The EU official responsible for Apple’s huge tax bill explains why Tim Cook is wrong

The European Union’s competition commissioner Margrethe Vestager and her office are forcing Apple to pay €13 billion (£11.2 billion, $14.5 billion) in tax to Ireland, a move Apple CEO Tim Cook called “total political crap.

In interviews both before and after the fine, Cook hit out at Vestager and her office. He claims the EU is trying to retrospectively change Ireland’s tax laws because the fine came after Apple agreed a so-called “sweetheart deal” with Ireland to pay a lower rate of tax in the country.

Vestager says this claim is false and the insists the real issue is how Apple chose to set itself up in Europe.

Speaking at the FT Women at the Top event on Thursday in London, Vestager addressed an imaginary Tim Cook saying: “Well, basically this is how you organised [your company], because we are not questioning or interrogating how Apple organise themselves, where they book their profits or where they themselves see where they didn’t make their profits.

“A huge part of Apple profits generated in Europe, in African countries, Middle East, and India were all booked in Ireland and I think it is a very basic principle in taxation that your profits are taxed where the profits are generated.

“Then we have a US tax system, which is global in the way that tax credits work for taxes paid in other jurisdictions, that goes for every company. It’s not special for Apple in Ireland or any other US company being taxed in other jurisdictions.”

When asked whether the EU is trying to retrospectively change tax laws for somewhere like Ireland, Vestager simply said: “No.”

This is not about tax legislation, this is about fair competition

“This is not about tax legislation, this is about fair competition and our founding fathers has three tools; anti-trust, merger control, state aid control,” added Vestager.

“Because they said, if we want fair competition then we’ll make member states, even a large, rich member state, shouldn’t be allowed to promote their own businesses with tax payers money. Taxpayers money coming in for loans or grants or a tax benefit.”

“Party politics of the day has no role to play because we are enforcers. So look at the facts of the case, the evidence we can find, and first of all to take the right decisions and secondly how to make a case that would stand up in court.”

The EU Commission has been pretty clear about this since it was walloped with the tax bill in August this year. It put out a press release and a chart to illustrate what Apple did wrong:

Applemap 1

Apple keeps most of the money it generates overseas parked offshore. The company says this is because most of the money is reinvested in foreign entities, but critics have argued it’s a sophisticated manoeuvre to avoid the ~35% US corporate tax, which is significantly higher than the 12.5% rate in Ireland where Apple keeps most of its cash.

Before Apple got fined, CEO Tim Cook did an interview where he lambasted the EU Commission for the accusations, saying that it was “political crap.”

“We pay more taxes in this country than anyone,” Cook said while acknowledging that that should be the case since Apple is the most profitable company in the US, as reported by my colleague Eugene Kim.

Cook said he’d love to bring back some of the cash to the US, but it wouldn’t make sense under the current tax code. “It would cost me 40% [taxes] to bring it home. And I don’t think that’s a reasonable thing to do,” he said.

“This is a tax code that was made for the industrial age, not the digital age. It’s backwards. it’s awful for America. It should have been fixed many years ago. It’s past time to get it done.”

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