From BBC News
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| Apple Inc. |
The European Commission has ruled that The Republic of Ireland should recover up to €13bn (£11bn) from Apple in back taxes, after concluding that the US firm's tax benefits are illegal.
The Commission said Ireland enabled the company to pay substantially less than other businesses, in effect paying a corporate tax rate of no more than one percent.
Ireland and Apple both said they disagreed with the decision and would appeal against it.
"Member states cannot give tax benefits to selected companies - this
is illegal under EU state aid rules," commissioner, Margarethe
Vestager said. "The
Commission's investigation concluded that Ireland granted illegal tax
benefits to Apple, which enabled it to pay substantially less tax than
other businesses over many years."
The standard rate of
Irish corporate tax is 12.5 percent. The Commission's investigation concluded
that Apple had effectively paid one percent tax on its European profits in 2003
and about 0.005 percent in 2014.
Ms Vestager said that the tax agreement
reached between Ireland and Apple meant that the company's taxable
profits "did not correspond to economic reality".
"The
European Commission has launched an effort to rewrite Apple's history in
Europe, ignore Ireland's tax laws and upend the international tax
system in the process," the company said in a statement. "The
Commission's case is not about how much Apple pays in taxes, it's about
which government collects the money. It will have a profound and
harmful effect on investment and job creation in Europe. Apple
follows the law and pays all of the taxes we owe wherever we operate. We
will appeal and we are confident the decision will be overturned."
The Irish government held a similar view.
"I disagree profoundly with the Commission," Ireland's finance minister, Michael Noonan said in a statement. "The
decision leaves me with no choice but to seek cabinet approval to
appeal. This is necessary to defend the integrity of our tax system; to
provide tax certainty to business; and to challenge the encroachment of
EU state aid rules into the sovereign member state competence of
taxation."
The investigation into Apple and similar probes into other US firms have been criticised by US authorities.
Last
week, the US Treasury Department said the European Commission was in
danger of becoming a "supra-national tax authority" overriding the tax
codes of its member states.
Brussels was using a different set of
criteria to judge cases involving US companies, the US Treasury warned,
adding that potential penalties were "deeply troubling".
Apple is not the only company that has been targeted for securing favourable tax deals in the European Union.
Last year, the commission told the Netherlands to recover as much as €30m (£25.6m) from Starbucks, while Luxembourg was ordered to claw back a similar amount from Fiat.
The current focus is on the size of the bill, but there are even
larger issues at stake, including one fundamental question - who really
runs the world, governments or giant corporations?
At present, it
is difficult to tell. Individual governments appear impotent in their
attempts to apply their tax laws to multinationals like Apple. They have
systems designed to deal with the movement and sale of physical goods,
systems that are useless when companies derive their profits from the
sale of services and the exploitation of intellectual property.
In
Apple's case, 90 percent of its foreign profits are legally channeled to
Ireland, and then to subsidiaries which have no tax residence. At the
same time, countries can scarcely afford not to co-operate when Apple
comes calling; it has a stock market value of $600bn, and the attraction
of the jobs it can create and the extra inward investment its favours
can bring are too much for most politicians to resist.
There is an
echo here of the tycoons of the early 20th Century who bestrode
America. Andrew Carnegie, Cornelius Vanderbilt and John Rockefeller were
judged so powerful that they were almost above the law, something that
successive US administrations sought to curb.
The European
Commission's attempt to bring Apple to heel is on the surface about tax,
but in the end about the power of the multinational and the power of
the state. There is more to come; Margarethe Vestager, the Danish
commissioner who is leading the charge against Apple, is warming up to
take on Google.
Europe versus the giants of corporate America will be a battle royale, and one that will run and run.
Culled from: http://www.bbc.com/news/business-37220799
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