Apple Inc sparks US, EU tax row

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Apple CEO Tim Cook
Apple Inc CEO Tim Cook

The United States has accused the European Union of grabbing revenue intended for U.S. coffers when it ordered Apple Inc  to pay up to $14.5 billion in back taxes, a decision that could cause friction at an international summit in China next week.

The EU executive this week retroactively scrapped a tax deal Apple had with Ireland, arguing the technology giant was effectively paying a tax rate of a fraction of 1 percent on its profits.

“I have been concerned that it reflected an attempt to reach in to the U.S. tax base to tax income that ought to be taxed in the United States,” U.S. Treasury Secretary Jack Lew said on Wednesday at an event to discuss Washington’s position ahead of a meeting of the Group of 20 industrial nations in China next week.

The Apple row is the latest spat between Brussels and Washington over company regulation. Earlier this month, the Treasury issued a detailed legal argument that the EU Commission’s approach went against European laws.

Lew said making Apple pay higher taxes in Ireland could let the company deduct those payments from what it owes to the United States, reducing U.S. tax revenues.

The European Commission rulings appeared to be highly focused on U.S. companies, Lew said.

“We think that it undermines the environment in Europe for international business because it creates uncertainty that ultimately will not be good for the European economy,” Lew said at an event hosted by the Brookings Institution in Washington.

For now, other U.S. companies under scrutiny for their EU tax arrangements are staying in the background as Lew, Apple and certain industry trade groups lead the charge against the European Union action.

Online retailer Inc (AMZN.O), for example, declined to comment on an EU investigation of the tax treatment of royalties paid by a Luxembourg unit. In the past, Amazon has said that it received no special treatment.

However, a trade group representing U.S. technology companies said it is concerned the European Union will hit other firms with retroactive penalties.

“It appears … they’ve invited folks to come forward and try and claim a piece of this settlement,” said Jennifer McCloskey, director of government affairs at the Information Technology Industry Council, a business group representing more than 60 global companies, including Apple.

The EU has ordered coffee chain Starbucks Corp (SBUX.O) to pay more Dutch taxes while Amazon and restaurant group McDonald’s Corp (MCD.N) are still being investigated. Also, the EU has made a series of accusations that Google, part of Alphabet Inc (GOOGL.O), has abused its market power.

Apple has said it will appeal the ruling, issued on Monday.

Critics in the U.S. Congress have denounced the move as a predatory money grab that would encroach on U.S. government jurisdiction and ultimately add to the federal deficit.


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