A couple of days ago, Apple won a massive legal battle against the European Union authorities. Now they don’t have to pay €13 billion unpaid taxes to the Irish authorities. There is a reason behind Apple likes to operate out of Ireland. The country has about only a 12.5% corporate tax rate, which is one of the lowest in the world. But the company does not even have to pay that. It actually pays nothing!
Back in 1991, Apple launched his new subsidiary in Ireland known as Apple Sales International (ASI), which calculates all the profit made by the company in Europe, the Middle East, Africa as well as India. Therefore, if someone buys an Apple product in India, it will be recorded in ASI Ireland. And the tax is only 0.005% to 1% in Ireland until 2014 because of an agreement between Ireland and Apple. This was considered as a “The Big Irish Sweetheart deal”.
Everything was going well. But then the European Union Competition Commission intervened and claimed that Apple is only struck with Irish deal only gain a tax benefit. The deal helps tech giants such as Apple to avoid paying taxes on most of their profit selling products in different regions. For Example, Apple made a profit of $22 billion in 2011 in Europe but they only had to pay $57 million as a tax in Ireland.
Ireland had this issued tax ruling specifically to offer apple a distinct advantage. The profits were calculated in the head office of Apple Sales International when the head office existed on paper and not able to generate profits accurately. Only the Irish branch of ASI was able to handle the profits generated by selling Apple products. Therefore, the profit is generated and taxed in Ireland only.
If we think from a different perspective, why would Ireland help Apple by such distinction? Why would they lose out their precious tax revenue?
Well, if we talk about Ireland, it has a low-tax environment lured with some 250,000 multinational employers. Out of these, Apple accounts for 6,000 employees over the country. Along with that, the country gets employment opportunities from other tech giants such as Google and Facebook who account for around 10-20% Irish workers. Hence, Ireland doesn’t want to spoil this deal.
However, the authorities of the European Union states that this kind of preferential treatment is considered as State Aid. Whereas Ireland proposed an economic advantage to an individual company that threatens the competitiveness of the European Market. That is why the authorities forced Ireland to compensate up to €13 billion from Apple including interest. Apple refused the EU antitrust commission claims and even said it is “total political crap”. After this situation, the case was dragged to the court and battle raged for over four years.
The Luxembourg based-court on Wednesday said that the EU’s executive body was failed to prove that Apple is benefited from any illegal agreement with Irish authorities. In other words, the commission simply couldn’t prove that Apple was getting any benefit from Ireland’s tax authorities by selling their products. Hence, Apple got vindicated. And now they don’t have to pay €13 billion to the EU.