Low taxes at dozens of firms in spotlight after Apple ruling

The ruling is the highest-profile move yet in the European battle to make worldwide companies pay what authorities consider their fair share of EU taxes.

“It is simply untrue that Ireland provided favourable treatment to Apple”, the minister said. No other region in the world can deliver that kind of benefits.

The EC doesn’t accuse Apple of breaking Irish tax laws. “This isn’t an argument about how much tax we pay, but where we pay it”. But with sales of some Apple products falling in recent months, the tax scandal could potentially overshadow the much-awaited release of Apple iPhone 7 on September 16th. “The EU ruling creates uncertainty among Ireland’s current and potential foreign investors, and is hence credit-negative for Ireland”. One is an “amnesty” allowing USA companies such as Apple to bring their huge stashes of foreign profits home at a one-time preferential rate – a key motivator of inversions. By 2010, that had quintupled to 42%, according to Jane Gravelle, an analyst at the nonpartisan Congressional Research Service. Under those circumstances, an IRS analysis would be appropriate to determine whether AOI functions as an instrumentality of its parent and whether its income should be attributed to that USA parent, Apple Inc.

There are several drivers for this increase. To the contrary, the United States aids and abets US multinationals in their stateless income tax gaming, whose object is to skim profits from countries where income actually is earned, and then to deposit those profits in a zero or near zero tax receptacle. Because the US leads in IP-intensive industries, its companies are naturally the most avid users of such techniques.

He said the European Commission ruling was encroaching on sovereign states’ decisions on tax and contained contradictions on where Apple owed tax.

When proving the issue is one of state aid, the commission also would have to demonstrate one important element: Ireland’s treatment was specific for Apple and not accessible to other companies in a similar situation.

Apple’s response was characteristically unapologetic. At the G-20 summit meeting in China last weekend, US President Barack Obama reiterated his support for a cooperative global effort to end the worldwide tax shell game.

The recent European Union ruling about Apple’s tax affairs and the response of the Irish government should be ringing alarm bells on this side of the border as well. “What we know not to be Irish we’re not touching”.

Mr. Lew is also motivated by money. But the US also claims the money.

Reuven S. Avi-Yonah, who directs the worldwide taxation program at the University of Michigan Law School, said the European Union had a strong case for collecting the taxes from Apple and that if the situation were reversed, Americans would be clamoring to collect taxes from a foreign company. When countries compete on tax rates, it becomes a race to the bottom.

Whatever the outcome, studies show Apple isn’t the only company adept at cutting its tax bill, which is why officials are cracking down.

The Minister for Finance will eliminate a loophole which enabled so-called vulture funds to avoid paying tax on Irish assets – while he intends on appointing an independent tax expert to review Ireland’s corporate tax regime. The company held $214.9 billion of that amount in foreign subsidiaries. The EU says some 50-70 billion euros ($56-79 billion) are lost every year due to tax avoidance. It maintains a worldwide network of tax havens to park its global profits, some of which don’t even have any employees.