The European Union says Ireland needs to recover $14.5 billion in taxes from Apple.
Update: Apple's CEO, Tim Cook, has posted "A Message to the Apple Community in Europe" on apple.com/ie. Here's the crux of the counter-argument, in Cook's usual cut-to-the-chase style:
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.
The Commission'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. This 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 Commission's ruling and Apple will do the same. We are confident that the Commission's order will be reversed.
At its root, the Commission'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 company's profits should be taxed in the country where the value is created. Apple, Ireland and the United States all agree on this principle.
But read the whole thing.
Following a two-year investigation, the European Commission has concluded that the tax breaks Ireland has been giving Apple are illegal under EU state aid rules.
From the press release:
The European Commission has concluded that Ireland granted undue tax benefits of up to €13 billion to Apple. This is illegal under EU state aid rules, because it allowed Apple to pay substantially less tax than other businesses. Ireland must now recover the illegal aid.
Commissioner Margrethe Vestager, in charge of competition policy, 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 per cent on its European profits in 2003 down to 0.005 per cent in 2014."
You can read the rest of the press release for a breakdown of how Apple's Irish incorporated companies, Apple Sales International and Apple Operations Europe, operate in the country, the taxes they were subject to in Ireland, and the issues the EU had with the deal.
While you might think Ireland is a grown-ass country with the right and freedom to make any tax deal it wants with any companies it wants to attract and retain, Ireland is also part of the European Union, and bound by the agreements in place for the Union and the mechanisms in place to enforce those agreements.
I'm about as far from an Irish and EU tax expert as you can get, but I have seen my share of reassessments and the only thing worse than being on the receiving end of a whopping new bill is not having the cash in the bank to pay it.
Apple, the most profitable company in the history of profitable companies, obviously doesn't have that problem, but a €13 billion — approximately $14.5 billion — bill is still going to hurt. A lot.
Given the stakes, Ireland and especially Apple will certainly take advantage of every appeal process open to them.