Why Apple Was Taxed $14.5 Billion for Ireland, Which Doesn't Want the Money

Carl Court/Getty Images(NEW YORK) — The staggering result of three-year investigation into Apple’s tax dealings in Europe was announced Tuesday: an order from the European Union to pay $14.5 billion in back taxes to the government of Ireland, where Apple has run its European operations.

Perhaps even more surprising is that Ireland doesn’t want the money. The country’s Finance Minister released a statement saying he “disagrees profoundly” with the ruling and is seeking permission to launch an appeal.

Apple also challenged the European Commission (EC) -- the executive branch of the European Union, which announced Tuesday’s ruling -- saying that it was attempting to “rewrite Apple’s history in Europe,” and “ignore Ireland’s tax laws and upend the international tax system in the process.” The company said that it will appeal.

Here’s a breakdown of what happened:

Apple’s operations in Europe

Apple, according to the Commission, conducted its business in Europe through two fully-owned companies that were incorporated in Ireland: Apple Sales International and Apple Operations Europe.

Outside of North and South America, these two companies hold the rights to Apple’s intellectual property, which allow them to manufacture and sell the company’s products around the world, according to the EC.

Apple Sales International, according to the EC, is responsible for buying products from equipment manufacturers (the factories that build them) and then selling them in Europe, the Middle East, Africa and India.

Apple Operations Europe, the EC said, “was responsible for manufacturing certain lines of computers for the Apple group.”

The deal between Ireland and Apple

The EC said that Ireland had given Apple unfair tax advantages, allowing it to pay rates as low as 0.005 percent at times.

By comparison, the Irish typically tax corporations at about 12.5 percent, according to the BBC.

According to the Commission, Apple was channeling its profits in Europe through companies it incorporated in Ireland. Two Irish tax rulings -- one in 1991 and one in 2007 -- then “endorsed a way to establish the taxable profits for two Irish incorporated companies of the Apple group ... which did not correspond to economic reality.”

“Apple set up their sales operations in Europe in such a way that customers were contractually buying products from Apple Sales International in Ireland rather than from the shops that physically sold the products to customers,” the Commission said. “In this way Apple recorded all sales, and the profits stemming from these sales, directly in Ireland.”

From there, only part of Apple’s sales in Europe -- the commission said -- were actually taxed in Ireland.

The Irish laws "endorsed a split of the profits for tax purposes in Ireland,” the commission said. "Under the agreed method, most profits were internally allocated away from Ireland to a 'head office' within Apple Sales International.

“Almost all sales profits recorded by the two companies were internally attributed to a ‘head office’,” the EC said, which “existed only on paper.”

The Commission said Apple’s allocation of sales through Apple Sales International resulted in a tax rate that was just one percent in 2003 and eventually as low as 0.005 percent in 2014. “As a result of the allocation method endorsed in the tax rulings, Apple only paid an effective corporate tax rate that declined from 1% in 2003 to 0.005% in 2014 on the profits of Apple Sales International.”

About the “head offices”

While the offices of tech firms are often busy complexes with hundreds of employees and luxurious, open floor plans, the EC said Apple’s “head offices” in Europe had no physical location or employees.

“This ‘head office’ was not based in any country and did not have any employees or own premises,” the Commission said. “Its activities consisted solely of occasional board meetings.”

“This ‘head office’ had no operating capacity to handle and manage the distribution business, or any other substantive business for that matter,” they added. “The only activities that can be associated with the ‘head offices’ are limited decisions taken by its directors (many of which were at the same time working full-time as executives for Apple Inc.) on the distribution of dividends, administrative arrangements and cash management.”

Why Ireland doesn’t want the money

Perhaps, this is a bit of a head scratcher for some: Ireland doesn’t want back taxes from Apple.

When the ruling was announced, the Irish Finance Minister, Michael Noonan immediately released a statement saying, “I disagree profoundly with the Commission’s decision,” and that Ireland’s, “tax system is founded on the strict application of the law.”

