The European Union ordered Apple yesterday to pay a record ß13-billion (R210-billion)in back taxes in Ireland, saying deals allowing the US tech giant to pay almost no tax were illegal.
In the latest in a series of rulings that have angered Washington, Brussels said the world’s most valuable company had avoided tax bills on virtually all its profits in the bloc.
Apple and the Irish government immediately said they would appeal against the European Commission ruling, while the US Treasury said it could undermine its economic partnership with the EU.
Ireland has been seeking to attract multinationals by offering extremely favourable tax conditions, known as sweetheart deals, but EU competition commissioner Margrethe Vestager said Apple’s agreement broke EU laws on state aid.
“This decision sends a clear message.
Member states cannot give unfair tax benefits to selected companies, no matter if European or foreign, large or small,”Vestager said.
“This is not a penalty, this is unpaid taxes to be paid.”
The tax repayment order –the largest in EU history – follows a three-year inquiry into whether Dublin’s tax breaks for Silicon Valley titan Apple were against the law.
Apple has had a base at the southern city of Cork since1980 and employs 5 000 people in Ireland, through which it routes its international sales, avoiding billions in corporation taxes.
But Vestager – who has launched a series of cases against US firms – said that Apple’s
“so-called head office in Ireland only existed on paper –it had no employees, no premises and no real activities”.
Apple as a result paid an effective corporate tax rate of 0.005% on its European profits (R800) for every million, Vestager said.
Tensions have been growing between Washington and Brussels over anti-trust investigations
targeting companies such as Apple, Amazon, Starbucks and Fiat Chrysler Apple said: “We will appeal
and we are confident the decision will be overturned.
“It will have a profound and harmful effect on investment and job creation in Europe.”
Irish Finance Minister Michael Noonan said the decision “leaves me with no choice but to seek cabinet approval to appeal the decision before the European Courts”.
The Apple tax bill dwarfs the previous EU record for (R21-billion) received by the Nurburgring race track from German authorities.
The US stepped up its rhetoric before the decision, accusing the European Commission of unilateralism and overstepping its mandate.
The US Treasury said yesterday the Apple ruling threatened the “spirit of economic partnership”.
“The commission’s actions could threaten to undermine foreign investment, the business climate in Europe, and the important spirit of economic partnership between the US and the EU,” it said.
The EU has made taxes a core issue since the Lux Leaks scandal in which it was revealed that European Commission president Jean-Claude Juncker’s native Luxem bourghad given companies huge tax breaks while he was prime minister.
In October last year, Brussels ordered US coffee giant Starbucks and Italian carmaker Fiat to each repay up to ß30- million (R484-million)in back taxes to the Netherlands and Luxembourg respectively.
The US has acknowledged the problems around tax breaks, but says the deals were made under international treaties and accepted tax practices.
Vestager insisted that US companies were not being unfairly targeted.
Washington has also expressed concern about EU anti-trust cases targeting tech giant Google, alleging that it has unfairly suppressed competition