The European Commission has ordered Apple (US:AAPL) to pay up to €13bn (£11bn) in back taxes to Ireland after regulators decided the nation's 'sweetheart' tax deal with the US tech titan represented illegal state aid. By booking its earnings in Ireland, Apple has paid minimal tax on profits from products sold in the EU single market for more than two decades; its effective rate was 0.005 per cent in 2014.
European commissioner Margrethe Vestager says the current situation violates state aid laws, as EU member states can't strike tax deals with individual companies. But Apple chief Tim Cook says the company neither requested nor received special treatment. In an open letter, he pointed out that "countless" multinational companies have followed Apple by investing in Ireland. He accuses the European Commission of attempting to "rewrite Apple's history in Europe, ignore Ireland's tax laws and upend the international tax system in the process". In his view, the decision could mean "every company in Ireland and across Europe is suddenly at risk of being subjected to taxes under laws that never existed".
US politicians have criticised the decision, and both the Irish government and the iPhone maker intend to appeal. Downing Street has capitalised on the backlash, saying it would welcome any company to Britain. The European Commission's move has wider implications for companies and European nations. It could undercut one of the key attractions of smaller EU countries to businesses - lower corporate tax rates - but allow larger nations to capture taxes on profits earned within their borders. If the UK pursues a 'semi-Brexit' and continues to abide by European tax laws, it could face similar regulatory pushback if it attempts to lure multinational companies with favourable tax deals. And if fewer tax incentives cause companies to pull out of certain countries, the upshot could be job losses, lower income tax receipts and reduced investment.
