Well the Tax Attorneys are about to go crazy! Because no matter how you dice it they stand to make an insane amount of money either prosecuting Apple & Ireland or defending the Dynamic Duo.
Without getting into history lessons involving such titillating topics like the Magna Carta, here’s a brief rundown of the situation-
Corporate taxes in the U.S. are approximately 15%
Certain countries in the EU (Ireland, The Netherlands, and Luxembourg) have corporate tax rates as low as 2% if certain conditions are met (the difference of 13% in taxes is enormous for larger, multi-Billion dollar corporations).
By listing their intellectual property as an asset of one of these EU countries and getting a letter stating the Country will allow them to be ‘domiciled’ (headquartered) there they can now avoid taxes on an epic scale.
Here is the difference between tax avoidance and tax evasion. Tax avoidance is not illegal and is a common practice amongst businesses and individuals to avoid paying one cent more than is absolutely necessary. Tax evasion is illegal and can have dire consequences on a corporation – not only from a prosecutorial/legal and financial stance but also from a reputational stance as well.
The crux of the case seems to be that Ireland offered Apple preferential treatment since the standard corporate tax rate in Ireland is 12.5%
As a point of interest last year Apple paid the Italian authorities $350M in back taxes.
So there you have it easy, peasy, lemon squeezy!
Nothing is that easy in the world of international taxes. Of course Apple & Ireland would appeal any findings but here’s the wrinkle – the U.S. Treasury Department has written a letter to the EU letting them know how really, really miffed they are. They wrote a letter stating that the EU has overstepped their bounds!
So to sum it up Apple gets a sweetheart of a deal from Ireland and avoids paying Billions in taxes. The EU intervenes claiming they dodged the law and therefore owe boatloads of money. Finally the U.S. Treasury is mad that someone did their job so they tell the EU to back off and mind its’ own beeswax.
Oh what a tangled web we weave when first we practice to deceive…