This ruling puts Ireland in a difficult position because it wants to continue its relationship with Apple and other foreign businesses.

The BBC reported that, “governments such as Ireland, Luxembourg and the Netherlands, which face losing the advantages that attract foreign investment ... resent what they see as interference in their right to set their own taxes.”

Similarly, another report in the BBC said that: “countries can scarcely afford not to co-operate when Apple comes calling; it has a stock market value of $600bn, and the attraction of the jobs it can create and the extra inward investment its favours can bring are too much for most politicians to resist.”

Noonan said that he was left “with no choice but to seek Cabinet approval to appeal the decision before the European Courts. This is necessary to defend the integrity of our tax system; to provide tax certainty to business; and to challenge the encroachment of EU state aid rules into the sovereign Member State competence of taxation.”

The U.S. reaction to the E.U. tax bill for Apple

The U.S. Treasury was quick to condemn this kind of ruling when the news broke this morning.

While a spokesperson refused to comment on the Apple case specifically, the spokesperson said that the Treasury was disappointed that the Commission was “acting unilaterally and departing from the important progress the U.S., the EU, and the rest of the international community have made together to combat tax avoidance.”

As for the $14.5b tax bill that Apple received, “we believe that retroactive tax assessments by the Commission are unfair, contrary to well-established legal principles, and call into question the tax rules of individual Member States,” the treasury spokesperson said.

Finally, the treasury warned that the Commission’s actions: “threaten to undermine foreign investment, the business climate in Europe, and the important spirit of economic partnership between the U.S. and the E.U.”

The response follows a white paper and summarizing blog post from the U.S. Treasury last week, which sharply criticized the European Commission and rulings of this nature.

“We emphasize that the Commission should not seek to impose recoveries under this new approach in a retroactive manner because it sets a bad precedent for tax policymakers around the world,” the blog post read. “The Commission’s approach undermines U.S. tax treaties and international transfer pricing guidelines already accepted broadly in the global tax community.”

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Ryan Lochte Now Endorsing a Personal Security Alarm 'That Can Get You Out of a Bad Situation'

ABC News(NEW YORK) -- U.S. Olympic swimmer Ryan Lochte has a new endorsement deal after losing multiple sponsorships from his scandal at the Rio Olympics.

In a tweet Tuesday, the 32-year-old gold medalist announced his collaboration with handheld alarm-maker ROBOCOPP.

"Excited to partner with @ROBOCOPPUSA" he tweeted.

Lochte included a video in the tweet showing off the device.

"All you do is pull the pin, and it releases a startling alarm that can get you out of a bad situation," he said in the video.

Lochte was dropped by four sponsors, including Ralph Lauren and Speedo, after claiming he had been held up at gunpoint in a robbery in Rio de Janeiro, a story he later said was "a mistake."

"Like I said, I did lie about that one part," he said Tuesday on ABC's Good Morning America. "I take full responsibility. I’m human. I made a mistake. A very big mistake."

Lochte signed another endorsement deal last week with Pine Bros. Softish Throat Drops.

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US Stocks Close Lower as Investors Fret Over Fed Rate Hike, Apple's EU Tax Bill

iStock/Thinkstock(NEW YORK) -- Wall Street closed lower Tuesday as investors continued to think about interest rates and processed news of Apple owing back taxes to Ireland.

The Dow gave up 48.69 (-0.26 percent) to finish at 18,454.30.

The Nasdaq fell 9.34 (-0.18 percent) to close at 5,222.99, while the S&P 500 finished at 2,176.12, down 4.26 (-0.20 percent) from its open.

Crude oil slid over 1 percent with prices hitting about $46 a barrel.

Federal Reserve:
  After Fed Chair Janet Yellen's comments in Jackson Hole last week on the possibility of an interest rate hike, investors are now waiting for more hints to tell how soon a rate raise is coming. The release of the August jobs report on Friday could prove the case for a rate hike in September.

