Apple owes back taxes

The European Commission ruled yesterday that Ireland’s deal with Apple was a good deal too sweet for Apple (and thus sour for Ireland and the Irish people).

Ireland should recover up to €13bn (£11bn) from Apple in back taxes, the European Commission has ruled.

After a three-year investigation, it has concluded that the US firm’s Irish 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 1%.

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

“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,” she added.

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.

I wonder why Ireland did that. Hoping it would contribute to Ireland’s status as a tech hub?

Dominic O’Connell explains:

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% of its foreign profits are legally channelled 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.

But 13 billion euros? I would think politicians would find that hard to resist too.

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; Margrethe 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.

Colonialism rides again, disguised as a hipster.

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