Apple's $14.5 Billion EU Tax Bill Could Test U.S.-E.U. Relations
Apple's $14.5 Billion Tax Bill Could Test U.S.-E.U.
Relations
by Reuters AUGUST
31, 2016, 11:43 AM EDT
Despite the U.S. being the ones to plant the idea.
The U.S. is furious at the EU for handing Apple a $14.5
billion tax demand on Tuesday, but EU officials say it was Washington which put
them on to the scheme in the first place.
It was a U.S. Senate report in May 2013 revealing the
tech giant’s deal with the Irish government to rule a big slice of its global
earnings untaxable that prompted the European Commission to launch its own
inquiries the following month.
The U.S. Treasury said the Commission’s order that Apple
pay 13 billion euros in back taxes to Ireland—which the company and Dublin are
appealing—endangers EU-U.S. economic relations just as efforts to reach a
transatlantic free trade pact unravel.
A senior Democratic senator said Brussels had made “a
cheap money grab” for U.S. revenues.
But his party colleague who chaired hearings into Apple’s
taxes three years ago, Carl Levin, said the Europeans were only trying to take
what U.S. authorities had failed to claim by not closing loopholes that allowed
firms to hoard profits overseas.
“The IRS has failed to stake a claim for U.S. taxes on
those revenues,” he said in a statement, referring to the U.S. Internal Revenue
Service. “So Europe attempts to fill the vacuum. Shame on Apple for dodging
U.S. taxes. Shame on the IRS for failing to challenge Apple’s tax avoidance.”
For Marcel Fratzscher, president of leading German
economic think-tank DIW Berlin and author of a new book on growing inequality,
the mudslinging between politicians reflects how global corporations have
exploited competition for investment to blunt states’ efforts to co-operate
against tax avoidance.
“Companies are playing one government against another,”
he told Reuters.
EU Listened to Senate
EU Competition Commissioner Margrethe Vestager, a
straight-talking Dane who dismisses talk of leading an anti-American crusade,
says the hearings at the Senate Permanent Subcommittee on Investigations
chaired by Levin were what gave her Spanish predecessor grounds to demand
disclosure by Apple and Ireland.
“The Commission listened and decided to look deeper into
the matter,” Vestager said in June, crediting media reporting and hearings in
the British parliament for also providing evidence to help break secrecy around
nearly 1,000 cases across Europe.
The Commission said in its judgment on Apple that the
United States and other countries were welcome to try and claim some of the
unpaid taxes for themselves—highlighting just the complaints of Levin and other
senators three years ago when they skewered Apple CEO Tim Cook for failing to
bring cash home.
As well as Apple, Starbucks was ordered to pay more Dutch
taxes and Amazon and McDonald’s are still being investigated; a series of EU
accusations that Google, part of Alphabet, has abused its market power have
also fueled complaints from U.S. President Barack Obama’s administration that
Europe is out to punish American success.
Competition lawyer Pierre Sabbadini said political
pressures drove different responses by different authorities. Leaks and public hearings
on tax deals had created pressure among voters for the EU to act in 2013, he
said, while the size of the companies targeted gave them clout with political
leaders, too.
“When investigation-target companies have grown to the
size of Apple, they can reach out for political support,” he said.
The Obama administration has taken its own action to curb
tax avoidance schemes lately. In April, amid public controversy over drug
company Pfizer proposed merger with Allergan of Ireland, it announced plans to
curb so-called “tax inversions,” by which U.S. firms have undertaken
cross-border mergers in order to switch to a domicile abroad and so avoid U.S.
taxes.
Pfizer abandoned the merger.
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