EU Commission’s ‘Apple-Gate’ Ruling: Ireland’s €13 Bn Tax Benefits for Apple Illegal

Written by | Thursday, September 1st, 2016

The European Commission has said that Ireland had provided undue tax benefits of almost €13 billion to the US giant, Apple, which is illegal under EU state aid rules as it gives Apple a major advantage over other businesses. Ireland essentially allowed Apple to pay substantially less tax than other companies.

Following an in-depth state aid investigation launched in mid-2014, the rulings endorsed a way to establish the taxable profits for two Irish incorporated companies of the Apple group (Apple Sales International and Apple Operations Europe), which did not correspond to economic reality. The Commission’s investigation revealed that the two companies were internally attributed to a “head office” but they existed only on paper and could not have generated such big profits.

Ireland is now obliged to recover the unpaid tax from Apply for the years 2003-2014 which can amount up to €13 billion, plus interest. The tax savings enabled the company to avoid taxation on almost all profits generated by sales of Apple products in the entire EU Single Market, which has been made possible by the Apple’s decision to record all sales in Ireland rather than in the countries where products are actually sold.

Commissioner Margrethe Vestager commented that “Member States cannot give tax benefits to selected companies – this is illegal under EU state aid rules. 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. In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1 percent on its European profits in 2003 down to 0.005 per cent in 2014.”

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