What to understand about the fine of 13 billion euros imposed on Apple
Much awaited for a few days, the sanction of Brussels against Apple fell on Tuesday, August 30. Much harsher than the expected billion euros, the Cupertino company was ordered to pay a fine of 13 billion euros, plus interest, to the Irish state.
The investigation led by Commissioner Margrethe Vestager lasted three years. Its conclusions point to agreements contrary to European law. In other words, Brussels believes that the Irish government has created tailor-made state aid to keep the American giant on its soil in the best conditions.
As a reminder, Apple’s turnover reached $ 42.4 billion in the third quarter (of its staggered fiscal year). The net profit was $ 7.8 billion. The Commission is thus asking for the equivalent of double its net profit, generated in a single quarter.
- This fine is the heaviest financial penalty imposed by the European Union.
- The previous record was held by EDF, ordered to pay 1.4 billion euros to the French state last year as part of a corporate tax exemption obtained by the operator between 1987 and 1996.
- Established in Ireland since 1980, Apple would not have paid the slightest tax until 1991 and would have subsequently benefited from preferential treatment. The Cupertino company had to pay a profit tax of barely 1%, against the 12.5% in force. “Ireland must now recover the taxes unpaid by Apple on its territory between 2003 and 2014, namely 13 billion euros, plus interest”, wrote the European executive in a press release.
- Margrethe Vestager, Commissioner in charge of competition, indicated the elements which made it possible to detect such an arrangement: “In 2011, Apple Sales International made a profit of 16 billion euros. Less than 50 million euros have been allocated to the Irish branch. The rest, the vast majority, were allocated to the so-called seat where they remained untaxed. For every million euros in profit, Apple paid only 500 euros in taxes. “
The consequences of the conviction
- After the announcement of this sanction, Dublin intends to appeal this decision. “I strongly disagree with the Commission’s decision,” said Michael Noonan, Irish Finance Minister. Before adding: “This decision leaves me with no choice but to seek government approval to appeal.”
- In the wake of the Irish state, Tim Cook, Apple CEO, was quick to express his discontent in a open letter. “The European Commission is in the process of trying to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and turn the international tax system upside down (…) This special offer claim on our taxes doesn’t has no basis in fact or in law, ”he denounced.
- Like Ireland, Tim Cook is also preparing to appeal the decision made by the European body. “Ireland has said it plans to appeal the Commission’s decision and Apple will do the same. We are convinced that the order of the Commission will be reversed, ”said the strong man of the Cupertino company.
- On the Nasdaq, Apple’s stock was down 0.93 points to $ 105.89 in early trading on Tuesday.
The opinion of Bruno Vanryb, founder and president of Be Brave
“Do not confuse tax dumping and tax evasion”
“The first thing that emerges from the decision of the European Commission, and this is a major innovation, is the colossal amount of the fine, comparable to those that the United States can impose. This shows that the European Commission has taken the problem of non-taxation of GAFA head-on. The main impact of this sanction is the “trust” character that this implies. How far can we accept that a company has a monopoly without this leading to sterilization of innovation?
The objective is not to destroy those who have succeeded but to ensure that we do not go too far. In the case of Apple, we should not confuse tax dumping and tax evasion. This is fiscal dumping since Ireland has made discounts to attract Apple to its territory. To me, this raises a question: does Ireland have the right to lower its taxes to attract businesses? The United States threatened to react in the event of a fine imposed on Apple by Brussels but it is the hospital that does not give a damn about charity. There is no more protectionist than the United States and China.
It is important that Europe defends itself at levels comparable to the United States. It makes sense and is normal to pay taxes where you sell. Otherwise, it creates a distortion of competition. However, I would not want this case to be seen as a solution to the non-payment of taxes by companies. ”
The opinion of Erik Van Rompay, expert in innovation strategies, spokesperson for the Europeans Disruptors group of the European Commission
“An American reaction is to be expected”
“The real subject is the desire of the European Commission to establish equal treatment between companies. It is not possible to benefit a company, as was the case for Apple with the Irish State. In addition, Ireland receives a lot of money from the European Union, in particular with the ERDF (European Economic and Regional Development Fund), for its regions. In these circumstances, the Commission ensures that there is no distortion of the market. It is getting to a point where it is no longer possible for companies not to pay their taxes in countries where companies are making a profit.
With the economic crisis, Europe needs money. Therefore, Brussels does not want the money that comes out to be misused. However, there will surely be an American reaction. I do not know if it will be effective or not but it will surely be the responsibility of the next American president. The United States often has a heavy hand when it comes to sanctioning companies, like the penalties imposed on BNP Paribas or what is happening with Volkswagen. Granted, Ireland has given Apple too many tax breaks, but I don’t think it’s the only company in Ireland in this case. This case raises a question: How far can we set the limit on tax benefits for countries that want to attract businesses? ”
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