In a new twist to the ongoing saga between Ireland, the European Union and multinational companies operating in the region, Apple has agreed to pay the Irish government $15 billion in back taxes for the August 2016 case brought up against the US firm by the EU.
According to the Irish Finance Ministry Paschal Donohoe, the funds paid “will be placed into an escrow fund with the proceeds being released only when there has been a final determination in the European Courts over the validity of the Commission's Decision.”
More specifically, says Donohoe, “We expect the money will begin to be transmitted into the account from Apple across the first quarter of next year.”
Additionally, an agreement has already been reached “in relation to the framework of the principles that will govern the escrow arrangements.”
More than a year and a half ago, the EU ruled that the American tech company benefitted from specific tax deals with the Irish government and received tax benefits deemed illegal by the region’s antitrust authority.
As part of this ruling, Apple was asked to pay Ireland the hefty amount in back taxes, a decision the Irish government appealed in order to protect its economic model based on these so-called “sweetheart” deals.
Despite this decision, both Apple and the Irish government will appeal this ruling with the America company hoping to recover the money to be paid in 2018.
As explained by Apple in a statement, “We have a dedicated team working diligently and expeditiously with Ireland on the process the European Commission has mandated.”
“We remain confident the General Court of the EU will overturn the Commission’s decision once it has reviewed all the evidence,” the company added.
“The Commission’s case against Ireland has never been about how much Apple pays in taxes, it’s about which government gets the money,” it said, adding that “the United States government and the Irish government both agree we’ve paid our taxes according to the law.”
French Activists Storm Apple Stores Over Unpaid Taxes
Earlier this week, one hundred French activists belonging to Attac, an anti-globalization movement, stormed an Apple store in Paris demanding that the US tech giant pay its fair share in taxes.
According to the group’s spokesperson, Aurélie Trouvé, “We must be able to verify that the taxes paid by Apple are in line with its actual activities. For this, we require Apple to publish its country-by-country reporting now and retroactively over the last few years.”
The activists left the premises following a promise by Apple’s management to meet with them within 15 days to discuss the company’s tax practices, but vowed to reoccupy the store before Christmas if these talks failed to happen.
EU Public Consultation Over European Tax Unity
All of this comes at a time when the European Union is moving forward with its plan to bring some sort of tax consistency to the region.
Last month, the European Union set forth a public consultation to gauge what would be a fairer, more efficient and more profitable tax system for everyone involved.
Upon this public consultation’s launch, the EU said, “the current tax framework does not fit with modern realities. It was designed in a pre-computer age and cannot capture activities which are increasingly based on intangible assets and data."
“As a result, there is the risk of shrinking tax bases for Member States, competitive distortions for businesses, and obstacles for innovative companies,” it added.
As reported by Tas Bindi for ZDNet, EU officials “wants binding legislative proposals for "unitary tax" that would be levied on a share of tech companies' global profits, divided up between the EU countries where they operate.”
One plan being pitched by the EU is to tax revenue instead of profits.
Peter Coy for Bloomberg explains that the rationale behind this particular option “is that revenue is harder to manipulate.”
However, Coy goes on to say, “revenue is a crude measure of a company’s ability to pay taxes,” as “revenue-based taxation would be too hard on companies with lots of revenue but little profit, and too easy on companies with little revenue but lots of profit.”
Scott Marcus, an analyst with Bruegel Institute in Belgium, draws an apt comparison for revenue-based taxation: “I liken it to a drunk looking for his keys under the lamp post because the light is better there. The mere fact that it’s easier to measure revenue doesn’t mean it’s the right thing to tax.”
How will this protracted battle end? Any thoughts?