There may be inconsistencies between international trade rules and the EC’s ruling on Apple’s tax status, Ireland-based tax experts have said.
The EC ruling said that Apple sales profits from the EU should have been recorded by two subsidiaries that Apple established in Ireland, and taxed in Ireland.
Allocating tax to head offices of the subsidiaries meant Apple was able to pay substantially less tax than other companies – a situation that the EC felt did not reflect economic reality and which is unlawful under EU rules for companies receiving State aid.
“It is not clear to what extent [the EC ruling] is consistent with, for example, the OECD guidelines on branch profit attribution and how that interacts with the State aid analysis,” write tax leaders at PwC Ireland in a report.
PwC’s Irish tax experts – which include Anne Harvey, EU direct tax leader, and Joe Tynan head of tax – point out that the EC noted the arrangement between Apple and Ireland did not call into account Ireland’s tax system or its corporate tax rate.
A more detailed ruling is necessary to understand the consistencies of EC and wider trade rules, they said.
The EC concluded on August 30 that Apple benefitted from unlawful State aid granted by Ireland, and has ordered full recovery of up to €13 billion plus compound interest. The Irish government is to appeal.
Meanwhile, Professor Louise Gracia, of Warwick Business School in the UK, said: "This ruling is a serious attempt at curtailing the power large multinationals have in avoiding their tax liabilities, and sends a warning to countries that facilitate hard-edged corporate tax minimisation strategies.”
Gracia, who is a professorial teaching fellow in the accounting group at Warwick, added: "It also shines a spotlight on the paltry levels of corporate tax that large multinationals are actually paying. Even if we accept the job and wealth creation arguments put forward by multinationals as mitigation against tax liability, this has to be within reason.”
The average person “probably has a right to challenge the reasonableness of Ireland facilitating Apple to pay so little tax on its European profits”, Garcia said.
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