In an era when many companies seek international solutions that in simpler times might have been openly labeled “tax evasion,” governments around the world are seeking to ensure they are not cheated of legally due taxes by what is now euphemistically called “profit shifting.” Apple Inc. (AAPL) has been keeping much of its cash outside the United States to avoid taxes and penalties upon repatriation. Ireland offered Apple Inc. some exceptional tax deals in exchange for bringing jobs and economic activity to the Emerald Isle, but the northern European nation is now in serious trouble with the EU, according to Reuters.
The exclusive article by Foo Yun Chee in Brussels reports that the European Commission is seeking detailed information from the Irish government regarding the “rulings” it made in order to attract Apple’s business to Ireland’s shores. Tax competition is a troubling problem for the European Union, which is in the process of addressing the most flagrant cases of favoritism and illegal tax deals.
Algirdas Semetas, the EU’s Tax Commissioner, noted that he is keen to ensure fair play is being observed in countries’ dealings with private companies. The Commission is bringing a number of pressures to bear on the Irish, calling on the island’s government to reform its tax practices to make processes more transparent and eliminate as much “profit shifting” as possible. It also wants “selective” treatment for large enterprises like Apple (AAPL) to cease.
The EU has warned Ireland that it will pursue other companies benefiting from its rules as a type of penalty if it does not address Apple’s special status promptly. If the Commission can prove that Ireland broke with international tax laws applying to EU member states, then the Irish government may be obliged to pay the amount of lost taxes out of its pocket, besides eliminating the Cupertino company’s favored status. With a valuable membership in the European Union at stake, the Irish are likely to comply if found to be in violation.
The Irish government and Apple Inc. (AAPL) both deny wrongdoing or tax evasion of any kind. The Irish finance ministry claims that it is complying fully with the demands of the European Commission as regards the information it wants, and that in any case, its dealings with Apple have been completely aboveboard and in compliance with international procedures used by the EU.
