Apple ordered to pay €13bn tax penalty over illegal state aid

APPLE has been ordered to pay a record €13bn (£11bn) in back taxes after the European Commission ruled the Silicon Valley tech giant’s Irish tax scheme was illegal.

The EC has ordered Ireland to claw back the record-breaking tax bill after it concluded the tax arrangements between Apple and the Irish tax authorities amounted to illegal state aid.

The commission’s investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay a maximum tax rate of just 1%, compared to the usual rate of corporation tax in Ireland of 12.5%.

“Member states cannot give tax benefits to selected companies – this is illegal under EU state aid rules,” said the European competition commissioner, Margrethe Vestager.

“I have the feeling that if my objective tax rate were 0.05% falling to 0.005%, maybe I should have had a second look at my tax bill.”

The ruling, which sets the stage for a protracted battle between the US and EU, prompted a furious response from Apple and the US government. The US Treasury said the decision threatened the business climate between the US and Europe.

In an open letter to Apple customers, Tim Cook, chief executive, said the ruling 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.

“The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process. The opinion issued on August 30th alleges that Ireland gave Apple a special deal on our taxes. This claim has no basis in fact or in law,” he said.

“We never asked for, nor did we receive, any special deals. We now find ourselves in the unusual position of being ordered to retroactively pay additional taxes to a government that says we don’t owe them any more than we’ve already paid.

“The Commission’s move is unprecedented and it has serious, wide-reaching implications. It is effectively proposing to replace Irish tax laws with a view of what the Commission thinks the law should have been.”