“The European Commission raised pressure on Ireland, the Netherlands and Luxembourg over their corporate tax practices, saying it was investigating deals the countries have cut with Apple, Starbucks and Fiat,” Tom Bergin reports for Reuters. “The EU is looking at whether the countries’ tax treatment of multinationals, which help to attract investment and jobs that might otherwise go to where the companies’ customers are based, represent unfair state aid.”
“Corporate tax avoidance has risen to the top of the international political agenda in recent years following reports of how companies like Apple and Google use convoluted structures to slash their tax bills,” Bergin reports. “Governments have promised to rewrite the rules that govern international tax, but experts said the European Commission would struggle to make any challenge to the deals Ireland, Luxembourg and the Netherlands had agreed under existing rules.”
“Apple said on Wednesday it has not received any selective tax treatment from the Irish authorities, while the Irish government said it was confident that it has not breached state aid rules and will defend its position vigorously,” Bergin reports. “The Commission said it was looking at whether the pricing for transactions between company subsidiaries – known as transfer pricing – that were approved by the Irish, Luxembourg and Dutch tax authorities and which allowed the companies to reduce their tax bills, were selective and thereby represented unfair incentives. But Sheila Killian, assistant Dean in the Accounting & Finance department of the University of Limerick, Ireland, said international tax rules gave companies wide flexibility in choosing transfer prices and so the legal hurdles the Commission faced were substantial. ‘It’s almost impossible to prove that the transfer pricing is any way favourable … but in launching a high-profile investigation, it puts a spotlight on those companies’ tax affairs, which acts as a deterrent to companies against engaging in aggressive tax planning,’ she said.”
Read more in the full article here.
“Apple’s office in Cork, Ireland, was the first one the company opened outside the U.S., and it now has 4,000 employees making it the biggest employer in Cork,” Leonid Bershidsky writes for Bloomberg View. “If economist Enrico Moretti is right about each tech job creating five additional ones in the service sector, the once-depressed city is getting plenty of reward from Apple.”
“No wonder the Irish authorities are not treating Apple as a tax-avoiding pest but a major partner. Prime Minister Enda Kenny toured the Cork facility in January with Apple chief executive Tim Cook,” Bershidsky writes. “EU bureaucrats are not guided by such logic, however. They are using the provision of the EU treaty which generally bans state aid to get into an area they aren’t supposed to regulate.”
“Technically, it is none of Brussels’ business how Ireland, the Netherlands or Luxembourg choose to tax corporations: The bloc’s member states have the right to veto its attempts to set tax rules,” Bershidsky writes. “State aid is another matter… Theoretically, if the European Commission rules that Ireland provided illegal aid to Apple, the Cupertino giant might be hit with retroactive taxes. In practice this never happens. Ireland — and the other two countries involved — will just look for a way to satisfy the bureaucrats without worsening their investment climates. It’s not that difficult: Brussels doesn’t really care how much tax Apple, Starbucks or Fiat will pay. All it wants is control.”
Read more in the full article here.
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