Apple to Attend EU Hearing on Tuesday to Discuss Taxes

[MacRumors]

Apple, Google, McDonald's, and IKEA representatives will be in Brussels on Tuesday to discuss their tax deals in Europe, reports Reuters.

The hearing will be hosted by the European Parliament's tax committee, but the lawmakers do not have the power to order any changes, according to the report. Nevertheless, the meeting should raise some important questions about each company's compliance with EU tax rules in the past and present.

Apple is one of several multinational corporations that have been targeted for possible corporate tax avoidance in Europe. In September 2014, the European Commission formally accused the iPhone maker of receiving illegal state aid from Ireland, where it has reportedly paid a reduced tax rate of around 1.8% on it overseas profits.

Apple operates multiple subsidiaries in Ireland to pay significantly less tax outside of the U.S., where it earns up to 60% of its revenue. The company's $64.1 billion in profits generated from 2004 to 2012 could be subject to a higher 12.5% tax rate, in which case it would owe more than $8 billion in back taxes.

A decision in the tax probe was originally expected in late 2015, but the European Commission's request for additional information has pushed the investigation into 2016. Last week, EU competition chief Margrethe Vestager told reporters "don't hold your breath" in terms of when the commission will make a decision.

Apple previously said it pays all of its taxes and added that it would appeal any decision made against the company.

Update: While Reuters says the hearing will take place on Wednesday, the European Parliament's website states the meeting will start on Tuesday at 15:00 CET.

Update 2: Apple provided the following statement on Tuesday during its meeting with the European Parliament's tax committee:

"Apple is the largest taxpayer in the world. In 2015 we paid 13.2 billion dollars in taxes worldwide, which is an effective tax rate of 36.4%", its representatives said when asked about the company's tax structures in Europe and the state aid investigation launched by competition Commissioner Margrethe Vestager. However, they were not prepared to disclose its EU and Irish tax figures. "Those are confidential. When country-by-country reporting will become mandatory, we will of course follow". Apple, like Google, pays most of its taxes in the US, where most of its employees are based and its research is done.

Note: Due to the political nature of the discussion regarding this topic, the discussion thread is located in our Politics, Religion, Social Issues forum. All forum members and site visitors are welcome to read and follow the thread, but posting is limited to forum members with at least 100 posts.

Article Link: Apple to Attend EU Hearing on Tuesday to Discuss Taxes

 

[You are the One]

I wish EU-establishment fell over and died.

*edit: changed EU to EU-establishment

 

[Zwhaler]

This should be interesting...
It seems Apple legally used the loophole which is now closed. But in the US, the IRS has been known to force people to pay back taxes on something that was legal back when they did it... wonder now this will play out across the pond.

 

[2457282]

Apple pays based on laws passed in Ireland. If the law is invalidated, Apple would certainly have to pay taxes going forward based on whatever the new law is. Invalidating a law retroactively seems dangerous to me. I would hate for the government to say the tax break for mortgage interest is invalid retroactively and I now owe a gazillion dollars. I would not like them to invalidate my tax break, but if they did, don't tell me I owe back taxes. That is just crazy.

I say this, change the law if you want -- that will hurt you enough. But don't make it retroactive, because that is like committing suicide.

 

[logicstudiouser]

I wish EU fell over and died.

Where is the dislike button when you need it!

 

[Harrycooke]

I worry that if companies like Apple and Amazon are forced to pay a full amount of tax, that the consumer will bear the brunt of the cost. I could see increases of product prices to offset their 'losses'. So while the country would be seeing the money, it's highly doubted that the people will see even a penny of it, especially with our current government in power.

 

[H2SO4]

Apple pays based on laws passed in Ireland. If the law is invalidated, Apple would certainly have to pay taxes going forward based on whatever the new law is. Invalidating a law retroactively seems dangerous to me. I would hate for the government to say the tax break for mortgage interest is invalid retroactively and I now owe a gazillion dollars. I would have for them to invalidate tax break, but if they did don't tell me I owe back taxes. That is just crazy.

I say this, change the law if you want -- that will hurt you enough. But don't make it retroactive, because that is like committing suicide.

Unless the deal was illegal in the first place.

 

[swajames]

What often gets lost in conversations like this is the convoluted and arguably manufactured circumstances and transaction flows which are necessary to achieve the tax result.

On the one hand it's legitimate to argue that companies are entitled to organize their affairs in a manner to produce a desired result, including lower effective tax rates, but it's equally legitimate to question whether the transactions, money flows and corporate governance aspects which are necessary to achieve it serve any purpose other than to move profits from one point to another and move the point of taxation from one point to another.

