Feedback
Business

After Apple Dinged With a $14.5B Tax Bill, Who’s Next?

The staggering $14.5 billion tax bill Apple was served with today by the European Union is putting the spotlight on what other American companies are under scrutiny by the commission.

Apple's tax bill comes after a three-year investigation by the Brussels-based European Commission, which ruled Ireland's tax dealings with Apple breached rules on state aid.

The European Commission's antitrust team is also investigating two other American giants: McDonald's and Amazon.

An Amazon shipping box and McDonald's sign Getty; Reuters

McDonald's

The European Commission announced last December it had opened an investigation into McDonald's operations in Luxembourg to determine whether the fast food giant was given illegal tax breaks.

The investigation is focused on a 2009 tax ruling that resulted in McDonald's Europe Franchising, which is headquartered in Luxembourg, from “paying no tax on their European royalties either in Luxembourg or in the U.S.," according to a news release from the European Commission.

Despite recording a $280 million profit from its business in 2013, the European Commission said McDonald's did not pay a corporate tax in Luxembourg or in the United States. Many countries have double taxation treaties, allowing a corporation sending profits to its main location to avoid being taxed twice.

"A tax ruling that agrees to McDonald's paying no tax on their European royalties either in Luxembourg or in the US has to be looked at very carefully under EU state aid rules," Margrethe Vestager, the commissioner in charge of antitrust investigations said in a statement. "The purpose of Double Taxation treaties between countries is to avoid double taxation – not to justify double non-taxation."

McDonald's representatives have said they believe the company is properly complying with all tax laws. In their 2015 annual report, the company warned investors if the "matter is adversely resolved," McDonald's could be on the hook for a large tax bill and face a future increase.

Amazon

A similar probe looking at Amazon's tax dealings in Luxembourg was announced by the European Commission in 2014.

In Amazon's case, which dates back to 2003, the commission is probing whether Amazon paid appropriate taxes in Luxembourg on "most" of its European profits, which were routed through a subsidiary called Amazon EU Sàrl, according to a news release.

"Based on a methodology set by the tax ruling, Amazon EU Sàrl pays a tax deductible royalty to a limited liability partnership established in Luxembourg but which is not subject to corporate taxation in Luxembourg. As a result, most European profits of Amazon are recorded in Luxembourg but are not taxed in Luxembourg," the European Commission said in the news release.

Amazon included the ongoing case in its 2015 annual report, telling shareholders it believes its tax estimates are reasonable, however if the case is "adversely resolved," the company may be slapped with a sizable bill.

What's next for Apple

Apple and the Irish government both said they would appeal the decision.

Apple posted a message from CEO Tim Cook on some of its European sites calling the tax ruling "unprecedented" and one that "has serious, wide-reaching implications."

"It is effectively proposing to replace Irish tax laws with a view of what the Commission thinks the law should have been," the message said. "This would strike a devastating blow to the sovereignty of E.U. member states over their own tax matters, and to the principle of certainty of law in Europe."

The European Commission alleges Apple avoided tax on its profits across the E.U. by recording all sales in Ireland rather than in the country where the devices were actually sold.

Ireland has been ordered to recover taxes from 2003 to 2014 of up to €13 billion [$14.5 billion] plus interest.

If Apple agreed to repay tax to the other countries, "this would reduce the amount to be recovered by Ireland," the Commission said.

The White House also weighed in today, with Press Secretary Josh Earnest saying he was "concerned about a unilateral approach" and said it could "undermine progress that we have made collaboratively with the Europeans to make the international taxation system fair," Reuters reported.

Apple could deduct those back taxes from what it owes the United States, Earnest said. However, he noted that wouldn't be fair to American taxpayers.

Ireland has positioned itself over the past two decades as an attractive place for international companies, especially those in the technology sector, to set up their European headquarters, largely due to its low corporate tax rate.

Intel and Apple were some of the first American tech behemoths to set up shop in the country. Since then, Google, Facebook, Airbnb and others have followed suit.

With reporting from NBC News' Alastair Jamieson.