EU Claims Apple Owes $14.5B in Back Taxes to Ireland

By Todd R. Weiss  |  Posted 2016-08-30 Print this article Print
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Cook wrote that the EU provides "obvious targeting of Apple" and that the decision will harm 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," he wrote.

"We are committed to Ireland and we plan to continue investing there, growing and serving our customers with the same level of passion and commitment," wrote Cook. "We firmly believe that the facts and the established legal principles upon which the EU was founded will ultimately prevail."

Analysts: A Long Legal Battle Is Expected

Apple's appeal and any eventual payment of back taxes, if that occurs, is likely to take some time, said several analysts who spoke with eWEEK about the situation.

Louise Gracia, a professor at the Warwick Business School at the University of Warwick in Coventry, England, said in an email that the "ruling is a serious attempt at curtailing the power large multinationals have in avoiding their tax liabilities, and sends a warning to countries that facilitate hard-edged corporate tax minimization strategies."

The EU ruling also "raises some bigger issues beyond the tax practices of Apple, not least the tension created by EU encroachment into the tax practices of individual member states," she wrote. "It also shines a spotlight on the paltry levels of corporate tax that large multinationals are actually paying. Even if we accept the job and wealth creation arguments put forward by multinationals as mitigation against tax liability, this has to be within reason."

While "no one is arguing that large multinationals should pay extra or shoulder the responsibility for social order in society, it is not unreasonable to expect them to pay their fair share," she wrote. "Apple has fallen short in this instance. The outcome of the appeal is unknown and will be for some considerable time."

Charles King, principal analyst at Pund-IT, told eWEEK in an email that "the way in which U.S. companies leverage offshore holdings to lower their tax burden has been festering for years" and it "was inevitable that foreign regulators would scrutinize Apple and other companies, and it seemed likely that they would rule against them."

King said he expects the ruling by the EU to stand but that Apple's tax bill with Ireland will likely be reduced significantly. "Congress doesn't like to be lectured to by foreign entities so the appeal process could take years to conclude and impact other areas of U.S./EU cooperation."

Rob Enderle, principal of Enderle Group, said: "Apple is hardly alone in using Ireland as a tax heaven, and I expect this is just the tip of the iceberg." But Apple "has one of the strongest legal teams in the world so if they can't get this overturned, it is unlikely anyone else will."

If the EU's case against Apple is ultimately successful, "expect massive tax bills for other multi-nationals who have been using Ireland similarly," wrote Enderle.

Another analyst, Jan Dawson of Jackdaw Research, said that both sides clearly see the case from different angles, based on their interests. "If you're inclined to believe that big U.S. tech companies don't pay enough taxes in Europe, this likely confirms that view and makes it official, whereas if you're more inclined to believe that the EU uses its various investigations as a way to handicap big U.S. tech companies who are more successful than European equivalents, there's more evidence here for you, too."

Apple's position isn't that it's "avoiding taxation altogether, but rather [it] chooses to pay taxes when it repatriates money to the U.S.," wrote Dawson.

Dan Olds, principal analyst with Gabriel Consulting Group, wrote in an email reply to an eWEEK inquiry that he thinks the case and the EU's ruling were "inevitable given Ireland's reputation as a European tax haven (particularly for tech companies) and how successful Apple has been over the past decade. I would imagine that less profitable companies aren't getting this kind of scrutiny."

Olds said he agrees with Cook that the EU ruling could have a chilling effect on jobs in Europe. "If Ireland is forced to change their tax laws, Apple will find another place within the EU to land their operations, but they probably won't get nearly as good a deal as they've had in Ireland. The EU will extract their taxes, which will be passed on to consumers in the form of higher prices."


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