Apple, Google's economy with truth on tax at European Parliament

In 1986 Sir Robert Armstrong, UK Cabinet Secretary, used a euphemism for lying that had its origin in 1796 — "economical with the truth" — during a court case in Australia on the British government's request for a ban on a book by a former spy. Representatives of Apple and Google, at a meeting of a tax committee of the European Parliament in Brussels Tuesday, made emphatic statements about paying taxes but they were short of the full truth.


Apple, Google, IKEA and McDonald's agreed to explain their views in front of the committee while Fiat Chrysler and Starbucks declined.

Apple's Cathy Kearney, vice-president for operations at the Cork campus, told the members of the Special Committee on Tax Rulings that Apple is the world’s largest taxpayer, paying $13.2bn, with an effective tax rate of 26.5%, on its profits worldwide last year.

She said that the company does not operate the "double-Irish tax structure"; it pays whatever tax is due in Ireland.

The effective rate of tax is artificially boosted.

Apple for example reported a US tax liability of $6.9bn in its financial accounts in 2011. But it actually only paid the IRS $2.5bn, according to a US Senate subcommittee report in 2013.

Tim Cook, Apple CEO, in 2013, said Apple was the largest taxpayer in the US — ExxonMobil made a $31bn provision for taxes in its 2012 accounts.

Apple does not use the double-Irish tax structure because it was allowed to use offshore Irish shell companies as if they were onshore companies operating from the Cork campus — in effect there was no need to route cash generated by profit shifting via Amsterdam and an Irish company in an island tax haven. They were able to send it directly to the United States (officially it remained offshore)  — with the prospect of a tax liability indefinitely deferred.

Google’s Adam Cohen, head of economic policy for Europe, Middle East, and Africa, said Google has a tax structure in Bermuda that does not affect the amount of tax it pays in Europe. “Without Bermuda it would be the same” — that could mean several things including what he means by "Europe" or seeing that Apple achieved the same end results with the benefit of sanguine Irish authorities, Google may believe that it missed a trick!

The European Commission is investigating special tax deals between large multinationals and member states. Latest developments include the following:

In January 2016, the Commission ordered Belgium to recover an estimated €700m in unpaid taxes from 35 multinationals. The companies have benefited from a tax ruling scheme dubbed "only in Belgium", which the Commission considers to be a form of illegal state aid.
In October 2015 the Commission released two decisions stating that Luxembourg and the Netherlands have granted selective tax advantages to Fiat Finance and Trade and Starbucks, respectively. The Commission considers these illegal under EU state aid rules.
The investigation into Ireland's tax treatment of Apple is ongoing. Last December the Commission opened an investigation into Luxembourg's tax deal with McDonald's.
Tax inquiries are also a major issue in EU countries. For instance, Google and UK reached a settlement in January on payment of £130m in retrospective taxes.

Last month, IKEA of Sweden was accused of avoiding paying €1bn in taxes from 2009 to 2014 by the Parliament's Green Party. It said the company had channeled income through a Dutch company and possibly through Luxembourg and Liechtenstein. McDonald's have also had similar accusations made against the fast-food chain's tax deals with Luxembourg.

Edmund Burke (1729-1797), the renowned Irish-born parliamentarian and political thinker, was in poor health in 1796 when he wrote one of his letters on the French Revolution that were published as 'Letters on a Regicide Peace.' Oeconomy was the archaic spelling of economy.

In this crisis I must hold my tongue, or I must speak with freedom. Falsehood and delusion are allowed in no case whatever: but, as in the exercise of all the virtues, there is an oeconomy of truth. It is a sort of temperance, by which a man speaks truth with measure that he may speak it the longer. But, as the same rules do not hold in all cases, what would be right for you, who may presume on a series of years before you, would have no sense for me, who cannot, without absurdity, calculate on six months of life.

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Pic on top: Alain Lamassoure,(EPP, FR) and Bernd Lucke (ECR, DE), chair and vice-chair, at the meeting of the Special Committee on Tax Rulings, European Parliament, Brussels, 15 March, 2016.