Apple ordered to pay more than $14 billion in back taxes to Ireland
Apple on Tuesday lost a long-running legal battle with the European Union, forcing the company to pay 13 billion euros (14.4 billion dollars, or about Rs 1,20,903 crore) in back taxes to Ireland, as part of a broader crackdown on so-called “sweetheart deals.”
What happened
In 2016, Margrethe Vestager, the European Commission’s head of competition, accused Ireland of giving Apple illegal tax benefits that unfairly diverted investment away from other countries.
Both Apple and Ireland, whose low tax rates have attracted major tech companies to set up their European headquarters there, successfully challenged the EU ruling.
But the European Court of Justice has now ruled in Vestager’s favour, finding that Apple unfairly took advantage of an unfair loophole in Ireland’s tax system. The company must now pay Ireland €13 billion (approximately Rs 1,20,903 crore) in back payments.
What was the ‘Double Irish’ programme?
Part of Ireland’s success in attracting tech giants was due to its old tax system, which allowed multinationals to reduce their foreign contributions to a single-digit percentage.
The scheme involved a complex corporate structure that allowed a multinational to pass on untaxed income to an Irish subsidiary, which then paid the money to another company registered in Ireland but liable for tax elsewhere, such as tax haven Bermuda.
Because both companies are Irish, the term “Double Irish” was coined.
Apple used a version of the Double Irish arrangement until around 2014, when Ireland, under sustained pressure from the EU and US, closed the loophole.
What did Apple say?
Apple expressed disappointment with the ruling, which is final and cannot be appealed.
“The European Commission is attempting to change the rules retroactively, ignoring that our income was already subject to US taxes as required by international tax law,” the company said.
How will Ireland spend the money?
In its initial statement, the Irish government said nothing. It will likely be placed in a new sovereign wealth fund that Dublin set up last year to invest rising corporate tax revenues that have given it one of the few budget surpluses in Europe.
The government already plans to cut taxes and increase spending again in a budget before the Oct. 1 election. Opposition parties have repeatedly called for Apple’s tax revenues to be used to further increase spending on now-strained services.
Will other companies be forced to pay back taxes?
The Commission’s case against Ireland was strengthened by its access to documents in which Irish officials were unusually candid about the deal they had struck with Apple.
Amazon has been under investigation in Luxembourg over its tax practices, but last year the Court of Justice of the European Union (CJEU) won the case, ruling that the company would not have to pay 250 million euros (approximately Rs 2,317 crore) in back taxes.
In 2019, Starbucks won its lawsuit against an EU demand to pay up to €30 million (approximately Rs 238 crore) in Dutch back taxes, while Fiat Chrysler Automobiles lost its lawsuit against an order to pay a similar amount to Luxembourg.
© Thomson Reuters 2024
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
