Local And World News

Apple Owes EU $14.5 Billion in taxes

Margrethe Vestager

The European Union on Tuesday 30 August commanded Ireland to fetch $14.5 billion in evaded taxes from Apple. The EU's competition enforcer, commissioner Margrethe Vestager pictured left, said that Apple’s illegal deals with the Irish Government allowed the tech firm to pay almost nothing on its European business in some years. According to the Commission, the deals allowed Apple to make profit from two Irish subsidiaries to a head office with no employees, no land, no solid activities.

The European Union claims that Apple paid only 50 euros in taxes per one million euros in revenue during 2014. Europe demanded that Ireland recoup 10 years’ worth of back taxes, which amounts to 13 billion euros, or about $14.5 billion, and interest added. That amount is a small piece of the pie for Apple, a Company that has a total of profits reaching beyond $230 billion. However, the company described the decree from EU as a sore blow to the rule of law. The United States Treasury Department said it jeopardized "the important spirit of economic partnership between the U.S. and the E.U."

Margrethe Vestager, has made tax evasion a number one priority, a campaign that has affected Starbucks in the Netherlands, Amazon in Luxembourg and Anheuser-Busch InBev in Belgium. The United States Treasury, one of the major vocal critics of these EU tactics, has said that Europe is exaggerating its power, unfairly targeting American companies and hurting global efforts to curtail tax avoidance.

According to Ms. Vestager, "the ultimate goal should of course be that all companies, big or small, pay tax where they generate their profits,". She mentioned this at a news conference in Brussels on Tuesday 30 August. "We need a change in corporate philosophies and the right legislation to address loopholes and ensure transparency", said the Competition Commissioner.

Tax authorities have criticized corporate mergers that permitted companies to move their headquarters to places like Ireland to take advantage of lower tax rates."U.S. companies are the grand masters of tax avoidance", said Edward D. Kleinbard, professor at the Gould School of Law at the University of Southern California who is also a former chief of staff to the congressional Joint Committee on Taxation.

U.S. politicians will likely paint the case as an abuse of power by EU to shrink U.S. companies. Senator Chuck Schumer, Democrat of New York, termed the EU move as a "cheap money grab" by the European Commission, "targeting U.S. businesses and the U.S. tax base."

Timothy Cook

Apple and Ireland produced similar defense statements.Timothy D. Cook, pictured left, the Chief Executive Officer of Apple, said that "Europe’s ruling had no basis in fact or in law", and claimed it to be an attempt to "rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process." Cook called the tax rate "a completely made-up number". The Ministry of Finance for Ireland said that the EU’s decision would undermine an ongoing global tax overhaul and create business uncertainty. The Ministry stated that taxes are a "fundamental matter of sovereignty." Ireland and Apple both said they will appeal against Europe’s decision, even though the process might take years to complete.

Ireland’s corporate tax rate is at 12.5 percent,which is one of the smallest in the developed world. There are other ways that allow companies to trim expenses even further. In 2013, a United States Senate committee said that Apple had schemed a special corporate tax rate of 2 percent or less to be paid in Ireland. The committee did not accuse Apple of violating any laws, however lawmakers criticized the gimmicks, tactics and sophisticated corporate structures that permitted Apple to avoid heavy taxes.

The technology company and other companies have been criticised for storing large amounts of profits overseas. The cash is not taxed at home until it is returned to the parent company in the United States. According to the credit rating agency Moody’s, nonfinancial US companies own about $1.7 trillion in money altogether overseas. In a case separate from the Apple's, the United States Treasury has made tough steps to lessen so-called inversions, a tax move that has significantly advantaged Ireland. Under such merger deals, US companies could buy an overseas firm and move its headquarters overseas to lessen its taxes.