In August 2016, the EU ordered Ireland to collect 13 billion euros (around $15 billion) in back taxes from Apple citing illegal tax benefits from 2003 to 2014. Both Ireland and Apple have rejected the judgement and are appealing the decision in a court battle that will last years.
For the time being, the money will be left in an escrow account. It was announced today that Apple will start paying into that account from next month. This will be the largest ever tax recovery of its kind, if the ruling holds up as lawful.
With neither Apple nor Ireland in agreement with the EU’s ruling, it has taken some time for the escrow payments to begin. Late last year, Ireland was potentially going to be fined for non-compliance on this matter.
It was reported a payment schedule had been outlined by January, and this has finally come to fruition today with payments to begin in May. The full sum will be paid by September.
The crux of the dispute is whether the low 0.5% tax rate Ireland offered to Apple was lawful. The EU are characterising the tax rate as a special deal that was only available to Apple, whereas the Irish government and Apple reject the notion.
Before Apple submitted its formal appeal, Apple’s general counsel Bruce Sewell said that the company had been targeted to ‘generate lots of headlines’ and described the judgement as a misunderstanding of how large internal companies operate.
“So when Tim Cook, who is the CEO of our company, makes decisions that impact ASI, the Commission says we don’t care because he is not an ASI employee, he is an Apple Inc employee. But to say that somehow Tim Cook can’t make decisions for ASI is a complete mis-statement of corporate law, it’s a misunderstanding of how corporations operate,” he said.
It will take many years for the legal cases (likely with multiple rounds of appeals) to be resolved, with the issue exacerbated by the sheer magnitude of the tax bill.
For the time being, Ireland will hold the money in an escrow account. If the EU’s case is ultimately not upheld, the money will be given back to Apple. It is possible that Apple will eventually agree that it should pay something, but not necessarily the full ‘sticker shock’ 13 billion euros as calculated by the EU commission.