Apple ordered to repay record S$20 billion to cover unpaid EU tax

BRUSSELS – Apple was ordered to repay a record €13 billion (S$19.8 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 (EU) regulator said on Tuesday (Aug 30) in its 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 United States.

“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.

“This selective treatment allowed Apple to pay an effective corporate tax rate of 1 per cent on its European profits in 2003 down to 0.005 per cent in 2014.”

Apple was one of the first companies caught up in the EU’s backlash against corporate tax-avoidance. Online retailer Amazon.com and hamburger group McDonald’s face probes over taxes in Luxembourg, while coffee chain Starbucks has been ordered to pay up to €30 million to the Dutch state.

A bill of €300 million this year for Swedish engineer Atlas Copco to pay Belgian tax is the current known record.

For Apple, whose earnings of US$18 billion (S$24.5 billion) last year were the biggest ever reported by a corporation, finding several billion dollars should not be an insurmountable problem.

The €13 billion represents about 6 per cent of the firm’s cash pile.

As of June, Apple reported it had cash, cash equivalents and marketable securities of US$231.5 billion, of which 92.8 per cent, or US$214.9 billion, were held in foreign subsidiaries.

It paid US$2.67 billion in taxes during its latest quarter at an effective tax rate of 25.5 per cent, leaving it with net income of US$7.8 billion, according to company filings.

The European Commission in 2014 accused Ireland of dodging international tax rules by letting Apple shelter profits worth tens of billions of dollars from tax collectors in return for maintaining jobs. Apple and Ireland rejected the accusation.

“I disagree profoundly with the Commission,” Irish Finance Minister Michael Noonan said in a statement.

“The decision leaves me with no choice but to seek Cabinet approval to appeal.

“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.”

Ireland also said the disputed tax system used in the Apple case no longer applied and that the decision had no effect on Ireland’s 12.5 per cent corporate tax rate, or on any other company with operations in the country.

Apple said in a statement it was confident of winning an appeal.

“The European Commission 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. The Commission’s case is not about how much Apple pays in taxes, it’s about which government collects the money. It will have a profound and harmful effect on investment and job creation in Europe.” Agencies