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European Commission demands Apple pays €13bn in “illegal state aid”

Apple has received €13 billion ($14.5 billion) in what the European Commission has deemed “illegal state aid” over a ten-year period through a tax deal struck with the Irish government.

The Commission began investigating Apple’s tax deal back in 2013, finding it illegal soon after. Now it rules the arrangement gave Apple a “significant advantage” over its competitors. It must now prepare to pay back the €13 billion – the amount the company was found to have benefitted from between 2003 and 2014.

The iPhone maker may also have to pay an additional €1-2 billion in interest.

Commissioner Margrethe Vestager said:

“Member States cannot give tax benefits to selected companies – this is illegal under EU state aid rules. 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. In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1 percent on its European profits in 2003 down to 0.005 percent in 2014.”

However, Apple CEO Tim Cook has called the Commission’s move “unprecedented,” saying the decision has “serious, wide-reaching implications.” In a ‘Customer Letter’ posted to Apple’s website, he said Apple are “responsible corporate citizens” and that the Commission is “effectively proposing to replace Irish tax laws with a view of what the Commission thinks the law should have been.” Cook wrote:

“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. The opinion issued on August 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.”

Apple plans to fight the ruling. For more analysis on the legal ramifications behind the ruling, check out Engadget’s piece on the EU Commission’s decision.