Apples European tax increase likely as Ireland expected to relent

Apple’s European tax rate is likely to increase from 12.5% to 15%, despite Ireland being reluctant to impose the higher rate.

Apple based its European headquarters in Ireland, and has historically funneled most of its revenue from all 27 EU countries through the country in order to benefit from the low rate of corporate tax charged there …

Background

Apple’s approach of declaring all its European income in Ireland has already been challenged in some individual countries over the years. Italy, for example, accused Apple of tax evasion by failing to declare more than $1.3B of income through its online and retail stores there. Apple quietly settled that by paying the full tax due on its Italian sales. But many European sales continue to be booked in Ireland.

Apple looked set to wave goodbye to its 12.5% tax bill in Ireland when agreement was reached between the G7 nations and the European Union on a 15% global minimum.

However, Ireland subsequently suggested it might seek to “negotiate a compromise” that would allow it to continue charging a lower rate.

Apple’s European tax increase likely

The New York Times reports that both Ireland and the companies that benefit from its low tax rate have been rather quiet since the agreement was reached.

Ireland risks looking as if it wants to deprive other countries of their fair share of tax revenue — and the government in Dublin has been grudging in its statements on the issue. The finance ministry declined interview requests and did not respond to written questions. Similarly, multinational companies that have profited from the low-tax regime have been conspicuously silent, declining requests to discuss the issue.

But commentators do expect it to reluctantly increase the rate to 15% in order to protect its international standing. It will then find other ways to offer tax and regulatory breaks that will allow it to remain a popular base for tech giants.

Critics say tax-driven industrial policy has had its day, and caution the government against risking Ireland’s standing with the United States and the rest of Europe by fighting what is likely to be a losing battle.

“The government seems determined to show the world that Ireland is a rogue state,” a column in The Irish Times said this week. “It is bafflingly foolish to nail our colours to the mast of a sinking ship” […]

Ireland could, for example, continue to offer the so-called Knowledge Development Box, a special 6.25 percent rate for revenue tied to companies’ patents and other intellectual property.

Analysts say Ireland could sign on to the agreement, bump its corporate tax rate to 15 percent and grab more income without a huge risk that companies would move their European headquarters to the continent […]

“Ireland has benefited a lot from the tax advantage it has provided to multinationals,” said Ricardo Amaro, a senior economist at Oxford Economics in Dublin. “Going forward, they will have to come up with a strategy that relies on nontax tools such as a stable regulatory environment and skilled work force to lure investment.”

Photo: Adeolu Eletu/Unsplash

Source: 9to5mac.com