EU antitrust regulators have ordered Apple to pay up to 13 billion euros ($A19.15 billion) in taxes to the Irish government after ruling that a special scheme to route profits through Ireland was illegal state aid.
The massive sum, some 40 times bigger than the previous known demand by the European Commission to a company in such a case, could be reduced, the EU executive said in a statement, if other countries sought more tax themselves from the US tech giant.
It also risks inflaming tensions with the U.S., which argues the EU is picking on American companies and depriving it of potential tax windfalls of its own.
The White House says the Obama administration is concerned that American taxpayers will ultimately bear the brunt of the European Union’s decision requiring Apple to pay billions of dollars in back taxes,” The Associated Press reports.
At the heart of the matter is the EU’s claim that many multinationals - including Amazon and McDonalds - struck deals with EU countries to pay unusually low tax in exchange for basing their EU operations there.
Apple, which with Ireland, has already said it will appeal the decision, paid a tax rate on European profits of between 0.005 and one per cent, the Commission said.
“Ireland granted illegal tax benefits to Apple which enabled it to pay substantially less tax than other businesses over many years,” said EU Competition Commissioner Margrethe Vestager.
“This selective treatment allowed Apple to pay an effective corporate tax rate of one per cent on its European profits in 2003, down to 0.005 per cent in 2014,” she added.
The Apple case, which the commission has been looking into since mid-2013, is one of several high-profile probes into tax deals that EU member states granted multinationals including Starbucks, Amazon and McDonald’s.
The European Union’s executive found Apple’s sales profits in Ireland, where the company has its European headquarters, were allocated in a way that “did not correspond to economic reality.” Most of the profits generated in Europe were allocated to head offices that “existed only on paper” and did not have to pay taxes anywhere, the commission said in a statement.