EU delays judgement on Apple's Irish tax deal as discovery proves 'time consuming'
Initially slated for mid-June, the European Commission's investigation into Apple's tax arrangement with Irish authorities will not be completed until later in the year, Europe's competition chief said Tuesday.
Source: European Commission
"We will not sacrifice the rule of law or the quality of our work to speed up the process," European Commissioner for Competition Margrethe Vestager said. Vestager blamed the delay on the "time consuming" process of gathering information, according to Bloomberg.
"But we will do our best. It is among our top priorities. Of course fast is always better than slow. But best of all is to be just," she added.
The Commission believes that Apple's 1991 and 2007 tax accords with Ireland, which afford the company a reduced effective tax rate, amount to illegal state aid designed to skirt market forces. Both Apple and the government of Ireland deny that charge, and Ireland has vowed to fight any judgement otherwise.
All the same, Apple has begun preparing shareholders for the possibility of an adverse outcome, saying that it may be forced to pay back taxes which could have a material impact on its balance sheet.
"If the European Commission were to conclude against Ireland, it could require Ireland to recover from the company past taxes covering a period of up to 10 years reflective of the disallowed state aid, and such amount could be material," the company wrote in its latest quarterly report.
In addition to Apple, the Commission is also investigating similar arrangements between Amazon and Luxembourg as well as Starbucks and the Netherlands.
Source: European Commission
"We will not sacrifice the rule of law or the quality of our work to speed up the process," European Commissioner for Competition Margrethe Vestager said. Vestager blamed the delay on the "time consuming" process of gathering information, according to Bloomberg.
"But we will do our best. It is among our top priorities. Of course fast is always better than slow. But best of all is to be just," she added.
The Commission believes that Apple's 1991 and 2007 tax accords with Ireland, which afford the company a reduced effective tax rate, amount to illegal state aid designed to skirt market forces. Both Apple and the government of Ireland deny that charge, and Ireland has vowed to fight any judgement otherwise.
All the same, Apple has begun preparing shareholders for the possibility of an adverse outcome, saying that it may be forced to pay back taxes which could have a material impact on its balance sheet.
"If the European Commission were to conclude against Ireland, it could require Ireland to recover from the company past taxes covering a period of up to 10 years reflective of the disallowed state aid, and such amount could be material," the company wrote in its latest quarterly report.
In addition to Apple, the Commission is also investigating similar arrangements between Amazon and Luxembourg as well as Starbucks and the Netherlands.
Comments
I don't see how Apple did anything wrong here? Apple followed the laws of Ireland. They give the Tax break to Apple and others to bring business to their country. This being some type of EU thing, it's on Ireland. They should pay and shouldn't be able to collect anything from Apple. Moving forward, Apple would have to pay more since the rules have changed, but not before.
Well that’s not how it works.
Agreed. Incentives are created to attract companies, so when it works you shouldn't turn around and try to argue the company did wrong by simply by being 'incentivised' beyond anyone's wildest dreams. I would not be shocked if the EU try to retrospectively go after Apple though, legal in our view or not.
Apple is obligated to do this under securities regulations when it may have a “material impact.” It’s the law. You make it sound like they’re doing this voluntarily because they are nice.
Keep in mind the deal with Apple and Ireland predated the EU existence, and now they want to come in and say something was illegal. Grant it they may have more success for Amazon and Google than Apple because they deal actually goes back to the 80's and Ireland has always given Apple special treatment to keep jobs in Ireland verse sending them elsewhere.
I think the clue is in the article, where they refer to rule of law. It seems that the quest for justice has been completely lost and replaced with law. Law was originally intended as a tool for justice. It has become an end in itself. Law, a tool for justice, has therefore killed any real possibility of justice.
As for taking longer than they originally planned, I doubt a member of the EU can work out what chair to sit in at a restaurant before everyone else has finished their desserts.
Well that’s not how it works.
Then please explain to us how it does work because JBDragon sounds right on. Apple made a deal with Ireland, If Ireland did some funny stuff to land that deal, then this is Ireland's problem.
