Apple agrees to pay its €13bn EU tax bill – even though Ireland doesn’t want the money

Evan Gower August 25, 2016

Apple has agreed to pay up to €13 billion (£11.5bn) in back taxes after the European Commission accused it of receiving an unfair tax advantage in Ireland.

Apple agrees to pay its €13bn EU tax bill - even though Ireland doesn't want the money

Last year, the European Commission ruled that the tax arrangement was illegal under EU state aid rules and ordered the vast sum to be paid back into the Irish economy. Apple, unsurprisingly, appealed the order, as did the Irish government.

Ireland said the European Commission had misapplied State Aid law, and in doing so, was attempting to re-write Irish corporation tax rules. In a document released by the Irish government’s Department of Finance, eight points were made about how the EU is overreaching its authority.

“The Commission has exceeded its powers and interfered with national tax sovereignty,” the document reads. Europe’s competition chief Margrethe Vestager responded saying that the European Commission would take Ireland to court if it failed to collect the taxes.

Apple’s appeal is still in process so the tax payments will be made into an escrow account, starting early next year. Escrow is a financial arrangement where a third party manages the payment of funds on behalf of the two groups involved in the initial deal.

The ruling followed a three-year investigation into Apple tax affairs in Ireland, which is said to have enabled the technology giant to – according to Vestager – pay only 1% on its European profits in 2003, down to 0.005% in 2014. The EU has previously claimed that this amounts to illegal state aid, while the Irish government has denied any breach of EU law.

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The EU’s ruling, that Ireland must recover what has now been deemed illegal aid, marks a significant move in the clash between Brussels and Silicon Valley – with the former cracking down on so-called sweetheart deals between EU countries and multinational companies. The US treasury has accused the EU of acting like a “supra-national tax authority” and pointed to a number of other US companies under investigation. The European Commission has denied any bias against US companies.

“This is real change, and it is change for the better,” said Vestager.

Tim Cook then responded with a long and strongly wordy statement, which you can read in full here.

“The Commission’s move is unprecedented and it has serious, wide-reaching implications,” Cook says in the statement, titled ‘A Message to the Apple Community in Europe’. “It is effectively proposing to replace Irish tax laws with a view of what the Commission thinks the law should have been. This would strike a devastating blow to the sovereignty of EU member states over their own tax matters, and to the principle of certainty of law in Europe. Ireland has said they plan to appeal the Commission’s ruling and Apple will do the same. We are confident that the Commission’s order will be reversed.”