Apple and Ireland say they will contest an EU tax ruling that has landed the American tech giant with a 13 billion euro bill.
Competition Commissioner Margrethe Vestager said arrangements dating back to the early 1990s were illegal under state aid rules and had given Apple favourable treatment over other businesses in Ireland.
As a result, she said, the maker of iPads and iPhones had paid just 1 per cent tax on its European profits in 2003 and 0.005 per cent in 2014 – and it should now reimburse Ireland to the tune of 13 billion euros (£11bn).
“This is not a penalty, this is unpaid taxes to be paid,” she said.
Ireland has a corporation tax rate of 12.5 per cent, one of the lowest in the developed world, and has used this to attract US multinationals, including Apple, Google, Microsoft anfd Facebook.
Irish Finance Minister Michael Noonan and Apple Chief Executive Tim Cook said they would fight the EU ruling.
Apple warned of the ramifications for future investment in Europe, where it employs 22,000 people, 5,500 in Ireland. Its European headquarters are in Cork.
‘Profound and harmful effect’
Apple said: “The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and up-end the international tax system in the process.
“It will have a profound and harmful effect on investment and job creation in Europe. Apple follows the law and pays all of the taxes we owe wherever we operate. We will appeal and we are confident the decision will be overturned.”
A European Commission inquiry found that Ireland’s treatment of Apple allowed it to avoid tax on profits generated by sales in the European single market.
It said this was because Apple recorded all its sales in Ireland rather than in the countries where its products were sold.
Mr Noonan said Ireland would contest the ruling in the courts “to defend the integrity of our tax system, to provide tax certainty to business, and to challenge the encroachment of EU state aid rules into the sovereign member state competence of taxation”.
He added: “It is important that we send a strong message that Ireland remains an attractive and stable location of choice for long-term substantive investment.”
It is not the first time the European Commission has taken action against companies’ tax planning. Starbucks and Fiat are appealing against rulings ordering them to pay back taxes to the Netherlands and Luxembourg.