Who’s the baddie?

13 September 2016

Rebecca Reading

Following the European Commission ruling that Apple should pay Ireland €13bn in back taxes, reaction from the US was indignant. The US Treasury accused the EC of overriding national authority. Why do the US authorities appear to be more annoyed with Brussels than they are with Apple?

The US has a very particular world view when it comes to tax. They are an outlier amongst developed economies, with a combination of high tax rates – 35 per cent, compared with twenty something being the norm elsewhere – and a base that includes repatriated foreign earnings. 

This means the US tax authority can top up their coffers by taxing a slice of profits that other countries have already taxed. This is a reason why the US objects vociferously to attempts by Europe to increase tax take to what they would defend as fairer levels. If somewhere in Europe takes more tax, the US will take less and so they protest, regardless of whether this is equitable.

The answer here would be for the US to reform its tax system, although given the mechanics of their legislature it is hard to envisage this happening any time soon. For now, we can at least realise that whereas in the UK the clampdown on tax avoidance has focussed firmly on the behaviour and attitude of multinationals, the US accuse other tax authorities, or here the European Commission, of being the baddies.

If you would like to discuss any of the points raised, please contact Rebecca Reading or your usual RSM contact.

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