With New European Data Centers, Apple Hopes to Get Regulators Off Its Back

Apple plans to spend nearly $2 billion on two new data centers in Denmark and Ireland. The centers will run completely on renewable energy, in keeping with Apple’s recent efforts to build cleaner, greener data centers.

The move, which Apple announced in a blog post today, comes at an interesting moment in Apple’s history of doing business in Europe. The tech giant is currently at the wrong end of an investigation by the European Commission over Apple’s tax agreements with Ireland, and the announcement of this data center may be a not so subtle attempt to score some good will with European regulators.

The investigation is part of a much larger crackdown on suspected tax avoidance by some of the world’s largest companies. Starbucks is facing similar scrutiny in the Netherlands, while Amazon’s dealings in Luxembourg are also being assessed.

If any of these companies are found to have gotten unfair tax advantages, they could owe billions of dollars in recovery. As Gert-Jan Koopman, an E.U. official overseeing the investigation, recently told members of the press, “The odds and stakes for the companies concerned are massive. The concept of too big to fail in terms of recovery doesn’t exist.”

So it stands to reason that Apple would want to do everything in its sizable power to avoid paying billions of dollars in tax repayments. The first step? Making nice. In its announcement of the two new data centers, Apple trumpeted its history of employing European workers, writing that Apple “supports 672,000 European jobs,” including 18,300 direct reports, and has generated nearly $7.5 billion in revenue for developers who sell their apps in its App Store. The announcement then goes on to note all the ancillary benefits to the local communities where these data centers will be built, including a land restoration project and a new outdoor education space for schools in Ireland.

“Having a greater business in Ireland would certainly help Apple make a case to the European Commission that a larger fraction of their operations are based in the country in which they have this tax deal,” says Arun Sundararajan, professor of information, operations, and management sciences at NYU’s Stern School of Business.

And yet, Sundarajan says there is another, longer-term reason Apple might want to build data centers abroad: they will enable Apple to store data from European users on European soil. That will not only keep the data safe from the potentially prying eyes of the National Security Agency back at home, but it will appease European regulators, who have stricter data privacy regulations.

“I think U.S. companies are going to increasingly be under pressure to keep data in the country where their customers are,” he says. “There’s going to be a greater level of comfort from the E.U. if the data collected in Europe resides in Europe.”