The EU tax man is catching up with Apple. On Friday Apple put $1.76 billion into a tax escrow to comply with the 2016 EU order that Ireland reclaim back taxes from Apple. Two years ago the EU Commission ruled that Ireland’s tax arrangements with Apple amounted to state aid, violating EU competition law. While Apple and Dublin are challenging the ruling, they were forced to establish and start funding an escrow account for the $16 billion in back taxes and interest.
Over the years many EU countries — prominently Ireland, the Netherlands and Luxembourg — have encouraged US companies to set up offshoots in their countries with very favorable tax incentives. In Europe, these tax schemes were dubbed “double Irish” or “Dutch sandwich” in the 1980s. The tax strategies were a way for some EU countries to grow their economies and employment ranks with local big foreign brand operations. Today, Apple employs around 5,000 people in its Cork facility.
Under similar EU rulings Starbucks paid back taxes to the Netherlands, while Amazon and Fiat paid Luxembourg tax authorities.
In recent years, Margrethe Vestager, EU Competition Commissioner, has stepped up investigations of behemoth US tech companies for various competition transgressions. EU countries who now rely on US and other international companies for significant employment and tax revenues worry about the ramifications of the zealous commissioner. Other EU nations applaud the actions they see as long overdue.