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Apple has agreed to dip into its multibillion-dollar cash pile to pay Ireland $15.4 billion in back taxes — a ruling CEO Tim Cook has called “total political crap.”
Here’s the catch — Ireland doesn’t want Apple’s money; the European Commission is forcing the Emerald Isle to collect it. The funds will go into an escrow account while Ireland appeals the decision and will be released after the General Court of the European Union makes the final call, according to a statement from the Irish Finance Ministry.
Apple was slapped with the record-setting tax bill last year after a multi-year investigation by the Brussels-based European Commission determined Apple had benefited from unfair tax loopholes allowing the iPhone maker to pay less tax than other businesses. Ireland was ordered to collect back taxes for 2003-2014, putting Apple’s new tax bill at a steep €13 billion [$15.4 billion.]
The Commission said Apple was able to pay an effective corporate tax rate of 1 percent on its European profits in 2003. In 2014, that shrunk to 0.005 percent for Apple Sales International, an Irish incorporated arm of Apple.
At issue is whether Apple avoided tax on its foreign profits, which were recorded by its Irish subsidiaries and lightly taxed. This amounts to unfair state aid, according to the Commission.
Apple is sitting on at least $261.5 billion in cash, according to its most recent earnings report. A $15.4 billion payment certainly won’t sink the tech titan, but for some perspective, that’s the entire value of Twitter.
In an interview with the Irish Independent last year, CEO Tim Cook called the ruling “total political crap.”
“No one did anything wrong here and we need to stand together. Ireland is being picked on and this is unacceptable,” Cook said.
Apple did not immediately respond to NBC News’ request for comment. When Ireland's tax laws changed in 2015, Apple changed its corporate structure in the country to comply. Since then, Apple has been paying 12.5 percent tax — Ireland's statutory rate — according to a newsroom post from the company. Worldwide, Apple has an effective tax rate of 24.6 percent — a number the company says is higher than many other multi-nationals.
The European Commission's decision is also raising questions about sovereignty. In a statement posted online last year, Apple said the Commission’s ruling is “effectively proposing to replace Irish tax laws with a view of what the Commission thinks the law should have been… 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 Emerald Isle 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 behemoths to set up shop in the country. Since then, Google, Facebook, Airbnb, and others have followed suit.
Apple is the world's largest tax payer.