Lawmakers Criticize Europe for Going After Apple’s Back Taxes

Calls to make U.S. tax system more attractive for multinational corporations

Photographers take iPhone photos of Apple CEO Tim Cook during a 2013 Senate hearing on offshore profit shifting and charges that Apple was avoiding taxes. (Tom Williams/CQ Roll Call file photo)
Photographers take iPhone photos of Apple CEO Tim Cook during a 2013 Senate hearing on offshore profit shifting and charges that Apple was avoiding taxes. (Tom Williams/CQ Roll Call file photo)
Posted August 31, 2016 at 11:46am

A bipartisan group of lawmakers accused European authorities of a money grab by seeking more than $14.5 billion in back taxes from Apple Inc.’s Ireland operations, and some are using the case to call for a tax overhaul.

The European Commission concluded Tuesday that Ireland should recover 13 billion euros in “unpaid taxes” — plus interest —from the tech giant’s operations in the country.

House Ways and Means Chairman Kevin Brady said the decision is “a predatory and naked tax grab” and called for Congress to act on making the U.S. tax system more attractive for multinational companies to remain in the country.

“This is occurring because our uncompetitive tax code strands American profits overseas instead of allowing businesses to bring those profits home to reinvest in our jobs, research, and growth,” the Texas Republican said in a statement. “Instead of standing by and allowing other countries to deliver multibillion-dollar tax bills to American companies, Washington should act now to ensure this doesn’t happen again.”

Sen. Charles E. Schumer also called for an overhaul of the tax system to require multinational companies to bring their revenues back to the United States.

“This is a cheap money grab by the European Commission, targeting U.S. businesses and the U.S. tax base,” the New York Democrat said in a statement.

[Obama to Congress: End ‘Insidious’ Corporate Tax Inversions]

At the White House, Press Secretary Josh Earnest said the Obama administration is “concerned about a unilateral approach in state aid negotiations that threaten to undermine progress that we have made collaboratively with the Europeans to make the international taxation system fair.”

If European officials have gripes with international tax regimes, they should work on those matters “jointly” with the United States and other governments, he added.

Earnest also warned that the billions in back taxes “could be treated in the U.S. tax system as a current tax payment that would allow, essentially, Apple to deduct that EU tax payment from their U.S. taxes,” a move he said would not be fair to American taxpayers.

Sen. Ron Wyden of Oregon raised the same concern, noting in a statement that “because of the way our outdated tax laws work, American taxpayers could be on the hook for a big portion of this penalty.​”

Wyden, the top Democrat on the Senate Finance Committee, said the panel will work with the Treasury Department to monitor the case.

“This ruling could set a dangerous precedent that undermines our tax treaties and paints a target on American firms in the eyes of foreign governments,” he said.

Many technology companies based in the United States, including other major players such as Google and Facebook, have operations in Ireland, which has a corporate tax rate of 12.5 percent.

[Corporations Won’t Wait for Tax Reform, So Why Should Congress?]

Apple and other multinational companies argue they are discouraged from bringing their overseas profits back to the United States because the money would be subject to a 35 percent corporate tax rate.

Lawmakers have been watching the broader issue of multinational companies’ taxes for years.

In May 2013, Apple CEO Tim Cook appeared before a Senate panel to answer questions about the company’s foreign profits held by affiliates based in Ireland.

Lawmakers including former Democratic Sen. Carl Levin of Michigan and Republican Sen. John McCain of Arizona said Apple was avoiding paying U.S. taxes by shifting its profits overseas.

Cook said a lower U.S. corporate tax rate would help encourage Apple and other companies to bring their overseas profits back to the country.

In its decision Tuesday, the European Commission said that “Ireland granted illegal tax benefits to Apple,” an assertion the country and the company dispute.

Michael Noonan, Ireland’s minister of finance, said in a written statement that he plans to “seek Cabinet approval to appeal the decision before the European courts.” 

In an open letter on Apple’s website, Cook said Apple also plans to appeal the European Commission’s decision and is confident the order will be reversed.

Cook argued that the company “never asked for, nor did we receive, any special deals.”

John T. Bennett contributed to this report.