The Double Irish: Apple’s Tax Advantage
Early today the European Commission ordered Ireland to collect $14.6 Billion in unpaid taxes from Apple. This is the third major crackdown on American companies by the EU in just a year. Last October, the European Commission demanded similar payments from Starbucks and Fiat Chrysler. Is this the end of one of the most efficient tax avoidance strategies used by America’s largest companies?
Apple may have to pony up for an alleged 11 years of tax evasion.
The US corporate tax rate is the highest in the world at 35% naturally making Ireland’s 12.5% appealing. But according to the European Commission, Apple didn’t pay anywhere near that 12.5% - they allege that Apple paid a rate less than 1%. Apple disputes this, claiming it paid everything it owed. According to Apple CEO, Tim Cook “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”.
Margrethe Vestager, Europe’s top antitrust official, however, claims that the Irish Government illegally collaborated with Apple, artificially lowering their tax liability. "[EU] member states cannot give tax benefits to selected companies -- this is illegal under EU state aid rules."
Regardless of Apple’s guilt or innocence, their stock has taken a massive hit on American exchanges in just the first day of the announcement. Could this be the death knell of the Double Irish tax avoidance strategy?
To learn more about how Double Irish works, read our blog about it here.