Apple has finally agreed to start paying a €13bn ($15.4 billion) tax bill in early 2018, a full 12 months after a European Union competition court ruled that a special tax deal with Ireland had allowed Apple to pay almost zero tax on Europe wide profits between 2003 and 2014.
The irony is that Ireland has said it doesn’t want the money. The Irish government has instead, reluctantly decided to take the 13 billion Euro into a special escrow account, hold on to it, and then hopefully return it, if both Apple and the Irish government win appeals they have both launched against the ruling.
In the meantime, however, Ireland has been forced by the EU to start taking the money from Apple, a year after the country was originally ordered to do so. The Irish government has only started to take action after the European Commission, headed by EU competition commissioner Margrethe Vestager, took the country to court to the European Court of Justice, the highest court in the EU.
Ireland is now seeking an investment manager and a custodian to operate the account and expects to appoint both next month.
“We have now reached agreement with Apple in relation to the principles and operation of the escrow fund,” Finance Minister Paschal Donohoe told reporters before a meeting with Vestager. “We expect the money will begin to be transmitted into the account from Apple across the first quarter of next year.”
The core of the matter
Last year, the EU ordered the Irish government to retrieve billions of euros in back taxes, that the EU claims Apple deliberately avoided paying thanks to so-called special sweetheart deals, that Apple enjoyed with the Irish government in relation to the amount of tax Apple paid.
Ireland currently has the lowest Corporation Tax levels in the EU, a fact that other countries, such as France and Germany, have long complained against, but have been powerless to change. At the heart of the issue with Apple and its tax arrangements in Ireland, is that both claim that the tech giant was and is fully compliant with its taxes.
The EU disagreed however. “This selective treatment allowed Apple to pay an effective corporate tax rate of 1pc on its European profits in 2003, down to 0.005pc in 2014,” said Vestager in 2016.
Apple executives are bullish about their upcoming appeal, and fully expect to win, and take back the $15 billion.
Rotten to the core? Not us, says Apple.
“We have a dedicated team working diligently and expeditiously with Ireland on the process the European Commission has mandated,” Apple said in a statement given to the WSJ. “We remain confident the General Court of the EU will overturn the Commission’s decision once it has reviewed all the evidence.”
Time will tell.