Tim Cook responds to $14.5B EU tax bill with open letter, says decision will be reversed

AppleInsider

After being hit with a $14.5 billion tab for alleged unpaid back taxes, Apple Chief Executive Tim Cook published an open letter to the "Apple Community" on Tuesday, saying he is "confident" that the decision from the European Commission will be reversed.

The customer letter published on Apple's site, titled "A Message to the Apple Community in Europe," begins with a history of the company's operations in Europe, when late company cofounder Steve Jobs established a factory in Cork, Ireland, in 1980 with 60 employees.

Today, Apple employs nearly 6,000 people in Ireland, most of them in Cork. Cook said his company's operations there are vast and play a crucial role in its global presence.
"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." - Apple CEO Tim Cook
Because of this, Apple is the largest taxpayer in Ireland, Cook said. The Mac maker is also the largest taxpayer in the United States, and across the world.

Though Cook and Apple officials believe they have paid their fair share of taxes, the European Commission slapped the company on Tuesday with $14.5 billion in back taxes. Both Apple and Ireland have appealed the ruling, and Cook believes the Commission's decision was unfair and will be overturned.

"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," Cook wrote. "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."

Calling the move "unprecedented," Cook portrayed the Commission's decision as potentially dangerous, with "serious, wide-reaching implications." He argued that a company's profits should be taxed "in the country where value is created" -- a principle he said Ireland, the U.S. and Apple all agree on.

"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," he wrote. "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."

Tuesday's decision from the European Commission was years in the making, with the investigation into Apple's back taxes originally opened in 2013. Earlier reports had pegged the fine much lower than the ultimate $14.5 billion ruling.

Apple officials have signaled the company is committed to Ireland, regardless of how the European Union would rule on taxes.

Cook's full letter is republished in its entirety below:

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.

Steve Jobs visits Apple's new facility in Cork, October 1980.
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

monstrosity

Go Tim! Expose the EU and all it's corruption.

[Deleted User]

Calling the move "unprecedented," Cook portrayed the Commission's decision as potentially dangerous, with "serious, wide-reaching implications." 

EC previously ruled against Starbucks's tax deal in Holland and Fiat's tax deal in Luxembourg. Not unprecedented.

"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," he wrote. "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."

There is no law that states you should only be taxed where your R&D offices are located. There ARE laws however that say you pay tax where you operate and sell products. On top of that, funnelling profits from those sales to other countries while not technically illegal, is morally questionable. Similar to those with offshore accounts (cayman islands, panama etc.) albeit nowhere near as shady.

latifbp

adm1 said:

Calling the move "unprecedented," Cook portrayed the Commission's decision as potentially dangerous, with "serious, wide-reaching implications." 

EC previously ruled against Starbucks's tax deal in Holland and Fiat's tax deal in Luxembourg. Not unprecedented.

"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," he wrote. "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."

There is no law that states you should only be taxed where your R&D offices are located. There ARE laws however that say you pay tax where you operate and sell products. On top of that, funnelling profits from those sales to other countries while not technically illegal, is morally questionable. Similar to those with offshore accounts (cayman islands, panama etc.) albeit nowhere near as shady.

$14.5 billion is unprecedented as well as is the recent attempts to gouge U.S. companies for extra. In the U.S. European companies do not face a corporation tax, but simple sales and VAT. Maybe we'll retroactively apply a new law and start vouching your companies. BMW... want to keep selling your cars here now you gotta pay an extra 12.5% on your profits here even though you're based in Europe. Too bad, so sad. Same tax deal since 1980. Apple never asked for anything different. 

gatorguy

latifbp said:

adm1 said:

Calling the move "unprecedented," Cook portrayed the Commission's decision as potentially dangerous, with "serious, wide-reaching implications." 

EC previously ruled against Starbucks's tax deal in Holland and Fiat's tax deal in Luxembourg. Not unprecedented.

"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," he wrote. "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."

There is no law that states you should only be taxed where your R&D offices are located. There ARE laws however that say you pay tax where you operate and sell products. On top of that, funnelling profits from those sales to other countries while not technically illegal, is morally questionable. Similar to those with offshore accounts (cayman islands, panama etc.) albeit nowhere near as shady.

