EU ruling on Apple stirs calls for U.S. tax reform

Tue Aug 30, 2016 8:44pm EDT
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By David Morgan and Jason Lange

WASHINGTON (Reuters) - A European Commission order requiring Apple Inc (AAPL.O: Quote) to pay Ireland $13 billion euros ($14.5 billion) in unpaid taxes on Tuesday drew swift rebukes from the Obama administration and lawmakers in Congress, while reigniting calls for U.S. tax reform.

The White House and the Treasury Department, which enforces federal tax policy, warned that U.S.-EU economic relations could be affected by the European Commission's ruling that Apple had received illegal state aid under its agreement with Ireland.

Business groups protested. The Business Roundtable, which represents U.S. chief executives, called the decision "an act of aggression" against a law-abiding U.S. company and a sovereign government.

Members of both parties in Congress pointed to the stunning decision as evidence that the U.S. tax code should be rewritten to give American companies an incentive to bring home some $2.1 trillion in U.S. corporate profits held abroad. But there was no sign that lawmakers were any closer to bridging the substantial divides that have prevented agreement up to now.

"Above all, this is yet another reason why we need to fix our tax code," House Speaker Paul Ryan, the highest-ranking elected Republican, said in a statement. "Today's decision should be a spur to action."

Apple was found to be holding over $181 billion offshore, more than any U.S. company, in a study published last year by two left-leaning nonprofit groups: Citizens for Tax Justice and the U.S. Public Interest Research Group Education Fund.

"This is yet another example of why we need to reform the international tax system to ensure these revenues come home," said Senator Charles Schumer, the chamber's No. 3 Democrat.

Even the European Commission voiced indirect criticism of the U.S. tax code, suggesting that Washington could require Apple's Irish operations to pay larger amounts of money to the U.S. parent to finance research and development, which would increase Apple's U.S. tax bill.   Continued...

A sign is seen outside the Apple Store in Covent Garden in London, April 10, 2015. The Apple Watch, CEO Tim Cook's first new major product, was today available for pre-order online and to try out in stores - but not take home.  REUTERS/Toby Melville