European Commission: Does Apple, Starbucks and Fiat really pay their taxes?

Press conference by Joaquín Almunia, Vice-President of the EC, on the investigation of the EC on transfer pricing arrangements on corporate taxation of 3 companies (EC Audiovisual Services)

Press conference by Joaquín Almunia, Vice-President of the EC, on the investigation of the EC on transfer pricing arrangements on corporate taxation of 3 companies (EC Audiovisual Services)

The European Commission (EC) decided two days ago to conduct an investigation which will focus on the tax affairs of Apple, Starbucks and Fiat Finance and Trade in Ireland, the Netherlands and Luxembourg respectively. Basically, EC’s purpose is to examine if the tax authorities of the aforementioned countries are in line with the rules of European Union on state aid and whether the three multinational enterprises (MNE) have paid the correct amount of corporate income tax or not.

Transfer pricing: a way to avoid taxes

One of the methods to help enterprises “play” with their income statements is called transfer pricing. It refers to prices set for goods or services by a subsidiary of a corporate group to another subsidiary of the same corporate group. This practically means that a company can transfer profits to one of its subsidiaries in another country in order to take advantage of lower corporate income taxable basis. Consequently the company pays less money by being applied to a more favourable taxable basis. However this practice apart from common is also legal but to the extent it complies with the EU rules on state aid.

Preliminary results show possible guilt

The EC, before claiming the above, has done a research which at first showed that it is probable that the EU counties involved have underestimated the taxable profit and let the respective MNEs go without paying the right amount of taxes. The money not paid influenced the government’s budgets negatively. Commission’s Vice President in charge of competition policy Joaquín Almunia had to say on this: “In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes. Under the EU’s state aid rules, national authorities cannot take measures allowing certain companies to pay less tax than they should if the tax rules of the Member State were applied in a fair and non-discriminatory way”.

Ireland: a case from the past

It is old news that the US tech “giant” has been favoured by the Irish government with regards to its income tax rate. Last year’s US Senate report revealed a deal which implied a “beneficial” (for Apple) tax rate of only 2% by Ireland to Apple’s local subsidiaries. Of course Ireland denied this, as they do now against the EC, stating that the same corporate tax rate is applied to each and every firm. It should be mentioned also here that Ireland’s tax authorities have provided all the so far necessary information to the Commission’s officials. However, it is not only Apple’s case that should be investigated but other MNEs like Google which also has subsidiaries in Ireland.

Starbucks deal and Luxembourg’s lack of collaboration

Starbucks stated at a previous investigation that it had received a “favourable” agreement with the Netherlands which let them benefit from low tax rate. The EC mentioned that the Netherlands gave them all the information needed and Eric Wiebes, the Dutch finance secretary, said that he is confident the outcome of the investigation will show compliance with the EU rules. However, the EC didn’t have the full cooperation of Luxembourg. The tax authorities provided the Commission with only a limited amount of information that was asked and the representative of Luxembourg Finance Ministry refused to make any comment on this.

EC’s efforts on competitiveness

Will the EC be able to achieve a more competitive environment for companies within the EU or just pretending to help? Will these investigations have a worthwhile impact? Algirdas Šemeta, Commissioner for Taxation said on Wednesday’s meeting: “Fair tax competition is essential for the integrity of the Single Market, for the fiscal sustainability of our Member States, and for a level-playing field between our businesses. Our social and economic model relies on it, so we must do all we can to defend it”. Even if it seems that he shows great concern, the situation doesn’t change for the better.

Could it be because multinationals still have the power to influence governments and make loads of money?

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

UN appeals for international support as flood waters rise in wake of second Mozambique cyclone

Day of the Seafarer: Commissioner Vălean supports the rights of seafarers and their vital role

Multilateralism must weather ‘challenges of today and tomorrow’ Guterres tells Paris Peace Forum

SMEs are the most valuable partners. Here’s why

COVID-19: lessons from Italy on public-private healthcare procurement

International Women’s Day 2019: women’s power in politics

Azeri natural gas will keep the EU warm soon

Intervene, don’t overthink – the new mantra of systems design

Strengthening security through an EU-wide information system

Italy’s dilemma after Merkel-Hollande agreed loose banking union

The US may be “open” to reviving TTIP, while the EU designs the future of trade with China

Further reforms will promote a stronger and more inclusive Hungarian economy

Making money from meeting the SDGs? An overarching approach to sustainable development.

How to keep essential value chains moving during the COVID-19 crisis

These countries are leading the way in green finance

JADE Testimonial #1: Marcello @ Enlargement

Macron leads EU-wide minimum wage call as Merkel, Medvedev warn of global injustice

Should tech companies pay us for our data?

Palestine refugees’ relief chief warns Security Council money to fund Gaza operations will run out in mid-June

EU Commission says falling labour remuneration leads to deflation and damages growth prospects

THE COMMITTEES: ‘All roads lead to the Fifth’

‘Do everything in your power to tackle climate change’ UN chief urges on Mother Earth Day

Ten UN peacekeepers killed in a terrorist attack in northern Mali

The European Sting @ the European Business Summit 2014 – Where European Business and Politics shape the future

EU prepares a banking union amidst financial ruins

MEPs back plans to boost joint assessment of medicines

Deep science: what it is, and how it will shape our future

2019: A deadly year for migrants crossing the Americas

18th European Forum on Eco-innovation live from Barcelona: What’s next for eco-labelling?

This Chinese megacity is building a massive car-free district

UN experts voice ‘deep concern’ over Iran’s ‘consistent pattern’ of denying life-saving medical treatment to detainees

EU and UK soon to be in a post-Brexit rush over free trade agreement with Australia

China in my eyes

Sudan: ‘Violence must stop’, says UNICEF chief, ‘gravely concerned’ over 19 child deaths since military backlash

The eight types of AI you should know about

3 things the G20 can do to save the World Trade Organization

What Mary Poppins teaches us about behavioural economics

This year’s Earth Hour is going digital due to the COVID-19 pandemic

Harnessing the power of nature in the fight against climate change

FROM THE FIELD: Photos highlight agony of West African civil wars

Climate change is forcing 20 million people a year from their homes, Oxfam says

EU invests in green projects and bans single-use plastics while climate change requires more to be done

UN mourns death of former Secretary-General Kofi Annan, ‘a guiding force for good’

Haitian President at General Assembly calls for essential development aid as UN mission shifts away from peacekeeping

How Cameron unwillingly helped Eurozone reunite; the long-term repercussions of two European Council decisions

UN chief ‘deeply alarmed’ over military offensive in south-west Syria

Ebola situation worsening in DR Congo, amidst growing ‘funding gap’ UN health agency warns

What we’ve learned about mental health from young people

Is Universal Health Coverage really available for all in the European Union?

This is how we can help Australia organize the world’s generosity

COVID-19: Commission steps up research funding and selects 17 projects in vaccine development, treatment and diagnostics

Transport Committee pledges to stop empty flights due to COVID-19

Mobile World Congress Shanghai 2019, in association with The European Sting

UN chief calls for ‘a fair globalization’ with first-ever Global Goals Summit

3 reasons why data is not the new oil – and why this matters to India

More than 90 per cent of Africa migrants would make perilous Europe journey again, despite the risks

THE COMMITTEES: ‘All roads lead to the Fifth’

These forms of exercise are best for your mental health

4 ways to build businesses that work for good, right now

It’s just electronic cigarette, don’t worry?

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s