After a two-year investigation, the European Union (EU) says the American company Apple must pay over $14 billion in back taxes to Ireland.
The EU’s competition commissioner said the company did not pay enough in taxes between 2003 and 2014. She questioned how anyone might think that Apple’s 2014 Irish tax rate of five thousandths of one percent was fair.
The European Commission is responsible for making official decisions for the European Union. The Commission follows rules designed to make sure businesses in Europe compete fairly.
In late August, the Commission announced that it would attempt to recover the back taxes from Apple. It said the company reported earnings for all of the computers, computer tablets and mobile phones it sold in Europe through its office in Ireland. Because of a tax deal with the Irish government, Apple never had to pay much tax on its earnings.
The Competition Commission is not only investigating Apple. It is looking at deals between European countries and major international businesses including Starbucks, Fiat, Amazon and McDonald’s.
Apple Chief Executive Officer Tim Cook denies the EU allegations. He said Apple paid $400 million in taxes in 2014, and his company paid more in taxes than any other business in Ireland.
The tax bill is not only causing concerns in Ireland and Europe. Government officials in the United States are also worried.
Josh Earnest is the spokesman for President Barack Obama. He said Americans could be hurt by the EU’s ruling if Apple is required to make the payment. He said the company then could legally reduce the billions of dollars it pays Ireland from the U.S. taxes it owes.
Earnest said the Obama administration is concerned EU officials decided to rule against Apple without first talking to the U.S. government.
The U.S Treasury Department called the EU’s decision unfair. It claimed the EU was targeting American companies for punishment recently. The commission denied that allegation.
On September 1, Tim Cook told an Irish newspaper that Apple would work with Irish officials to overturn Europe’s decision. He also said the tax ruling was politically motivated.
The European Commission said Ireland offered Apple the low tax rates in order to save thousands of Apple jobs within the country. It called the deal, “illegal.”
Ireland’s Minister of Finance, Michael Noonan, said his country will appeal the commission’s ruling. But if the tax is paid, it would be the largest ever in Europe.
Words in This Story
commissioner – n. a person who is responsible for a government office, agency or part of a government department
commission – n. a group of people who have been given the official job of finding information about something or controlling something
allegation – n. a statement saying that someone has done something wrong or illegal
motivate– v. to give someone a reason for doing something