Friday 28 October 2016

US allies ‘racing to the bottom’ with tax policy

President Obama makes thinly veiled criticism of Ireland's deal with Apple

Published 06/09/2016 | 02:30

US President Barack Obama speaks to media after the G20 closing in Hangzhou, China. (Photo by Lintao Zhang/Getty Images)
US President Barack Obama speaks to media after the G20 closing in Hangzhou, China. (Photo by Lintao Zhang/Getty Images)

US President Barack Obama has accused allies of the United States of "racing to the bottom" with their tax policies, as Ireland and Apple remain in the spotlight following last week's ruling by the European Commission.

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At the G20 summit in China, President Obama said he had raised tax avoidance with leaders from the world's 20 biggest economies at the G20 summit in the eastern Chinese city of Hangzhou, but did not specifically mention the Apple case.

European Commission President Jean-Claude Juncker. REUTERS
European Commission President Jean-Claude Juncker. REUTERS

Ireland made global headlines last week after the ­European Commission ruled that Apple owed up to €13bn in back taxes to the State.

Without naming Ireland, President Obama said some of the US's "closest allies" were embarking on a race to the bottom in terms of tax policies, leading to revenue shifting and tax avoidance in the United States.

And without naming the European Commission or the technology giant, he said there are risks when decisions regarding tax avoidance are taken unilaterally, rather than jointly with other states.

"The one thing that we have to ensure we do is to move in concert with other countries," President Obama said.

"Because there is always a danger that if one ... acts unilaterally, that it's not just a matter of a US company being impacted, but it may also have an impact in terms of our ability to collect taxes from that same company.

"In the same way, we then have to do some coordination with even some of our closest allies racing to the bottom in terms of how they enforce their tax policies in ways that lead to revenue shifting and tax avoidance in our country," President Obama added.

The ruling by the Brussels competition watchdog - described by Finance Minister Michael Noonan as bizarre and outrageous - found Ireland gave Apple a sweetheart deal which ultimately allowed the iPhone maker to pay 0.005pc tax on its European profits in 2014.

Read more: The Government must learn lessons from the Apple debacle

The tech giant's chief executive Tim Cook branded the numbers set out in Commissioner Margrethe Vestager's ruling as untrue and maddening.

The ruling against Apple has pushed the issue into the limelight and raised the risk of significant push-back from the United States, where some lawmakers are saying it represents a European encroachment on the US potential tax base.

President Obama said tackling the issue effectively was important to "regain the trust" of people who feared the system is rigged, but that it would not be fixed overnight.

The EU decision against Apple comes amidst a coordinated global initiative to crack down on tax evasion by multinational companies, spearheaded by the Paris-based Organisation for Economic Cooperation and Development (OECD).


While Apple chief Cook last week described the ruling as "total political crap", France and Germany have come out to back Brussels on the decision.

European Commission President Jean-Claude Juncker said on Sunday in China that the ruling against Apple was clearly based on facts and existing rules and was not a decision aimed against the United States.

"Our rules on state aid have always been clear," said Mr Junker.

"National authorities cannot give tax benefits to some companies and not to others.

Read more: Martin: It's wrong that we are in the dark on Apple ruling

"This is the level playing field that the Commission is always working to defend."

He also said that "all companies must pay their fair shares of taxes in the countries where they make their profits".

German finance minister Wolfgang Schauble has also come out strongly in favour of the €13bn Apple tax ruling.

During the bailout, Michael Noonan insisted that Mr Schauble was "a friend" to Ireland and would not do anything to damage the country.

Mr Schauble said individual states should not give "undue advantage" to companies.

Irish Independent

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