 million euros it saved thanks to a sweetheart tax deal with the Netherlands. Fiat Chrysler was ordered to repay a similar amount after a similar deal with Luxembourg.

Both companies have appealed the decisions.

The EU is also probing the tax arrangements of Amazon and McDonald’s. Google is under investigation over its taxes in France and a couple of other European countries.

The ruling against Apple’s tax deal comes despite a stern warning from the U.S. last week. The Treasury Department urged the European Commission to stop its tax crackdown on American companies, saying it would consider “potential responses” if Brussels doesn’t change course.