$14.5 billion is unprecedented as well as is the recent attempts to gouge U.S. companies for extra. In the U.S. European companies do not face a corporation tax, but simple sales and VAT. Maybe we'll retroactively apply a new law and start vouching your companies. BMW... want to keep selling your cars here now you gotta pay an extra 12.5% on your profits here even though you're based in Europe. Too bad, so sad. Same tax deal since 1980. Apple never asked for anything different. 

Extra? They can do the same as the US. If 12.5% taxes are paid on foreign profits to a foreign country they don't then owe the full corporate tax rate at home too. It's not "extra" taxes. 

asdasd

adm1 said:

Calling the move "unprecedented," Cook portrayed the Commission's decision as potentially dangerous, with "serious, wide-reaching implications." 

EC previously ruled against Starbucks's tax deal in Holland and Fiat's tax deal in Luxembourg. Not unprecedented.

"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," he wrote. "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."

There is no law that states you should only be taxed where your R&D offices are located. There ARE laws however that say you pay tax where you operate and sell products. On top of that, funnelling profits from those sales to other countries while not technically illegal, is morally questionable. Similar to those with offshore accounts (cayman islands, panama etc.) albeit nowhere near as shady.

There no "funnelling". corporations sell at a wholesale to retailers from their corporate base. That's where they get the revenue and where corporation tax is charged. This is both legal and moral. 

asdasd

latifbp said:

adm1 said:

Calling the move "unprecedented," Cook portrayed the Commission's decision as potentially dangerous, with "serious, wide-reaching implications." 

EC previously ruled against Starbucks's tax deal in Holland and Fiat's tax deal in Luxembourg. Not unprecedented.

"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," he wrote. "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."

There is no law that states you should only be taxed where your R&D offices are located. There ARE laws however that say you pay tax where you operate and sell products. On top of that, funnelling profits from those sales to other countries while not technically illegal, is morally questionable. Similar to those with offshore accounts (cayman islands, panama etc.) albeit nowhere near as shady.

$14.5 billion is unprecedented as well as is the recent attempts to gouge U.S. companies for extra. In the U.S. European companies do not face a corporation tax, but simple sales and VAT. Maybe we'll retroactively apply a new law and start vouching your companies. BMW... want to keep selling your cars here now you gotta pay an extra 12.5% on your profits here even though you're based in Europe. Too bad, so sad. Same tax deal since 1980. Apple never asked for anything different. 

Yes. Charging corporation tax where sales occur is beyond absurd as a principle.  

nht

The simplest response would be for the US to state that Brussels appears to prefer to engage in economic warfare rather than economic cooperation then pull our TTIP negotiators to work on a post-Brexit trade deal with the UK.  Given that TTIP is likely dead anyway a unilateral withdrawal sends a significant message without any long term repercussions.

That would give the UK economy a big temporary boost and a richly deserved middle finger to Brussels for being total putzes.  They would have benefitted under TTIP more than we would have.

jamesevanstn

One thing I have to correct because this drives me crazy: "The customer letter published on Apple's site, entitled..." It's not "entitled" it should say "titled" Entitled means something completely different (i.e. entitlement) and this type of mistake is made all the time.

frac

nht said:

The simplest response would be for the US to state that Brussels appears to prefer to engage in economic warfare rather than economic cooperation then pull our TTIP negotiators to work on a post-Brexit trade deal with the UK.  Given that TTIP is likely dead anyway a unilateral withdrawal sends a significant message without any long term repercussions.

That would give the UK economy a big temporary boost and a richly deserved middle finger to Brussels for being total putzes.  They would have benefitted under TTIP more than we would have.