Apple: Shares in Apple Inc. dropped nearly 1 percent Tuesday after the European Union ordered the iPhone-maker to pay $14.5 billion in back taxes to Ireland. Ireland, where Apple has run its European operations, doesn't want the money. The country's finance minister released a statement saying Ireland was looking to launch an appeal. Ireland could be worried about losing more foreign investments if they do not cooperate with Apple, according to BBC.

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Amazon, McDonald's Face EU Tax Audit Similar to Apple's YORK) -- From Cupertino to Copenhagen, the top business story across the world Tuesday is the European Commission slapping Apple with a massive $14.5 billion tax bill.

The ruling is the result of a three year investigation by the commission, which is the executive branch of the European Union, that concluded Ireland gave Apple unfair tax advantages. The commission claims this gave the tech giant an effective tax rate as low as 0.005 percent at some points. Both the Irish Finance Minister and Apple have denounced the ruling and say they will seek appeals.

While Apple is the subject of Tuesday's ruling, the European Commission (EC) is currently looking into the tax dealings of two other prominent U.S. companies: McDonald’s and Amazon.

Both cases involve the tiny country of Luxembourg, nestled between Belgium, France and Germany, in the heart of Europe.

Open Investigation: Amazon

In October 2014, the EC opened an investigation into Amazon’s tax arrangements with Luxembourg, saying in a press release from the time, that a tax ruling in favor of Amazon from 2003 might be in violation of the trade bloc’s rules.

"It applies to Amazon's subsidiary Amazon EU Sàrl, which is based in Luxembourg and records most of Amazon's European profits," the commission said. "Based on a methodology set by the tax ruling, Amazon EU Sàrl pays a tax deductible royalty to a limited liability partnership established in Luxembourg but which is not subject to corporate taxation in Luxembourg.”

"As a result, most European profits of Amazon are recorded in Luxembourg but are not taxed in Luxembourg," the commission added in the statement.

Amazon declined to comment further to ABC News, citing the ongoing investigation, but referred to a statement in which the company said: "Amazon has received no special tax treatment from Luxembourg, we are subject to the same tax laws as other companies operating here."

Open Investigation: McDonald’s

McDonald’s has also drawn a concerned eye from the EC over its activities in Luxembourg.

In December, the commission said that it was opening an investigation into McDonald’s, alleging that "McDonald's Europe Franchising has virtually not paid any corporate tax in Luxembourg nor in the U.S. on its profits since 2009," which were made from "royalties paid by franchisees operating restaurants in Europe and Russia for the right to use the McDonald's brand and associated services."

The commission said that two tax rulings from Luxembourg allowed the company to operate without paying taxes in Luxembourg or the U.S. on its European profits.

Those profits were more than €250 million ($278 million dollars at today's rate) in 2013, the commission said.

The company was paying tax in Switzerland, according to the statement released by the EC.

McDonald’s did not return ABC News’ request for comment.

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Save or Splurge? Comparing Low-Cost, Natural and Designer Deodorants

iStock/Thinkstock(NEW YORK) — Deodorant: It costs a few bucks at the drug store, you swipe it on after a shower and that’s it, right? Wrong.

Deodorant is a $4 billion business and growing, partly because brands that advertise themselves as “natural” are selling faster than ever and because designers are jumping into the category. But are natural deodorants that sometimes cost twice that of drugstore brands and designer deodorants that cost as much as $50 better than our traditional choices?

To understand this trend you first need to understand the difference between antiperspirants and deodorants. I asked Barrie Drewitt, director of testing at Princeton Consumer Labs, an independent lab that tests claims made by deodorant companies, to explain.

“An antiperspirant actually works to stop you from sweating. Deodorant will only mask the smell,” he said.

The active ingredient in antiperspirants is aluminum and it physically blocks the pores where sweat would come out. Because our armpits sweat more and from some of the stinkier glands in our body, blocking those pores is an effective way to reduce body odor. Deodorant, on the other hand, is all about smell reduction.

