You must have heard by now that the European Commission have served Apple with a tax bill for alleged tax evasion in the European Union. What you might not be aware of is the magnitude of penalty that Apple has been asked to pay. The amount is a whopping 13 billion Euros!Let’s do some quick math: € 13 billion = ₹ 972,540,000,000. That’s Ninety Seven Thousand Crore Rupees! Just to put it in perspective, our Union Budget allocated 88,000 crores towards rural development in 2016. So, Apple’s tax liability is worth more than what the government of India thinks it will take to fix our entire broken rural infrastructure.
How did this happen?
The European Commission had been investigating Apple for the past three years. Minor breaches of laws aside, the largest point of contention was a tax deal that Apple had with Ireland. According to The Guardian, the deal “allowed Apple to pay a maximum tax rate of just 1%. In 2014, the tech firm paid tax at just 0.005%. The usual rate of corporation tax in Ireland is 12.5%.
The European competition commissioner, Margrethe Vestager, who was leading the investigation clarified:
“Member states cannot give tax benefits to selected companies – this is illegal under EU state aid rules. Ireland’s tax arrangements with Apple between 1991 and 2015 had allowed the US company to attribute sales to a ‘head office’ that only existed on paper and could not have generated such profits.”
What’s Apple saying?
What can Apple say!? A tax bill is a legal document. It’s not an unworthy opinion you can just disregard and ignore. However, like any other legal document, it’s validity can be contested for. And that’s exactly what Apple is doing. Tim Cook has declared that there is nothing wrong with what they were doing and that the tax bill issued by the European Union is just “absurd”.
Apple is essentially doing what we in India call: “Hum upar tak jayenge!”
Many market analysts, however, are saying that Apple is overreacting. It’s not as if the development has taken place overnight. Apple had it coming for quite some time now. So it was only a matter of time before the law caught up with Apple. And everyone seemed to have taken that as granted. Everyone except Apple, of course.
The theatrics being displayed by Apple have been excellently captured in this title by Quartz, that says, “Apple is shocked —shocked! — at a massive tax penalty that everybody saw coming.” Sarcasm isn’t dead after all!
Cook’s lament
In an open letter to the public, Tim Cook defended his company like a noble leader, claiming, “The opinion issued on August 30th alleges that Ireland gave Apple a special deal on our taxes. This claim has no basis in fact or in law.” Cook also warned that the “Commission’s move is unprecedented and it has serious, wide-reaching implications.”
The letter is powerfully worded and it draws on both emotion and the sheer influence Apple has over the world economy. There’s a slight hint of aggression there as well, showing that Apple is not afraid to flex its political and financial muscles, should it come to that.
Cook concludes by trying to take a moral high-ground, accusing the European Union itself of greed. He wrote:
“At its root, the Commission’s case is not about how much Apple pays in taxes. It is about which government collects the money.”
While the application of international tax laws does differ from nation to nation, just the amount of money that Apple has pumped into this off-shore account reeks of guilt. And no matter how much Cook swears by the purity of those funds, we’ve seen enough Hollywood movies to know that an off-shore account spells trouble!
This monstrous amount has broken several records for figures appearing on a tax bill. More importantly, it has shattered the aura of invincibility that Apple had generated around it for many years now. It has also started new debates on how corporations should be allowed to use their international accounts and how the nations themselves need to come a unified set of laws for multinationals.
As of now, a majority of legal experts believe that Apple is on the wrong side of the line. However, what they disagree about is just how far across the line has Apple gone. Cook obviously thinks that they never crossed the line. The European Union, on the other hand, is quoting Joey Tribbiani: “Over the line? You’re so far past the line that you can’t even see the line! The line is a dot to you!
