Commentary

Was Apple Dumb Enough To Think They'd Get Away With It?

There is, of course, only one topic of conversation today in the UK and the rest of the EU. Did Apple really never think its tax deal with Ireland was just a bit too amazing to be true? If not, it certainly should have. As it announced an event for next week -- almost certainly the launch of the iPhone 7 -- the corporation could have been forgiven for expecting today's headlines to be more positive. But that's the news for you. Everywhere you look, there's talk of the giant having to pay €13bn of unpaid tax.

Gurus and experts have lined up to give an opinion on either side of the argument. One Telegraph columnist even warns today that the UK will be next in line as we prepare to leave the EU. Brussels has gone power mad and is hitting big U.S. corporations with a large stick. The theory then goes that the UK will be next in line. 

I simply don't buy it. I don't know about you, but if most of Europe had corporation tax rates around the 20% mark and then one country said they could do you a deal in which you paid less than a single percentage point of tax on profit, what would you think? Great deal? Well, yes, it certainly is. Storing up trouble for the future? Almost certainly so. 

Despite the vast majority of Apple's EU sales coming from the UK and the rest of the EU, it chose to locate itself in Cork, where a tax break -- now considered to be illegal state aid -- was on offer. The office is being widely described as a flag of convenience -- a comparatively small outpost that allows its goods and services to emanate from within the EU and so avoid tariffs.

There will be appeals, but these are likely to focus on the final sum and the eventual logistics of what Apple has to pay to continue to be based in the EU. Ultimately, it's a simple question of economics. How could a company as smart as Apple ever think that being based in the EU and paying corporation tax of a fraction of 1% would ever mean their financial arrangements would not come under scrutiny?

I have written about it many times and will continue to do so. The tide in Europe is turning against U.S. tech giants that have scant regard for local laws and the need to pay tax at rates comparable to any other EU business. If Apple wants to remain in the EU it will need to dig deep and cough up and probably reflect that at least it got away with it for so long and banked the interest on the money it didn't pay in tax for the past couple of decades.

1 comment about "Was Apple Dumb Enough To Think They'd Get Away With It?".
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  1. Kevin Lee from Didit, August 30, 2016 at 5:21 p.m.

    Of course in the US, we'd far prefer that the profits be taxed here.  Yet the only equitable way to allocate taxes is non-practical.  Have the corporation pay taxes based on revenue allocation pro-rata by country.  that way the country gets the taxes based on the spending of their residents. Don't hold your breath for that one ;-) 

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