Source: http://www.nytimes.com/2014/10/01/business/international/european-commission-report-warns-ireland-over-tax-treatment-of-apple.html?ref=international
The European commission
has publicly accused Ireland of giving illegal subsidies to Apple under the
guise of tax breaks. The accusations come as the United States and the European
Union look to curb multinational corporations maneuvering to get around higher
tax rates and weak economies in their home nations. Ireland’s current corporate
tax rate is 12.5%, which is extremely low in comparison to other EU members.
While this low rate is not illegal it has drawn criticism from other countries
over the theme of an unfair advantage.
Whether the accusations are true or not will have little
effect on Ireland or Apple. Worse case scenario Apple would have to pay back
taxes to Ireland at an amount that does not even compare to their
astronomically high profits.
This article raises a number of questions. Are tax incentives ethical for countries
looking to bring in foreign business and further their economies? Are certain
nations jealous of the low tax rates that other nations are offering and
therefor want to level the playing field? Currently, lower tax rates are not
illegal but there are questions on how Ireland actually figured Apple’s rates
for taxation. It will be interesting to see how the effected governments will
attempt to regulate these issues.
This is interesting to hear as Apple tax practices have also been under fire in the past. In previous years, Apple has been accused of avoiding billions in taxes in the United States and around the world through a web of subsidiaries. It was discovered that many of Apple’s subsidiaries had no employees and were instead run from company headquarters in California. In locating them in places like Ireland, Apple was able to make them stateless; in effect, they were exempt from taxes and record-keeping laws. Essentially, there was no need for the subsidiaries to file tax returns anywhere in the world.
ReplyDeleteIt is not uncommon that companies seek out places that have the lowest tax rates. I read an article that reported a similar situation in Luxembourg, which also have incredibly low tax rates. It seems that both places are taking a lot of heat for their tax rates and many companies are being investigated as a result. The lower tax rates are definitely an incentive for companies because they can save millions of dollars but reducing their tax rate by several percentage. It is not much of an ethical question whether or not countries lower their tax rates to bring in more clients, but rather a business strategy.
ReplyDeleteI agree with Sean in the sense that it is not against European Union rules for one country to have lower tax rates than another. However, I think it is also important to recognize that it would be a violation against European Union rules if one country granted special deals to certain companies that were not available to others. According to the article, it sounds like it would be difficult for Ireland to give similar deals to other multinational companies.
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