On 30 August 2016, Apple was the subject of the European Commission’s most forceful blow in it’s confrontation with multinational enterprises over corporate taxation. The Company is facing a potential bill of €13bn, as the European Commission intensifies its attacks on what it perceives to be attractive arrangements granted to multinationals in low tax jurisdictions such as Ireland.
The move from the EC, the magnitude of which has blown open the debate over multinational taxation wider than we have ever seen before, will bring consequences that stretch much further than Europe and will particularly infiltrate the US election campaign, as candidates can be expected to seek to establish their positions on where and how company profits and cash should be taxed especially the intellectual property held by tech companies.
What’s clear is that the decision will create greater instability and no doubt increase the cost of doing business in the EU as all tax rulings, advanced pricing agreements or settlements of litigation will no doubt carry a yet greater risk.
The EC may have good intentions towards creating a more level playing field, but the turmoil and confusion that arises from this ruling and the other recent and pending state aid cases is not conducive to improved business and investment confidence at a time when corporates are facing the challenges of slow growth across global markets. The EC needs to give us all clear rules that both multinational enterprises and national governments can rely upon in planning and governing their affairs, and the sooner that happens the better for all concerned. A tax bill of €13bn is not immaterial for any organisation.