John-Thor Dahlburg
and Shawn Pogatchnik

BRUSSELS: Apple has to pay up to $14.5 billion — plus billions more in interest — in back taxes to Ireland after the European Union found Tuesday that the U.S. technology giant contributed almost no tax across the bloc’s 28 countries for 11 years.

The ruling is a dramatic escalation by the EU executive commission in its battle to have multinationals pay their fair share in the region, where popular outrage over corporate tax dodging has grown after years of financial crises and austerity budgets.

It also risks inflaming tensions with the U.S., which argues the EU is picking on American companies and depriving it of potential tax windfalls of its own.

At the heart of the matter is the EU’s claim that many multinationals — including Amazon and McDonald’s — struck deals with EU countries to pay unusually low tax in exchange for basing their EU operations there.

EU Competition Commissioner Margrethe Vestager said that a three-year investigation found Ireland granted such lavish tax breaks to Apple that the multinational’s effective corporate tax rate on its European profits dropped from 1 percent in 2003 to a mere 0.005 percent in 2014.

That last tax rate meant that for each 1 million euros in profits, Apple paid just 50 euros in taxes, Vestager told a news conference.

“Member states cannot give tax benefits to selected companies—this is illegal under EU state aid rules,” Vestager said.

For Ireland, a country of barely 4.6 million people, the sum to be recovered would be a huge windfall — equivalent to more than $3,150 for every man, woman and child.

And yet the government said it would appeal the decision, arguing it had granted no favorable treatment to Apple.

Ireland has for years offered low corporate tax rates to multinationals, a common strategy among Europe’s smaller nations, including Luxembourg and Holland.

Because the countries are small, they gain from even small amounts of tax on multinationals’ huge revenues. They also benefit from the jobs created locally. Apple has 5,500 workers in Ireland, making it one of the biggest private-sector employers.

The Irish government insisted that Apple had paid its full amount of tax and no state aid was provided.

“It is important that we send a strong message that Ireland remains an attractive and stable location of choice for long-term substantive investment,” said Irish Finance Minister Michael Noonan. “Apple has been in Ireland since the 1980s and employs thousands of people in Cork.”

Apple likewise claimed that it had followed the law and paid every cent of what it owed.

Both Apple and the Irish government said they would challenge the EU action in the European courts, and predicted they would be vindicated.