Ireland’s low corporate tax rate has been a cornerstone of the country’s economic policy for decades, drawing investors from multinational companies whose staff account for nearly one in 10 of the country’s workers.
Advertisement
Shares in Apple fell slightly in NY as investors largely shrugged off a European Commission ruling that the company must pay up to €13 billion in unpaid taxes, plus interest, to Ireland. This figure is larger than Ireland’s entire corporate tax take in 2015.
Apple and the Irish Government have strongly rejected the commission’s findings that the iPhone maker secured selective tax advantages in this country under agreements with the Revenue Commissioners in 1991 and 2007.
Now catch the tax rate the Commission claims Apple paid, “an effective corporate tax rate of one per cent on its European profits in 2003 down to 0.005 per cent in 2014”.
Apple must now repay those taxes, the commission ruled. Ireland could be anxious about losing more foreign investments if they do not cooperate with Apple, according to BBC.
Apple shares (AAPL) fell almost 1% in morning trading.
Analysts said the size of the claim underlined the Commission’s aggressive stance, but since each case involves different circumstances and tax rules, lawyers said it was hard to see if further big claims were any more or less likely.
The Business Roundtable, which represents US chief executives, called the decision “an act of aggression” against a law-abiding USA company and a sovereign government.
“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.
In a statement, a spokesperson for the U.S. Treasury Department says the agency is “disappointed” with the EU’s ruling.
“Ireland must now recover the unpaid taxes in Ireland from Apple for the years 2003 to 2014 of up to 13 billion euros ($14.5 billion), plus interest”, the Commission said in a statement.
The EU ruling raises the hard question of how to fairly tax multinationals – in their home country, where the bulk of their goods are developed, or in the countries where the goods are sold. The U.S. government can not tax any of that money unless it is repatriated.
Mr Noonan added that it was necessary to fight the verdict in the courts “to defend the integrity of our tax system, to provide tax certainty to business, and to challenge the encroachment of European Union state aid rules into the sovereign member state competence of taxation”.
“It is important that we send a strong message that Ireland remains an attractive and stable location of choice for long-term substantive investment”, Noonan said. Apple has had a presence in Ireland since 1980, when it opened a factory in Cork. Any money will be placed in a hands-off escrow account pending what could be years of litigation before the European Court of Justice in Luxembourg, he said.
Advertisement
An editorial at Bloomberg View chose to blame both sides, saying the USA needs to reform its corporate tax system, while also describing the European Union’s retroactive remedy as unjust.
