Yahoo – AFP, Danny Kemp, August 30, 2016
Brussels (AFP) - The EU ordered tech giant Apple on Tuesday to pay a record 13 billion euros in back taxes in Ireland, a move Washington warned could damage hugely important transatlantic economic ties.
The European Union has ordered Apple to pay a record 13 billion euros in back taxes in Ireland (AFP Photo/Philippe Huguen) |
Brussels (AFP) - The EU ordered tech giant Apple on Tuesday to pay a record 13 billion euros in back taxes in Ireland, a move Washington warned could damage hugely important transatlantic economic ties.
Brussels
said Apple, the world's most valuable company, avoided virtually all tax on its
business in the bloc by illegal arrangements with Dublin which gave the company
an unfair advantage over competitors.
Apple and
the Irish government immediately said they would appeal against the European
Commission ruling, with the iPhone maker warning it could cost European jobs.
The White
House meanwhile cautioned against "unilateral" measures by the EU.
The
company's shares lost some of their shine after the ruling, down 0.7 percent in
early afternoon trading, making for a more than 3 percent loss over the past
two weeks ahead of the highly anticipated ruling.
"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,"
EU Competition Commissioner Margrethe Vestager said.
"The
Commission's investigation concluded that Ireland granted illegal tax benefits
to Apple, which enabled it to pay substantially less tax than other businesses
over many years," she added.
Ireland has
attracted multinationals over many years by offering extremely favourable
sweetheart tax deals to generate much-needed jobs and investment.
But after a
three-year investigation Brussels said the arrangement with Apple broke EU laws
on state aid.
The
findings come amid growing tensions between Washington and Brussels over a
series of EU anti-trust investigations targeting other giant US companies such
as Google, Amazon, McDonald's, Starbucks and Fiat Chrysler.
The
European Commission launched an inquiry three years ago into tax breaks
that
Ireland offered iPhone-maker Apple (AFP Photo/Siska Gremmelprez)
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'Devastating blow'
Apple has
had a base in the southern city of Cork since 1980 and employs nearly 6,000
people in Ireland, through which it routes its international sales totalling
billions.
Apple chief
Tim Cook said he was "confident" the EU ruling would be overturned,
adding that the Silicon Valley giant was the biggest taxpayer in Ireland, the
United States and the world.
"The
most profound and harmful effect of this ruling will be on investment and job
creation in Europe," he said.
Cook also
warned that the ruling was a "devastating blow to the sovereignty of EU
member states over their own tax matters", echoing the concerns of Dublin
over the decision.
Ireland's
Finance Minister Michael Noonan described the ruling as "bizarre" and
"an exercise in politics by the Competition Commission".
Dublin,
which suffered from harsh austerity measures after it was bailed out during the
eurozone debt crisis, has vigorously defended its low tax rates as a way of
boosting the economy.
"If
you look at the small print on an Apple iPhone, it says designed in California
and manufactured in China and that means any profits that accrued didn't accrue
in Ireland and so I can't see why the tax liability is in Ireland," he
said.
But
Vestager said Apple's Irish operation was a sham -- Apple's "so-called
head office in Ireland only existed on paper. It had no employees, no premises
and no real activities."
Apple paid
an effective corporate tax rate of just 0.005 per cent on its European profits
in 2014 -- equivalent to just 50 euros for every million, Vestager said.
The Apple
tax bill dwarfs the previous EU record for a state aid case -- 1.3 billion
euros for the Nurburgring race track in Germany.
While the
13-billion-euro ($14.5-billion) sum itself is unlikely to trouble Apple with
its massive $600 billion of market capitalisation and $234 billion in revenue
last year, the political ramifications are huge.
US anger
Washington
has made increasingly angry comments over the case in recent weeks, and on
Tuesday it echoed Apple's warnings that the tax bill could hurt the European
economy.
"We
are concerned about a unilateral approach," said White House spokesman
Josh Earnest, adding that the move "threatens to undermine progress that
we have made collaboratively with the Europeans to make the international
taxation system fair."
The US
Treasury said the ruling "could threaten to undermine foreign investment,
the business climate in Europe, and the important spirit of economic
partnership between the US and the EU."
The Apple
decision may also complicate struggling EU-US talks on what would be the
world's biggest free trade deal, meant to be completed before US President
Barack Obama steps down in January.
French
President Francois Hollande on Tuesday said he doubted agreement could be
reached by then.
Tax
avoidance has moved sharply up the political agenda since EU governments
adopted tough austerity policies to balance the public finances, driving public
resentment that the rich paid relatively little tax.
The issue
was highlighted close to home by the LuxLeaks scandal which revealed that
European Commission President Jean-Claude Juncker's native Luxembourg gave
companies huge tax breaks while he was prime minister.
In October
Brussels ordered US coffee giant Starbucks and Italian automaker Fiat to each
repay up to 30 million euros ($34 million) in back taxes to the Netherlands and
Luxembourg respectively.
#UPDATE Apple ordered to pay record 13 billion-euro Irish tax bill https://t.co/ycty2yXNoz pic.twitter.com/uxyGZ01qPt— AFP news agency (@AFP) August 30, 2016