Both senators have called for USA tax reforms forcing giant companies like Apple to pay more taxes in America.
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“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. Shame on Apple for dodging United States taxes. Under earlier Irish rules, while companies might tell their “home” country they were based elsewhere, Ireland declared them stateless for the purposes of declaring their global profits.
Apple Chief Executive Officer Tim Cook criticized the European Commission’s decision, saying his company “received guidance from Irish tax authorities on how to comply correctly with Irish tax law”. “The IRS has failed to stake a claim for U.S. taxes on those revenues”, he said in a statement, referring to the U.S. Internal Revenue Service. But others applauded the crackdown on what they described as a “race to the bottom” by individual nations offering lower tax rates than their neighbors.
“Every company in Ireland and across Europe is suddenly at risk of being subjected to taxes under laws that never existed”.
The Apple decision may also complicate struggling EU-US talks on what would be the world’s biggest free trade deal, meant to be completed before US President Barack Obama steps down in January. The EU rules also try to ensure that a country can effectively tax profits generated in its territory.
Apple shares fell 82 cents to close Tuesday at $106 in NY, a modest drop that reflects expectations that Apple can afford the settlement, should it stand. Apple made $10.5 billion in the first three months of this year.
The EU ruling raises the hard question of how to fairly tax multinationals – in their home countries, where the bulk of their goods are developed, or in the countries where the goods are sold. A few years later, Apple was paying just €50 per million.
That internal company practice, as well as two favorable Irish tax rulings in 1991 and 2007, “enabled Apple to avoid taxation on nearly all profits generated by the sale of Apple products in the entire EU single market”, according to the European Commission.
The EU’s campaign against tax avoidance is meant to create a fairer society by having companies contribute taxes to the countries they operate in.
The case was kicked off in 2014 and revolved around Apple’s position in Ireland.
Members of both parties in Congress pointed to the stunning decision as evidence that the USA tax code should be rewritten to give American companies an incentive to bring home some $2.1 trillion in US corporate profits held overseas. Supporters say the ruling is a step forward in harmonizing tax laws between European Union countries – rather than have them race to the bottom – and taking action across borders in a way that the European Union was meant to do. “It’s a big shot across the pond to US companies”. The European Commission ruled that Ireland gave Apple illegally favourable tax treatment, letting it pay an effective tax rate on European profits of 1 percent in 2003 and down to 0.005 percent in 2014. But as the Financial Times pointed out yesterday, “Apple’s lightly taxed foreign cash mountain is the biggest of any US multinational”. Most importantly, the Commission completely ignores the fact that the vast majority of those profits was subject to US taxation.
Apple was found to be holding over $181 billion offshore, more than any U.S. company, in a study published past year by two left-leaning nonprofit groups: Citizens for Tax Justice and the U.S. Public Interest Research Group Education Fund. The revelation that has fueled popular anger in Europe, where cash-strapped governments had been raising taxes on households.
Why Does the U.S. Government Care? Obama has proposed 14 percent; House Republicans this year proposed 8.75 percent.
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Can Apple Afford the Tax Judgment? 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.
