First Click: Apple's tax dispute sets the stage for a US-EU showdown

September 1st, 2016

The European Commission’s decision on Apple’s tax deals in Ireland sent shockwaves across the world this week, after the Irish government was ordered to collect up to $14.5 billion in back taxes from the company. Both Apple and Ireland have said they’ll appeal the decision, with CEO Tim Cook writing a lengthy letter in defense of the company’s tax practices.

Experts say the decision could mark a shift in how the EU polices so-called sweetheart tax deals for multinational companies, following similar decisions against Amazon and Starbucks. But the Apple dispute has recently entered the political realm, as well — and it won’t be settled anytime soon.

The White House came out in defense of Apple this week, arguing that the EU does not have the authority to act unilaterally in the case, and that the decision could harm American taxpayers if Apple deducts its Irish tax bill from the amount it owes the IRS. In a statement Tuesday, the Treasury Department described the Commission’s retroactive tax decisions are “unfair” and “contrary to well-established legal principles.”

Cook sharpened his tone in an interview with the Irish Independent newspaper published Thursday, describing the EU ruling as “total political crap,” and suggesting that it may have been spurred by anti-American sentiment.

But European officials have stood by the decision, suggesting that US law encourages tax avoidance among corporations, and maintaining that Ireland’s tax arrangements constituted a form of illegal state aid that benefited Apple at the expense of other businesses. Had the US adopted stronger laws on overseas taxation, the decision may have been different, the EU said.

Neither Hillary Clinton nor Donald Trump have weighed in on the matter, and it will be interesting to see if and how the issue plays out during the presidential campaign. Apple and its low tax bills have suddenly become an avatar of US interests, and there is already speculation that Facebook could be the next tech giant to be targeted by European regulators. But the standoff will certainly extend well beyond the election cycle, as it will take years for a final decision to be reached.


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