EU sues Ireland for failing to collect back taxes from Apple

The European tax triangle drama involving Apple escalated on Wednesday, as the European Union took Ireland to court for failing to recover taxes worth more than $15 billion from Apple.

Last year, the European Commission, the executive arm of the European Union, ordered Apple to pay the unpaid taxes to Ireland, saying the country gave the Cupertino tech giant illegal tax benefits. After a year of no action by Ireland, during which Apple missed its initial January 3 deadline to pay the taxes, Brussels took legal action and asked the European Court of Justice to intervene.

“We of course understand that recovery in certain cases may be more complex than in others, and we are always ready to assist,” said EU’s commissioner for competition Margrethe Vestager in a statement. “But member states need to make sufficient progress to restore competition. That is why we have today decided to refer Ireland to the EU Court for failing to implement our decision.”

Vestager and EU also took action against another U.S.-based tech giant on Wednesday. It asked Luxembourg to recover more than $290 million from Amazon for similar illegal tax arrangements.

While Ireland has a corporate tax rate of 12.5 percent, the EU found in a two-year investigation started in 2014 that Ireland gave Apple deals which effectively cut its corporate tax rate Apple to 1 percent in 2003 and a minuscule 0.005 percent in 2014.

“This selective tax treatment of Apple in Ireland is illegal under EU state aid rules, because it gives Apple a significant advantage over other businesses that are subject to the same national taxation rules,” the Commission said in 2016. 

Ireland and Apple both appealed the decision in 2016. After the decision, Apple CEO Tim Cook then wrote a lengthy letter excoriating the Commission.

“The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process,” wrote Cook. “This claim has no basis in fact or in law.”

Apple did not immediately respond to a request for comment.

Ireland said that since the investigation, it has been engaged in dialogue with the Commission and Apple for more than a year. But there were delays that frustrated the Commission, such as the setup for an escrow account between Ireland and Apple. Ireland and Apple agreed they will jointly choose investment managers to handle the fund.

But Ireland made progress on calculating the exact amount due — which will be concluded by March 2018 at the earliest, according to Vestager.

“It is extremely regrettable that the Commission has taken this action, especially in relation to a case with such a large scale recovery amount,” the Irish finance ministry said in a statement.

Photo: EU Competition Commissioner Margrethe Vestager gives a press conference on Aug. 30, 2016 in Brussels to order Apple to pay back taxes to Ireland. (John Thys/AFP/Getty Images)

 

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