Apple must pay back $14.5 billion to Ireland, the European Commission ruled Tuesday. Ireland is accused of giving Apple preferential tax breaks in exchange for Irish workers being hired. File Photo by Keizo Mori/UPI | License Photo

BRUSSELS, Aug. 30 (UPI) -- The European Commission on Tuesday ruled Ireland gave illegal tax benefits to Apple, meaning the tech giant must pay back $14.5 billion.

The European Union's antitrust enforcer conducted a two-year investigation into whether Ireland gave preferential treatment to Apple. The investigation was part of a European crackdown on corporate tax avoidance.


"The European Commission has concluded that Ireland granted undue tax benefits of up to €13 billion to Apple," the agency said in a statement. "This is illegal under EU state aid rules, because it allowed Apple to pay substantially less tax than other businesses. Ireland must now recover the illegal aid."

Margrethe Vestager, who is in charge of the commission's competition policies, said Apple paid an effective corporate tax rate of 1 percent on its European profits in 2003 and a 0.005 percent rate in 2014. The deal between Apple and Ireland meant the tech company could allocate European profits into Ireland and pay a minimal tax rate because it owned a small operation in return for Irish workers being hired.

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"In fact, the tax treatment in Ireland enabled Apple to avoid taxation on almost all profits generated by sales of Apple products in the entire EU Single Market," the commission writes. "This is due to Apple's decision to record all sales in Ireland rather than in the countries where the products were sold ... If other countries were to require Apple to pay more tax on profits of the two companies over the same period under their national taxation rules, this would reduce the amount to be recovered by Ireland."

Apple said it would appeal the decision.

"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," Apple said in a statement.

Ireland's minister of finance said he would also appeal the commission's decision as it is "necessary to defend the integrity of our tax system."

"It is important that we send a strong message that Ireland remains an attractive and stable location of choice for substantive investment," Finance Minister Michael Noonan said.

The European Commission's ruling follows months of contentious debate between EU tax regulators and American companies such as Apple, Google and Yahoo.

In June, Google's offices in Madrid were raided by Spain's tax investigators. Google's offices in Paris were raided in May by French investigators over accusations of aggravated financial fraud and organized money laundering. Google in January agreed to pay more than $180 million in back taxes to the British Treasury. France is seeking about $1.6 billion in back taxes from Google.