The EU says Apple has to pay 13 billion Euros + interest in back taxes

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Read more below. So, Ireland had tax rules that allowed Apple to use this loophole, and Apple has now been penalized (but not Ireland apparently). I’m not really ok with that. What if Ireland simply forgives Apple’s debt? Ireland has since closed the loophole however.

From https://www.reuters.com/technology/why-does-apple-have-pay-ireland-144-billion-2024-09-10/

LONDON, Sept 10 (Reuters) - Apple lost a long-running court battle with the European Union on Tuesday, resulting in the company being forced to pay 13 billion euros ($14.4 billion) in back taxes to Ireland, as part of a wider crackdown on so-called “sweetheart deals”.

WHAT HAPPENED?

In 2016, the European Commission’s competition chief Margrethe Vestager accused Ireland of having granted Apple illegal tax benefits, unfairly diverting investment away from other countries.

Both Apple and Ireland, whose low tax rates helped it attract Big Tech companies to set up their European headquarters, successfully challenged the EU ruling.

But the European Court of Justice has now sided with Vestager, agreeing Apple had unduly benefited from unfair loopholes in Ireland’s tax regime, and that the company must now hand Ireland 13 billion euros in back payments.

WHAT WAS THE ‘DOUBLE IRISH’ SCHEME?

Part of Ireland’s success in luring tech giants was a result of its old tax regime, under which multinational businesses were able to cut their overseas contributions to single digits.

The arrangement involved a complex corporate structure whereby a multinational could channel untaxed revenues to an Irish subsidiary which then pays the money to another company registered in Ireland but taxed elsewhere, such as tax haven Bermuda.

Both companies being Irish led to the term “Double Irish”.

Apple used a version of the Double Irish scheme until around 2014 when, under sustained pressure from the EU and U.S., Ireland closed the loophole.

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I don’t know Irish or European law, but it seems to me that Ireland having closed the loophole would be irrelevant. I’d assume that Apple’s Irish tax liability – as far as Ireland is concerned --is set by the laws in effect at the time that gave Apple the benefit, not now.

It bothers me more that the EU seemingly has the right to set Ireland’s tax law and policy. Does Ireland’s participation in the EU allow that? If they agreed to that at the time they joined, well, I guess that’s that. If the EU is trying a power grab that’s not within its actual authority, that’s another thing. Again, I don’t know the details, but I personally see the Apple+Ireland arrangement as between Apple and Ireland, with the EU butting in.

Surely Apple and Ireland can come to an arrangement to mutual benefit over this $13B.

-awlabrador

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We’d think, but perhaps not, per the “Ireland must do what the EU says” rule, if such exists.

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Would it bother you if Wisconsin had a tax law which said “Pay corporate tax in Wisconsin, we will allow you to pay your Federal tax in the Bermudas and you will have no further tax obligation to Washington.” ?

Ireland concocted a scheme whereby ex-national corporations could discharge their corporation obligations by setting up shop in Ireland, but run profits from other areas through it without further penalty. So yeah, it was finally closed down in 2014; now the tax man wants what he should have had in the first place.

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But the back taxes are being paid to Ireland, not the EU, right? So the EU is not quite like the US Federal government in this analogy. Or am I misunderstanding this?

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It’s a poor analogy. Wisconsin doesn’t set Federal tax policy or what is owed to the US Treasury, and even though Federal law usually preempts state law, the Federal government doesn’t generally control state taxes. Or at all, AFAIK.

Yes, that article seems to say the EU is ordering Apple to pay $13B to Ireland. I wouldn’t call them back taxes, because that “underpayment” was apparently, explicitly allowed under the Irish tax law at the time. AFAIK, Apple and Ireland were correct until the EU dictated that they weren’t.

If Ireland agreed to let the EU control its tax policy – and the business incentives that can influence and be influenced by that policy – then that’s what they agreed to. In my opinion, that would be a bad agreement for Ireland, but I’m not to party whatever they agreed to.

-awlabrador

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