<\/figcaption><\/figure>\nThus, Apple had a complex set of arrangements to achieve this outcome \u2013 all of which were thought to be legal. They involved using non-resident Irish companies to sell goods across the EU. As a result very little tax was payable in Ireland and the US was looking forward to receiving the lion\u2019s share of the taxable profits.<\/p>\n
The EU\u2019s ruling that Apple obtained \u201cstate aid\u201d from Ireland as a result of paying very little tax and that it owes back-taxes to the tune of \u20ac13 billion to the Irish authorities thwarts this set-up.<\/p>\n
The US government will therefore feel that Europe is expropriating the taxes that it is due on incredibly profitable consumer products. In 2015, Apple earned international profits of US$48 billion. To put this in perspective: Coca-Cola earned US$8 billion internationally, while Kellogg\u2019s earned US$0.3 billion.<\/p>\n
Leaving populism aside, it is very hard to argue that any European country has a right to the excess profits that Apple earns as a result of its great marketing, excellent design and some technical innovation that probably occurred in the US.<\/p>\n
Therefore, it is easy to understand why the US Treasury states that the ruling will undermine US foreign investment in Europe. If Europe levies a profits tax on US innovation \u2013 and hijacks the taxes that the US hoped to receive in the future \u2013 it will serve to undermine transatlantic relations.<\/p>\n
EU overstretch?<\/h3>\n
Apportioning Apple\u2019s huge profits among the countries where a product is designed, manufactured and sold is difficult. Until the EU\u2019s recent fight to reclaim taxes, there was an acceptance that gains would ultimately find their way back to the US, even if it involved circumnavigating transactions through Belgium, Ireland, Luxembourg and the Netherlands. European companies selling goods in the US would have used equivalent structures.<\/p>\n
This is why the US government is so unhappy with the ruling.<\/p>\n
It also serves to undermine many existing arrangements by drawing attention to the tax agreements reached between national tax authorities and multinational companies.<\/p>\n
It is inconceivable that the Irish tax authorities foresaw the seismic success of the iPhone, when Ireland negotiated its agreements with Apple in 1991 and 2007. Advance agreements between tax authorities and companies were seen as a pragmatic solution to the apportioning of income from internationally-produced products to individual countries.<\/p>\n
Characterising these agreements as \u201cstate aid\u201d is a very recent EU innovation. And calculating this state aid with the benefit of hindsight sets a dangerous precedent. Retrospective reassessments of agreements that are reached between companies and sovereign governments and the spectre of determining them \u201cstate aid\u201d are likely to undermine international relationships and create many years of bitter litigation.<\/p>\n
Meanwhile, new tax arrangements are likely to emerge that will ensure that innovative products from outside the EU continue to contribute little to the European exchequer.<\/p>\n
With both Amazon and McDonald\u2019s tax set-ups in Luxembourg also under investigation, expect this dispute between the EU, US multinationals and US government to continue.<\/p>\n
Eamonn Walsh is a professor of accounting at University College Dublin.<\/em><\/p>\nThis article was originally published on The Conversation. Read the original article.<\/em><\/p>\nFollow StartupSmart on<\/em> Facebook,<\/em> Twitter, <\/em>LinkedIn. <\/em><\/p>\n","protected":false},"excerpt":{"rendered":"By Eamonn Walsh The EU\u2019s ruling that Apple must pay the Irish tax authorities \u20ac13 billion in back taxes appears<\/p>\n","protected":false},"author":1,"featured_media":58635,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11,20,17,1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/posts\/45673"}],"collection":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/comments?post=45673"}],"version-history":[{"count":0,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/posts\/45673\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/media\/58635"}],"wp:attachment":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/media?parent=45673"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/categories?post=45673"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/tags?post=45673"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}