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Glasgow
+44 (0)141 221 2984

Edinburgh
+44 (0)131 225 6366

Stirling
+44 (0)1786 451745

Dumbarton
+44 (0)1389 765238

Hamilton
+44 (0)1698 459444

French Duncan

SEPTEMBER 2016 - iMess as Apple pressed between Ireland & Europe

The public must be standing open mouthed over the relatively miniscule amount of corporation tax which the American multinational technology company, Apple, has paid in respect of its European profits.

To summarise, Apple make a lot of money from their operations in Europe which are based in Ireland.  This is all fair and well, but the issue is that Irish tax law dictates that Apple only needs to pay corporation tax on the profits which it makes in Ireland, and not on the further huge profits it makes in the rest of Europe. This is a very generous approach taken by the Irish authorities, and interestingly, similar rules apply in a number of other countries such as Hong-Kong, to encourage inward investment from overseas.

Most countries recognise that, through legitimate planning, multinational companies are able to organise their affairs so that some of the profits are subject to corporation tax in countries with low or no corporation tax at all.

While many would argue that companies like Apple have a moral responsibility to pay tax on all of their profits, this is not what the law demands. The issue therefore lies with the politicians who have created the stir about tax by not passing laws which are fit for purpose or, at best, have not kept up with the rapidly developing means by which business is conducted internationally.

Many double taxation treaties which countries have negotiated with one another ensure that a company is only subject to corporation tax in the country in which it has an office or place of management. 

In the case of Ireland, the tax system has been devised to encourage inward investment, hence why Apple set up their European headquarters there.  Now the EC is telling Ireland to collect billions – an order which will involve a great degree of difficulty around retrospective taxation.  Understandably, Apple will be upset too.  The company located in Ireland for obvious reasons, and have complied with their tax laws. Now they are being forced to pay millions due to EC intervention.

While many have little sympathy with Apple, is the principle of retrospective taxation right?  Those who voted for Brexit will point to this further example of the EC getting involved where it is not wanted or needed. Others would argue that this strengthens the case for a more harmonised EU tax structure.

Who is right?