DUBLIN: Apple’s tax benefits in Ireland are illegal, and the company will have to pay up to $14.5 billion in back taxes, plus interest. That’s the verdict European Commissioner Margrethe Vestager delivered Tuesday, wrapping up a two-year investigation of the company’s tax affairs stretching back to 2003.
The investigation found that Apple’s effective tax rate on profit reported in Ireland was just €500 (US$557) per million euros in profit, falling to €50 (US$56) per million in 2014. Apple and the Irish tax authority disputed the commission’s charges.
“I would have a feeling if my effective tax rate were 0.05 percent, falling to 0.005 percent. I would feel that maybe I should have another look at my tax bill,” she said.
The commission looked into tax rulings granted by the Irish government to two Apple subsidiaries, Apple Operations Europe, which makes some Apple computers, and Apple Sales International, which resells the company’s products throughout Europe, the Middle East, Africa and India. The latter accounts for almost all of the unpaid taxes Ireland now needs to recover, Vestager said.
Vestager said that Irish tax authorities had allowed Apple to split profit from the two companies, which were subject to normal taxes, with “head office” companies that were subject to no taxes, either in Ireland or elsewhere. “Splitting the profits did not have any factual or economic justification. The so-called head office had no employees, no premises, no real activities,” she said. Those head-office companies were allocated almost all the profits.
