The U.S. could really stand to learn from Europe on this ruling.
The European Commission has ruled that Apple, a company long accused of dodging taxes in a number of countries, must pay $14 billion in back taxes after making an illegal deal with Ireland.
A three-year investigation revealed that in 2014, Apple paid only $55 per every $1.12 million it made in European profits. That amounted to only 0.0005% in taxes in 2014, all because Apple made a deal with Ireland that stated it would pay a maximum of 1% in taxes from 1991 to 2015.
The agreement itself was illegal, but the fact that Apple was paying even less than the agreement is outrageous. To make matters worse, Ireland’s normal corporate tax rate is 12.5%.
“Member states cannot give tax benefits to selected companies – this is illegal under EU state aid rules. This is not a penalty, it is an unpaid tax,” said the European competition commissioner, Margrethe Vestager.
Apple’s sweet deal with Ireland was complicated so no one would catch on, and they got away with it for awhile. The profits made on products sold in Ireland were instead shifted to a “head office” that was not based in any country and had relatively low economic activity to avoid paying the full corporate tax rate.
A press release regarding the decision stated the following:
“Only a fraction of the profits of Apple Sales International were allocated to its Irish branch and subject to tax in Ireland. The remaining vast majority of profits were allocated to the “head office”, where they remained untaxed.”
Apple, Ireland, and the US have expressed their disdain for the ruling and plan to appeal the decision. Apple has claimed that they were targeted by Europe, and has threatened the future of investments and job opportunities in Europe. The US Treasury said that the ruling threatened to damage “the important spirit of economic partnership between the US and the EU.”
Ireland is worried about its reputation, and the finance minister said they would seek an appeal because it’s “important that we send a strong message that Ireland remains an attractive and stable location of choice for long-term substantive investment.”
No matter what the outcome may be, this ruling is important in letting other corporations know that special tax deals for corporations will not be allowed in Europe, and it’s a lesson that the US needs to embrace as well to boost the economy.
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