European Ruling Highlights Apple's Corrupted Business Model

By William Lazonick

Aug 31, 2016

There is much for U.S. authorities to learn from the European example of forcing corporations to pay their fair share of taxes, but more far-reaching oversight of executives’ allocation of resources is also required

The European Commission’s decision to serve Apple with a 13 billion euro tax bill represents a step forward in compelling multinational companies to pay the taxes that they owe in the countries in which they do business. The Commission has determined that tax deals between Apple and the Republic of Ireland as far back as 1991 violated the tax laws of the European Union, of which Ireland is a member state. Both Ireland, which stands out within the EU for its “multinational friendly” tax regime, and Apple, which makes a business of avoiding taxes at home and abroad, claim that their tax agreements were legal, and hence that the EC’s attempt to claw back taxes is without merit. Apple will appeal the EC’s decision, and the courts will decide.

The U.S. government should be applauding the EC’s attempt to bring a measure of rationality to international corporate tax law. It was in May 2013 that the U.S. Senate Permanent Subcommittee on Investigations called Apple CEO Tim Cook on the carpet to answer for the company’s use of its global operations to game the U.S. tax system.

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