That companies have to pay a lot attention to the substance as much as the form of an arrangement, for example what is just enough to constitute residence for tax purposes or what might constitute just enough of a fair value for the transactions in question to be compliant with transfer pricing rules where appropriate, does lend credence to the questions around whether the tax savings that result were the only real purpose of the kind of structures that are used to deliver these results.

 

[2457282]

Unless the deal was illegal in the first place.

How was it illegal if it was a law passed by the Irish parliament?

 

[swajames]

How was it illegal if it was a law passed by the Irish parliament?

Because for certain matters around taxation and things like state aid and so on, EU member states are required to follow EU law when making or administering their national law.

 

[2457282]

Because for certain matters around taxation and things like state aid and so on, EU member states are required to follow EU law when making or administering their national law.

Okay, but the member state passed a law (maybe or maybe not following EU law). Why would Apple have to pay back taxes for the failure of the state? I am okay if they want to change the law or invalidate it going forward. Apple and others can evaluate their options and many will simply move to the next country where they get favorable taxes. And they will come back when the laws change again. But put in back taxes and the companies will leave and never come back and not just to Ireland but all of EU. This is why i see it as suicide. As a company, I would never put my HQ in a place that could, at any time, pass a law requiring me to pay retroactively for anything. Unless they can prove that APPLE did something wrong (like bribe someone to pass the law), this is going to bite the EU in the rear end if they are not careful.

 

[rekhyt]

Because for certain matters around taxation and things like state aid and so on, EU member states are required to follow EU law when making or administering their national law.

Yes but the EU has not harmonised tax law.

 

[obeygiant]

Yes but the EU has not harmonised tax law.

Hmmmmmmmmmm?

 

[macs4nw]

Bruce Sewell and his team are busy people these days..... So many different things going on simultaneously..... It's hard to imagine how they can manage to stay focussed. I'd hate to be in their shoes.....

 

[FieldingMellish]

EU wants the dough and will hand it over to Greece.

 

[KALLT]

Okay, but the member state passed a law (maybe or maybe not following EU law). Why would Apple have to pay back taxes for the failure of the state? I am okay if they want to change the law or invalidate it going forward. Apple and others can evaluate their options and many will simply move to the next country where they get favorable taxes. And they will come back when the laws change again. But put in back taxes and the companies will leave and never come back and not just to Ireland but all of EU. This is why i see it as suicide. As a company, I would never put my HQ in a place that could, at any time, pass a law requiring me to pay retroactively for anything. Unless they can prove that APPLE did something wrong (like bribe someone to pass the law), this is going to bite the EU in the rear end if they are not careful.

Companies the size of Apple know what they are doing and if the only reason why they choose a particular country is because both the government and the company effectively agree to bribe each other, then I think that a penalty for both sides is appropriate, to assure that it will not happen again or make the parties responsible pay. Every possible party is affected when illegal state aid is given: the company in question, its competitors who might not have gotten the same deal, the government which could lose its credibility, tax payers who lose public funds, other EU countries that might have been more attractive destinations and the internal market as a whole when public money is spent needlessly and competition is harmed. Recovery is a way to rectify the mistake. If that penalty is not there, there would simply be no effective recourse, despite the fact that money has flowed into the private sector. The money would be gone and Apple, and others, would keep all the benefits.

 

[H2SO4]

Okay, but the member state passed a law (maybe or maybe not following EU law). Why would Apple have to pay back taxes for the failure of the state? I am okay if they want to change the law or invalidate it going forward. Apple and others can evaluate their options and many will simply move to the next country where they get favorable taxes. And they will come back when the laws change again. But put in back taxes and the companies will leave and never come back and not just to Ireland but all of EU. This is why i see it as suicide. As a company, I would never put my HQ in a place that could, at any time, pass a law requiring me to pay retroactively for anything. Unless they can prove that APPLE did something wrong (like bribe someone to pass the law), this is going to bite the EU in the rear end if they are not careful.

Because it falls upon not only Ireland but Apple as well to do due diligence. It would be a failure of Apple too. Ignorance is no defence remember.
With the army of lawyers available to Apple it seems a bit strange that they put all that effort into protecting rounded corners but ‘didn’t know’ when it comes to shady agreements.
[doublepost=1458030440][/doublepost]

EU wants the dough and will hand it over to Greece.

Whilst that may be true it doesn’t mean that Apple have done wrong or not.
[doublepost=1458030765][/doublepost]

Yes but the EU has not harmonised tax law.

