In a ruling that will put worldwide regulators at odds with the U.S. Treasury Department, the European Commission on Tuesday is expected to rule that Apple enjoyed an illegal tax arrangement with the Irish government putting the company on the hook for several billion dollars in back taxes. That arrangement, according to the commission, is illegal because it amounts to an improper trade incentive.
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“They don’t have responsibility for taxes and they are opening a back door through state aid to influence tax policy in European countries when the European treaties say tax policy is a matter for sovereign governments”, he added.
TD Paul Murphy says other companies have probably also benefitted in the same way as Apple: “It wouldn’t surprise me in the slightest, if it is not just Apple that benefitted not just from the 12.5%, not just the normal ways of getting around it, that the corporations have, but other secret deals”.
Following the bloc’s decision on Apple, the U.S. Treasury Department voiced disappointment, saying retroactive tax assessments by the EU Commission “are unfair, contrary to well-established legal principles and call into question the tax rules” of the individual countries in the EU. According to Reuters, the ruling will be released on Tuesday.
That means Apple is shielding billions of dollars from taxation and America’s relatively steep corporate tax rate simply by stashing earnings overseas – a practice that isn’t necessarily illegal but has been frowned upon by American lawmakers and government officials aiming to increase USA tax revenues and cut down on instances of corporate tax avoidance.
A bill of €300 million this year for Swedish engineer Atlas Copco AB to pay Belgian tax is the current known record.
The commission is expected to recommend a figure, although it will be up to the Irish state itself to calculate one.
As of June, Apple reported it had cash, cash equivalents and marketable securities of $231.5 billion, of which 92.8 percent, or $214.9 billion, were held in foreign subsidiaries. The Irish government said Monday that it needed to defend its “international reputation” against the suggestion that it granted illegal aid to Apple. Those deals have been given to Belgian brewers, German chemical companies and Italian auto manufacturers – not just U.S. tech giants. Earlier this month Tim Cook said. It notes that Italian automaker Fiat was targeted last year, and that 35 mostly European firms were impacted this year by its ruling against a Belgian tax scheme. And some are already charging that the EC is abusing its own rules by finding against Apple and Ireland on this issue.
Apple could be handed a tax bill of more than €1bn (£853m) with the European Commission set to announce that it has ruled against the tech giant’s tax dealings in Ireland.
Irish Finance Minister Michael Noonan said he profoundly disagreed with the decision and in order to preserve Ireland’s attractiveness for investment he would appeal.
Apple said in a statement: “The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the global tax system in the process”.
French authorities recently raided the Paris headquarters of two US corporate giants, Google and McDonald’s.
But it may not be able to stop them.
A European Commission spokeswoman declined to comment.
In June 2013, the United Kingdom led efforts to lobby the OECD to bring worldwide tax rules up to date for the internet world. USA lawmakers and regulators have lamented the practice but have had little success in pressing the corporations to bring the money home. Company CEO Tim Cook has since called tax avoidance accusations “total political crap” and told 60 Minutes in December that Apple shelters some overseas earnings overseas because the US corporate tax code “was made for the industrial age, not the digital age”.
However, Matt Brittin, head of Google Europe, said the January deal did not prove that the company had avoided paying tax in the past.
It’s certainly going to be a lot of money, and Apple and Ireland are both very likely to appeal. The Commission says many multinationals take advantage by shifting their profits from one country to another.
“Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years”, said Competition Commission Margrethe Vestager, whose crackdown on mainly US multinationals has angered Washington which accuses Brussels of protectionism.
Her inquiry found the profits were not subject to tax anywhere. These offices “existed only on paper and could not have generated such profits”, the commission said. These then hire contract manufacturers to make devices which they sell to Apple retail subsidiaries around Europe and Asia. The Commission says all companies that generate and record profits in an European Union country should pay taxes in line with national tax laws, no matter whether they’re based in Europe or overseas.
This isn’t Apple’s first foray into tax avoidance accusations.
Both companies and countries have appealed against those decisions.
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Apple said in a statement that it had followed the law and paid every cent of the taxes it owed.
