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Read Tim Cook’s damning response to ‘devastating’ EU ruling here

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Tim Cook

Earlier today, the European Commission ordered Ireland to recoup 13 billion euros in what it believes to be unpaid taxes from Apple.

The EU believes that Apple’s enterprising exploitation of tax loopholes and special deals with Ireland allowed the tech giant to avoid tax, and ruled that Ireland supplied "illegal state aid” to Apple in breach of EU law. As a member state, Ireland now has to collect ten year’s of what the EU claims are unpaid taxes from Apple.

Both Apple and the Irish government have already spoken out against the ruling, and have pledged to appeal in hopes of quashing the decision. But Ireland still has to collect the cash during the appeal process, and can hold it in a third-party escrow account pending the outcome of the deal.

Today, Apple CEO Tim Cook released the following statement:

Tim Cook’s response to the EU tax ruling

August 30, 2016

A Message to the Apple Community in Europe

Thirty-six years ago, long before introducing iPhone, iPod or even the Mac, Steve Jobs established Apple’s first operations in Europe. At the time, the company knew that in order to serve customers in Europe, it would need a base there. So, in October 1980, Apple opened a factory in Cork, Ireland with 60 employees.

At the time, Cork was suffering from high unemployment and extremely low economic investment. But Apple’s leaders saw a community rich with talent, and one they believed could accommodate growth if the company was fortunate enough to succeed.

We have operated continuously in Cork ever since, even through periods of uncertainty about our own business, and today we employ nearly 6,000 people across Ireland. The vast majority are still in Cork — including some of the very first employees — now performing a wide variety of functions as part of Apple’s global footprint. Countless multinational companies followed Apple by investing in Cork, and today the local economy is stronger than ever.

The success which has propelled Apple’s growth in Cork comes from innovative products that delight our customers. It has helped create and sustain more than 1.5 million jobs across Europe — jobs at Apple, jobs for hundreds of thousands of creative app developers who thrive on the App Store, and jobs with manufacturers and other suppliers. Countless small and medium-size companies depend on Apple, and we are proud to support them.

As responsible corporate citizens, we are also proud of our contributions to local economies across Europe, and to communities everywhere. As our business has grown over the years, we have become the largest taxpayer in Ireland, the largest taxpayer in the United States, and the largest taxpayer in the world.

Over the years, we received guidance from Irish tax authorities on how to comply correctly with Irish tax law — the same kind of guidance available to any company doing business there. In Ireland and in every country where we operate, Apple follows the law and we pay all the taxes we owe.

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.

In Apple’s case, nearly all of our research and development takes place in California, so the vast majority of our profits are taxed in the United States. European companies doing business in the U.S. are taxed according to the same principle. But the Commission is now calling to retroactively change those rules.

Beyond the obvious targeting of Apple, the most profound and harmful effect of this ruling will be on investment and job creation in Europe. Using the Commission’s theory, every company in Ireland and across Europe is suddenly at risk of being subjected to taxes under laws that never existed.

Apple has long supported international tax reform with the objectives of simplicity and clarity. We believe these changes should come about through the proper legislative process, in which proposals are discussed among the leaders and citizens of the affected countries. And as with any new laws, they should be applied going forward — not retroactively.

We are committed to Ireland and we plan to continue investing there, growing and serving our customers with the same level of passion and commitment. We firmly believe that the facts and the established legal principles upon which the EU was founded will ultimately prevail.

Tim Cook

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Tell us your thoughts on today's EU ruling in the comments below.

toboev

August 30, 2016, 3:49 pm

"...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."

And that is the weakness in this ruling. The money is justly owed not to Ireland (which as Cook correctly points out is happy with its proceeds from the arrangement) but to the economies robbed through transfer pricing. Ireland is as guilty as Apple.

happyfunball

August 31, 2016, 12:40 am

This ruling was against Ireland, not Apple, which is just an example. Apple behaved legally and took advantage of tax law, even if the law is strange and the Irish are pushing their sovereignty to boost their economy. Sure Apple and Google can easily afford to pay the new tax bill, but there are thousands of other companies that will be affected and its 10 year retroactive ruling is brutal. Many companies don't even have this money anymore, its already been spent. Nobody thinks tax law is ideal as it stands now, but the EU telling Ireland how to tax on the eve of Brexit is strangely arrogant. Its almost like they want to break up the EU.

PGrGr

August 31, 2016, 10:09 am

He may have a point but there is so much that is disingenuous about the statement. For example, he says:

"We never asked for, nor did we receive, any special deals."

But the record is clear. Tax "deals" were made in 1991 and again in 2007. Maybe Tim's interpretation is that these deals weren't "special". However, there are thousands of other companies in Ireland who were not able to strike any deals, and simply paid the tax due according to the rules of the game.

For example, he says:

"The Commission’s move is unprecedented"

But there are precedents. The EU has made similar rulings against Fiat and Starbucks, and they are actively investigating deals made by McDonalds and Amazon. The EU is not singling out Apple for special treatment.

For example, he says:

"At its root, the Commission’s case is not about how much Apple pays in taxes. It is about which government collects the money."

In my opinion, there is a third option which better describes what this case is about, and that is whether the ultimate decider of tax liabilities is government (in general) or the organisations which are being taxed. Apple are implicitly wielding their economic clout, by reminding us of the employment they bring etc, to obscure the the unrelated fact that they have a disproportionate say in deciding their own tax liability.

As far as the Irish government are concerned, their obvious interest is to distance themselves from any wrongdoing and not get in the way of the emerging EU US spat. As such, their protests should be seen as irrelevant. Apple's appeal should be decided on the principles of law, and not on who shouts the loudest.

Menorca Man

August 31, 2016, 7:10 pm

The EU Commission did not tackle this from the point of view of Southern Ireland's right to set its own Corporate Tax rates. It was the Anti Competition arm of the EU Commission that carried out the investigation and issued the subsequent ruling. Had the Irish government applied the same 0.005% corporate tax rate to ALL companies operating in Southern Ireland then there would have been no case to answer. It is clear that Apple had been provided with a competitive advantage by the government in order to persuade Apple to set up business in Southern Ireland. Therefore, in my view both parties are guilty as charged, the Irish government probably more so than Apple.

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