Apple responded to the European Commission ruling that it pay $14.5 billion (USD) in back taxes by claiming that paying taxes will impact jobs. With more than $200 billion in cash reserves hoarded, it seems like paying taxes and hiring people at the same time is unlikely to break Apple’s back, financially speaking.
As I point out at the beginning of my Forbes post on this subject–I am not an economist and I am not a tax professional. If someone cares to try and explain why my assumptions or assertions are wrong, I would love to hear it. But, like an actual explanation–not silly name calling from a Twitter account of a wannabe New York house music DJ with a website that doesn’t exist and a handful of Mixcloud mixes from years ago (To be fair, the mixes are alright–but the most recent one is from mid-2013).
The European Commission has ruled that member states of the EU can’t grant special tax status to select companies. The ruling negates Apple’s lucrative arrangement with Ireland, and means that Apple now owes about $14.5 billion (USD) in back taxes. Apple’s response was a statement that sounds ominously like a threat, claiming, “It will have a profound and harmful effect on investment and job creation in Europe.”
Let me preface this whole thing by stating that I am neither an economist nor a tax professional. I am tech guy who writes about tech, so the opinions I express here are the opinions of a layperson in this particular field. As an average citizen, though, I see a couple flaws in this defense from Apple.
European Commission Ruling
It seems that Apple does employ thousands of people in Ireland, and that Apple is the largest taxpayer in Ireland. However, according to Margrethe Vestager, the European Commission’s competition commissioner, Apple’s effective tax rate was only 1 percent—falling as low as .005 percent in 2014.
The European Commission implies that Apple funneled funds through Ireland specifically to avoid taxes—sort of an internal money laundering scam. The report states that the sales and profits recorded for Apple’s entities in Ireland are attributed to a “head office”, but that the office in question exists only on paper and could not have generated the profits claimed.
The European Commission report sums up the situation, “In fact, the tax treatment in Ireland enabled Apple to avoid taxation on almost all profits generated by sales of Apple products in the entire EU Single Market. This is due to Apple’s decision to record all sales in Ireland rather than in the countries where the products were sold.”
Taxes or Jobs: Choose
As noted above, Apple’s response to the European Commission decision was to essentially threaten that if Apple has to pay taxes then it will employ fewer people as a result. That defense does not seem to hold water.
Read the full story on Forbes: Apple’s Tax Defense Seems Flawed.