Ireland has been ordered by the EU to claw back a staggering $14.5 billion in what the European Commission deems unpaid taxes from Apple. Ireland has lured in multinationals like Apple with rock-bottom tax rates. Today, European regulators said the deal it gave Apple was illegal. Both the U.S. and Irish governments oppose that ruling. On the line to help explain all of this is NPR's Frank Langfitt in London. Good morning.
FRANK LANGFITT, BYLINE: Good morning, Renee.
MONTAGNE: Now, Apple routed its profits from Europe, Africa and the Middle East and India through an Irish subsidiary to take advantage of those low tax rates. Why is the EU objecting to this?
LANGFITT: So in a nutshell, Renee, it's about unfair competition from the perspective of the EU. They see Apple getting this unfair advantage by paying so little. And we are talking about an incredibly low tax rate. Margrethe Vestager—she's the European Commission's competition commissioner — she gave this example at a press conference this morning in Brussels.
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MARGRETHE VESTAGER: In 2011, Apple Sales International made a profit of 16 billion euros. The huge majority was allocated to the so-called head office where they remained untaxed. This means that Apple's effective tax rate in 2011 was 0.05 percent.
MONTAGNE: .05 percent? That's jaw-dropping, Frank. But Ireland does plan to appeal it. It opposes it. You know, explain exactly why — I mean, it offers these low tax rates, but what?
LANGFITT: Well, this is really — this is not about money, but investment. That's why it's offering these great tax rates. And this is Ireland. Part of Ireland's business model is to lure in companies like Apple and Google. Keep in mind this is a small economy. They need all the investment they can. And this worries them because, going forward, the U.K. is actually a huge trading partner of Europe. They're very concerned about the way Brexit is going to hit them hard. And so they want to — a message they're really trying to put out there is that they're open for business.
MONTAGNE: And why is the U.S. opposing this ruling?
LANGFITT: Well, the U.S. is against it for different reasons. Last week — they knew this ruling was coming — they said the EU was acting like a, quote, "supranational tax authority." The U.S. doesn't like U.S. companies holding the profits overseas, and they are concerned, you know, if Ireland gets the money, that reduces the amount that the U.S. might potentially be able to tax.
MONTAGNE: Apple isn't the only U.S. company that is getting really low taxes in countries in the European Union.
LANGFITT: No, and the European Commission's been cracking down on this. We've seen similar decisions on Starbucks in the Netherlands, Fiat in Luxembourg. But really, Apple is the biggest case so far and certainly the biggest amount of money. And so the United States and other multinationals that benefit from these low tax deals, they're going to be watching this very closely and worrying who might be next.
MONTAGNE: NPR's Frank Langfitt speaking to us from London. Thanks very much.
LANGFITT: Happy to do it, Renee.