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Apple Is Said to Owe Back Taxes to Irish Government Apple Is Said to Owe Back Taxes to Irish Government
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The European Union’s competition authorities are poised to announce a major tax ruling against Apple’s tax dealings with the Irish government on Tuesday, a decision that will likely increase trans-Atlantic tension over how some of the world’s largest companies pay taxes on their global operations.The European Union’s competition authorities are poised to announce a major tax ruling against Apple’s tax dealings with the Irish government on Tuesday, a decision that will likely increase trans-Atlantic tension over how some of the world’s largest companies pay taxes on their global operations.
The ruling, expected to be announced early Tuesday in Brussels, will result in Apple having to pay back taxes to the Irish government, according to three people briefed on the decision who spoke on the condition of anonymity because they were not authorized to speak publicly. The amount is anticipated to be in the hundreds of millions of dollars, one of these people said.The ruling, expected to be announced early Tuesday in Brussels, will result in Apple having to pay back taxes to the Irish government, according to three people briefed on the decision who spoke on the condition of anonymity because they were not authorized to speak publicly. The amount is anticipated to be in the hundreds of millions of dollars, one of these people said.
The decision is set to further stoke tensions between American officials and their European counterparts, with Europe claiming the right to oversee tax policies for companies like Apple and Amazon, among others, that have used complicated tax structures in nations like Ireland and Luxembourg to reduce the amount of corporate tax they pay in other countries.The decision is set to further stoke tensions between American officials and their European counterparts, with Europe claiming the right to oversee tax policies for companies like Apple and Amazon, among others, that have used complicated tax structures in nations like Ireland and Luxembourg to reduce the amount of corporate tax they pay in other countries.
The Obama administration and Congress have strenuously fought to defend Apple, the company that made the iPod music player and iPhone global bywords for American prowess in technology. They have accused the European Commission of leading a campaign against American corporate success and suggested that it would be overstepping its authority by issuing a formal tax order. American officials have said reforms to corporate taxation first need to be agreed to internationally.The Obama administration and Congress have strenuously fought to defend Apple, the company that made the iPod music player and iPhone global bywords for American prowess in technology. They have accused the European Commission of leading a campaign against American corporate success and suggested that it would be overstepping its authority by issuing a formal tax order. American officials have said reforms to corporate taxation first need to be agreed to internationally.
“This will be framed by the U.S. as Europe overreaching,” said Edward Kleinbard, a professor at the University of Southern California’s Gould School of Law and a former chief of staff to the Congressional Joint Committee on Taxation. “That overreaction will make it a lot more difficult to police companies’ international tax structures.”“This will be framed by the U.S. as Europe overreaching,” said Edward Kleinbard, a professor at the University of Southern California’s Gould School of Law and a former chief of staff to the Congressional Joint Committee on Taxation. “That overreaction will make it a lot more difficult to police companies’ international tax structures.”
Apple, Irish authorities and European competition authorities declined to comment. The tax decision was earlier reported by RTE, the Irish broadcaster.Apple, Irish authorities and European competition authorities declined to comment. The tax decision was earlier reported by RTE, the Irish broadcaster.
Margrethe Vestager, Europe’s top antitrust official, is expected to say on Tuesday that the Irish government gave Apple preferential treatment on its local tax arrangements. These deals, related to agreements from 1991 and 2007, gave Apple an unfair advantage over other companies, and broke Europe’s so-called state-aid rules that forbid any government from providing unfair assistance to certain companies over others, she is expected to say.Margrethe Vestager, Europe’s top antitrust official, is expected to say on Tuesday that the Irish government gave Apple preferential treatment on its local tax arrangements. These deals, related to agreements from 1991 and 2007, gave Apple an unfair advantage over other companies, and broke Europe’s so-called state-aid rules that forbid any government from providing unfair assistance to certain companies over others, she is expected to say.
Ireland can appeal any judgment by suing in the Court of Justice of the European Union to stop any resulting penalty, and Apple could seek to support such an appeal. Such appeals are likely to take years.Ireland can appeal any judgment by suing in the Court of Justice of the European Union to stop any resulting penalty, and Apple could seek to support such an appeal. Such appeals are likely to take years.
For Apple, the potential tax clawback would be a blow to the company’s approximately 30 years of activity in Ireland, where it currently employs around 5,500 people, mostly in Cork, a city in the south of country. For Apple, the potential tax clawback would be a blow to the company’s approximately 30 years of activity in Ireland, where it currently employs around 5,500 people, mostly in Cork, a city in the south of the country.
The tech giant has repeatedly denied that it received unfair tax treatment from Irish authorities, saying that it complies with all tax laws wherever it operates. While Apple has a large operation in Ireland, the company said its main corporate tax liabilities remain within the United States where it is based and conducts the majority of its research and development.The tech giant has repeatedly denied that it received unfair tax treatment from Irish authorities, saying that it complies with all tax laws wherever it operates. While Apple has a large operation in Ireland, the company said its main corporate tax liabilities remain within the United States where it is based and conducts the majority of its research and development.
