Billions of Euros In Back Taxes Could Hit Apple After Brussels Ruling

As the European Commission finally decides on tax arrangements between the company and the Dublin government this week, Apple and Ireland is expected to face the ire of the body.

Apple could be made liable for billions of euros in back taxes following a ruling by Margerethe Vestager, the European competition commissioner. Under the state aid rules, the arrangements are expected by the Irish officials to be declared as unlawful.

US efforts to persuade the commission to drop its interest amid warnings about retaliation from Washington would be rebuffed by a decision against Apple and Ireland after a two-year investigation.

Apple’s tax deals with Ireland have allowed the company to pay very little tax on income earned throughout Europe and the commission has been investigating whether this amounted to state aid.

After publishing preliminary findings suggesting deals between Apple and Ireland in 1991 and 2007 involved state aid that was incompatible with the EU’s internal market, the commission opened a formal inquiry in September 2014.

No special deal was given to Apple, the company and Ireland have denied repeatedly. Apple and Ireland would appeal against a ruling that Apple received state aid, said Tim Cook, Apple’s chief executive, adding that the investigation was a “political crap”.

Apple could face as much as $19bn (£15bn) in back taxes if the commission requires Apple to retroactively pay the Irish corporate tax rate of 12.5% on the pre-tax profits it collected via Ireland, the investment bank JP Morgan has warned.The Irish Times said that the bills is expected to be in hundreds of millions by Irish sources and significantly smaller than what is being expected.

Through gaps in the Irish and American tax code, little or no tax on profits of at least $74bn over four years was paid by Apple, a US Senate investigation in 2013 found. While both Apple and Ireland deny any wrongdoing, the investigation found no evidence of illegal activity.

It may be recalled that just last week, row over the European commission’s anti-trust cases against Apple, Amazon and Starbucks had resulted in an escalating war of words between Washington and Brussels  where the US was been accused of “behaving like a tax haven”.

In case Europe continues its tax crusade against American multinationals, retaliatory actions was threatened by the US Treasury on Wednesday.

Europe was accused of targeting American companies disproportionately and behaving like a “supranational tax authority” in a white paper commissioned by the US Treasury secretary, Jack Lew. A swift rebuttal from MEPs and the European commission have been now prompted by the claims.

“The US Treasury prefers defending the interest of its multinationals rather than promoting international cooperation to fight corporate tax avoidance,” said Molly Scott Cato MEP, a spokeswoman for the Green party on tax affairs in the European parliament.

Failure at backing by the US of two major initiatives designed to combat tax avoidance and money laundering has made the campaigners furious.

“The US is behaving like a tax haven by operating a deferral system which allows US companies to stash profits offshore. The commission is seeking to prevent exactly this sort of free-riding and to ensure that tax is paid where economic value is added,” said Cato.

(Adapted from The Guardian)

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Categories: Economy & Finance, Regulations & Legal

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