Taxes and greener pastures..

EU hits Apple with $14.6 billion tax bill
by Ivana Kottasova @ivanakottasova
August 30, 2016: 9:04 AM ET


Tech giants hold $500 billion in cash
Ireland must recover up to 13 billion euros ($14.6 billion) in unpaid taxes from Apple, Europe's top regulator ruled on Tuesday.
The tax ruling is by far the biggest the European Union has ever made regarding a single company, and it could spark a huge transatlantic row over how Europe treats big U.S. companies.
Apple shares fell almost 3% in premarket trading. The company will appeal the decision. It said the ruling upended the international tax system and would damage jobs and investment in Europe.
The European Commission, the EU's de-facto government, said the Irish government had granted illegal state aid to Apple (AAPL, Tech30) by helping the tech giant to artificially lower its tax bill for more than 20 years.
apple ireland tax reaction
Apple reacts to the EU commission hitting it with a 14.5 billion tax bill
"Member States cannot give tax benefits to selected companies -- this is illegal under EU state aid rules," said Commissioner Margrethe Vestager, Europe's top antitrust official.
Apple paid tax at 1%, or less, on profits attributed to its subsidiaries in Ireland, well below the 35% top rate in the United States and even well below Ireland's 12.5% rate.
That prompted complaints by both European and U.S. lawmakers, who argued the deal gave Apple an unfair advantage in exchange for creating jobs in Ireland. CEO Tim Cook was even called to testify on Apple's tax deal before a Senate committee in 2013.
The bill for tax benefits, plus interest, covers 2003 to 2014. Apple has more than $231 billion in cash on its balance sheet to cushion the blow.
Cook said on Tuesday the ruling has "no basis in fact or in law," calling it "obvious targeting of Apple."
eu apple
He also said Apple has helped create and sustain more than 1.5 million jobs across Europe and stressed the company follows the law and pays all the taxes it owes.
"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," he wrote.
Ireland said it will appeal the decision, saying Apple paid what it owed. The country has one of the lowest corporate tax rates in Europe, which makes it an attractive place to invest for global companies.
The Irish government is afraid companies would be less likely to invest in Ireland if its tax regime changes, which could cost the country thousands of jobs.
Related: U.S. warns EU: Don't hit Apple with a massive tax bill
Apple is not the only American company that has recently found itself under scrutiny over its European tax affairs.
The European Commission ordered Starbucks and Fiat Chrysler to repay millions in taxes last October.
Starbucks (SBUX) has to pay back up to 30 million euros it saved thanks to a sweetheart tax deal with the Netherlands. Fiat Chrysler (FCAM) was ordered to repay a similar amount after a similar deal with Luxembourg.
Both companies have appealed the decisions.
Related: France going 'all the way' to collect tax from Google, McDonald's
The EU is also probing the tax arrangements of Amazon (AMZN, Tech30) and McDonald's (MCD). Google (GOOGL, Tech30) is under investigation over its taxes in France and a couple of other European countries.
The ruling against Apple's tax deal comes despite a stern warning from the U.S. last week. The Treasury Department urged the European Commission to stop its tax crackdown on American companies, saying it would consider "potential responses" if Brussels doesn't change course.

Apple may finally be bringing some of its enormous offshore cash pile back home.
Just days after the EU hit Apple with a $14.6 billion tax bill, CEO Tim Cook said he expects to transfer billions of dollars in profit to the United States next year.
"We provisioned several billion dollars for the U.S. for payment for as soon as we repatriate it, and right now I would forecast that repatriation to occur next year," Cook said in an interview with Irish broadcaster RTE news.
U.S. companies are supposed to pay federal taxes on their global profits, but the tax on money made overseas is only due when it's brought back to the U.S.
Cook said last year that he would "love to" repatriate Apple's foreign profits but that he can't because "it would cost me 40%." That refers to the combined U.S. federal and state tax rate Apple would likely owe.
Oxfam America estimated in April that Apple (AAPL, Tech30) was holding $181 billion offshore, and that the company's effective tax rate was 25.9% between 2008 and 2014.
Apple says it paid $400 million in taxes in Ireland in 2014, and another $400 million to the U.S.
"In 2014, our worldwide income tax rate was 26.1%...I personally think that's a reasonable level," Cook told RTE.
Related: How Apple paid just 0.005% tax
European officials said Tuesday that Ireland must recover 13 billion euros, plus interest, in unpaid tax from Apple.
The European Commission, which administer EU law, said that the Irish government had granted illegal state aid to Apple by helping it to artificially lower its tax bill for more than 20 years.
The corporate giant paid just $50 in tax for every million it made selling iPhones and iPads to most of the world outside America, the EU claimed, equal to a tax rate of just 0.005% in 2014.
"It's a false number," Cook said. "I have no idea where the number came from. It's not true."
Apple has said it will appeal the EU ruling, and expects to win. Ireland is also expected to appeal, although the government postponed a decision on Wednesday.
Despite the turmoil, the company said it remains committed to its operations in Ireland.
"We've got a long term romance together," says Cook. "It's a 37-year marriage. Like any marriage you go through pothole here or there but we stuck together because we always felt so close to the community and the people there."