Apple Ordered To Pay 13 Billion Euros In Back Taxes

31 August 2016

Tim Cook:

In Apple’s case, nearly all of our research and development takes place in California, so the vast majority of our profits are taxed in the United States. European companies doing business in the U.S. are taxed according to the same principle. But the Commission is now calling to retroactively change those rules.

Beyond the obvious targeting of Apple, the most profound and harmful effect of this ruling will be on investment and job creation in Europe. Using the Commission’s theory, every company in Ireland and across Europe is suddenly at risk of being subjected to taxes under laws that never existed.

Preface: I am not a lawyer.

Apple’s effective tax rate in Ireland was lower than 1% since 2004 according to the findings. On moral righteousness grounds, I think it’s fair to concede that Apple should have paid more tax in Ireland than they did. Even as an operations funnel, <1% regional tax seems ridiculously low.

However, both Apple and Ireland insist that nothing was illegal at the time. Apple made an agreement with Ireland back in the 1980’s and it paid off years later, when Apple grew into a huge corporation.

If the European Commission thought what Apple was doing was unlawful or incorrect, it had years to raise a formal complaint. What I really detest about the Commission’s judgement is how they are imposing their ‘new’ position to the past. The Commission is demanding repayments of ‘unpaid’ taxes from more than a decade ago. To me, that is unequivocally unfair.

Force Apple (and Ireland) to change its practices going forward, by all means. If Apple and Ireland were acting illegally (which both parties refute profusely), then levy fines. Reaching into the past to claim taxes that Ireland didn’t ask for at the time, and still says it isn’t owed today, is ridiculous.