White House Fears U.S. Tax Payers will Pay Apple’s Irish Tax Bill

The European Union’s main regulatory body, the European Commission, has sent Apple a staggering tax bill of an estimated $14.5 billion for unpaid taxes. While the commission had been expected to rule against Apple, both Apple and the U.S. government had anticipated a much smaller amount. Here is how it happened and why U.S. taxpayers may end up having to pay most of the bill.
Apple, like many other big U.S. tech multinationals, built its European headquarters in Ireland. While there are various reasons Ireland is attractive to U.S. tech companies, the most crucial attraction is Ireland’s very corporation-friendly tax system. Apple located its intangible intellectual property in subsidiaries in Irelend, which earned about 90 percent of Apple’s foreign profit, protecting it from tax authorities outside of Ireland.
Other countries in the European Union are concerned with Ireland’s tax policies, believing that Ireland is stealing business as well as tax revenue. Until now, the European Union had limited authority over taxes making it very difficult for these countries, or European authorities, to do anything about it. Now the European Commission has taken the stance that Irish tax policy for multinationals is a kind of state aid to business, which the European Commission does have jurisdiction to police. The European Commission has decided that Ireland’s tax arrangements are an illegal state subsidy, which would force Ireland to reverse the subsidy and demand back taxes from Apple.
“It’s also possible that the kinds of payments that are contemplated by the EU decision today, at the end of the day, are merely a transfer of revenue from U.S. taxpayers to the EU,” said White House spokesman Josh Earnest in a press briefing on August 30, 2016. “That’s the crux of our concerns about this approach.”
If Apple was required to pay billions in back taxes to Ireland, it could then deduct those payments from what it owes to the Internal Revenue Service (IRS), either retroactively or in future returns. Those deductions, could reduce Apple’s tax bill to the U.S. government, ultimately lowering the amount collected by the IRS. Theoretically, that would mean U.S. taxpayers would have to make up the difference, or the government would simply have to go without those monies.
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