U.S. Warns Apple Tax Probe in Europe Could Set 'Undesirable Precedent'

Just weeks before the European Commission is expected to make a decision in its landmark Apple tax probe, the U.S. Treasury department has criticized the Brussels-based body for "threatening international agreements on tax reform," and warned that a decision against the iPhone maker could "set an undesirable precedent."

Apple Ireland
Apple's offices in Cork, Ireland

According to Financial Times, the U.S. Treasury said the European Commission is becoming a "supranational tax authority," going beyond acceptable enforcement of competition and state aid law. The U.S. has previously called out Brussels for setting unfair and "disturbing" precedents and singling out U.S. companies.

Brussels has accused Apple of sheltering tens of billions of dollars in Ireland, partly in exchange for creating jobs in the country, a deal that could be considered illegal state aid. Apple operates multiple subsidiaries in Ireland to pay significantly less tax outside of the U.S., where it earns up to two-thirds of its revenue.

Apple's $64.1 billion in profits generated from 2004 to 2012 could be subject to a higher 12.5% tax rate, compared to the sub-2% it has paid in Ireland, in which case it could owe more than $8 billion in back taxes. Apple insists that it is the largest taxpayer in the world and pays every cent of tax it owes under current laws.

A decision in the tax probe is expected in September or October, according to Ireland's finance minister Michael Noonan. Apple CEO Tim Cook said last month that the company would appeal any unfavorable ruling against the company.

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42 months ago
God forbid they pay taxes like the rest of us.
Rating: 19 Votes
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42 months ago
The EU has rules. Deal with it.
Rating: 17 Votes
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42 months ago
If you make billions abroad, you get taxed abroad. If you make billions at home, you get taxed at home.

In a reasonable manner - of course!

But a SUB-2% tax rate for one of the biggest, richest and most successful companies on the planet though is neither reasonable nor fair to your employees, who get taxed way beyond that.
Rating: 15 Votes
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42 months ago

The EU has rules. Deal with it.

Dear EU,
This is how we deal with it.
Love,
The U.K. #Brexit
Rating: 11 Votes
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42 months ago

Dear EU,
This is how we deal with it.
Love,
The U.K. #Brexit


Yes by running away doing nothing and taking the own economy down. Great resolution!
Rating: 10 Votes
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42 months ago

Can the EU force a European country on deciding how the taxes should be structured? Honest question.

Some sweetheart deals can supposedly go against EU rules. This is how the investigation is going.

The EU has punished more European companies than American ones.
Rating: 7 Votes
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42 months ago
Apple pays ireland taxes based on the laws on the books. Nothing wrong there. EU determines Ireland passed a tax law that is against the rule. Okay then, force Ireland to change their tax law. return to the beginning - Apple pays ireland taxes based on the laws on the books. This would all seem reasonable.

The only part that seems off to me is if EU says to apple that even though they paid per law, they are changing the law retroactively and now Apple owes back taxes and fines. That would be wrong IMO.
Rating: 7 Votes
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42 months ago

Apple pays ireland taxes based on the laws on the books. Nothing wrong there. EU determines Ireland passed a tax law that is against the rule. Okay then, force Ireland to change their tax law. return to the beginning - Apple pays ireland taxes based on the laws on the books. This would all seem reasonable.

The only part that seems off to me is if EU says to apple that even though they paid per law, they are changing the law retroactively and now Apple owes back taxes and fines. That would be wrong IMO.


No, that's not how it works nor is that actually what might happen.

The European Commission (EC) has no authority to create legislation; they only have the power to propose legislation which must be approved by the Council of the European Union and the European Parliament. What is happening here is the EC is investigating whether or not the Republic of Ireland, as a member of the EU (and therefore subject to European law), violated rules governing the exercise of state aid. Offering companies exclusive tax breaks under a special scheme can be illegal state aid depending on the circumstances. The rules are designed to prevent member states from distorting the market which can be harmful to the economy and to other companies. If the European Commission finds a member state in breach of state aid rules, EU law grants power to the European Commission to direct a member state in breach of state aid rules to recover the money it gave out (or the tax it waived). In the case of Apple, if the Republic of Ireland are found to be in breach of state aid rules, the EC can require the Irish government to recover the tax that Apple did not pay under the reduced tax rate that was illegal in the first place.

So hopefully you understand by now that no new laws are being created. If you have received state aid that was given to you unlawfully, then you have to pay it back. In the case of Apple, that would be the tax it should have paid. The laws governing state aid were in place well before the Republic of Ireland agreed with Apple that it can generate profits in the country at a reduced tax rate. So there is nothing "retrospective" that could not already have been known to both parties at the time the agreement was formed.

Maybe if the United States modernised its tax rules, perhaps we wouldn't be having this conversation. The reason many companies do not repatriate their cash back into the United States is because of the ridiculously high corporate tax rate. Would you accept up to a 35% cut to bring your income back home? No, you might opt to keep your money at a bank overseas. I'm not saying it's right what Apple are doing - they should pay more tax in the Republic of Ireland and bring a portion of their cash pile back to their home country, but comments from the U.S. Treasury pointing to the European Commission for attempting to address this problem and sending a message to other companies operating in the EU is not helpful. It can easily be misinterpreted as interfering in a matter of EU jurisdiction.
Rating: 6 Votes
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42 months ago
It's called "bait and switch."

When you switch right before attempting the sale, it's deception. When you do it 12 years later, it's thievery.


Whatever the legal technicalities may be, this is unethical. If the EU had really cared, they should have done something 12 years ago, not try to steal $8bn from them today.
Rating: 4 Votes
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42 months ago

If the tax deal Ireland proposed is against EU rules, it is an erroneous application of the law, so Apple receives a tax adjustment. Normal.

Yes and this interpretation is why this is a dangerous precedent to set. If a company is always at risk that they will owe back taxes because some politician decides to change the rule, companies will have a hard time estimating their cost of doing business. this will bring uncertainty and risk which means less investment as the horde cash to protect against these activities. Bad business all around.
Rating: 4 Votes
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