Following the European Commission’s decision today that Ireland should recoup Ã¢â€šÂ¬13bn plus interest in unpaid taxes, Apple CEOÃ‚Â Tim Cook has written a letterÃ‚Â to customers in Europe on todayÃ¢â‚¬â„¢s decision.
The commission said that two deals between Apple and Ireland, dating back as far as 1991, were illegal under EU law, allowing Apple to attribute its profits from Europe and elsewhere via CorkÃ‚Â toÃ‚Â a head office with no employees, premises or any economic activity, and pay almost no tax.
It said the company had paid an effective tax rate of between 1 per cent and 0.005 per cent between 2003 and 2014, with the rateÃ‚Â diminishing over time, even as the company grew to the world’s biggest.
Apple earlier today said:
“The European Commission has launched an effort to rewrite AppleÃ¢â‚¬â„¢s history in Europe, ignore IrelandÃ¢â‚¬â„¢s tax laws and upend the international tax system in the process. The CommissionÃ¢â‚¬â„¢s case is not about how much Apple pays in taxes, itÃ¢â‚¬â„¢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.”
Cook’s letter however, goes into much more detail:
A Message to the AppleÃ‚Â Community inÃ‚Â Europe
Thirty-six years ago, long before introducing iPhone, iPod or even the Mac, SteveÃ‚Â Jobs established AppleÃ¢â‚¬â„¢s first operations in Europe. At the time, the company knew that in order toÃ‚Â serve customers in Europe, it would need a base there. So, in October 1980, Apple opened aÃ‚Â factory in Cork, Ireland with 60 employees.
At the time, Cork was suffering from high unemployment and extremely low economic investment. But AppleÃ¢â‚¬â„¢s leaders saw a community rich with talent, and one they believed could accommodate growth if the company was fortunate enough to succeed.
We have operated continuously in Cork ever since, even through periods of uncertainty about our own business, and today we employ nearly 6,000 people across Ireland. The vast majority are still in Cork Ã¢â‚¬â€ including some of the very first employees Ã¢â‚¬â€ now performing a wide variety of functions as part of AppleÃ¢â‚¬â„¢s global footprint. Countless multinational companies followed Apple by investing in Cork, and today the local economy is stronger than ever.
The success which has propelled AppleÃ¢â‚¬â„¢s growth in Cork comes from innovative productsÃ‚Â thatÃ‚Â delight our customers. It has helped create and sustain more than 1.5 million jobs across Europe Ã¢â‚¬â€ jobs at Apple, jobs forÃ‚Â hundreds of thousands of creative app developersÃ‚Â who thrive on the App Store, and jobs with manufacturers and other suppliers. Countless small and medium-size companies depend on Apple, and we are proud to support them.
As responsible corporate citizens, we are also proud of our contributions to local economies across Europe, and to communities everywhere. As our business has grown over the years, we have become the largest taxpayer in Ireland, the largest taxpayer in the United States, and the largest taxpayer in the world.
Over the years, we received guidance from Irish tax authorities on how to comply correctly with Irish tax law Ã¢â‚¬â€ the same kind of guidance available to any company doing business there. In Ireland and in every country where we operate, Apple follows the law and we pay all the taxes weÃ‚Â owe.
The EuropeanÃ‚Â Commission has launched an effort to rewrite AppleÃ¢â‚¬â„¢s history in Europe, ignore IrelandÃ¢â‚¬â„¢s tax laws and upend the international tax system in the process. The opinion issued on AugustÃ‚Â 30th alleges that Ireland gave Apple a special deal on our taxes. This claim has no basis in fact or in law. We never asked for, nor did we receive, any special deals. We now find ourselves in the unusual position of being ordered to retroactively pay additional taxes to a government that says we don’t owe them any more than we’ve already paid.
The CommissionÃ¢â‚¬â„¢s move is unprecedented and it has serious, wide-reaching implications. It is effectively proposing to replace Irish tax laws with a view of what the Commission thinks the law should have been. ThisÃ‚Â 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. Ireland has said they plan to appeal the CommissionÃ¢â‚¬â„¢s ruling and Apple will do the same.Ã‚Â We are confident that the CommissionÃ¢â‚¬â„¢s order will be reversed.
At its root, the CommissionÃ¢â‚¬â„¢s case is not about how much Apple pays in taxes. It is about which government collects the money.
Taxes for multinational companies are complex, yet a fundamental principle is recognized around the world: A companyÃ¢â‚¬â„¢s profits should be taxed in the country where the value is created. Apple, Ireland and the United States all agree on this principle.
In AppleÃ¢â‚¬â„¢s case, nearly all of our research and development takes place in California, so the vast majority of our profits are taxed in the United States. European companies doing business in the U.S. are taxed according to the same principle. But the Commission is now calling to retroactively change those rules.
Beyond the obvious targeting of Apple, the most profound and harmful effect of this ruling will be on investment and job creation in Europe.Ã‚Â Using the CommissionÃ¢â‚¬â„¢s theory, every company in Ireland and across Europe is suddenly at risk of being subjected to taxes under laws that never existed.
Apple has long supported international tax reform with the objectives of simplicity and clarity.Ã‚Â We believe these changes should come about through the proper legislative process, in which proposals are discussed among the leaders and citizens of the affected countries. And as with any new laws, they should be applied going forward Ã¢â‚¬â€ not retroactively.
We are committed to Ireland and we plan to continue investing there, growing and serving our customers with the same level of passion and commitment.Ã‚Â We firmly believe that the facts and theÃ‚Â established legal principles upon which the EU was founded will ultimately prevail.