The European Commission’s ruling issued Tuesday said that following an investigation launched in 2014, it decided that Ireland granted “undue tax benefits” to Apple, something that is illegal under the European Union’s state aid rules. “In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1 per cent on its European profits in 2003 down to 0.005 per cent in 2014”, she added. In Tuesday’s letter, he acknowledges the intricacy of the subject matter and attempts to outline the basics of worldwide corporate taxes: “Taxes for multinational companies are complex, yet a fundamental principle is recognized around the world: A company’s profits should be taxed in the country where the value is created”.
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Just last month, Facebook revealed that it had received a notice of tax deficiency from the Internal Revenue Service related to questions about how that company values its overseas holdings, particularly in Ireland. The unit, which is in charge of sales in Europe, the Middle East, Africa and India, generated more than $22 billion in pretax profit in 2011, said a 2013 U.S. Senate report. “It is effectively proposing to replace Irish tax laws with a view of what the Commission thinks the law should have been”.
Ireland has said they plan to appeal the Commission’s ruling and Apple will do the same.
Ireland’s low corporate tax rate has been a cornerstone of economic policy for 20 years, drawing investors from major multinational companies whose staff account for nearly one in 10 workers in Ireland.
Irish political parties and business bodies have been keen to air their opposition to the European Commission’s ruling that Apple was given a “sweetheart” tax deal. This directly translates into minimizing how much money goes out the door to the taxman instead of business operations.
Two years ago that worked out at 50 euro on every million in profit, she said.
“We are concerned about a unilateral approach”, said White House spokesman Josh Earnest, adding that the move “threatens to undermine progress that we have made collaboratively with the Europeans to make the global taxation system fair”.
Apple responded by publishing a letter directed at the Apple Community in Europe.
The EU found Tuesday that the USA technology company received illegal tax benefits over 11 years.
He also claimed: “W e have become the largest taxpayer in Ireland, the largest taxpayer in the United States, and the largest taxpayer in the world”. It is unclear if this special arrangement is extended to other multinationals or only Apple is paying a tax rate well below Ireland’s stated 12.5% corporate tax rate.
The company went on to say that the European Commission is trying to “rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the worldwide tax system in the process”. “The decision leaves me with no choice but to seek Cabinet approval to appeal the decision before the European courts”.
A Treasury representative said on Tuesday that the ruling could “threaten to undermine foreign investment, the business climate in Europe, and the important spirit of economic partnership between the USA and the European Union”.
The European Commission may be justified in highlighting tax rules of member states that give preferential treatment to individual companies at the cost of others. The Commission said it treated all companies equally. Apple has 5,500 workers in Ireland, making it one of the biggest private-sector employers. “It is about which government collects the money”. So it is too early to tell if Apple’s case is an anomaly or the norm.
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The fact that Apple made a decision to create its European subsidiaries in Ireland despite the fact that there were other countries which offered larger markets for its iPhones, other products and services, may point to the fact that these may have been a give-and-take relationship. So too is the Irish government, which is in a odd position of being against the European Commission’s attempts to provide them a big tax payoff.
