(Image source from: Apple)
Are companies like Apple, Starbucks and Fiat dodging taxes by enjoying selective treatment from countries like Ireland and Holland? European officials are probing whether these companies have entered into some arrangements with these governments.
The European Commission believes that these companies are indulging in transfer pricing arrangements, which may underestimate taxable profits. This gives undue advantage to these companies, which is unfair as well as illegal. European Commission has come to this conclusion based on a preliminary analysis.
Companies are said to indulge in transfer pricing, when they move taxable profits from one part of the group to another, usually in a different country, by showing inflated cost incurred in goods or services that has been sourced internally. Few years back, a famous multi-national food chain operating in India was also indulging in transfer pricing. They used to source raw potatoes used in french fries from their mother country stating specific requirement. But actually they were moving the profit to their home land by paying less tax.
European antitrust chief Joaquin Almunia has made it clear that in current timen when countries were following tight public budgets, it vital that large multinationals should also pay their fair share of taxes in the countries where they operate.
Apple (AAPL, Tech30), Starbucks (SBUX), Amazon (AMZN, Tech30) and Google (GOOG) have come under the notice of lawmakers in Europe as well as America. These companies have been allegedly taking undue advantage of transfer pricing to reduce their tax bills in large markets.
For example, Apple paid only 2% on profits attributed to its Ireland subsidiaries, where the corporate tax is as high as 12.5%. According to tax experts, companies like Apple seem to allow offshore subsidiaries to enjoy very large profits, as it helps them to exploit tax loopholes.
However, these companies insist that they have been paying all the tax due.
However, an Apple spokesperson denies that the company is receiving any selective treatment from the Irish government. He attributes the success and growth of the company in Ireland to the hard work of Irish employees in Apple and not from any special tax deal.
Even Starbucks denied any special arrangement. A spokesperson from the company stated that Starbucks follows international guidelines and complies with all relevant tax rules. The European Commission probe includes tax compliance of Starbucks in the Netherlands. The company has its European headquarters and a coffee roasting operation in the Dutch country.
Meanwhile automaker Fiat, whose tax affairs in Luxembourg are under the in-depth probe of the Commission, has declined to comment on the issue.
The government of Ireland has promised full cooperatin to the European Commission probe. Irish government was confident that no such breach of EU rules on state aid to companies was commited. The finance ministry issued a statement saying that the company under probe did not receive any selective treatment and no 'special tax rate deal' was made by the Irish government.
(AW: Pratima Tigga)
