Apple Ordered to Pay $14.5B in Back Taxes to Irish Government

Company’s that use Ireland as a tax haven may want to evaluate their accounting procedures after a European Union regulatory commission found a special scheme Apple Inc. used to skirt tax law was illegal.

On Tuesday, the European commission announced findings that tax deals between Apple and Irish tax authorities amounted to “illegal state aid” and that the company must pay 13 billion euros ($14.5 billion) in back taxes to Ireland.

“This decision sends a clear message,” said EU competition commissioner Margrethe Vestager. “Member states cannot give unfair tax benefits to selected companies. No matter if they are European or foreign, large or small, part of a group or not.”

From The Guardian:

“The commission said Ireland’s tax arrangements with Apple between 1991 and 2015 had allowed the US company to attribute sales to a ‘head office’ that existed on paper only and could not have generated such profits.

“The result was that Apple avoided tax on almost all profits from sales of its products across the EU’s single market by booking the profits in Ireland rather than the country in which the product was sold.”

According to the commission, Apple paid an effective tax rate of one percent in 2003 on profits of Apple Sales International. By 2014, the tax rate had dropped to 0.005 percent.

Apple and Ireland did not agree with the ruling and plan to appeal. For Ireland, some are concerned the decision could hurt investment in the country as well as the rest of Europe.

Apple CEO Tim Cook 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.”

Supporters of the decision hope the company pays the amount, which they say is equivalent to the annual budget for the Irish health service and could be used to invest in public housing, according to The Guardian.

Apple’s 2015 profits totaled an estimated $18 billion, reported Reuters.

The Guardian also reports the company has a stockpile of more than $230 billion in cash and securities, most of which is held outside the U.S. to avoid American tax laws.