Apple is in trouble due to “sweetheart tax deal”. In this smaller states offer tax deals to multinational companies so that they can lure them into making investments. Apple has faced big trouble with regards to taxation both in EU and Japan.
Apple’s taxation trouble in EU
After investigating for 3 years, European Commission has come to the conclusion that the tax arrangements between Ireland and Apple are illegal. Ireland’s Corporation tax rate is already on the lower side (12.5 %). With the tax deal, Apple was paying a tax rate of less than 1%. The European Commission has therefore told Ireland to recover 13 billion Euros from the tech company.
According to the EU State Aid Rules, it is illegal for member states to give tax benefits to selected companies. The illegal tax benefits that the company got from Ireland helped Apple pay a very low effective corporate tax rate on its European profits. European Commissioner Margrethe Vestager has said that European member countries cannot give tax benefits to selected companies.
Since Ireland had given illegal tax benefits to Apple,it helped them pay taxes which were lower than that paid by other businesses. The statement is a clear indication that EU will adopt a very tough stand on matters of taxes.
Apple’s stand on the EU orders
Image Source : IbnLive.In
As per the statement issued by Apple, it is clear that they are going to take up the issue and fight the decision. Apple says that they abide by the law and pay their taxes. According to Apple, EU was more concerned about which country is getting the money rather than how much money Apple was paying as taxes. Apple’s chief executive Tim Cook has clearly said that they never asked for any special favours and they never got any special treatment.
He also went on to say that EU was only trying to replace the Irish Laws. He said that Apple is in this rather strange condition where they have been asked to pay to a government who says that Apple owes them no more tax. In fact, all the taxes have been paid and that Apple has never expected nor does it want any special deals from governments.
Stand taken by Ireland and US treasury on the EU decision
Ireland is all set to challenge the decision. According to them, their tax laws are not biased and they have a law abiding tax system. The Irish Finance Minister said that he will take an approval from the cabinet to challenge the EU decision in the European courts. The US treasury has made a statement which gives a clear indication that this decision can affect business relations between Europe and US. They have clearly stated that this decision will affect foreign investment in Europe. The economic partnership between EU and US will be affected adversely.
Apple’s tax trouble in Japan
Image Source : Apple.Com
Apple has been accused of not reporting the proper income that it got from Japan’s iTunes unit. The tech company has therefore been ordered to pay an amount of £89m (12 bn yen). It is believed that the amount has been paid by Apple to Tokyo Regional Taxation Bureau. Part of the profits that are earned from the Japanese subscribers is sent to the Ireland-based Apple Unit. The tax on these earnings had not been paid by Apple.
Apple has got into serious trouble regarding taxes both in Japan and Ireland. Though it seems to be tough on its stand that the company has not evaded taxes, the approach of EU and Japan is rather firm and this will definitely affect the business relations between US and Japan, and US and EU member states.