Apple to pay more tax in UK following EU profit-shifting law repeal

Posted:
in General Discussion edited March 6
Apple could be made to pay more tax on earnings from the United Kingdom, proposals from the Chancellor of the Exchequer Rishi Sunak suggest, with a repeal of legislation potentially affecting how tech giants manipulate their taxes on the way.




The UK Treasury's annual budget outlines inbound tax changes and other policy updates that can affect how individuals and companies are taxed. One small change has been spotted in the announcement that paves the way to bigger tax changes that can affect Apple and other tech companies in the future.

Buried as a single line in the budget announcement but explained further by the UK government's website, the proposal spotted by Bloomberg repeals a law that affects royalty payments.

The repeal of provisions in the Interest and Royalties Directive affects UK companies that make "payments of annual interest or royalties" to connected companies within the European Union. Specifically, the repeal eliminates any tax exemptions in place that affected EU companies when funds are transferred in such a way.

EU companies therefore will "no longer receive more favorable treatment than companies based elsewhere in the world," the policy states. In effect, companies in EU countries would be treated the same way as firms based in other regions regarding royalty payments.

Apple, like other multinationals, uses tax rules to funnel revenues through the most tax-efficient route, minimizing the amount of tax it pays to governments. For UK revenue, this has involved royalty payments paid to Apple's European headquarters in Ireland.

Apple's use of its Irish headquarters for tax purposes has been highly lucrative to the iPhone maker. It is currently in the midst of a prolonged legal fight with the European Union over a $14.4 billion tax ruling.

The rule change isn't likely to be a hefty cost to Apple or others as of yet, as the UK Treasury believes it will only bring in an extra 10 million pounds ($13.8 million) annually to the government. However, the change is likely to be the first step for the government to implement other changes that can minimize the amount of tax moved around.

"The repeal would make it easier for the UK to target royalties and interest payments to European tax havens if the UK wanted to override tax treaties, as there would not be a second layer of the directive to prevent the override," said TaxWatch executive director George Turner. With the UK's "Brexit" from the EU, there's also no requirement to follow its tax directives.

A Treasury spokesperson described the policy as a "post-Brexit technical change," and that it will continue to abide by international obligations, such as Double Taxation Agreements. The UK "continues to be at the forefront of the global action to tackle tax avoidance, with a series of robust measures in place to tackle profit shifting arrangements," they continued.

In February, German finance minister Olaf Scholz warned that global tax reform was "highly likely" to be introduced in 2021, affecting Apple and other tech giants. Negotiations in the OECD are still underway to revamp tax laws, with an international agreement to close tax loopholes potentially arriving by the summer of 2021.
dysamoria

Comments

  • Reply 1 of 7
    Only £10M? hardly worth it unless Apple isn't the real target.

    There are a number of well-documented cases where Amazon pays fewer property taxes (business rates) than corer shops.  That is not right by any shape or form.
    Apple certainly pays its fair share of property taxes. I shudder to think how much they are for their Regent Street store.

    The target will be all the dodges companies use to avoid paying Corporation Tax. This is a tax on profits. Complex [cough][cough] licensing payments where almost all the profit is erased by paying an offshore tax haven is what the UK, France, Germany and other countries are targetting.
    elijahg
  • Reply 2 of 7
    Gerry-AGerry-A Posts: 10member
    It's not just Apple, Amazon Google all the Big Tech companies, Pharmaceuticals etc, will feel the pain. The UK is no longer in the EU so cleaning up the tax legislation was coming. The Corp's will no longer be able legally park tax profits in Eire and Luxembourg in relation the UK and frankly we are going to need every penny after the havoc Covid has caused.  
    seanj
  • Reply 3 of 7
    mobirdmobird Posts: 541member
    FYI regarding what OECD is.
    "Scholz refers to negotiations in the Organization for Economic Cooperation and Development (OECD)".
  • Reply 4 of 7
    GeorgeBMacGeorgeBMac Posts: 9,218member
    Another tax haven bites the dust.

    You can't blame companies for taking advantage of every loop hole.
    But neither can you blame countries for closing those loopholes.
    seanjFileMakerFeller
  • Reply 5 of 7
    darkpawdarkpaw Posts: 188member
    This is hilarious:
    A Treasury spokesperson [...] said, "The UK continues to be at the forefront of the global action to tackle tax avoidance..."
    According to this Tax Justice Network article from 21st November 2020:
    The UK and its "spider's web" of overseas territories are responsible for more than a third of global tax avoidance each year, a study has found.
    Abuse of the tax system by multinational firms and wealthy individuals deprived countries of $427bn (£321bn) for hospitals, nurses, schools and other public services last year, according to advocacy group the Tax Justice Network. Of that figure, more than $160bn was facilitated by the UK and its territories and dependencies.
    The real reason we left the EU is not because of "foreigners coming' over 'ere, takin' our jobs"; it was so we wouldn't be obliged to follow the tax avoidance crackdown the EU was implementing on 1st January 2021.

    The UK government is just gaslighting us now. They know they're lying, but most of the public are too stupid to realise.
    edited March 7 GeorgeBMacright_said_fredsphericFileMakerFeller
  • Reply 6 of 7
    dysamoriadysamoria Posts: 3,191member
    This is good.
  • Reply 7 of 7
    sphericspheric Posts: 2,058member
    darkpaw said:
    This is hilarious:
    A Treasury spokesperson [...] said, "The UK continues to be at the forefront of the global action to tackle tax avoidance..."
    According to this Tax Justice Network article from 21st November 2020:
    The UK and its "spider's web" of overseas territories are responsible for more than a third of global tax avoidance each year, a study has found.
    Abuse of the tax system by multinational firms and wealthy individuals deprived countries of $427bn (£321bn) for hospitals, nurses, schools and other public services last year, according to advocacy group the Tax Justice Network. Of that figure, more than $160bn was facilitated by the UK and its territories and dependencies.
    The real reason we left the EU is not because of "foreigners coming' over 'ere, takin' our jobs"; it was so we wouldn't be obliged to follow the tax avoidance crackdown the EU was implementing on 1st January 2021.

    The UK government is just gaslighting us now. They know they're lying, but most of the public are too stupid to realise.
    Indeed. It is no coincidence that the people selling Brexit to the British — Farage and his cronies — are well-invested in this web of tax avoidance. They’ve all already applied for or hold non-British passports to avoid the restrictions faced by the British now, but their money’s continue to travel freely, as well. 
    GeorgeBMac
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