Europe Says Apple Owes More than $14 Billion in Unpaid Taxes

The American tech giant Apple had $234 billion in annual revenues in 2015. Now, it’s going to have to pony up $14.5 billion to European authorities for skirting taxes.

That’s according to the European Commission, which announced Tuesday that Apple had paid a tax rate of just 1 percent or even less — .0005 percent, in some years — on its European profits while some of the company’s operations were based in Ireland. The commission determined such a low tax rate was illegal because it creates an illegal trade incentive.

“Member States cannot give tax benefits to selected companies — this is illegal under EU state aid rules. The Commission’s investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years, commissioner Margrethe Vestager, in charge of competition policy, said in a statement Tuesday.

The massive penalty is likely to send shockwaves through boardrooms of companies like Amazon and McDonald’s that have extensive operations in Europe. European authorities are investigating both companies to see if they paid their fair share of taxes.

The ruling also puts the Obama administration in a tight spot. President Barack Obama wants to keep American companies in the country to contribute to U.S. revenue. At the same time, he doesn’t want European authorities to target American companies simply because they’re American and doing business in Europe. In a statement Tuesday, the Treasury Department said it was disappointed in the ruling.

Republicans share the president’s frustration. In a statement, House Speaker Paul Ryan of Wisconsin said, “This decision is awful. Slamming a company with a giant tax bill — years after the fact — sends exactly the wrong message to job creators on both sides of the Atlantic. It’s also in direct violation of many European countries’ treaty obligations.”

Both Apple, which has been operating in Ireland since 1980, and the Irish government have said they would appeal the ruling.

“We never asked for, nor did we receive, any special deals.” Apple’s Chief Executive Tim Cook, said in a letter to customers. “We now find ourselves in the unusual position of being ordered to retroactively pay additional taxes to a government that says we don’t owe them any more than we’ve already paid.”

Andrea Montanino, director of global business and economics at the Atlantic Council who previously worked at the European Commission, put the blame for the mess on Dublin.

“There are rules in Europe as there are rules in the United States,” Montanino told Foreign Policy Tuesday. “You have to comply with the rules. I would not say it’s the fault of Apple. Apple followed the rules. It is Ireland that broke the rules.”

FP’s John Hudson contributed to this report. 

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