Europe’s ‘unfair’ Apple tax ruling sparks US anger

BBC News : There has been widespread criticism in the US of the European Commission’s ruling that Apple should pay up to €13bn (£11bn) in back taxes.

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The US Treasury said that such tax investigations were “unfair” and undermined the tax rules of individual states.

Charles Schumer, a senior Democrat senator, called the move a “cheap money grab”.

The White House said the ruling could cost US taxpayers.

White House spokesman Josh Earnest argued that if Apple paid the back taxes, it might offset that amount against tax due in the United States, which would be unfair for American taxpayers.

‘Illegal state aid’

Earlier the European Commission said Ireland had enabled Apple to pay substantially less than other businesses, in effect paying a corporate tax rate of no more than 1%.

Ireland and Apple both said they disagreed with the record penalty and would appeal against it.

“Member states cannot give tax benefits to selected companies – this is illegal under EU state aid rules,” said Competition Commissioner Margrethe Vestager.

The standard rate of Irish corporate tax is 12.5%. The Commissions’s investigation concluded that Apple had effectively paid 1% tax on its European profits in 2003 and about 0.005% 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”.

‘Grabbing revenue’

The US Treasury said: “We believe that retroactive tax assessments by the Commission are unfair, contrary to well-established legal principles, and call into question the tax rules of individual member states.”

Last week the Treasury warned that the European Commission was in danger of becoming a “supranational tax authority”.

Schumer: EU’s “money grab” targets US businesses, undermines competitiveness, and diverts tax revenues from American investments.

‘Profound’ effect

Apple said the decision would be harmful for jobs.

EU seeks to rewrite Apple’s history, disregarding Ireland’s tax laws and international tax norms, says the company.

“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, with finance minister Michael Noonan saying: “I disagree profoundly with the Commission.”

He added: “The decision leaves me with no choice but to seek cabinet approval to appeal. This defends tax integrity, provides certainty to business, and challenges EU state aid rules. The tax bill shouldn’t be an issue for Apple, given its substantial profit.

Apple is not the only company that has been targeted for securing favourable tax deals in the European Union.

Last year, the commission ordered the Netherlands and Luxembourg to recover millions from Starbucks and Fiat, respectively.

Analysis: Dominic O’Connell, Today business presenter

The bill’s size is just one aspect; the bigger question is who truly governs 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. Their systems are ill-suited for companies profiting from services and intellectual property instead of physical goods.

Apple channels 90% of foreign profits tax-free through Irish subsidiaries, luring countries with its $600bn market value and job creation potential. The European Commission’s actions against Apple expose a power struggle between multinational corporations and governments that extends beyond taxes. Margrethe Vestager, the Danish commissioner, is gearing up to challenge Google next.

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