On Tuesday, the European Union's antitrust agency ruled that Ireland had given Apple an enormous illegal tax break and ordered the country to recoup up to 13 billion euros, or $14.5 billion, from the tech giant. Apple and Ireland are expected to appeal the decision, which followed a three-year investigation by the European Commission into preferential tax treatment for certain companies by E.U. member states. European Commissioner Margrethe Vestager, who oversees E.U. antitrust efforts, said Apple pays an effective corporate tax rate of 1 percent, and the record penalty is for 10 years of back taxes.
The U.S. Treasury Department warned the E.U. against trying to claw back the taxes of American companies, arguing that the European Commission is overstepping its authority over national tax policy and that taking money from American multinationals hurts U.S. efforts to collect taxes on the companies. Ireland said its appeal, probably to the E.U. Court of Justice, is "necessary to defend the integrity of our tax system" and "send a strong message that Ireland remains an attractive and stable location of choice for substantive investment." Vestager told The New York Times earlier this year that her bureau is guided by simple policy: "Profits should be taxed where profits are made." An appeal is expected to take several years.
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