EU Commissioner Gives Warning against Tax Avoidance

EU Commissioner Gives Warning against Tax Avoidance

European commissioner for competition Margrethe Vestager gave an interview yesterday in Brussels. The main topic: the EU decision to set out a template for recovering taxes. It is part of a plan to prevent tax avoidance by multinationals.

These statements came to light after recent developments regarding Apple’s paying of taxes. And in Apple’s avoiding of taxes, more importantly. Ireland recently acknowledged that Apple has units in the country that are liable to tax in no country. The bill for the company for those operations is a record 13-billion euro.

Tax Avoidance and Apple

Speaking about tax avoidance behavior, she told Reuters that firms that route profits to subsidiaries in Ireland and are tax resident in places like Bermuda, might not be alright.

She gave another warning to multinationals that do not employ as extreme Irish tax schemes as Apple.  But who shift profits via the country to tax havens. Consequently, that could also be contrary to EU rules.

A question was if things would have been different if the head office of Apple’s Irish unit had been registered and paid tax in Bermuda. The commissioner’s reply was: “not much.”

The core of the case against Apple and its actions was that it had an Irish registered company that booked most of the profits generated across Europe. However, since the subsidiary was not a tax resident there, the unit reported just a small part of the taxable income at an Irish “branch.”

Apple Reacts to the Investigation

Apple did not take the news lying down. There were unfavorable statements about the EU commission’s decision. Tim Cook, Apple’s CEO called the Commission ruling an unjust raid on tax that should be going to the United States. His statements got support from Washington. Luca Maestri, Apple’s chief financial officer, spoke to reporters on Tuesday. He said that it is “simply wrong” that Apple doesn’t pay taxes anywhere on its profits.

“These are profits that are taxed in the United States, and for anybody that understands the U.S. worldwide tax system, this is very easy to understand,” Maestri said. “We actually accrue those tax liabilities on our balance sheet on an ongoing basis and we’ve done it consistently over the years.”

Vestager said that if Washington chose to tax the profits reported by Apple’s Irish operation, the situation could be different. There could be the possibility of lowering the amount that Apple has to pay.

Another question for Commissioner Vestager was if there are any other companies that are the object of an inquiry. She declined to make comment. She did say that the Commission has been looking through about 1,000 such instances in the EU.

Another thing that European commissioner Margrethe Vestager wanted to point out was that the actions were not about politics. She wanted to make it clear that it had nothing to do with anti-American populism. Such allegations were in the media. Moreover, she stated that most of 35 firms probed over tax in Belgium were from Europe and that those under inquiry were a broad sample. A statement meant to clarify why US companies are right now in the spotlight regarding their taxes.

Image source: here.