The European Commission announced in August this year that the iPhone maker would have to pay a €13 billion tax bill to the Irish government
Apple and Ireland are in the new again this week and despite some strong words on either side, nothing has really changed from August, when the European Commission announced that the iPhone maker would have to pay a huge €13 billion tax bill to the Irish government.
The reason all this has been dragged up again this week is because Apple has joined Ireland in officially appealing the decision, the Irish government has set out the legal arguments it plans to use in appealing the decision while the European Commission published a 130-page report detailing its three year investigation into Apple’s tax affairs.
Apple’s language was strong, accusing the European Commission of seeking headlines, and using the world’s most valuable company as a “convenient target.” The company’s general counsel Bruce Sewell focused in on one person within the EU, competition commissioner Margrethe Vestager, who he claimed used the prestige of the Apple investigation to boost her own profile.
The Irish government for its part said that it will argue the EU overstepped the mark and infringed on national sovereignty when it decided to tell the government how to tax companies operating in its jurisdiction. Simply put, the government says the investigators “misunderstood the relevant facts and Irish law.”
All this blustering is just preparation for a day in court next year when the European court of Justice will be asked to decide if Ireland’s tax deals with Apple were legal or not.
The problem with this whole issue is that the company involved and the size of the potential windfall make it a moral debate rather than a legal one which is what Apple, the EU and the Irish government are having.
The huge figure of €13 billion was clearly designed to grab headlines and even more importantly stir up debate in Ireland. The government came in for severe criticism for backing Apple and appealing the decision, with many opponents highlighting the critical services which could be boosted by such an influx of cash.
The thing is that even if the court sides with the EU, and Apple is forced to pay back taxes, the actual figure will be a hell of a lot less, with other countries likely to stake their claim while under Donald Trump’s regime Apple could repatriate a huge swathe of its cash at a lower corporate income tax rate.
Of course there are also many who believe that Apple and companies like Google and Amazon are simply exploiting loopholes in the international tax system to minimize their tax burden far below what is morally acceptable.
The question therefore is, what is morally acceptable?
Companies like Apple are private enterprises and are therefore answerable — principally — to their shareholders. That of course doesn’t mean that they can’t also be morally and socially responsible.
Apple likes to paint itself as a socially responsible company when it comes to using green energy, removing toxic materials from its products and trying to reduce human rights abuses in the factories that build its iPhones.
In the face of the outrage in Ireland at the huge tax bill, Apple even claimed to be Ireland’s “largest taxpayers” — though the validity of this claim remains unclear.
But that’s not what people want to focus on. The company’s huge profits and ever-growing mountain of cash make it an easy target for those who want to paint it as a pariah, one that is, along with the rest of Silicon Valley, stripping Europe bare and hiving off huge profits without paying a cent in tax.
The truth is that tax should be paid on where the economic value of the good sold is created, and for Apple, Google and pretty much every other Silicon Valley tech company, that means in the US.
Virtually all of Apple’s design, engineering and software is done in Cupertino and not in Ireland. So Apple should pay the bulk of its tax there, not here — which it does.
I’m not denying that Apple uses convoluted tax arrangements to minimize its tax payments, but it is not doing anything illegal, and nothing almost all companies of a similar size do. The international tax code is dense and incompatible with global trade and needs reforming — but until that happens Apple and Google and all the other US tech giants operating in Europe will continue to face the opprobrium of those who think they are creating us all out of big pots of gold.