EU says, “Hey Apple. That’ll be £11bn in back taxes.”

It’s a company which is big and, like many others, is “careful” about how taxes are paid. By “careful” we of course mean that they try to avoid paying any if they can.

A lot of large companies do this and a lot will offer the same defence – they’ll tell you that they’re using perfectly legal ways to move their earnings around to get the most “efficient” tax bill. Apple, however, are a company who’ve made a £40.5bn net profit last year and most of their global revenue ends up in Ireland. After a three year investigation, the European Commission has come to the conclusion that this arrangement – which resulted in tax bills of almost nothing – was, in fact, illegal.

EU says, Hey Apple. Thatll be £11bn in back taxes.

The now want £11bn in back taxes. That’s over 27% of last years’ net profit.

Ireland has long been attractive to companies because of their low tax rate of 12.5%, however this only applies to profit made in Ireland. Apple has been funnelling profit made all over Europe and beyond to Ireland where this doesn’t get taxed at all. The result is that Apple has been enjoying a tax rate which is as low as 0.005%. Now the EU is telling Ireland to stop this and collect £11bn in back-taxes.

Finance chiefs in Ireland (which is in Europe) are denying that they should be responsible for collecting additional taxes that come into their country from the rest of Europe. They’re basically telling the European Commission to back off – saying that collecting taxes is a “national competency” and the Commission is “overreaching” into their affairs. Meanwhile, in the US, a White House spokesman agrees and says that they are concerned that US tax payers will lose out.

EU says, Hey Apple. Thatll be £11bn in back taxes.

Countries are free to set their own tax rates, and Ireland has long attracted business with their low tax rates. As countries compete to attract and retain these business, it means that huge companies such as Apple can simply play these counties off each other.

Apple CEO, Tim Cook, has given a rather blunt response, stating that this behaviour could actually harm the EU..

This would strike a devastating blow to the sovereignty of EU member states over their own tax matters, and to the principle of certainty of law in Europe.

Beyond the obvious targeting of Apple, the most profound and harmful effect of this ruling will be on investment and job creation in Europe.

Apple is threatening to appeal. The Irish government have stated that they don’t want to collect the money and will appeal too. I’ve decided to have another cup of tea.