EU orders Apple to repay $14B in tax breaks from Ireland

European antitrust commissioner Margrethe Vestager. Photo credit: Flickr user Friends of Europe.

European Union regulators ordered Apple to pay as much as $14.5 billion in taxes and interest after ruling that a deal with the Irish government illegally granted undue tax benefits to the iPhone vendor.

The figure is reportedly 40 times bigger than any previous demand under EU rules prohibiting countries from helping companies gain advantages over their competitors. The decision by the European Commission follows an investigation launched in June 2014.

“The Commission’s investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years,” Commissioner Margrethe Vestager said in prepared remarks. “In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1 percent on its European profits in 2003 down to 0.005 percent in 2014.”

Apple vowed to appeal the decision, with CEO Tim Cook saying the allegation that Ireland gave Apple any special tax considerations “has no basis in fact or law.” Ireland said it plans to appeal as well.

“We never asked for, nor did we receive, any special deals,” Cook wrote in an open letter. “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.”

Cook went on to claim that the Commission hopes to replace existing Irish tax laws with policies that the EU thinks should have been in place.

“This would strike a devastating blow to the sovereignty of EU member states over their own tax matters, and to the principle of certainty law of Europe,” Cook continued. “At its root, the Commission’s case is not about how much Apple pays in taxes, it is about which government collects the money.”

The EU’s move also could strain growing tensions between the EU and the U.S. over the Commission’s tax investigations into American companies, as The Wall Street Journal noted. A representative from the U.S. Treasury Department expressed disappointment in the ruling and said “retroactive tax assessments by the Commission are unfair, contrary to well-established legal principles, and call into question the tax rules of individual Member States,” according to a Journal report.

Shares of Apple were down roughly .75 percent in mid-day trading Tuesday following the news.

For more:
- see the EU’s press release
- read Tim Cook’s open letter
- check out this Wall Street Journal story

Related articles:
EC's Vestager vows to continue probing Google, Apple's EU tax arrangements
EU weighs iPhone operator contracts amid antitrust complaints
Apple wins temporary EU sales ban on Samsung's GalaxyTab tablet
Apple earnings set to miss expectations following UK's EU exit decision