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Apple tax ruling may have offshore impact

The European Union has demanded Ireland claw back up to $14.5 billion in back taxes from tech giant Apple — a move that could impact on Bermuda.

Yesterday an expert said that the ruling — the biggest ever under the EU's state aid rules — may be part of a renewed drive to target jurisdictions branded tax havens.

Nathan Kowalski, chief financial officer of Anchor Investment Management and a columnist for The Royal Gazette, said: “The EU's huge tax assault on Apple comes at a time when governments everywhere are trying to up taxes to tackle ever-growing entitlements, debt and other fiscal liabilities.

“The whole global tax system appears to be going through a period of upheaval and transfer pricing schemes are being questioned it seems daily.

“How this ultimately plays out is impossible to determine at this stage and I'm sure we will see appeals.

“As for offshore jurisdictions some would argue that they may become more attractive if other countries become aggressive on tax collections.

“The other side of this, however, is that any jurisdiction that may offer some form of advantageous tax situation could become a focal point for disruption.

“If the ultimate aim of the OECD — and countries desperate for tax revenue — is to force taxes to be paid where goods are sold then shifting profits and/or costs from one jurisdiction to another to minimise taxes will likely become less effective — thus limiting the benefit of offshore strategies in some cases.”

Mr Kowalski was speaking after the EU ruled that Ireland should collect taxes going back a decade from the Silicon Valley giant after it decided legal tax breaks amounted to state aid.

EU regulations forbid companies from gaining advantages over competitors because of help from governments.

The European Commission said tax arrangements offered by Ireland to Apple in 1991 and 2007 allowed the firm to pay annual tax rates of between 0.005 and 1 per cent on its European profits for more than a decade up to 2014, by designating a tiny proportion of its profits as taxable in Ireland.

Both Apple and the Irish government said they planned to appeal against the decision.

Tim Cook, Apple chief executive, said: “Apple follows the law and we pay any taxes we owe.”

He added: “The European Commission has launched an effort to rewrite Apple's history in Europe, ignore Ireland's tax laws and upend the international tax system in the process.”

And Michael Noonan, the Irish finance minister, said: “I disagree profoundly with the Commission's decision.”

And he said Ireland would lodge an appeal in the European courts to “defend the integrity of our tax system”.

The EU move has also angered the US Treasury, which has argued that the EU unfairly targets US companies and acts outside international tax convention.

A Treasury Department spokesman said: “Retroactive tax assessments by the Commission are unfair, contrary to well-established legal principles and call into question the tax rules of individual member states.”

Apple: ordered to pay more than $14 billion in Irish back taxes

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Published August 31, 2016 at 9:00 am (Updated August 31, 2016 at 9:39 am)

Apple tax ruling may have offshore impact

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