A unilateral withdrawal would do nothing to anything. The fevered atmosphere in Europe regarding powerful international companies, means there is zero chance of TTIP being implemented anyway. Big corporations being granted the power to sue governments for lost profits if tax laws inhibit said companies retroactively? Sound familiar? 

fuxxybunny

Jamesevanstn: One thing I have to correct because this drives me crazy: "The customer letter published on Apple's site, entitled..." It's not "entitled" it should say "titled" Entitled means something completely different (i.e. entitlement) and this type of mistake is made all the time. WRONG en·ti·tle inˈtīdl,enˈtīdl/ verb past tense: entitled; past participle: entitled 1. give (someone) a legal right or a just claim to receive or do something. "employees are normally entitled to severance pay" synonyms: qualify, make eligible, authorize, allow, permit; More 2. give (something, especially a text or work of art) a particular title. "an article entitled “The Harried Society.”" archaic give (someone) a specified title expressing their rank, office, or character. "they entitled him Sultan" synonyms: title, name, call, label, head, designate, dub; formaldenominate "a chapter entitled “Comedy and Tragedy”"

MacPro

IMHO the letter from Tim stands on its own, no need for any preamble by AI on this occasion.

latifbp

asdasd said:

latifbp said:

adm1 said:

Calling the move "unprecedented," Cook portrayed the Commission's decision as potentially dangerous, with "serious, wide-reaching implications." 

EC previously ruled against Starbucks's tax deal in Holland and Fiat's tax deal in Luxembourg. Not unprecedented.

"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," he wrote. "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."

There is no law that states you should only be taxed where your R&D offices are located. There ARE laws however that say you pay tax where you operate and sell products. On top of that, funnelling profits from those sales to other countries while not technically illegal, is morally questionable. Similar to those with offshore accounts (cayman islands, panama etc.) albeit nowhere near as shady.

$14.5 billion is unprecedented as well as is the recent attempts to gouge U.S. companies for extra. In the U.S. European companies do not face a corporation tax, but simple sales and VAT. Maybe we'll retroactively apply a new law and start vouching your companies. BMW... want to keep selling your cars here now you gotta pay an extra 12.5% on your profits here even though you're based in Europe. Too bad, so sad. Same tax deal since 1980. Apple never asked for anything different. 

Yes. Charging corporation tax where sales occur is beyond absurd as a principle.  

Yes it is. Like Cook said it finds its basis in Common Law that has served as precedent for all tax law.

latifbp

gatorguy said:

latifbp said:

adm1 said:

Calling the move "unprecedented," Cook portrayed the Commission's decision as potentially dangerous, with "serious, wide-reaching implications." 

EC previously ruled against Starbucks's tax deal in Holland and Fiat's tax deal in Luxembourg. Not unprecedented.

"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," he wrote. "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."

There is no law that states you should only be taxed where your R&D offices are located. There ARE laws however that say you pay tax where you operate and sell products. On top of that, funnelling profits from those sales to other countries while not technically illegal, is morally questionable. Similar to those with offshore accounts (cayman islands, panama etc.) albeit nowhere near as shady.

$14.5 billion is unprecedented as well as is the recent attempts to gouge U.S. companies for extra. In the U.S. European companies do not face a corporation tax, but simple sales and VAT. Maybe we'll retroactively apply a new law and start vouching your companies. BMW... want to keep selling your cars here now you gotta pay an extra 12.5% on your profits here even though you're based in Europe. Too bad, so sad. Same tax deal since 1980. Apple never asked for anything different. 

Extra? They can do the same as the US. If 12.5% taxes are paid on foreign profits to a foreign country they don't then owe the full corporate tax rate at home too. It's not "extra" taxes. 

If it shouldn't be taxed that much in the first place it is extra.

thrang

Cook: "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."

This is one of the reasons the Brexit vote was correct. Can you imagine some world order where unelected officials were deciding your taxes and laws. Sovereignty matters

imat

Time to move here in Switzerland. Lower taxes, no EU problems. Yes, life and salaries are expensive. But not 14 Billions expensive.

Templeton

EU will never change. Old men in Brussels rewriting history and sucking the life out of progress. Brits were right in dumping these old farts.

gatorguy

sog35 said:

adm1 said:

Calling the move "unprecedented," Cook portrayed the Commission's decision as potentially dangerous, with "serious, wide-reaching implications." 

EC previously ruled against Starbucks's tax deal in Holland and Fiat's tax deal in Luxembourg. Not unprecedented.

"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," he wrote. "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."

