It’s been found that Apple had been benefitting from illegal tax profits and because of this the European Commission instructed Ireland to recover the criminal aid from Apple and the amount will come to around $14.5 billion. For the past few years there had been an ongoing debate over European taxes. It may not be illegal to pick Ireland to act as the base for your European headquarters but it can become an issue when Ireland decides to hand out tax benefits to a certain enterprise specifically like they did with Apple.
Other companies that also have headquarters in Ireland are being unfairly taxed when compared to Apple and Commissioner Margrethe Vestager have decided it to be illegal and that Apple will be responsible for the repayment of said benefits. She further said that tax benefits cannot be given to only selected companies and that such dealings are illegal under EU state aid rules.
Over quite a few years these tax benefits saw Apple paying much less than other businesses based in Ireland. In 2003 they only paid about 1% of their profits in taxes and in 2014 only 0.005%. They have successfully optimized their tax structure by ways of creating a company that exists only on paper. Two subsidiaries of Apple that is based in Ireland called Apple Operations Europe and Apple Sales International paid over most of their profits to a certain head office. The head office has no base location anywhere and this resulted in their profits staying untaxed for years which greatly lowered their effective tax rate.
Although the exact amount of the fine isn’t clear as yet, the European Commission estimates Apples gains at around $14.5 billion and the commission has the authority to fine them for a period of ten years preceding 2013 which was when the first information request was lodged. This means that they will be fined for the period ranging from 2003 up to 2014 and interest would be added too. Luckily for Apple they may be able to negotiate some kind of deal with the Irish government which may see them paying less.
Apple now complies with Europe’s taxation laws since they changed their structure in 2015. Tim Cook has written a letter rubbishing these claims and states that Apple never asked for any special treatment and neither did they receive it. He further states that they are being asked to pay more taxes to a government that said they owe nothing more than what was already paid. There were much more to his letter but we will need to wait and see what the ultimate decision will be. We cannot help but wonder what the future holds for this mobile, computer and technology giant but the only ones that may decide their fate is the European Commision.