European Commission Orders Apple To Pay $14.5 Billion In Taxes

Aug 30, 2016
Originally published on August 30, 2016 6:24 pm
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Apple is vowing to appeal the ruling by the European Union ordering the U.S. tech giant to pay more than $14 billion in back taxes. EU regulators announced the long awaited ruling earlier today, saying the tax arrangement between Apple and the Irish government is illegal and gives Apple an unfair advantage over its competitors. NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: EU officials say that for years Apple benefited from a complex agreement that essentially allowed it to escape paying taxes on many of the products it sold overseas. The sales were recorded by a pair of subsidiaries called Apple Sales International and Apple Operations Europe. The head office for these two entities was ostensibly in Ireland. Margrethe Vestager, the EU's competition commissioner, spoke at a press conference today.

(SOUNDBITE OF PRESS CONFERENCE)

MARGRETHE VESTAGER: This so-called head office only existed on paper. It has no employees. It has no premises, and it has no real activities.

ZARROLI: Vestager says even though profits were recorded by these Irish subsidiaries, Ireland itself ruled that Apple didn't have to pay taxes on them. Reuven Avi-Yonah is a professor of tax law at the University of Michigan. He says Ireland didn't view the subsidiaries as legally Irish.

REUVEN AVI-YONAH: Well, the way the Irish let them record it is that it's not, from an Irish perspective, treated as being in Ireland at all, and the result is that the tax rate on that is effectively zero.

ZARROLI: Ireland was foregoing billions of dollars in tax revenue. Avi-Yonah says that may have something to do with the fact that Apple is a big employer there. It has nearly 6,000 workers in the country.

Whatever the reason, Ireland has insisted it doesn't want the money. Finance Minister Michael Noonan told CNBC his government would appeal the ruling, a process that could take years.

MICHAEL NOONAN: If they owe tax, they do not owe it to the Irish authorities. They may owe it elsewhere but not to the Irish authorities.

ZARROLI: Apple issued a statement. It said, we find ourselves in the unusual position of being ordered to pay additional taxes to a government that says we don't owe any more than we've already paid.

As for the U.S. government, Treasury Department officials said retroactive tax assessments are unfair, contrary to well-established legal principles and call into question the tax rules of individual states. Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.