There is no law that states you should only be taxed where your R&D offices are located. There ARE laws however that say you pay tax where you operate and sell products. On top of that, funnelling profits from those sales to other countries while not technically illegal, is morally questionable. Similar to those with offshore accounts (cayman islands, panama etc.) albeit nowhere near as shady.

It does not matter if the law is morally questionable in your opinion. It was the Irish tax law at that time. Apple did nothing wrong. They followed Irish tax law, and any other company operating in Ireland could have done the same. 

You like to keep saying that but if ANY company could do the same why wouldn't they? There's smart accountants all over the world and what Apple was doing was probably known to many of them. 

So no sir they could not. It requires a perfect storm of US corporate tax laws, a pre-existing special tax arrangement with the Irish and a creative use of corporate structure to pull it all off. Only the larger companies with US bases and worldwide operations could have taken advantage of this particular avoidance structure and even then only with special cooperation from friendly Irish tax folks. Your local Irish restaurant or retailer? Nope. The French bakery owner? Nope. The German car dealer (with three locations, whoo hoo). Sorry, no again. The computer retailer in Sweden? Sorry, no deal for you. Well then how about a big ol well-to-do grocery chain like Publix. Surely they can. They're kinda rich. Sorry. They all have to pay taxes if they have profits. No "stateless for tax purposes" is available to them, nor for any other regional company. Only the richest and biggest get this one. 

Of course those little guys could always use secret Swiss bank accounts to evade taxes, right? Nope, not even that. 
http://www.dw.com/en/switzerland-eu-to-tackle-tax-evasion/a-18327857

Yeah but some of those guys could still stash in the Cayman's according to you. Well. . .
https://www.treasury.gov/press-center/press-releases/Pages/jl2226.aspx

Dracarys

sog35 said:

adm1 said:

Calling the move "unprecedented," Cook portrayed the Commission's decision as potentially dangerous, with "serious, wide-reaching implications." 

EC previously ruled against Starbucks's tax deal in Holland and Fiat's tax deal in Luxembourg. Not unprecedented.

"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," he wrote. "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."

There is no law that states you should only be taxed where your R&D offices are located. There ARE laws however that say you pay tax where you operate and sell products. On top of that, funnelling profits from those sales to other countries while not technically illegal, is morally questionable. Similar to those with offshore accounts (cayman islands, panama etc.) albeit nowhere near as shady.

Are you joking? Starbucks/Fiat got slapped on the wrist. They were ordered to pay $20 million each. The $14 billion for Apple is the definition of unprecedented.

It does not matter if the law is morally questionable in your opinion. It was the Irish tax law at that time. Apple did nothing wrong. They followed Irish tax law, and any other company operating in Ireland could have done the same. 

Again the dispute isn't if Apple broke Irish tax law. They have not.
The dispute is if Apple was given a DIFFERENT tax law they anyone else in Ireland.  And as far as I can tell they didn't. They were just better at tax planning than anyone else.

It's all relative. $20 million to Starbucks was for how many years retroactively? And in comparison to the sheer size of Apple compared to Starbucks obviously the fee will be much less. 

Prove that Apple wasn't given a different tax law, because from what I can tell paying 0.005% tax is well below what anyone else pays. 

The diagram shown in this tweet is pretty accurate at describing what happened: 

https://twitter.com/EU_Commission/status/770561714635104256

johnbear

That's right, it's all about Cork, community and job creation there..LOOOL BS
Meanwhile other communities in US are suffering big, communities at Foxconn and other factories are suffering while Apple's keeping 300 billion in cash to avoid tax
Glad EU finally cracking down on those unscrupulous corporation. Not enough for now but a good start

fred1

jamesevanstn said:

One thing I have to correct because this drives me crazy: "The customer letter published on Apple's site, entitled..." It's not "entitled" it should say "titled" Entitled means something completely different (i.e. entitlement) and this type of mistake is made all the time.

Mr. Merriam and Mr. Webster don't agree with you.  Their first definition is the one you claim is wrong usage:

"Full Definition of entitleentitledentitling \-ˈtīt-liŋ, -əl-iŋ\

1. transitive verb

2. 1:  to give a title to :  designate

3. 2:  to furnish with proper grounds for seeking or claiming something <this ticket entitles the bearer to free admission>"