13 September 2016

Reuters: “Apple appeal against EU tax demand would break new ground”

Some lawyers say that Apple’s arrangement was legal in Ireland and theoretically available to any company and so the California-based company could not have received a advantage that was selective – key factors in most state aid cases. There’s nothing that I have seen in any of the cases that have been taken by the European Commission that suggests there is selective application of the rules, Tim Wach, Global Managing Director at international tax advisors Tax and.

However, other lawyers note that Apple’s unusual tax structure – involving companies which are tax resident nowhere – means its tax rulings are unlikely to have many close comparators. And the rulings lead to a less than 1 percent tax rate – something most other companies don’t enjoy.

If I had to bet my dollar on something here, I think Apple could have a hard time overturning the selectivity argument, said Georg Berrisch, a partner at Baker Botts in Brussels.

Tom Bergin

So the initial reports of an estimated 2 per cent corporate tax rate for Apple in Ireland were wrong: it’s actually less than one per cent, falling to 0.005 per cent in 2014! How many companies or individuals get to enjoy such a generous tax bill?! If this doesn’t amount to unfair state aid and tax evasion, I don’t know what does.

Despite all the discussion around the subject, the argument here is pretty straightforward: a question of following the letter of the law versus the spirit of the law. Apple naturally argues it followed the Irish law to the letter for all these years and so was within its rights to pay next to no taxes on its immense profits collected in the European Union. But the spirit of the law is quite different: everybody, from individuals to corporations, should contribute a fair share to state budgets through taxes – again, not only to the Irish state where Apple chose to open its headquarters, but to all countries where it sells products. By refusing to pay, Apple is effectively hurting the economy of all other EU members while slightly benefitting Ireland – and its own balance sheet of course – which is exactly what the European Union is trying to prevent. As a side note, I would love to see Apple trying to pull a stunt like this in China: setting up a ghost-headquarter somewhere in Singapore and routing its business through it to avoid Chinese taxes; my guess is the company would get immediately banned from the Chinese market.

The subject raised debates in Ireland as well, but even in Cork, the city that most benefitted from Apple’s investment, there isn’t much popular support for its creative tax accounting:

Like most people in Cork, Mr. Harrington, 53, said international companies — and the jobs they created — were more than welcome in the city. But he doesn’t think tax rules are equally applied.

When he recently refused to pay a new property tax, authorities took the money directly from his paycheck. If the government was so quick to penalize his small-scale tax avoidance, Mr. Harrington asked, then how could it protect Apple?

If the big guys don’t pay and the government helps them, then everyone else will ask why we are paying too, he said over a cup of tea in a living room decorated with family photos. They owe the money, so they should just pay it.

Mark Scott

Post a Comment