The EC concluded that Ireland granted undue tax benefits of up to £11.1bn to Apple between 2003 and 2014, which is illegal under European Union state aid rules. If legal appeals fail, Ireland could find itself in a similar position.
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Ireland is a tax haven that has helped multinationals avoid paying their rightful share of profits in taxes.
What does this mean for Apple?
But the reality, if those voters would think about it, is that between six and eight years ago these same politicians could have revoked the laws that allow what they label as gimmicks, schemes and loopholes.
For years, Apple CEO Tim Cook’s go-to tax defense is that his company is the country’s (or the world’s) largest taxpayer. As has since been asserted numerous times, the European Commission’s ruling potentially reduces Apple’s profits that can be taxed by the US.
The document for TDs outlines the United States tech company’s activities and structures and looks at Revenue’s tax treatment of Apple in 1991 and 2007. They are comfort letters issued by the tax authorities to give a company clarity on how its corporate tax will be calculated or on the use of special tax provisions.
“It’s clear that this comes from a political place, it has no basis in fact or in law, and unfortunately it’s one of those things we have to work through”, he told RTE. “So there were phases when there were different sectoral approaches but always statute-based, and there were no special deals”.
The Commission’s move is unprecedented and it has serious, wide-reaching implications. Apple also maintained that, because AOI was not incorporated in the United States, AOI is not a USA tax resident under US tax law either.
The Dáil (Lower House of Irish parliament) will today debate last week’s announcement of theEuropean Commission finding that Ireland granted Apple €13bn in illegal state aid.
At its root, the Commission’s case is not about how much Apple pays in taxes. “It is about which government collects the money”.
This is why issues are arising on whether Ireland has other such deals with other companies too, and one of the questions is why the Irish government is supporting Apple in this matter, when the European Union is acting in the public interest. They do not expect any near-term impact on our financial results nor a restatement of previous results from this decision. In traditional tax havens such as the British Virgin Islands and Cayman Islands, profits of USA subsidiaries equaled 20 times local GDP in 2010.
The bottom line: the European Commission’s tax claim is a minor problem for Apple.
Edward Kleinbard, USC’s peerless corporate tax expert, may have said it best during an appearance Monday on CNBC, a day before the EC issued its widely-anticipated ruling: “The easy days of single-digit tax rates are going to be over”. They are right from their point of view.
This story is intriguing for a number of reasons. Apple has had a base in the southern city of Cork since 1980 and employs almost 6,000 people in Ireland, through which it routes its global sales totalling billions. It is estimated there are 18,000 Apple jobs across the country, including over 5,000 direct Apple employees.
Meanwhile, Congress and tax officials back in the United States engaged in tax malpractice by imposing a 35 percent federal corporate income tax rate – way above the revenue maximizing rate. In addition to Europe’s crackdown on Apple, the U.S. Treasury recently announced rules limiting “inversions” that have allowed U.S. companies to slash taxes by moving their headquarters overseas.
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Apple Inc. paid a 25.5% tax rate in their most recently reported third quarter of their fiscal 2016. Although the United States generally determines tax residency based upon the place of incorporation, a shell entity incorporated in a foreign tax jurisdiction could be disregarded for US tax purposes if that entity is controlled by its parent to such a degree that the shell entity is nothing more than an instrumentality of its parent.