Harmonised means ‘applies to all’. It doesn’t mean that Ireland were not nuder EU rules for the criteria of taxation. Ther are lots of things in the EU no doubt that apply to some countries and not others.
Whatever the outcome Apple knew what they were doing. I would bet money, (and I mean my own money too), that at worst Apple either knew they were doing something underhand and at best they fashioned a deal that whilst not legal, wasn't strictly illegal either. You know, kind of when people teeter so finely on the edge of something it’s difficult to call it one way or the other.

 

[antonis]

I wish EU-establishment fell over and died.

*edit: changed EU to EU-establishment

With the exception of such matters (e.g. taxing) there's no EU-establishment anyway, as shown by recent events, since there's no real solidarity between its members.

 

[thermodynamic]

I wish EU-establishment fell over and died.

*edit: changed EU to EU-establishment

Gee, death threats - how much more devolved can we get?

It's bad enough that companies that want "corporate personhood" want corporate welfare from us but then squirm their way out of paying dues every other person has to, exploiting child labor and slave labor elsewhere...

Do you really think worker wages will go up one stinking cent if companies had to pay no tax, or got paid entitlements to be housed in the countries in which they complain for special treatment and special rights and using lobbyists to upend the lawmaking processes with?

Any other free rides you want these companies to have on our backs while they continue to blame customers, workers, governments, etc, for everything (but showing they do not want to resolve the problems because it might cost them money...

 

[jonnysods]

Man Apple are busy these days.

They will fight this one hard! Lawyers are happy and have plenty of work.

 

[CFreymarc]

Translation: EU socialists want more money to support their dysfunctional philosophies. They start to use whatever layer of treaty interpretation they can find to get that money.

 

[KALLT]

EU wants the dough and will hand it over to Greece.

The money would go back to Ireland, the EU is just ordering them to recover it. Moreover, the EU Commission frequently transfers money from competition cases back to the Member States. The EU in general does not hoard money, they spend lots on structural funds.

Translation: EU socialists want more money to support their dysfunctional philosophies. They start to use whatever layer of treaty interpretation they can find to get that money.

It is literally laid down in the Treaty and has been established EU law since the 60s. It is an essential tool for market regulation and meant to prevent public intervention in the market. Socialist states would do the opposite.

 

[0007776]

Okay, but the member state passed a law (maybe or maybe not following EU law). Why would Apple have to pay back taxes for the failure of the state? I am okay if they want to change the law or invalidate it going forward. Apple and others can evaluate their options and many will simply move to the next country where they get favorable taxes. And they will come back when the laws change again. But put in back taxes and the companies will leave and never come back and not just to Ireland but all of EU. This is why i see it as suicide. As a company, I would never put my HQ in a place that could, at any time, pass a law requiring me to pay retroactively for anything. Unless they can prove that APPLE did something wrong (like bribe someone to pass the law), this is going to bite the EU in the rear end if they are not careful.

Would you feel the same way if the law that was invalidated involved you paying more tax than you should have? It should be that whoever keeps the extra money, in this case Apple pays it back.

 

[2457282]

Would you feel the same way if the law that was invalidated involved you paying more tax than you should have? It should be that whoever keeps the extra money, in this case Apple pays it back.

Yes I would. It happens all the time. The government raises AND lowers the property tax all the time. Never has it made the change retroactive. Never have I gotten a check for back taxes. Never have I been asked to provide a check for back taxes. Both based on a law change. I am good with that and want this approach to stay. Otherwise, it would be impossible to budget since I never know what stupid law will get changed and there is always a risk that I owe money. So I will have to tie up significant money in a reserve to deal with the whim of the idiot politicians. No thanks. Your approach is a killer.

 

[0007776]

Yes I would. It happens all the time. The government raises AND lowers the property tax all the time. Never has it made the change retroactive. Never have I gotten a check for back taxes. Never have I been asked to provide a check for back taxes. Both based on a law change. I am good with that and want this approach to stay. Otherwise, it would be impossible to budget since I never know what stupid law will get changed and there is always a risk that I owe money. So I will have to tie up significant money in a reserve to deal with the whim of the idiot politicians. No thanks. Your approach is a killer.

I'm not talking about changing laws through the legislature, here it would be an EU court ruling that the tax law was invalid. It would be the same as if in the US congress passed a new tax and after someone who payed it sued it was ruled unconstitutional. You would expect in that case the government would be forced to refund the tax revenue after they have used up their appeals. Why should it be any different for a corporation who made an illegal deal with a government so that they didn't have to pay taxes.