They should fine themselves for negligence and incompetence for allowing breach of rules to go unchecked under their noses for a decade.
With the EU pursuing tax break deals of foreign companies, does this mean the EU will look into similar deals that were made to EU companies? Will the tax break deals made with Air Bus and other EU companies be ignored and allowed to be legal or will these tax break deals be deemed illegal? If illegal, will the companies have to pay money for the illegal activities? And, will the tax break deals be brought to an end?
Perhaps they should have reviewed all tax arrangements the member countries had when the EU was formed? As others are pointing out, I don't see how they can retroactively fine them for these arrangements (at least not to the tune of a DECADE), assuming they're actually found to be illegal. What is the limitation on how far back they can go? The EU was formed on 1 November 1993. Can they go all the way back to this date?
I read it as a simple factual statement. There was no hint that Apple was doing this out of the goodness of their hearts.
BTW, Apple isn't being singled out either. There's other companies including EU based ones like Fiat, and even the USA's own McDonald's Corp, that are getting the same treatment.
I think what is forgotten is that before Irlend JOINED the EU they were free to do whatever they wanted with their tax code. However upon joining they gained access to the entire EU market of half a billion people. What happened was that Apple and others consolidated their EMEA HQs on Ireland because they were and are being supported by the richer economies of Europe. Because Ireland decided to lower their corporate taxes and lure companies there whilst receiving funding for their infrastructure and other projects from EU.
Now this in term means that Apple, Google, Microsoft etc. got subsidized by EU tax monies, I see nothing wrong with EU trying to regain these and give them to other places where they would be needed more.
All EU countries have tax rules that allow for the dispensation of special allowances for companies to locate, with lower taxes. I find it hard to be.ieve that this would thus be an issue. But the EU is straining for cash. A problem they have there, which has been shown in its extreme form in Greece, is that tax payments in the EU are lower than in the USA. By that, I mean that there is much more tax fraud there than here. This is understandable because the USA is the lowest taxed industrial country in the world, while taxes in the EU are among the highest.
It's true that, in theory, business taxes there are lower, with generally a 25% base rate, compared to a base rate here of 35%. But the loopholes here are vastly greater than over there, so the average business tax rates aren't that much different. In addition, the cost of doing business in the EU are far greater than here.
Personal taxes are vastly higher than here as well.
But I have always believed that a business must do what is legal to reduce costs. When it comes to taxes, if it's legal, then there is a reason to do it. It seems as though the EU has "suddenly" found this arrangement, even though it's been in place for decades. As EU companies take these advantages when they can as well, I would like to seem them investigated too. Will that happen? Well, going by history, it's not likely.
I don't think they purposely added having no tax jurisdiction as an incentive. An incentive is offering a low tax rate and one that would be available to multiple companies (including Irish companies). Apple employs a lot of people in Ireland theses days:
http://www.independent.ie/business/irish/25pc-of-apples-european-workforce-based-in-cork-30487720.html
but this wouldn't have been the case when the business was setup.
Just because something is legal at one point in time, if it is found to have been wrong in future then it can be backdated. If you commit murder, are acquitted and double jeopardy laws prevent you being convicted even when new evidence surfaces then removing double jeopardy laws would allow a court to try you again. If a tax avoidance scheme is removed and Apple is found to not have paid what other companies were expected to pay then they'd be perfectly right in asking for what was due. Apple knew the tax rates the whole time.
When Apple setup in the US, they similarly agreed to a tax rate (which is nearly 3x Ireland's rate). Even if Apple pays Ireland the full rate, it's still one of the cheapest tax rates around. To get it lower, they'd have to go to a smaller population country but then they might not be able to hire the staff to work there.
Whatever amount is due, it's a tiny fraction of what they have sitting in a bank account somewhere and it won't need to affect their Irish staff count.
No tax authority is in agreement with tax avoidance:
http://www.irs.gov/uac/Offshore-Tax-Avoidance-and-IRS-Compliance-Efforts
This is using the law against its intent.