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January 18, 2018

Apple is paying the $16 billion in back taxes it owes in Ireland

by John_A

Apple may be forking over $38 billion in repatriation tax payments to the U.S. government as part of an enormous investment in the American economy, but that’s not the only sizable dent that a government will make in the company After a lengthy and contentious debate that has raged on since the summer of 2016, Apple is finally settling its debt in Ireland. The Public Accounts Committee in Ireland will expect to see the collection of $16 billion in taxes from Apple beginning in March, and lasting through September.In 2016, the European Commission ruled that Apple was the beneficiary of illegal state aid in Ireland by way of so-called sweetheart tax deals with the Irish government. In essence, Apple was paying far less than the 12.5 percent corporate tax rate thanks to a deal it struck with the government back in the 1990s. This allowed Apple to record sales in Ireland other than other countries with higher tax rates, saving the company billions in tax dollars. Until now, that is.Although Apple may have hoped that its enormous tax payment in the U.S. to account for overseas cash might reduce the amount it would have to pay in Europe, this has not been the case.

“The Commission’s 2016 state aid decision found that, over many years, tax rulings issued by Ireland had allowed Apple to pay less tax on profits recorded in Ireland than other companies subject to (the) same national taxation laws,” a spokesman for the European Commission said. “This gave Apple an illegal advantage in breach of EU state aid rules, which must now be recovered by Ireland — nothing has changed in that regard.”

Apple’s sizable tax payment will apparently be held in an escrow account — which is to say, one held by a third party. This account ought to be set up by end of March. In a letter to the Public Accounts Committee, Department of Finance Secretary General Derek Moran noted, “Given the scale and the bespoke nature of the establishment of the recovery process at this stage it is not possible to provide a definite date for the completion of the collection of the alleged aid. However, identification of the escrow agent/custodian by the end of March 2018 will then allow for a payment into the escrow fund account, with payments continuing through the course of April, May, and June and up to the end of September 2018.”

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