Some are saying the EC Apple Tax ruling has created huge opportunities for the UK to attract large multinational tech firms to these shores – what will the UK Government do next?
We’ve written often about the good efforts to turn the UK into the Silicon Valley of Europe. These efforts require robust digital infrastructure, fibre in the ground for high speed broadband and mobile telecoms infrastructure for seamless digital access, a strong indigenous tech sector built on access for entrepreneurs to seed and growth capital and the ability to attract large global tech firms to invest in the UK.
What others do will have an impact on investment decisions.
One question is if Apple’s treatment at the hands of the European Commission is supposed to open the floodgates for foreign tech direct investment into the UK economy, then why didn’t ex-Chancellor George Osborne’s £130m tax deal with Google parent Alphabet have the same affect? That deal was struck in January and covered a period of around the same duration as was covered in the Apple case. For those wishing to promote the UK’s tax leniency there is a nice symmetry between 13bn Euros and £130m.
This very day sees the UK Government Cabinet having a Brexit brain storm session at the Prime Minister’s official country residence.
November will see the first post Brexit budget. Will the UK Treasury drop corporation tax rates? Will it promise no retrospective taxes?
As Mr Cook said in his reaction to yesterday’s ruling, international tax is complex. And the Apple case seems mostly to be about goods which were sold. Not services.
And as we’ve covered in the past, where is the tax paid on a cloud service that is sold in the UK, hosted in an Irish data centre, supported in Belgium and where the customer is a UK pottery manufacturer selling tea cups to China?
It is to say the least, cloudy!
Extract from Tim Cook’s the apple customer letter dated August 30th 2016
“..Taxes for multinational companies are complex, yet a fundamental principle is recognized around the world: A company’s profits should be taxed in the country where the value is created. Apple, Ireland and the United States all agree on this principle.
In Apple’s case, nearly all of our research and development takes place in California, so the vast majority of our profits are taxed in the United States. European companies doing business in the U.S. are taxed according to the same principle. But the Commission is now calling to retroactively change those rules.
Beyond the obvious targeting of Apple, the most profound and harmful effect of this ruling will be on investment and job creation in Europe. Using the Commission’s theory, every company in Ireland and across Europe is suddenly at risk of being subjected to taxes under laws that never existed.
Apple has long supported international tax reform with the objectives of simplicity and clarity. We believe these changes should come about through the proper legislative process, in which proposals are discussed among the leaders and citizens of the affected countries. And as with any new laws, they should be applied going forward — not retroactively.
We are committed to Ireland and we plan to continue investing there, growing and serving our customers with the same level of passion and commitment. We firmly believe that the facts and the established legal principles upon which the EU was founded will ultimately prevail.