Apple Steps Up Lobbying Efforts Against European Tax Probe

  • Cook met with European Commission antitrust chief in Brussels
  • U.S. Senators come to Apple's defense against tax penalty

Apple Inc. is pushing back against an European tax investigation that could force the iPhone maker to pay more than $8 billion in back taxes.

Chief Executive Officer Tim Cook met with the European Commission’s antitrust chief Margrethe Vestager in Brussels on Thursday to press the company’s case. After the meeting, Cook sent out a tweet highlighting figures showing that the company’s products support more than 1.4 million jobs across Europe. Meanwhile, government officials on both sides of the Atlantic have come to the company’s defense to lobby against a penalty.

Apple is being scrutinized by European officials, who accuse the company of using subsidiaries in Ireland to avoid paying taxes on revenue generated abroad. While Apple generates about 60 percent of its sales outside the U.S., its foreign tax rate is about 1.8 percent, according to Bloomberg Intelligence analyst Matt Larson.

“If the commission follows its own precedent” from recent cases “and effectively requires Ireland to impose the statutory tax rate, Apple will be looking at around 10 percentage points of tax on substantially more than a hundred billion dollars of profit from a decade of sweetheart deals,” said Alex Cobham, director of research at the Tax Justice Network.

An Apple logo sits on a sign at the iPhone maker’s campus in Cork, Ireland.
An Apple logo sits on a sign at the iPhone maker’s campus in Cork, Ireland.
Photographer: Aidan Crawley/Bloomberg

Kristin Huguet, a spokeswoman for Cupertino, California-based Apple, confirmed Thursday’s meeting between Cook and Vestager without commenting further.

U.S. lawmakers have weighed in. The top members of the Senate Finance Committee, the panel in charge of writing tax code, wrote a letter to U.S. Treasury Secretary Jack Lew last week urging him to lobby European regulators against imposing a penalty on Apple and other U.S. companies that have been caught up in an wide-ranging investigation into tax avoidance.

The European Commission contends that Apple’s corporate arrangement in Ireland allows it to calculate profits using more favorable accounting methods. Apple determines its tax bill using low operating costs, a move that dramatically decreases what the company pays to the Irish government.

Irish Prime Minister Enda Kenny also defended its relationship with Apple on Thursday, calling the claims the country is a tax haven "false and baseless." If Ireland is found to have traded a special tax deal with Apple in exchange for a pledge to creating jobs in the country, it could be forced to recoup the billions of euros in back taxes.

A decision may come as soon as March, though regulators are still seeking information on the case, which could mean it will take longer.

Apple isn’t the only U.S. company being investigated. U.S. companies facing scrutiny from officials in Europe include Starbucks Corp., Amazon.com Inc. and McDonalds Corp.

Apple’s tax policies have been a source of controversy for years. In 2013, Senate investigators released a report accusing Apple of not paying corporate income tax to any government on tens of billions of dollars of overseas income. Cook, who testified before Congress about the topic, has maintained that Apple pays all the taxes it owes and that the criticism was “political crap.”

Apple has throughout its history mostly avoided entangling itself with high-profile policy debates. But as the company has grown -- now the world’s most valuable at about $540 billion -- that stance has changed. Cook has called for revamping the U.S. tax code so American companies can bring overseas money back to the U.S. without a big tax hit. He’s also been an outspoken advocate for encryption and blocking governments from gaining access to digital communications.

Apple spent $4.48 million on lobbying in the U.S. last year, up from $4.11 million in 2014, according to Consumer Watchdog, a nonprofit public interest group. That’s still less than the $16.8 million that Google Inc. spent in 2015.

As part of its push against the European probe, Apple on Thursday released a batch of data showing its influence on region’s economy. The company employs 22,000 people directly, with more than a million more jobs created through the ecosystem of developers who make applications for the iPhone and other Apple products.