In an interview last week with The Washington Post, Timothy D. Cook, Apple’s chief executive, said that he hoped his company would get a fair hearing in Europe on the tax issue and that “if we don’t, then we would obviously appeal it.”In an interview last week with The Washington Post, Timothy D. Cook, Apple’s chief executive, said that he hoped his company would get a fair hearing in Europe on the tax issue and that “if we don’t, then we would obviously appeal it.”
The European Commission has been seeking a greater say over tax issues for decades. Those efforts accelerated after the 2008 financial crisis amid complaints that prosperous corporations were enjoying tax breaks while citizens faced mounting tax demands and cuts to their public services.The European Commission has been seeking a greater say over tax issues for decades. Those efforts accelerated after the 2008 financial crisis amid complaints that prosperous corporations were enjoying tax breaks while citizens faced mounting tax demands and cuts to their public services.
Ms. Vestager has already ordered Luxembourg to claw back 30 million euros, or $33 million, from Fiat, the Italian carmaker, and the Netherlands to recover a similar amount from Starbucks. Both Luxembourg and the Netherlands have appealed those decisions. She still is investigating similar cases in Luxembourg affecting Amazon and McDonald’s.Ms. Vestager has already ordered Luxembourg to claw back 30 million euros, or $33 million, from Fiat, the Italian carmaker, and the Netherlands to recover a similar amount from Starbucks. Both Luxembourg and the Netherlands have appealed those decisions. She still is investigating similar cases in Luxembourg affecting Amazon and McDonald’s.
Last year, in another case, Ms. Vestager ordered France to recover €1.4 billion, or $1.6 billion, from state-controlled Électricité de France for failing to pay enough corporation tax in 1997. At the time, E.D.F. said it would make the reimbursement but was considering an appeal to the Court of Justice of the European Union.Last year, in another case, Ms. Vestager ordered France to recover €1.4 billion, or $1.6 billion, from state-controlled Électricité de France for failing to pay enough corporation tax in 1997. At the time, E.D.F. said it would make the reimbursement but was considering an appeal to the Court of Justice of the European Union.
“Our aim is very simple,” Ms. Vestager said in an interview earlier this year. “Profits should be taxed where profits are made.”“Our aim is very simple,” Ms. Vestager said in an interview earlier this year. “Profits should be taxed where profits are made.”
The European Union’s investigation into the Irish treatment of Apple began under Ms. Vestager’s predecessor, Joaquín Almunia. It was prompted in part by a United States Senate investigation in 2013 that found that Apple, the world’s largest public company by market capitalization, sheltered tens of billions of dollars in profit from tax in offshore entities including in Ireland. The European Commission opened a formal investigation in June 2014 into whether the tax deals granted to Apple in Ireland amounted to illegal state support.The European Union’s investigation into the Irish treatment of Apple began under Ms. Vestager’s predecessor, Joaquín Almunia. It was prompted in part by a United States Senate investigation in 2013 that found that Apple, the world’s largest public company by market capitalization, sheltered tens of billions of dollars in profit from tax in offshore entities including in Ireland. The European Commission opened a formal investigation in June 2014 into whether the tax deals granted to Apple in Ireland amounted to illegal state support.
At the time Mr. Almunia indicated that austerity measures as a result of the European debt crisis made it even more important for large multinational corporations to pay fair taxes to cash-starved governments.At the time Mr. Almunia indicated that austerity measures as a result of the European debt crisis made it even more important for large multinational corporations to pay fair taxes to cash-starved governments.
Ireland strongly objected to the investigation. The ruling is likely to be a hard pill to swallow for the country, which has spent decades championing its low corporate tax rate and other tax breaks to entice American companies to its shores.Ireland strongly objected to the investigation. The ruling is likely to be a hard pill to swallow for the country, which has spent decades championing its low corporate tax rate and other tax breaks to entice American companies to its shores.
The Irish government has said that it will appeal any tax decision announced by European officials, putting the country in the somewhat odd position of turning down potentially billions of dollars of extra revenue from Apple.The Irish government has said that it will appeal any tax decision announced by European officials, putting the country in the somewhat odd position of turning down potentially billions of dollars of extra revenue from Apple.
“The decision by the Irish government to fight this case is bizarre,” said James Stewart, a professor at Trinity College, Dublin. “The Irish government is opposed to any global tax harmonization because it will harm its ability to attract foreign direct investment.”“The decision by the Irish government to fight this case is bizarre,” said James Stewart, a professor at Trinity College, Dublin. “The Irish government is opposed to any global tax harmonization because it will harm its ability to attract foreign direct investment.”