Apple has been in the headlines quite a bit, hasn’t it?
This time it’s about taxes and who is doing investigation? Oh, no one big, just the European Union. For all who do not know, the EU is an economic and politcal union of about 28 countries primarily located in Europe. The European Commission is the executive body of the EU responsible for proposing legislation, implementing decisions, upholding the treaties and day-to-day running of the EU. The EC is the one conducting the investigation on Apple. It announced on June 10th 2014 that it will be investigation a couple of companies for possibly receiving special ‘treatments’ regarding taxes in some of its member states. One of the companies being investigated is Apple in regards to its business activities in Ireland. There are a few others such as Starbucks in Netherlands that too are being investigated.
The question is: has Apple been getting better tax deals that allowed under EU law? Technically, if it has, it has breached a major law in EUs eyes. The consequences may be severe if found guilty. Apple may need to pay a huge sum in damages. However, this is not the first time Apple is being investigated for its taxes. This time around the focus is on Apple’s Irish subsidiaries, Apple Sales International and Apple Sales Europe. They may have benefited from pricing arrangements. Surprisingly, Ireland does have one of the lower tax rate as compared to other member states at 12.5 percent but Apple has been accused of securing a rate as low as 2 percent. Let me assure you that one member state has a tax return as low as that from a huge multi national company, it affects the income of the whole Union. And being that, it isn’t the first time Apple has been in the spotlight for this, the Commission may have to be ‘creative’ in their punishment if Apple is guilty. Also, such special treatment goes against the concept of a Single Market held by the EU and would give Apple an unfair advantage compromising fair competition.
However, the CEO of Apple, Tim Cook defended the company in May last year in front of the U.S. Senate Permanent Subcommittee on Investigation stating that Apple pays all its taxes whether local or abroad. Nevertheless, it is confirmed that formal investigations have been opened. What the verdict is, we’ll just have to wait and see.
Keep following us for the next update as this topic is just too hot not to post about.