In “Apple Grilled Over Tax Practices” (24 May 2013), we reported on the controversy surrounding Apple’s practice of using Irish loopholes to minimize its tax bill. Now, it appears that those chickens have come home to roost, since the European Commission has concluded that Ireland illegally gave Apple up to €13 billion (roughly $14.5 billion) in tax benefits that the country must now recover.
Apple CEO Tim Cook is none too pleased with the ruling. In an open letter, he said:
The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process. The opinion issued on August 30th alleges that Ireland gave Apple a special deal on our taxes. This claim has no basis in fact or in law. We never asked for, nor did we receive, any special deals. We now find ourselves in the unusual position of being ordered to retroactively pay additional taxes to a government that says we don’t owe them any more than we’ve already paid.
In the letter, Cook cited Apple’s long-lasting commitment to Ireland, dating back to 1980, and the many people it employs there. “Beyond the obvious targeting of Apple, the most profound and harmful effect of this ruling will be on investment and job creation in Europe,” he said.
Apple and Ireland both plan to appeal the ruling. “We are confident that the Commission’s order will be reversed,” Cook wrote.
The news might make tax repatriation a topic of discussion in the U.S. presidential race. The two major party candidates have differing views on bringing that money to the United States: Republican candidate Donald Trump has proposed a drastically lower corporate tax, which would theoretically discourage offshoring of profits, while Democratic candidate Hillary Clinton has proposed a series of measures to discourage companies from offshoring profits in the first place.
The U.S. government, often at odds with Apple over issues like encryption, is not happy with the EU’s decision. The White House and the Treasury Department both warned that it could damage U.S.-EU relations. The Business Roundtable called it an “act of aggression.” “Above all, this is yet another reason why we need to fix our tax code,” said Republican House Speaker Paul Ryan. High-ranking Democratic Senator Chuck Schumer echoed Ryan’s sentiments. But while both parties might agree on the concept of tax reform, we’ll see if they can work together sufficiently to enact real reform.