Apple has agreed to pay the Irish government €13bn after the EU Commission found the tax benefits received by the company breached EU law. The amount is almost 6% of Apple’s liquid assets (August 2017), but Ireland reportedly does not want the money. The ‘special’ relationship appears to be threatened by the EU, who see the Irish government as enabling the company to avoid tax via Apple’s Irish subsidiaries.
Why It’s Important:
Both Apple and the Irish government are appealing the decision, which is based on state aid rules. EU law allows different member states to set their own corporate tax rates but prohibits what it called “state aid”, rules which benefit individual companies. Taxing companies differently is treated no differently from the state gifting the company money, which is illegal according to the EU commission.
While corporation tax in Ireland is 12.5%, Irish law meant Apple paid as little as 0.005% tax on profits in 2015. In return, the Irish government receives foreign investment and jobs for Irish workers. While the pair has enjoyed a fruitful relationship since the early 90s, the EU appears to be cracking down on this arrangement.
Apple Sales International and Apple Operations Europe are the subsidiaries allegedly used to funnel money through Ireland. Both are based in the country and reigning in large profits, despite neither company having any employees or real offices, says the EU Commission. The Commission has also targeted Starbucks and Fiat for their tax dealings in the Netherlands and Luxembourg respectively.
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