Drewitt explains that deodorants do have proprietary salts and charcoals that help to absorb smell, but most deodorants focus on covering smells up with other scents. That is where our designer $25 and $50 deodorants come into play.

As I sniffed around the perfume counters in a high-end California department store, the clerk explains to me that Tom Ford’s Portofino Neroli is an “extension of his fragrance line.”

I guess that makes sense. If you’ve paid $400 for a 3.4 oz bottle of cologne, you wouldn’t want to mix the smell with the ever-popular Axe for Men antiperspirant.

But this gets back to the crux of the issue. Designer deodorant is an extension of a designer fragrance.

Drewitt summarizes it this way when it comes to deodorant: “People think if you pay more, it's going to be better. That is just not the case, at all.”

He says if you want supreme efficacy in stopping sweat and minimizing smell, pick an antiperspirant/deodorant combo applied once every eight hours. “Go for the box standard, go to the supermarket. Pay $5 to $10,” he said.

But what about natural deodorants? Maybe they won’t stop you from sweating, but are they healthier?

I bought eight different types at my local natural foods store. They come in sprays, wipes, creams, even one called Primal Pit Paste. They ranged in price from $5 to $18 dollars and they all smelled great.

But none of them are antiperspirants. That’s because the main reason many people choose not to use an antiperspirant is the desire to avoid aluminum.

Thinking persists that the chemical is tied to Alzheimer’s disease, but numerous studies have led the Alzheimer’s Association to issue this statement on its website:

"During the 1960s and 1970s, aluminum emerged as a possible suspect in Alzheimer’s. This suspicion led to concern about exposure to aluminum through everyday sources such as pots and pans, beverage cans, antacids and antiperspirants. Since then, studies have failed to confirm any role for aluminum in causing Alzheimer’s. Experts today focus on other areas of research, and few believe that everyday sources of aluminum pose any threat."

So as you make a choice to try and stay fresh, let your budget and your nose be your guides.

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As Oil Prices Rally, US Gas Prices Continue to Rise

iStock/Thinkstock(WASHINGTON) — The cost of filling up the tank is still increasing across the U.S. The price of regular unleaded gas increased about 4 cents in the past week to $2.24 a gallon, according to the latest figures from the Department of Energy.

For three consecutive weeks, U.S. gas prices have inched higher as oil prices also rallied.

But even as fuel prices move higher, U.S. drivers have enjoyed a summer with the cheapest gas prices in about a decade. In fact, Americans are still paying 27 cents less than they were on this date a year ago.

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Fox News Slams Andrea Tantaros as 'Wannabe' Over Sexual Misconduct Claims

Jamie McCarthy/Getty Images(NEW YORK) -- Fox News has responded to a lawsuit filed by one of its former female staff members alleging sexual harassment, saying that Andrea Tantaros “is not a victim; she is an opportunist” and that her “unverified” lawsuit “bears all the hallmarks of the ‘wannabe’.”

Earlier this month, Tantaros became the latest female Fox News staff member to claim sexual harassment at work when she alleged that the popular cable news network “operates like a sex-fueled, Playboy Mansion-like cult, steeped in intimidation, indecency, and misogyny,” and that she was subject to alleged sexual harassment by former Fox News boss Roger Ailes as well as by former Sen. Scott Brown. Both have denied the allegations.

The misconduct, she claimed, was condoned by top brass at Fox News, some of whom were promoted in the wake of Ailes' widely publicized departure in July.

Seeking to move the dispute to arbitration, Fox News said that Tantaros never complained of harassment by Ailes “in the course of an investigation months ago,” according to court documents obtained by ABC News.

Judd Burstein, a lawyer for Tantaros, hit back on Monday in an email to ABC News. “If Mr. Shine and his minions are innocent, why do they want this dispute to be resolved in the shadows?” Burstein said, referring to arbitration, the proceedings of which would presumably remain confidential. “An innocent person would be so outraged that he or she would want public vindication.”

