taxing apple

Brussels Puts U.S. Companies on Notice

epa05547922 EU Commissioner for Competition Margrethe Vestager speaks at a news conference in which she addressed the Apple tax case and accusations that US companies have been targeted, at the Delegation of the European Union (EU) to the United States, in Washington, DC, USA, 19 September 2016. Vestager discussed the Apple tax case and accusations that she has targeted US companies. On 30 August 2016, Vestager announced Ireland gave illegal tax benefits to Apple worth up to 13 billion euros. EPA/MICHAEL REYNOLDS +++(c) dpa - Bildfunk+++
Margrethe Vestager, the EU commissioner for competition, faced tough talks in Washington.
  • Why it matters

    Why it matters

    Corporate America has warned that the European Commission’s decision against Apple could negatively impact investment in the European Union.

  • Facts

    Facts

    • The European Commission has accused Apple of receiving illegal state aide from the Irish government and has demanded €13 billion in back taxes.
    • The U.S. Treasury Department has accused the European Union of taking U.S. tax money by going after Apple.
    • The European Commission based its case on revelations about Apple’s tax practices made during a U.S. Senate hearing.
  • Audio

    Audio

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Margrethe Vestager didn’t come to Washington to compromise. The E.U. competition commissioner is staunchly defending Brussels’ demand that Apple pay $13 billion ($14.5 billion) in back taxes despite fierce objections from U.S. politicians and corporations.

During her visit to the U.S. capital on Monday, Ms. Vestager sought to explain the European Union’s rules on state aide to her irritated U.S. colleagues. The European Commission has accused Apple of receiving illegal aide from Ireland in the form of tax benefits.

“The rules on state aide were never a secret,” Ms. Vestager said. “The numbers and corporate structures [of Apple] were secret.”

“The rules on state aide were never a secret. The numbers and corporate structures [of Apple] were secret.”

Margrethe Vestager, E.U. competition commissioner

Ironically, Europe’s case against Apple began in the United States, where the company’s attempts to avoid taxes are also controversial. The commission based its ruling against Apple on information that was revealed during a U.S. Senate hearing.

Prior to meeting with Ms. Vestager on Monday, U.S. Treasury Secretary Jack Lew expressed understanding for the commission’s desire to go after companies that avoid taxes. But Mr. Lew said Apple’s profits should be taxed in the United States, not Europe.

“It’s U.S. income, it should come home, and it should be taxed,” Mr. Lew said in an interview with business news website Marketplace.

The trouble is that Washington doesn’t tax the foreign profits of U.S. corporations, creating an incentive for these companies to stash their earnings abroad. With Brussels now taking action where Washington has failed, leading companies in the U.S. are sounding the alarm bell.

The Business Roundtable, an association of chief executives from leading U.S. companies, wrote a letter to the 28 E.U. member states, which implied that Brussels had violated the rule of law.

“In the interest of all countries that respect the rule of law, this decision must not be allowed to stand,” the Business Roundtable wrote. The group warned the member states that the decision could have an adverse impact on European investment.

“The precedent set by this decision, if upheld, would increase uncertainty significantly with a consequent adverse effect on foreign investment in Europe, making this decision a grievous self-inflicted wound on the European Union and its citizens,” the association wrote.

Ms. Vestager is not intimidated by the warnings.

“U.S. companies do good business in the European Union, but they have to comply with E.U. rules. In the case of Apple, it is concretely about tax benefits,” Ms. Vestager told Handelsblatt in an interview published earlier Monday. “If American businesses are paying less taxes than European companies, that is irritating for us,” she added.

The E.U. competition commissioner has warned that there may be other cases in the future. She said the commission was looking at other companies, including Amazon and McDonald’s.

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