Top US firms back Apple in EU tax dispute

The European Commission ruled last month that the tax agreements Apple devised with Ireland constituted illegal state aid and ordered the country to recover at least €13 billion from the tech giant.
The European Commission ruled last month that the tax agreements Apple devised with Ireland constituted illegal state aid and ordered the country to recover at least €13 billion from the tech giant.PHOTO: EUROPEAN PRESSPHOTO AGENCY

Ruling may turn investment away, say 185 bosses in letter to Merkel

WASHINGTON • Chief executives of top companies in the United States are urging the European Union to reverse a ruling that requires Apple to reimburse Ireland for €13 billion (S$19.8 billion) in underpaid taxes, calling the move a "grievous self-inflicted wound".

As many as 185 US corporate chiefs, who are already grappling with uncertainty over the outcome of the US presidential election, said in letters sent to leaders last Thursday that the tax clampdown threatens to scare away investment by legitimising abrupt reversals of government policy overseas.

"In the interest of all countries that respect the rule of law, this decision must not be allowed to stand," said a letter from the Business Roundtable - through which the American corporate chieftains petitioned - to German Chancellor Angela Merkel, seen by the Financial Times (FT).

The push for national governments to intervene marks an escalation in US attacks on the EU, whose decision has already been slammed as "political crap" by Apple boss Tim Cook, said the FT in a report yesterday.

Last month, the European Commission ruled that favourable tax arrangements Apple devised with Ireland constituted illegal state aid between 2003 and 2014, and ordered Ireland to recover at least €13 billion from Apple.

The push for national governments to intervene marks an escalation in US attacks on the EU, whose decision has already been slammed as "political crap" by Apple boss Tim Cook, said an FT report.

EU member states, acting unanimously, can override the commission in state-aid cases under "exceptional circumstances", the FT reported, but only before a final decision is taken to recover illegal aid.

The newspaper said that it may, therefore, be too late for EU member states to overturn the Apple ruling. Besides, many EU countries back the tax penalty; French Finance Minister Michel Sapin called the decision "entirely legitimate".

But the decision, the letter to Dr Merkel warns, would set a precedent that undermines the legal certainty businesses need to make large-scale investments, reported the FT. It would be "a grievous self-inflicted wound for the European Union and its citizens", the corporate chiefs said.

"Other countries outside the EU will interpret the decision as acceptable governmental behaviour and will put all companies with cross-border investments - including EU-headquartered companies - at risk of having their assets expropriated by foreign governments seeking extra revenue or seeking to punish a successful foreign competitor," they added.

There are already signs that non-EU countries are following Brussels' lead, said the report.

Japan last Friday ordered Apple to pay 12 billion yen (S$160.5 million) in back taxes after the authorities ruled the company was liable for withholding tax on royalties paid from a local subsidiary to an Irish holding company.

The Business Roundtable counts among its members the heads of Caterpillar, Xerox, Honeywell, Lockheed Martin, Dow Chemical, Walmart, ExxonMobil, AT&T, GE and JPMorgan. Apple's Mr Cook is not part of the group.

The administration of US President Barack Obama has also been sharply critical of the commission and accused it of behaving like a "supranational tax authority".

A version of this article appeared in the print edition of The Sunday Times on September 18, 2016, with the headline 'Top US firms back Apple in EU tax dispute'. Print Edition | Subscribe