Apple vs the EU: Transfer Pricing Experts React

In a hardline move on corporate tax evasion, the EU Commission has declared that Apple must repay up to €13 billion in unpaid taxes.

You can read the decision itself here, but in the meantime we asked some respected industry figures for their opinions…

“The Apple tax ruling has been several years in the making so was not exactly a surprise but the amount involved is certainly in excess of most expectations. Apple and the Irish government are going to appeal the decision so the story and the issue will no doubt run for years to come, but the key takeaway for multinational taxpayers is that the goalposts in the transfer pricing world have changed irrevocably, and the old structures however efficient can no longer be assumed to be fit for purpose in coming years. With the far greater transparency of value chain profitability and tax/transfer pricing structures that will be the key consequence of the introduction of country-by-country reporting in the coming 1-2 years, tax authorities and competition authorities alike will increasingly challenge multinationals in this way, especially where significant profits are recognised for tax purposes in locations or entities that have little or no substance. In this regard, the Apple ruling could be the start of things to come. The issues that the case highlights are not unique to Apple, and all multinationals would be well advised to carry out a holistic prudential review of their global transfer pricing arrangements to identify risks arising as a result of the increased transparency and CbC and other disclosure requirements being implemented globally. There will remain opportunities to manage the overall effective tax rate to reasonable levels, but this needs to be done carefully to ensure that profits are aligned with economic substance and that when challenged this can be demonstrated to the satisfaction of tax authorities and all other stakeholders (including, increasingly, the global media).”

Douglas Fone, Managing Director, Quantera Global

“The appeal is likely to centre on a) whether the Commission has been incorrect to extend the State Aid rules to tax matters, b) whether it is inappropriate for it to become, in effect, a super-tax authority which does not recognize its Member States' tax treaties and c) whether it is wrong for it to apply contemporary transfer pricing standards to events that took place 25 years ago in a Member State that did not have transfer pricing rules at the time. These seem to be more points of law than quantitative issues, but the widely varying estimates of the likely tax impact are indicative of the difficulty of making a robust calculation and it is likely that further, independent advice may eventually be called for in this respect.”

Daniel Beeton, Managing Director, Duff & Phelps

If you wish to contribute to a further series on this topic, or just have something to say on the matter, please email lorna.mackinnon@informa.com.