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Apple comes out fighting against European Union's NZ $20 billion tax ruling

31 Aug 2016

Apple is confident it can wipe the pie off its face after it was hit by a whopping €13 billion (NZD $20 billion) in retroactive taxes, as CEO Tim Cook has come out fighting in an open letter to Europe's Apple community. 

The European Commission submitted a press release yesterday claiming that Ireland gave Apple illegal tax benefits of €13 billion and is now having to recoup the losses and interest spanning from 2003-2014.

The investigation was launched in June 2014 and concluded that Apple has been paying lower tax since 1991 - the result of illegal tax preferences. 

"Member States cannot give tax benefits to selected companies – this is illegal under EU state aid rules. 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. In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1 per cent on its European profits in 2003 down to 0.005 per cent in 2014," says Commissioner Margrethe Vestager, who is in charge of competition policy.

However, Cook says that with deep roots in Ireland's town of Cork, Apple has contributed a lot to the local economy - including the title of the largest taxpayer in Ireland, US and the entire world. He also believes Apple has always followed the law - and paid its taxes.

"The opinion issued on August 30th alleges that Ireland gave Apple a special deal on our taxes. This claim has no basis in fact or in law. 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," Cook's letter says.

However the European Commission says that Ireland allowed Apple to divert profits without tax to its head office, Apple Sales International - a place with no country base, no employees and no premises.

Cook goes on to state that the European Commission's accusations will wreak havoc on an 'idealised' version of what Ireland's tax laws should have been and will also cause other EU nations to question their own sovereignty on tax matters.

Both Ireland and Apple will be repealing the ruling, and Cook is confident that they will succeed. He goes on to state that it's not about the amount of tax Apple pays, but who gets the money.

"In Apple’s case, nearly all of our research and development takes place in California, so the vast majority of our profits are taxed in the United States. European companies doing business in the U.S. are taxed according to the same principle. But the Commission is now calling to retroactively change those rules," Cook's letter continues.

Apple believes it has been targeted unfairly, the results of which will not just affect Apple, but every company across Europe. This is because, Cook says, they may be "subjected to taxes under laws that never existed".

The European Commission states that it can only recover 'illegal state aid' for 10 years preceding the first request for information, which stated in 2013. As a result, Ireland must recover funds from as far back as 2003. It also states that Apple changed its Irish structure in 2015, so that period doesn't apply.

Cook says that Apple has been a supporter of tax reforms, but only when looking forward. He believes retroactive reforms are not the answer. He says the company is committed to Ireland.

"We firmly believe that the facts and the established legal principles upon which the EU was founded will ultimately prevail," Cook's letter concludes.

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