Europe’s Apple Tax Ambush: The EU rolls over the U.S. Treasury and Irish tax law to punish an American company

Europe’s Apple Tax Ambush: The EU rolls over the U.S. Treasury and Irish tax law to punish an American company. Editorial in the Wall Street Journal. The facts of Apple’s tax arrangements are basically simple:

Apple in the 1980s established two business units in Cork to manage global sales. These units held the rights to much of Apple’s intellectual property such as product designs. In payment for those licenses, the units remitted large portions of their profits to the U.S. each year to fund research at Apple headquarters.

The rest of those profits generally weren’t taxed under longstanding Irish law, since the money was earned overseas. The money wasn’t taxable elsewhere since the laws of other countries held that it was up to Ireland to decide whether and how much to tax it. In the case of America, the tax was deferred until Apple repatriated the profits.

That’s it. That’s the supposed tax evasion. Apple paid all the taxes it owed under existing tax laws around the world, which is why it hasn’t been subject to enforcement proceedings by revenue authorities. …

Apple Inc. headquarters sign

Ireland has a 12.5% corporate-tax rate and does not tax profits made outside Ireland. No wonder multinationals love to base themselves there. What business is that of anyone else? If other countries allow Apple to move profits offshore, say to Ireland, that’s their lookout.

Then again, this case isn’t about tax law. It’s about tax politics, and in particular the bureaucratic and left-wing frustration that low-tax governments are using normal accounting principles to deny high-tax governments more revenue booty. …

[H]aving lost the debate over tax rates, Brussels now wants to use antitrust law to tell Ireland and other low-tax countries how to apply their own tax laws. In this case it is forcing Dublin to collect €13 billion in revenue and interest that the Irish government never wanted.

Since these arrangements are legal under national laws and widely implemented accounting standards, Brussels is deploying its antitrust gnomes to claim that taxes that are “too low” are an illegal subsidy under EU state-aid rules.

Ahh, selective enforcement of some other rules. Gotta love bureaucracies with lots of rules for all circumstances. Europe is the big long term loser, and bureaucrats have no idea.

Brussels knew about these tax arrangements for years and never complained until the public mood turned. How safe is any business if entirely legal behavior can be subjected to retroactive antitrust enforcement a decade after the fact? Ms. Vestager is turning the EU into a banana republic on high-speed rail. …

This case is a prime example of why so many European economies can’t seem to grow: a deadly combination of high taxes, legal uncertainties and political grandstanding.