Depending on the outcome of an official investigation, Apple may face a bill that is estimated at between $8 billion and $19 billion for underpaid taxes to the Irish government. The Irish government really, really doesn’t want to get this money and is fighting as hard as it can to avoid receiving it. That may sound weird to ordinary people, who assume that governments want to squeeze individuals and businesses for as much taxes as they can get. But if you understand the politics of international corporation tax, it all makes sense.
Apple wants to avoid paying U.S. taxes
As Gabriel Zucman argues in his book on international tax evasion and avoidance, “The Hidden Wealth of Nations,” many U.S. firms locate as much of their activities as possible in low-tax jurisdictions like Ireland to minimize their tax bills. This is often easier for sophisticated technology firms, since so much of their profit is tied up in intangible activities and assets such as design. Hence, they can structure their operations so that much of the profits go to subsidiaries based in Ireland, Luxembourg and elsewhere, minimizing their U.S. tax exposure and deferring the point at which they have to pay U.S. taxes. Apple has approximately $200 billion salted away overseas. Businesses like Apple have also sought individualized tax “rulings” from countries like Ireland and Luxembourg that legitimize their specific tax arrangements. Critics describe these rulings as sweetheart deals, while defenders say that they assure long-term confidence and stability.
Apple’s tax ruling has come under fire
Other European countries are very unhappy with the low tax rates in Ireland, Luxembourg and other corporate tax havens. They believe that these countries are deliberately trying to lure business and investment away from them. However, under E.U. law, they haven’t been able to do much about it. Corporate taxation policy is mostly left to the discretion of individual European countries, providing few angles of attack for countries or officials who don’t like tax havens.
Read the full piece at The Washington Post.
- Publication Type:Other Writing
- Publication Date:01/29/2016