The European Commission is investigating Apple Inc. over tax avoidance allegations. The U.S. tech giant has been accused of hiding billions in profit by signing a sweetheart tax deal with Ireland, according to the reports. The commission, which is probing tax deals granted to U.S. companies for setting up headquarters in Europe, is expected to announce its decision on Apple in the next few months.
EU Tax Probes
The iPhone maker is accused of sheltering billions of pounds in profit in Ireland tax-free under a deal with Irish authorities, BBC News reported. A report from Business Insider suggest that the deal allows to company move its profits to wholly-owned Irish subsidiaries to reduce its corporate taxes.
JP Morgan, an investment banker for Apple, has estimated that the company could get a bill for $19bn (£14.3bn) in a worst-case scenario.
The EU’s executive body said that they are investigating whether the U.S. tech behemoth received special tax benefits for setting up in Ireland that were not granted to other companies, potentially violating EU state aid rules, according to the BBC report.
In addition to Apple Inc. , the EU is also probing several companies including Amazon and Starbucks over allegations of tax avoidance. Last year, the commission ruled that Starbucks and Fiat were received sweetheart tax deals in the Netherlands.
US Criticizes EU Tax Probes
The U.S. Treasury Department isn’t happy with the European Commission’s investigations against American companies. The department has warned the commission about taking action against U.S. companies over tax avoidance accusations.
The U.S. regulator said that the commission’s action would make it into a “supra-national tax authority” overriding the tax codes of its member states. In addition, it said that Brussels is targeting U.S. corporations by employing a different set of criteria for the judgment. The Treasury Department added that potential penalties were “deeply troubling”.
The Treasury Department requested Brussels to reconsider its actions against several U.S. companies including Apple, Starbucks, and Amazon. The regular believes that penalties for these companies could have broader repercussions for cross-border taxation.
“The investigations have global implications as well for the international tax system and the G20’s agenda to combat [tax avoidance] while improving tax certainty to fuel growth and investment,” Robert Stack, a Treasury Department deputy, said in a blog post.
The commission, in its response, said that it’s making sure that EU law was applied equally to all companies operating in Europe. The EU said that there was “no bias against US companies” in the investigations.
Apple has said that there wasn’t “any special tax deal with the Irish government”.
“We have received no selective treatment from Irish officials. Apple is subject to the same tax laws as scores of other international companies doing business in Ireland,” according to the company.
The Irish finance ministry has said that Apple “did not receive selective treatment and there was no ‘special tax rate deal'”.
Apple Wants Fair Tax Rate To Bring Money Back Home
Apple Inc. has more than $230 billion cash on hand, but most of it is sitting abroad. To bring it home, the company will have to pay approximately 40% in taxes.
CEO Tim Cook doesn’t want to pay such hefty tax, saying that this is an unfair system.
“The money that’s in Ireland that he’s probably referring to is money that is subject to U.S. taxes. The tax law right now says we can keep that in Ireland or we can bring it back,” Cook told The Washington Post. “We’ve said at 40 percent, we’re not going to bring it back until there’s a fair rate. There’s no debate about it. Is that legal to do or not legal to do? It is legal to do. It is the current tax law.”
Cook expects a reform of the U.S. tax code next year regardless of which candidate wins November’s presidential elections.