Apple and Tax Treatement example

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Apple and Tax Treatment

Table of Content

I.Introduction 3

II.Arguments of the European Commission 4

Tax Structure of Apple in Europe 5

Legal Background of the State Aid 8

III.Arguments of Irish Government 9

Criteria for Tax Havens 11

IV.Arguments of Apple PLC 12

Conclusion 15

References 16


The investigations aimed to find out whether state aid had been provided through secret tax dealings in contradiction to tax policies of European Union, to Fiat and Amazon in Luxemburg, Starbucks in Netherlands, and Apple in Ireland were announced by the European Commission (EC) in 2014. Although the results of investigations are not comprehensive, the general outcomes of investigations illustrate the widespread practice of tax avoidance which relies on the shortcomings of global tax system used by highly profitable multinational companies to minimize their fiscal expenses in the countries where they allocate financial and real operations. Speaking of the case of Apple and Ireland’s tax policies, the preliminary evidence of secret tax deals between Irish authorities and Apple’s subsidiaries has been publicized. The findings of investigation illustrate that this deal resulted in the significant revenue loss for the treasury (Debt and Development Coalition Ireland, 2015, 2). In August 2016, EC has concluded that Ireland granted unlawful tax benefits to Apple Inc. that were estimated of €13 billion. This practice was considered to be illegal under the aid rules because in the result of secretive tax deal Apple was allowed to pay the significantly lower tax than other businesses. Ireland is now obliged to recover the illegal aid (European Commission, 2016a). Both Ireland and Apple announced they would appeal while Apple denied the low effective tax rate. The EC’s conclusions triggered a feedback from major shareholders, such as Apple, Ireland, other MNCs, and the US Treasury Department. The EC concluded that during 2003-2014 Apple had paid an effective corporate tax rate of less than 1 percent, as the result of a tax deal with Irish tax authorities (Hufbauer and Lu, 2016, 1).

Tax avoidance and evasion cause annual losses to the EU which is approximately estimated as €1 trillion. Moreover, secret tax deals reduce also the tax revenues of those countries, including poorer countries in Middle East, Africa, Asia, where MNCs such as Apple operate failing to declare their real liabilities that correspond their activities and value created in the result of these activities (Debt and Development Coalition Ireland, 2015, 2). The poorest countries globally continue losing more tax revenue due to fiscal avoidance than they receive in financial aid, as MNCs use the opportunities created by the disadvantages of the global tax system (Christian …

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