Spare a charitable thought for Tim Cook, chief executive of Apple. That’s nearly one eighth of India’s national income. In fact, he doesn’t even try.
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But Apple’s corporate structure does merit some attention. Sales of iPhones and Mac computers are down and the stock price is off by 4 per cent over the past year.
The European Commission ruled that Apple must pay Ireland as much as $14.5 billion plus interest after the state illegally slashed the company’s tax bill, in a record crackdown on fiscal loopholes.
Both men also implied strongly that the commission’s ruling formed part of a larger effort to undermine Ireland’s 12.5 per cent rate of corporate tax. What they found turned out to be quite a sweet deal.
This is not a direct challenge to Ireland’s general taxation regime, or the 12.5pc corporate tax rate.
“There is a lot of envy across Europe about how successful we have been in putting the headquarters of many companies into Ireland”, said Mr Noonan. Apple’s profits in Europe, the Middle East, Africa and India were thus, in principle, taxed in Ireland at close to a zero rate.
One of the Irish subsidiaries, Apple Sales International, made a profit of 16 billion euros in 2011 – but most of the funds were allocated to its supposed head office, which had no employees, no premises and no activity.
The European Commission’s ramped up investigations of “aggressive tax planning”, which produced the Apple ruling, are a result of the same anxiety. But this is true of all governments, including our own. “It’s maddening. It’s disappointing”.
Cook further asserts that “at its root, the commission’s case is not about how much Apple pays in taxes”.
What’s infuriating about Apple and Tim Cook is their habit of insisting that they’re playing on a higher moral ground.
In the meantime, the provision makes the effective tax rate on the U.S. portion of Apple profits look outsized: 64.7 per cent in 2015 and 62.8 per cent in 2014.
“Whatever outcome we get will influence Apple”, he said.
What does require scrutiny is how Apple’s 26 per cent effective tax rate, which Cook keeps bringing up in his company’s defence, is worked out.
Apple, the iconic company that makes the iPhone, has 215 billion dollars in cash sitting in various places outside the United States.
If those companies are already paying some taxes overseas, then they get that much credit, and pay only the difference in tax liability to the United States. He says the EC is “effectively proposing to replace Irish tax laws with a view of what the Commission thinks the law should have been”, which is questionable.
State aid cases have up until now centered on targeted tax laws that countries introduce with an obvious aim of attracting investment and jobs by reduced tax bills.
In fact, what the U.S.is really anxious about is the Europeans grabbing the Apple tax money first. In the U.S., Congress and the White House will face more pressure to align the corporate income tax system with worldwide norms, but that will mean closing loopholes long enjoyed by U.S. -based global tax dodgers. His company, however, did not make a provision for paying the taxes in the U.S. – and made an insufficient one for paying in Ireland.
Congress has been debating for years how to deal with this growing stockpile but disputes between Democrats and Republicans over how to overhaul corporate taxes has stalled action. “That’s why it sometimes takes a long time to finish these investigations”.
“The pattern of actions certainly appears to be highly focused on USA firms”, Lew said.
And spurred by the G20, the Organization for International Cooperation and Development (OECD) is shepherding discussions on what’s called Base Erosion and Profit Shifting. So far, 85 countries have signed up for the talks, including Canada, the US and Ireland.
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But the government has delayed a decision on the appeal: Some ministers doubt that Ireland was right in undertaxing Apple as it did, and the windfall would be welcome in a debt-ridden country hurt by years of post-crisis austerity.
