Monday, 12 September 2016 10:48

EU says Apple fine a result of probe that began in US Featured


The European Union's move to demand that Apple pay €13 billion in back taxes was sparked by an investigation that began initially in the US, according to EU competition commissioner Margrethe Vestager.

In a speech to the Copenhagen Business School, Vestager said: "The story of the Apple investigation began in the United States. Because the US Senate cares as much as we do about making sure companies pay their fair share of tax.

"And it was their investigation into Apple — and US transparency rules — that tipped us off that the company might have received state aid."

The European Commissioner issued the demand to Apple on 29 August, claiming it had cut special tax deals with Ireland that resulted in an effective tax rate of one per cent on its European profits in 2003. This rate fell to 0.005 per cent by 2014.

Both Apple and the Irish government have said they will appeal the decision, with the Cupertino-based software company holding out a threat that the decision may affect its investment in Europe and lead to a drop in jobs.

But Vestager said this was not about any particular country. "This isn't about interfering with national tax laws," she said in her speech. "There's nothing to stop EU governments from deciding to apply a low tax rate to everyone. They just have to make sure that when they apply their tax laws, they don't give certain companies special treatment."

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EU competition commissioner Margrethe Vestager.

Referring to an action the EU had taken against Starbucks, Vestager said like any roasting company, it had to buy green coffee beans and also pay a royalty for a formula which it needed to roast those beans.

"An independent coffee-roasting company would have no choice but to pay the market price for those things," she said. "But Starbucks Manufacturing got both the beans and the formula from other companies in its group. And the amounts that it paid for them were out of line with market prices. So much so, in fact, that the taxes it paid since 2007 were 20 to 30 million euros below what they should have been."

Vestager said the same principle applied to the tax ruling that Ireland gave Apple.

"The Irish authorities allowed two of Apple’s subsidiaries in Ireland to allocate most of their profits to a so-called head office, which wasn't liable for tax anywhere in the world. And those so-called head offices had no employees, no premises and no real activities. So the idea that they generated most of the companies’ profits was clearly out of line with economic reality."

The appeals are likely to drag proceedings well into the next year.


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Sam Varghese

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.



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