EU Penalty For Apple’s ‘Illegal’ Tax Benefit Prompts US Intervention

The European Union’s battle with Apple over its “illegal tax benefits” has taken a new twist this week after the US government reportedly intervened in the case.

Last August, the European Commission (EC) had ordered the Irish government to recover up to €13 billion (£11.5bn) plus interest from Apple.

Apple rejected the EU claim that it has to pay £11.5bn in Irish taxes, and in December took its case to the Luxembourg-based General Court, Europe’s second-highest court. That case is scheduled to heard next year, in 2018.

US Intervention

The “sweetheart” tax deal that Apple enjoyed with the Irish government has been a bone of contention for a number of years now.

The EC investigation first began in 2014 and it eventually concluded that Apple had been able to avoid taxation on almost all profits generated in the EU single market.

The EC blamed a structure which routed revenues through two “paper” headquarters in Ireland, as well as minimal tax rates in that country.

The EC said that Apple only paid an effective corporate tax rate that fell from one percent in 2003 to 0.005 percent in 2014 – a rate which other companies in Ireland were not subjected to. This effectively amounted to state aid, the commission previously said.

Until now, the US government has remained relatively silent on the matter, although the EC penalty last year was criticised by the Obama administration, which said the European Union was helping itself to cash that should have ended up in the United States.

And now according to Reuters, the United States has decided to step into the case.

“I can confirm the United States filed an application with the European Union General Court to intervene in the case involving the retroactive application of state aid rules to Apple,” said Reuters’ source, who declined to be named because of the sensitivity of the matter.

It is known that the Trump administration has tentatively proposed a tax break on $2.6 trillion (£2.01 trillion) in corporate profits being held offshore as part of its tax reform.

That said, it is not immediately clear what the US intervention is seeking to achieve (either to assist Apple’s appeal, or to get the money paid in the US instead).

It is also not clear whether the US appeal was ordered by the previous Obama, or current Trump administration.

Apple for its part has said it was a convenient target for the EU and that the EU competition enforcer used an “absurd theory” to come up with a punitive figure.

Tax Haven?

The issue of tax breaks for large (mostly US-based) corporations have been rumbling on for a while now.

Indeed, pressure on Ireland has grown over concern that big name tech firms are using the coutnry as a tax haven.

In 2015 Apple opted to settle a corporate tax dispute with the Italian tax office, and reportedly handed over 318m euros (£235m).

But it is not just Apple facing increasing scrutiny from European tax authorities. Google, Amazon and other tech firms have also been the subject of tax inquiries in Europe.

Quiz: How well do you know Apple?