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Apple must pay Ireland $14.4 billion. Here is the reason

Apple lost a long-running court case with the European Union on Tuesday, resulting in the company being forced to pay 13 billion euros ($14.4 billion) in Irish taxes, as part of a wider reduction in so-called “love deals” “.

WHAT’S GOING ON?

In 2016, the European Commission’s competition chief Margrethe Vestager accused Ireland of offering illegal tax benefits to Apple, unfairly diverting investment from other countries.

Both Apple and Ireland, whose low tax rates have helped lure Big Tech companies to set up their European headquarters, successfully challenged the EU’s decision.

But the European Court of Justice has now sided with Vestager, admitting that Apple profited unfairly from the Irish tax regime’s loopholes, and that the company must now pay Ireland 13 billion euros in back payments.

WHAT ARE THE ‘DOUBLE IRISH’ PLAN?

Part of Ireland’s success in attracting tech giants was a result of its old tax regime, where multinational businesses were able to reduce their overseas contributions by single digits.

The arrangement involved a complex business structure where an international person would send untaxed income to an Irish subsidiary that would then pay income to another company registered in Ireland but tax elsewhere, such as a tax haven in Bermuda.

Both companies being Irish led to the name “Double Irish”.

Apple used a version of the Double Irish system until 2014 when, under constant pressure from the EU and the US, Ireland closed the gap.

WHAT DID APPLE SAY?

Apple expressed disappointment with the decision, which is final and cannot be appealed.

“The European Commission is trying to change the rules and ignoring that, as required by international tax law, our income is subject to tax in the US,” the company said.

HOW WILL IRELAND SPEND THE MONEY?

In his first statement, the Irish government did not say. It will likely be put into a new sovereign wealth fund set up by Dublin last year to invest the rising corporate tax receipts that have given it some of Europe’s budget surpluses.

The government is already planning to cut taxes and increase spending again in the budget before the Oct. election. 1. Opposition groups also called for Apple’s tax receipts to be used to boost current spending on struggling services.

WILL SOME COMPANIES BE FORCED TO RETURN TAXES?

The Commission’s case against Ireland was aided by its ability to gain access to documents in which Irish officials were outspoken about the deal they made with Apple.

Amazon was investigated for its tax arrangements in Luxembourg, but last year it won an ECJ hearing which ruled that the company did not have to pay 250 million euros in back taxes.

In 2019, Starbucks won its battle against the EU’s demand to pay up to 30 million euros in Dutch tax, while Fiat Chrysler Automobiles lost its challenge against an order to obtain the same amount from Luxembourg.

—Martin Coulter, Reuters


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