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Apple’s appealing against its EU tax bill, but thanks to President Trump, it might not need to

Published Dec 19th, 2016 5:30PM EST
Apple's EU Tax problem
Image: Niels Epting

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Apple has launched a formal appeal against a $14 billion tax ruling handed down earlier this year by the European Union. Apple has fought the decision since it was announced, painting Apple as a “convenient target” being used to generate “headlines” in the EU.

At the heart of the claim is a dispute about where Apple’s profits should be taxed. Under the agreement with the Irish government that Apple has had in place for decades, the bulk of the company’s European profits are attributed to a “head office” in Ireland, and go virtually untaxed.

This has led to Apple paying an effective 3.8% tax rate on its European earnings, well below Ireland’s published corporate tax rate, and below the rates of most other EU countries.

Surprisingly, Ireland is OK with this. It actually disagrees with the ruling of the European Commission, and is appealing against the ruling alongside Apple.

But the appeal may become a lot easier for Apple under a Trump administration. You see, if Apple brought its overseas cash holdings, said to be around $230 billion, back to the US and paid US tax on the money, it would have a much stronger case on appeal. The principle of “double taxation” holds true in most western countries: if money is taxed in one country, it can’t be taxed again (or for the full value) in another.

One of Trump’s many campaign pledges was to introduce a one-time 10% “repatriation rate” that would allow companies to bring cash back to the US and pay 10% tax, rather than the usual 35%. Tech companies in particular would be all for that, and it’s rumored that the issue was on the table when tech leaders went to kiss the ring at Trump Tower earlier this month.

Either way, a Trump administration is likely to be good for Apple’s foreign taxation battles. The key to most of Apple’s tax arguments is that the value of the products it makes — in other words, the research and design — is created in the US, so that’s where the income should be taxed. Given Trump’s favor for promoting American industries and fixing “bad deals” abroad, you can expect his administration to be fully on Apple’s side on this one.

Chris Mills
Chris Mills News Editor

Chris Mills has been a news editor and writer for over 15 years, starting at Future Publishing, Gawker Media, and then BGR. He studied at McGill University in Quebec, Canada.