Earlier this week, the European Union charged that Apple and Ireland had engaged in an illegal “sweetheart” tax agreement, ordering the Irish government to collect some $14.5 billion in back taxes from the tech company.
Apple houses two companies in Ireland, Apple Sales International and Apple Operations Europe, which the E.U. says have paid an effective tax rate of just 0.005% in recent years.
Arrangements in Ireland made it so that the profits from the two companies were funneled to a “head office” with “no employees, no premises, no real activities,” outside of the state, according to the European Union.
Margrethe Vestager, the E.U.’s competition enforcer, says that “Member states cannot give tax benefits to selected companies.”
Apple has fired back, as has the Irish government and some supportive voices from the United States. Apple CEO Tim Cook has argued that the ruling “is effectively proposing to replace Irish tax laws with a view of what the Commission thinks the law should have been. This would strike a devastating blow to the sovereignty of EU member states over their own tax matters, and to the principle of certainty of law in Europe.”
Apple is currently valued at about $230 billion, making it the most valuable company on the planet. How much will a $14.5 billion fine really affect them?
That amount of money is hard to visualize. To put in perspective, it’s the equivalent of about 24.3 million iPhones sales — enough to give every man, woman, and child in Ireland about five phones each. Yet, it’s only about 1.2% of what American consumers owe in debt, a total of about $11.9 trillion.
Cook argues that the E.U. ruling has “no basis in fact or in law,” and that the tax rate used to calculate it is “a completely made-up number.”
He also called it an attempt to “rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process.”
Both Apple and Ireland plan to appeal the decision.
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