New ‘tug of love’ over Apple’s €13bn
The new US corporate tax regime which is set to be implemented on January 1 will heighten the “tug of love” between Brussels and Washington over the €13bn in back taxes Apple owes Ireland, a leading tax expert has predicted.
Joe Tynan, head of tax at PwC, said the sweeping changes to the US corporate tax code that President Donald Trump’s White House will implement next month — earlier than seemed feasible a few weeks ago — will heighten the clashes between Europe and US over who should tap the international taxes earned by US multinationals overseas.
Apple and the Irish Government are appealing to the European Court of Justice the 2016 decision by the commission that Ireland had a sweetheart tax deal and is owned €13bn by Apple.
The iPhone maker may now argue that from January, it is paying taxes on the monies to the US, inflaming a “potential conflict” with tax authorities on both sides of the Atlantic.
Mr Tynan said from next month US-based companies, including the subsidiaries of Irish giants such as Kerry and Glanbia, will benefit from the reduction to 21% from 35% in the federal profit tax rate.
However, the gains for Irish firms like other companies there may be offset by receiving less in interest cost credits in the US.
The 21% rate will effectively rise to a US-wide average of 26% when state profit taxes are included. Those rates range between 0% in Delaware and 8% in California.
The tax on repatriating the $2 trillion (€1.7tn) held by US multinationals overseas will be set at a higher than expected rate of 15.5% but can be paid in over eight years with the clock ticking from January 1.
Mr Tynan said the prospects for the repatriation of the overseas funds was “one of the things” driving US stock markets to new high this year because investors were anticipating companies would likely fund bigger dividend payouts from the bounty.
Dermot O’Leary, chief economist at Goodbody, warned that the flows of US investment into Ireland could be affected.
“Ireland is more than just a casual observer in this change given the role US firms play in the Irish economy,” he said.
“It will take some time for the implications of the new US tax code to become fully known, but one has to at least believe a repeat of the flows of recent years are now unlikely,”
