Apple Inc. (NASDAQ:AAPL), which is notable for retaining most of its earnings in overseas cash in order to avoid paying taxes to the United States when repatriating its profits, is currently under the lens in Europe to determine if it violated European Union (EU) tax evasion laws. Apple claims to report all U.S. earnings directly to the I.R.S. as required, thus maintaining full legality in its dealings with America. The latest investigation is intended to reveal whether or not the Cupertino company received preferential tax treatment from Ireland.
A worldwide push is underway by governments to tax corporations which have “gamed” tax structures across international boundaries in order to pay less taxes than any individual country originally intended. Apple Inc. (AAPL) is one of many that has come under scrutiny, which is likely to be especially probing in light of how affluent and famous the company is. Thus far, no wrongdoing has been proved, but the investigation is ongoing.
The European Union’s competition commissioner, Joaquin Almunia, said that more evidence was needed to determine if Apple’s Irish arrangements, and those several other companies enjoy in the Netherlands and Luxembourg, are in actual violation of EU taxation laws. According to information uncovered by Bloomberg, Apple has negotiated a highly favorable 2% tax rate with the Irish government in exchange for opening an important branch there.
Apple Inc.’s (AAPL) Irish branch is a “ghost corporation,” according to some U.S. officials, existing only to elude higher taxes in the United States and EU. Both Apple and the Irish government deny that there is anything underhanded in the deals. Mr. Almunia has also noted that even if wrongdoing is proven, actually recovering any possible back taxes will also present problems.
Other investigations are underway across the continent, though none are occurring in Britain, whose tax code does not allow the government there to negotiate tax cuts with businesses for any reason, including locating important facilities in the Sceptered Isle.
Last month, Tim Cook spoke before the U.S. Senate Permanent Subcommittee on Investigations to testify regarding the matter of Irish taxes. Mr. Cook’s statement included a bold defense of his company’s practices. He declared that “We pay all of the taxes we owe – every single dollar.” He also directly addressed the insinuation of some critics that such words are legally but not morally true by going on to assert that “we comply with the spirit of the laws.”