The documents claim that another lawyer for Tantaros did not return a call from a law firm conducting an internal investigation into allegations made by several women against Ailes.

Burstein said that the charge of the unreturned phone call was “absolutely false.”

He added: “Even if it were true, why is it that Paul Weiss never reached out to me after this lawsuit was filed?”

In separate filings, Ailes’ lawyers also called for the case to be moved to arbitration, calling the allegations “false” and saying her lawsuit was “full of lies and halftruths.”

“From the first page of her Complaint, Ms. Tantaros reverts to tabloid fodder, smearing Mr. Ailes based on no findings of any court or body of competent jurisdiction, and certainly not on her own experience, since she was never harassed by Mr. Ailes,” the lawyers said. “As the Fox News Defendants’ brief makes clear, not once did Ms. Tantaros ever complain that Mr. Ailes had sexually harassed her, much less that she had been retaliated against as a result.”

Burstein also responded to Ailes’ lawyers’ separate filing, saying, “Fox News has all but acknowledged that Roger Ailes did sexually harass Andrea Tantaros because its lawyers are representing every defendant in the suit other than Roger Ailes.”

“They have dropped him like the proverbial hot potato in the hope that his former cabal members can continue in place,” he added.

Ailes left the network in July.

The Fox News documents provided to ABC News by the media company only briefly mention the allegations made against Brown, saying: “His interactions with Tantaros were professional and cordial, and in full view of other personnel and talent.”

In her filing earlier this month, Tantaros said that Brown “made a number of sexually inappropriate comments to Tantaros on set” during an appearance on “Outnumbered,” a program she hosted. She also alleged that the former senator said she “would be fun to go to a nightclub with,” and “snuck up behind” her while she was buying lunch and “put his hands on her lower waist.”

Brown, who represented Massachusetts in the Senate from 2010 until 2013, has called the accusations “false,” according to the Boston Globe.

In an email to the newspaper after news of the suit first broke, Brown said: “Her statement about our limited on air, green room interactions are false.”

“There were never any circumstances of any kind whatsoever in which I had any interaction with her or any other employee at Fox, outside the studio,” he told the newspaper. He said that all interactions were “always in full view of all staff, personnel and talent.”

He added that any other encounters were “professional and cordial,” according to the paper.

Tantaros is not the first person to allege sexual misconduct at Fox News.

Former morning and daytime host Gretchen Carlson filed a lawsuit earlier this summer after 11 years at the company, claiming that Ailes had “sabotaged” her career after she “refused his sexual advances,” and that her job was terminated in retaliation for rebuffing him and complaining to him about sexual harassment.

Fox News and Ailes have denied Carlson's allegations in the past, calling it a "retaliatory suit for the network's decision not to renew her contract" because of "disappointingly low ratings."

Shortly before Ailes' resignation, New York magazine published a story citing unnamed sources who claimed that another Fox News host, Megyn Kelly, had “told investigators that Ailes made unwanted sexual advances towards her about [10] years ago.”

After that story's publication, Susan Estrich, Ailes' lawyer, told ABC News that her client “never sexually harassed Megyn Kelly.”

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US Stocks Close Higher as Investors Weigh Rate Hike Possibility

iStock/Thinkstock(NEW YORK) -- After losses Friday, Wall Street rebounded as investors appeared to relax over Fed Chair Janet Yellen's comments on a possible interest rate hike.

The Dow jumped 107.59 (+0.58 percent) to finish at 18,502.99.

The Nasdaq gained 13.41 (+0.26 percent) to close at 5,232.33, while the S&P 500 finished at 2,180.38, up 11.34 (+0.52 percent) from its open.

Crude oil slid over 1 percent with prices hitting about $47 a barrel.

