Apple won the first act of a tax battle with the European Union over 13 billion euros ($14.9 billion): American manufacturer of iPhone has achieved in court of cancellation of the decision of the EU on a giant Supplement to the budget of Ireland. About it writes BBC.
Taking sides with Apple and Ireland, the European court erected a serious obstacle to the crusade of the European Union against American giants like Google, Facebook and Amazon, who earn around the world and pay taxes either in the US or in favorable jurisdictions. And showed how difficult it is to align tax environment within the single market of the 27 EU countries, which the EU authorities are seeking for almost a decade.
The issue price of a giant: the EU losing more than 250 billion euros ($286 billion) per year due to the ingenious tax schemes — legal and not. And the money is needed more than ever Europe is immersed in the biggest crisis of the century because of the pandemic COVID-19. The European Commission collects an unprecedented 750 billion Euro ($858 billion) to stimulate the economy, and therefore the question of raising taxes or at least improve their collection rate is very serious.
The case against Apple has been lasting for one year, and no end in sight: the court’s decision is sure to be challenged and will reach highest court of the EU. That will take another few years.
It all began four years ago when the EU decided that Ireland gave Apple illegal 13 billion euros ($14.9 billion) in the form of tax breaks and decided to take the subsidy back. Over the allotted four months, this did not happen, and the EU went to court. Two years later, the American company transferred the amount with interest — 14.3 billion euros ($16.3 billion) on the special account. Money languishing there, waiting for the outcome of the litigation.
The judges decided that the EU could not prove the special relation of Ireland to Apple.
In dealing with international companies in Europe are inferior to them now with a score of 1-2: earlier, the same court reversed a similar decision in relation to the American coffeehouse chain Starbucks, but supported the EU in a dispute with the auto giant Fiat Chrysler because of the tax benefits in Luxembourg. However, in both cases it was about the amounts on the order of below about 30 million euros ($34 million).
The EU committed to a more fair distribution of tax income among the 27 countries of the block and, in the longer term, to global tax justice, when the international companies pay taxes where you earn. This is an understandable policy for the largest and richest single market in the world: 450 million people, the second largest economy after the U.S. — more than 30 thousand euros ($34 thousand) per capita per year.
The EU giant effective demand for goods and services of international companies, however, social spending is large, so the taxes in most of the countries of the bite block. The business is much more profitable to sell in the EU, and the profit withdraw in the offshore, or at least in those countries where it is possible to negotiate with the authorities about the preferences and benefits. EU do not like it. He’s trying to reduce losses, and the main goal has long been an American company.
The Americans also EU methods seem clumsy. And the company, and the White house called tax Affairs political.
“Nonsense political. Took some figure out of my head. It is wrong, — said the head of Apple Tim cook in an interview with an Irish newspaper after the EU decision. — I most resent the fact that the decision was politically motivated, I’m convinced of it. No factual or legal grounds was not.”
The head of Apple there were non-traditional ally — the US President Donald trump, the person who called the cook “Tim Apple”. Trump turned on Margrethe Vestager, who has been in charge of the antitrust vendetta of the EU in the rank of Commissioner responsible for competition.
“I think I never met anyone who hates the United States. What she’s doing to us! All of our drags it to the court, — said trump. They’re suing Apple. They are all judged”.
“Aggressive tax optimization”
The resistance of other countries gives the EU to break the deadlock the idea of a unified international approach to the taxation of multinational companies, especially Internet giants. The European Commission is not going to retreat, but while on the external front, the calm, she focused on the inside. Wednesday, July 15, when the court ruled in a key case of this campaign, the EU announced another batch of measures aimed at combating tax evasion.
According to various European institutions, the EU loses on outright fraud with VAT inside the EU 150 billion euros ($171 billion) per year. A legitimate scheme “aggressive optimization” of taxes from citizens annually cost 46 billion euros ($52.6 billion), by companies — in 50-70 billion euros ($57-80 billion).
To eliminate distortions in the internal common market need a chorus of agreement 27 members of the Union, including those who benefit from them. So the success in this business is relative. The main objectives of the campaign the European Commission has outlined in may, pointing to loopholes in the tax laws of six countries: Cyprus, Hungary, Luxembourg, Malta, the Netherlands, and the same Ireland.
Ireland collects annually about 60 billion euros ($68,6 billion) in taxes and 13 billion euros ($14.9 billion) for it — a gigantic sum, equal to two months of all of its income, or almost three months of tax revenues. However, in a dispute with the EU, it is on the side of Apple, defending the legitimacy of two tax agreements with the American company, which found fault with the Commission.
Apple has agreed with the Irish in 1991 and the tax agreement itself is quite legal under EU rules — was updated in 2007. Only in 2013 they became interested in the European Commission.
Apple almost immediately changed the mechanism of distribution of profits from the European operations, and the agreement with Ireland came to an end in 2015 — a year before the EU regulations to return 13 billion euros of subsidies.
In the same amount, according to the EU, European taxpayers has cost the tax deal with Apple Ireland. And it is only 10 years old: the law allows the European Commission to demand the return of grants not more than a decade prior to the first request about it, that is, from 2003 to 2013.
The EU aims to protect free competition on the single European market through the restriction of subsidies to business from taxpayers. Ireland, according to European officials in Brussels, violated this principle. She allowed Apple to organize the output of all profits from the European operations through the Irish company in a “head office” and pay taxes only 50 million euros ($57 million) — or about 10 million euros ($11,4) per year at the Irish rate of income tax.
In one only 2011 Apple earned in the EU 16 billion € and thanks to the agreement with the Republic of Ireland paid in the EU, only a fraction of a percent on those profits, and to 15.95 billion euros brought over the border.
Apple and the US government say that taxes derived from net profit should have been paid at home in California, and the EU — a raider who is trying to keep the income of American businesses and taxpayers.