The U.S. Treasury on Wednesday declined to comment on whether Washington was considering such drastic measures, which Democratic and Republican lawmakers have proposed putting on the table due to what they see as overreach by the European Commission in a tax grab targeting American companies. But the decision was welcomed by groups that have long criticized the practices used by Apple and other large companies to legally reduce their tax obligations. However, analysts say, in this case the gain could be more than offset by perceptions that the ruling represents a threat to Ireland’s tax sovereignty and to foreign direct investment (FDI).
Advertisement
Lawmakers including Republican Senator Orrin Hatch and Democratic Senator Ron Wyden have pressed the administration to consider implementing Section 891 over the European Commission moves to scrutinize how US companies minimize their tax bills in Europe. “It’s a big shot across the pond to USA companies”. “Apple has been in Ireland since the 1980s and employs thousands of people in Cork”.
Badertscher agreed the ruling could discourage US companies from investing in Europe.
Ireland is an attractive location for foreign subsidiaries because its 12.5 percent corporate tax rate is one of the lowest in the developed world.
Those tax policies amounted to “illegal state aid” that gave Apple an unfair advantage over other companies operating in Europe, Vestager added. “We think that it undermines the environment in Europe for worldwide business because it creates uncertainty that ultimately will not be good for the European economy”, Lew said at an event hosted by the Brookings Institution in Washington.
Apple has said it will appeal the ruling, issued on Monday. In recent weeks, the Obama administration warned European officials that their investigations seemed to be unfairly singling out USA companies. “We never asked for, nor did we receive, any special deals”. Apple’s debt is a virtual drop in the bucket for a company that reported more than $53 billion in profit last fiscal year.
Conversely, the USA corporate tax rate of 35 percent is the highest among the 35 members of the Organization for Economic Development and Cooperation, although many companies pay less because of loopholes and accounting maneuvers. “Apple should move to Turkey”, Mehmet Simsek tweeted Tuesday. The Irish government has since claimed that the low-tax law has been changed and no longer exists while Apple has made claims of paying Ireland’s 12.5 percent tax-rate on the revenue it generated in the European Union country.
But Competition Commissioner Margrethe Vestager may be tempted to train her fire on European companies after a string of investigations of USA global giants that, especially after Tuesday’s Apple verdict, has enraged the United States.
“Unfortunately, there is no evidence that it increased USA investment or jobs, and it cost taxpayers billions”, assistant Treasury secretary Michael Mundaca wrote in 2011. It notes that the United States has chosen not to apply tax rules that would bar Apple from earning the money tax free. For that reason, US companies have left an estimated $2 trillion in untaxed foreign profits overseas.
Advertisement
Now the companies say they are ready to pay taxes on the money in the United States, just not at the current rate the USA government would assess.