Federal Reserve: Yellen told a conference of central bankers in Jackson Hole, Wyoming, last week that the U.S. economy might be strong enough for an interest rate hike. Though she did not cite when a rate hike might come, she said she believed "the case for an increase in the federal funds rate has strengthened in recent months."

EpiPen maker Mylan announced it will begin to sell a cheaper generic version after the company came under fire for raising prices. Mylan hiked the price of the EpiPen from  approximately $100 in 2009 to more than $600 in 2016. The generic version will sell for about half the price of the original EpiPen, according to Mylan.

J.Crew: J.Crew will sell a collection at select Nordstrom stores in an effort to boost sales for the company. Madewell, a J.Crew brand, has already been selling some clothing items at the fashion retailer since last year.

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Family That Lost Everything in California Wildfire Gets Disney Hawaii Vacation, Calif.) -- When the Valley Fire swept through Lake County, California, it left devastation in its wake.

Bill and Shaun Roderick from Middletown lost everything in the wildfire that was one of California’s biggest, but even though people in the community were devastated, they were also tremendously touched by the Rodericks' selflessness.

The high school sweethearts –- Bill is the principal at Middletown High School and his wife is a teacher and adviser there -– had only the clothes on their backs but they took charge, helping the 90 students and many school staffers who lost their homes with financial aid, clothing donations and support.

The Rodericks, who are both 42, even turned down donations for themselves, choosing instead to give them to the students.

"They just only cared about the school. They put everything else on hold," Marcella Nikolov, a parent, said.

Student Audrey Showen described the Rodericks as "the wheels of the school."

The Rodericks and their daughters Tori and Taelor are still living in an RV as their home is being rebuilt. The fire destroyed more than 175 structures and forced thousands of residents to evacuate the area.

Authorities have made an arrest in connection with this and several other fires in the area in the past year. The blazes are believed to be cases of arson, authorities have said.

Meanwhile, it's not just the community that's been inspired by the Rodericks' example.

"It makes me proud of them ... my mom, a bunch of the kids that lost their house would go to her and talk to her," Taelor said of her parents.

GMA was so moved by the Rodericks' commitment to their students and school that it surprised them with a vacation to Aulani, a Disney resort and spa on Oahu, Hawaii.

There, the family enjoyed a traditional welcome, along with other highlights included the winding lazy river and a visit to the Rainbow Reef. They sailed on the ocean, dined on local specialties and took lots of selfies to cherish.

The Walt Disney Company is the parent company of ABC News.

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Facebook Changes 'Trending' Section After Accusations of Political Bias

Sean Gallup/Getty Images(NEW YORK) — After facing accusations that Facebook's staff were being biased in their selection of stories for prominent placement on users’ newsfeeds, the company has announced that it is streamlining its “Trending” module so that the selection of topics is more automated.

The social media giant said that the selection of stories would be “more algorithmically driven,” and would no longer features a description written by human beings -- just a topic.

For more information, users will have to hover over a topic with their mouse, at which point they will see a snippet from “an automatically selected original news story.”

Humans will continue to oversee the software selection to ensure that topics selected are indeed newsworthy and not about everyday -- some might say banal -- topics like “#lunch,” according to a blog post on the company’s website.

Human influence over the section, which has the ability to bring lots of eyeballs to news topics, has been the topic of heated controversy in recent months after a Gizmodo report in May in which an unnamed former journalist who worked on the project said that staff “routinely suppressed news stories of interest to conservative readers.”

In wake of the report, Facebook was forced to release more information about how the module -- which sits prominently just to the left of users’ newsfeeds -- worked.

The company has said that it “looked into these claims and found no evidence of systematic bias,” but that making the changes, “allows our team to make fewer individual decisions about topics.”

Facebook did not immediately respond to ABC News’ request for comment. But in the blog post announcing the change, the company said that it was a “platform for all ideas, and we’re committed to maintaining Trending as a way for people to access a breadth of ideas and commentary about a variety of topics.”

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