Illegal tax benefits: Apple to pay back $15 billion to Irish government
WASHINGTON: It took a couple of years, but Apple has started to pay back illegal tax benefits to the Irish government. The company has paid $1.77 billion (€1.5 billion) into an escrow account designed to hold the fine. Apple has to pay $15 billion in total (€13 billion).
In August 2016, the European Commission said that Apple benefited from illegal tax benefits in Ireland from 2003 to 2014. According to Competition Commissioner Margrethe Vestager, Apple managed to lower its effective corporate tax rate thanks to a Double Irish structure.
By creating two different Irish subsidiaries and allocating profit to the right subsidiary, you can end up paying corporate tax on a fraction of your actual profit. Of course, Apple wasn’t the only tech company that optimized its tax structure. And the company also claimed that everything was legal.
The Irish government tried to appeal the decision but the decision remained intact. Ireland had to recover €13 billion starting on January 2017.
But nothing happened.
At some point Vestager got mad again and referred the case to the European Court of Justice. This time, Vestager wasn’t attacking Apple, but Ireland.
It looks like the case is closed now and Apple will slowly pay back the fine over time. Unfortunately, the fine is now more expensive than before because the U.S. dollar has been going down for a couple of years. Apple has hundreds of billions in cash, and a significant portion is overseas.
European governments lobbied to put an end to the Double Irish back in 2014. Apple moved some of its international cash to the tiny island of Jersey around the same time.
European governments are currently discussing a tax reform to tax big tech companies based on actual revenue in each European country. This way, tech companies wouldn’t be able to report profit in just one country with a lower corporate tax rate. But it’s taking longer than expected as some member countries are still dragging their feet.