Apple fined for $14.5 billion by the European Commission for tax evasion in Ireland

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A three-year long investigation has concluded that the tax benefits Apple had been getting from Ireland is illegal, and to that effect, the European Commission has released a statement putting a fine of $14.5 billion upon Apple.

The Commission ruled that Ireland enabled the Cupertino-based company to pay substantially less tax as compared to other businesses, which in effect, comes down a tax rate of no more than 1 per cent.

“Member states cannot give tax benefits to selected companies – this is illegal under EU state aid rules,” Commissioner Margarethe Vestager told BBC.

“The Commission’s investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years,” she added.

While the standard tax rate of Ireland for corporates is 12.5 per cent, Apple had optimized its tax structure by creating holdings that exists only on paper. Apple Sales International and Apple Operations Europe are two Irish subsidiaries of Apple Inc. These holdings attributed a large chunk profit to a “head office” which technically does not exist on the face of this Earth. Therefore these profits remained untaxed for years, effectively lowering the amount of taxes the company had to pay abroad.

Both the Irish government and Apple Inc. said they disagreed with the decision and will contest it further.

Apple also said the decision will have a profound and harmful effect on employment by the company.

“The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process,” Apple said in a statement.

“The Commission’s case is not about how much Apple pays in taxes, it’s about which government collects the money. It will have a profound and harmful effect on investment and job creation in Europe.

“Apple follows the law and pays all of the taxes we owe wherever we operate. We will appeal and we are confident the decision will be overturned.”