European Parliament backs Apple tax ruling

Meanwhile, Germany’s Minister of Finance Wolfgang Schäuble has said that while he would “naturally” welcome an Apple tax windfall in Europe, he believes it’s extremely premature for countries to be expecting extra cash from the tech giant.

The European Commission’s decision to impose a €13 billion ($14.6 billion) tax bill on Apple revealed the need for US corporate tax reform to discourage tax avoidance, according to US Treasury Secretary Jack Lew.

The Treasury issued legal guidance reducing the scope companies have to apply foreign tax credits against their US tax obligations. Ireland made global headlines earlier this week after the European Commission ruled that Apple owed up to €13bn in back taxes to the State in a ruling handed down by Competition Commissioner Margrethe Vestager.

Once the full decision is published, tax authorities in other member states could assess if they were liable to reclaim unpaid taxes under national tax rules, she added.

In the case of Apple – if the European regulators’ order is upheld – the US could stand to lose $14.5 billion in tax revenue if the company claims a credit for that new tax obligation.

US officials have grown increasingly concerned that more than $2 trillion in offshore earnings that USA multinationals haven’t yet repatriated is now fair game for European countries.

Mark J. Mazur, Treasury’s assistant secretary for tax policy, said new guidance would close “another tax loophole that contributes to the erosion of our tax base”.

While he said that the EC move essentially raided potential USA government tax receipts, Lew said the episode should give a boost to efforts to reform the USA system. The US Treasury has been a vocal critic of the European ruling.

‘Ireland has one of the most transparent and consistent and competitive tax systems in the world and we are unapologetic about the fact that we are competitive, ‘ said Shanahan. The difference here is that it – and other European countries – would be able to make the same claim for a full ten years of back-tax.

Under normal circumstances, US companies can reduce the taxes they owe the USA government by the value of the tax credits they claim for taxes paid overseas on foreign profits.

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