Apple and Margrethe Vestager - Nicole Pabello Reports

“Apple, keep your cool over global tax,” John Grapper in the Financial Times last week

After allegations over tax penalties began recently to appear more and more in the news, the FT writer spin the news with a new focus: Margrethe Vestager, the European commissioner for competition.

The Danish politician made it to FT news given her “cool” approach to the subject. So simple and neat, it actually seem taken from Apple’s founder manuals, Steve Jobs.

For many, her simple approach made it easy to understand, how come the most profitable company in the world and high taxes payable was still facing a penalty across Europe, mainly Ireland?

In 2014, Apple paid $400m in corporate taxes to Ireland being the largest taxpayer in the country. While now the country, with a very low tax subsidiary is expected to receive a penalty of 13bn Euros (38 times more than the rest of Europe).

 

How is it possible? Margrethe Vestager is not talking about an unknown company we cannot track where sales are or where the profit goes. She is talking one of the most popular companies and brands of the decade.

After many strategies as moving the Intellectual property offshore they could enjoy better it benefits, register sales in one country but only accounting them as revenues in a country with lower tax schemes and subsides. Apple ended up making revenues in Ireland where the tax in profits is 12.5 percent versus the 35 percent it would face in USA.

She made it clear to everyone, and she also made something clear, Apple had to face the penalties, no way around.

As explained by Jonh Grapper, the simplicity of her accusations made it “hard to believe it would hold u in court, where the argument is heading” but also, the way it is resumed the transfer of pricing and tax residency can make every other tax payer conclude there was a wrong doing in the company since the beginning of their tax strategy.

Although, for many, like the Irish. The argument might make no difference, they in fact on Apple’s side by not demanding the payment of the penalty.

Ireland before and during the financial crash had been welcoming major global companies to set their central European offices in Dublin. Coincidence or not, Google open his headquarter in Dublin in 2004. Accenture, a global consulting company moved to Dublin in 2009. A more recent example is a tech company Fitbit whose office open within this month in the capital of the country.

Among many other well-known companies, like Airbnb, Linkedin, dropbox, Facebook, Paypal, Ebay etc. these companies set their Central office in a low profit payable tax in Dublin. The only thing in common is not only their headquarters, but they all are a electronic, technology and online services companies that operate around the globe, and could be enjoying of the same “benefit tax scheme” as apple did “sale there, profit here”.

Is Margrethe Vestager case against Apple, going to start a trend for taxes legislation to tighten across EU? If yes, her “cool” speech will have the same coolness once high payable taxes relocate to avoid being under the same fire as Apple?

 

 

 

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