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Apple, Google, McDonald's, and IKEA representatives will be in Brussels on Tuesday to discuss their tax deals in Europe, reports Reuters.
The hearing will be hosted by the European Parliament's tax committee, but the lawmakers do not have the power to order any changes, according to the report. Nevertheless, the meeting should raise some important questions about each company's compliance with EU tax rules in the past and present.
Apple is one of several multinational corporations that have been targeted for possible corporate tax avoidance in Europe. In September 2014, the European Commission formally accused the iPhone maker of receiving illegal state aid from Ireland, where it has reportedly paid a reduced tax rate of around 1.8% on it overseas profits.
Apple operates multiple subsidiaries in Ireland to pay significantly less tax outside of the U.S., where it earns up to 60% of its revenue. The company's $64.1 billion in profits generated from 2004 to 2012 could be subject to a higher 12.5% tax rate, in which case it would owe more than $8 billion in back taxes.
A decision in the tax probe was originally expected in late 2015, but the European Commission's request for additional information has pushed the investigation into 2016. Last week, EU competition chief Margrethe Vestager told reporters "don't hold your breath" in terms of when the commission will make a decision.
Apple previously said it pays all of its taxes and added that it would appeal any decision made against the company.
Update: While Reuters says the hearing will take place on Wednesday, the European Parliament's website states the meeting will start on Tuesday at 15:00 CET.
Update 2: Apple provided the following statement on Tuesday during its meeting with the European Parliament's tax committee:
"Apple is the largest taxpayer in the world. In 2015 we paid 13.2 billion dollars in taxes worldwide, which is an effective tax rate of 36.4%", its representatives said when asked about the company's tax structures in Europe and the state aid investigation launched by competition Commissioner Margrethe Vestager. However, they were not prepared to disclose its EU and Irish tax figures. "Those are confidential. When country-by-country reporting will become mandatory, we will of course follow". Apple, like Google, pays most of its taxes in the US, where most of its employees are based and its research is done.
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Top Rated Comments
I wish EU fell over and died.
Where is the dislike button when you need it!I say this, change the law if you want -- that will hurt you enough. But don't make it retroactive, because that is like committing suicide.
How was it illegal if it was a law passed by the Irish parliament?
Because for certain matters around taxation and things like state aid and so on, EU member states are required to follow EU law when making or administering their national law.Okay, but the member state passed a law (maybe or maybe not following EU law). Why would Apple have to pay back taxes for the failure of the state? I am okay if they want to change the law or invalidate it going forward. Apple and others can evaluate their options and many will simply move to the next country where they get favorable taxes. And they will come back when the laws change again. But put in back taxes and the companies will leave and never come back and not just to Ireland but all of EU. This is why i see it as suicide. As a company, I would never put my HQ in a place that could, at any time, pass a law requiring me to pay retroactively for anything. Unless they can prove that APPLE did something wrong (like bribe someone to pass the law), this is going to bite the EU in the rear end if they are not careful.
Companies the size of Apple know what they are doing and if the only reason why they choose a particular country is because both the government and the company effectively agree to bribe each other, then I think that a penalty for both sides is appropriate, to assure that it will not happen again or make the parties responsible pay. Every possible party is affected when illegal state aid is given: the company in question, its competitors who might not have gotten the same deal, the government which could lose its credibility, tax payers who lose public funds, other EU countries that might have been more attractive destinations and the internal market as a whole when public money is spent needlessly and competition is harmed. Recovery is a way to rectify the mistake. If that penalty is not there, there would simply be no effective recourse, despite the fact that money has flowed into the private sector. The money would be gone and Apple, and others, would keep all the benefits.Apple pays based on laws passed in Ireland. If the law is invalidated, Apple would certainly have to pay taxes going forward based on whatever the new law is. Invalidating a law retroactively seems dangerous to me. I would hate for the government to say the tax break for mortgage interest is invalid retroactively and I now owe a gazillion dollars. I would have for them to invalidate tax break, but if they did don't tell me I owe back taxes. That is just crazy.
Unless the deal was illegal in the first place.I say this, change the law if you want -- that will hurt you enough. But don't make it retroactive, because that is like committing suicide.
Harmonised means ‘applies to all’. It doesn’t mean that Ireland were not nuder EU rules for the criteria of taxation. Ther are lots of things in the EU no doubt that apply to some countries and not others.
Get your facts straight.Whatever the outcome Apple knew what they were doing. I would bet money, (and I mean my own money too), that at worst Apple either knew they were doing something underhand and at best they fashioned a deal that whilst not legal, wasn't strictly illegal either. You know, kind of when people teeter so finely on the edge of something it’s difficult to call it one way or the other.
EU does not have tax law under its core and non-core competencies, as provided by the EU treaties (Maastricht, Rome, Lisbon.). Individual Member States within the European Union (Both within, and outside the Eurozone) have their national tax systems.
Therefore regulatory arbitrage can happen, because there is no 'EU tax law' rules as such. Companies are free to establish companies in Ireland and Luxembourg and use their national legal systems, and use that to cover their other European operations and subsidiaries.
If you look closely at how the European Commission is pursuing the cases (Apple, McDonalds, Amazon, ...), they are doing so under EU competition law (As there is no harmonised EU tax law.), under the argument of 'illegal state aid'. Not contravening EU tax law, because that doesn't exist.
What they are doing is not illegal under EU law, and national law. If politicians want to reform it, they should do so via legislation (E.g. EU directives and EU regulations.). But then the companies would then leave the EU, therefore damage employment and tax receipts.
Obligatory 'I am not a (qualified) lawyer' disclaimer.