At the heart of the matter is the EU’s claim that many multinationals – including Amazon and McDonalds – struck deals with European Union countries to pay unusually low tax in exchange for basing their European Union operations there. It said, we find ourselves in the unusual position of being ordered to pay additional taxes to a government that says we don’t owe any more than we’ve already paid.
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The European Commission made good on a long-rumored threat on Tuesday by demanding that Apple cough up $14.5 billion in taxes it allegedly avoided through various corporate gimmicks.
In 2014, Apple paid a tax rate of 0.005% when the usual corporate tax rate in the country is 12.5%.
“I think it’s on very tenuous grounds”, says Irish Finance Minister Michael Noonan. “It’s a big shot across the pond to US companies”.
But his party colleague who chaired hearings into Apple’s taxes three years ago, Carl Levin, said the Europeans were only trying to take what United States authorities had failed to claim by not closing loopholes that allowed firms to hoard profits overseas.
The commission has ordered Ireland to recover the unpaid taxes of up to €13 billion, plus interest.
Apple paid an effective corporate tax rate of just 0.005 per cent on its European profits in 2014 – equivalent to just 50 euros for every million, Vestager said.
Lewis Crofts, global chief correspondent at antitrust trade publication Mlex, explained that the USA is anxious that Apple’s cash won’t make it back to the US.
Both Apple and the Irish government said they would challenge the EU action in the European courts, and predicted it would be vindicated.
“This is necessary 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”.
Ireland is not the only country in Europe to offer such schemes.
In a statement, Apple criticised the decision and warned it could damage jobs. Apple has 5,500 workers in Ireland, making it one of the biggest private-sector employers.
Needless to say, Apple is not happy, and CEO Tim Cook quickly denounced the European Commission for deciding to “upend the global tax system”.
With such a determined push against Apple, the odds were always stacked against Ireland. “We will appeal and we are confident the decision will be overturned”.
Badertscher agreed the ruling could discourage USA companies from investing in Europe.
(First:) “They should be standing up and paying the tax that they should pay”.
Ireland’s low corporate tax rate has been a cornerstone of economic policy for 20 years, drawing investors from multinational companies whose staff account for nearly one in 10 workers in Ireland. Apple follows the law and pays all of the taxes we owe wherever we operate. European companies doing business in the USA are taxed according to the same principle.
“The scheme of US multinationals parking money offshore indefinitely, taxed at zero, may be coming to an end”, said Steven Rosenthal of the Tax Policy Center research group.
The company reported this summer that it holds almost $215 billion in cash and securities overseas, much of it generated by its Irish subsidiaries.
“We would prefer, if there are legitimate concerns that are raised by the Europeans about the erosion of their tax base, that they actually work effectively with the United States to address those concerns collaboratively, as opposed to taking the kind of unilateral approach that could have a totally unfair impact on U.S. taxpayers”.
In a statement, it also claimed the ruling “will have a profound and harmful effect on investment and job creation in Europe”. Wall Street analysts agreed, noting the potential tax bill is a small fraction of the company’s cash stockpile.
In Europe, Frankfurt’s DAX 30 finished up 1.1 percent and the CAC 40 in Paris added 0.8 percent as weak German inflation and a drop in eurozone business confidence raised hopes the European Central Bank will beef up stimulus.
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Dahlburg reported from Brussels, Pogatchnik from London.
