Why the US is on Apple’s side in EU decision

Reema Khrais Aug 30, 2016
HTML EMBED:
COPY
The European Union has ordered Apple to pay billions to the Irish government. Carl Court/Getty Images

Why the US is on Apple’s side in EU decision

Reema Khrais Aug 30, 2016
The European Union has ordered Apple to pay billions to the Irish government. Carl Court/Getty Images
HTML EMBED:
COPY

On Tuesday, Apple was ordered to pay Ireland as much as $14.5 billion in back taxes. That’s because the European Union ruled that the tech giant gave special and illegal tax treatment to the country.

Shortly after the decision, the U.S. Treasury Department expressed disappointment.

“The commission’s actions could threaten to undermine foreign investment, the business climate in Europe, and the important spirit of economic partnership between the U.S. and the EU,” the department said in a statement.

Last week, the Treasury Department warned that the European Commission was overstepping its powers and becoming a “supranational tax authority.”

The U.S. is trying to protect its revenue, explained Alan Auerbach, an economics professor at the University of California, Berkeley and former deputy chief of staff on the U.S. Joint Committee on Taxation.

“If Apple pays more taxes in Ireland, that means it will pay fewer taxes in the U.S. to the extent that it repatriates any of those earnings from Ireland,” he said. “[That’s] because the U.S. gives foreign tax credits for taxes paid in foreign countries.”

Another reason the U.S. is on Apple’s team?

“It’s a big engine of activity in Silicon Valley and other places in the U.S. The Treasury may feel that it’s important for Apple to remain a healthy company,” he said.

The U.S. Treasury has also complained that the commission is unfairly targeting American businesses and that its retroactive penalties go against legal principles.

“The expectation is that it would not be retroactive,” said Diane Ring, who teaches international taxation at Boston College Law School. “It would be forward-looking: ‘Ireland you shouldn’t do this again with Apple.’”

Both Ireland and Apple said they would appeal. 

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.