Thursday

6th Aug 2020

EU Commission: Apple paying so little tax still unfair

  • The EU court in Luxembourg overturned a €13bn tax ruling against Apple (Photo: Reuters)

The European Commission says it's unfair that big tech companies like Apple pay less than one-percent tax on profits earned in the European Union.

The comments follow an embarrassing defeat by the Brussels-based executive when the General Court of the European Union annulled its €13bn tax ruling against Apple on Wednesday (15 July).

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"We do not consider it normal that the largest corporates get away with paying one percent tax at most," European Commission executive vice-president Valdis Dombrovskis told reporters.

"It is just not sustainable from a tax-fairness point of view, it is not sustainable from a public revenues point of view and it needs to be addressed," he said.

Paolo Gentiloni, the EU commissioner for economy, made similar comments.

"A single ruling is not discouraging our commitment in this sense. I would say the contrary."

Margrethe Vestager, the European Commission vice-president, had in August 2016 determined that two tax rulings issued by Ireland to Apple constituted illegal state aid.

She said Apple's Irish subsidiary had recorded European profits of around €16bn but under the terms of the tax ruling only around €50m were considered taxable in Ireland.

But the court on Wednesday said the commission had failed to produce enough evidence to substantiate claims the rulings constituted illegal state aid.

"This case was not about how much tax we pay, but where we are required to pay it," Apple said in a statement.

The Irish government also praised the ruling, saying "the correct amount of Irish tax was charged... in line with normal Irish taxation."

Need better rules

The commission's defeat and its follow up comments are unlikely to assuage critics who say broader efforts to make taxation more transparent and fairer have been lacking for years.

Among them was Tove Maria Ryding, a tax expert at the Brussels-based European Network on Debt and Development.

"If we had a proper corporate tax system, we wouldn't need long court cases to find out whether it is legal for multinational corporations to pay less than one percent in taxes," she said.

Within two hours after Wednesday's ruling, the commission then presented wider plans on what it describes as fairer and more simple taxation.

Among the ideas discussed is article 116 in the EU Treaty, which could be used to label competitive national tax schemes as distortions of the single market.

The article could be used to circumvent the required unanimity decisions among member states when it comes to taxation.

A qualified majority vote would instead be needed to usher in tax reforms, in a move that is likely to generate blowback from some member states.

Sven Giegold, a German Green MEP, said the article needs to be used to prevent vetoes by individual member states.

He signalled out Germany's resistance to public tax transparency for large companies.

Giegold also criticised the commission's latest tax proposals, noting they postponed digital taxation, corporate taxation and majority decisions on tax matters.

"The action plan does not provide answers to the failure of the EU Commission in court today," he said.

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