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Apple’s Tax Debacle in Ireland  

Author:  James G.S. Yang.; Leonard J. Lauricella.

Source: Volume 34, Number 03, Spring 2017 , pp.15-28(14)

Journal of Taxation of Investments

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On August 30, 2016, the European Commission (the Commission) concluded that Apple Inc. had been granted tax benefits by Ireland that gave it a competitive advantage over other businesses. The Commission claimed that this was a violation of European Union (E.U.) state aid rules, and the government of Ireland was ordered to collect from Apple up to €13 billion plus interest (approximately $14.3 billion) representing an underpayment of tax for the period from 2003 until 2014. The crux of the Commission’s argument was the impact of two rulings by Ireland that had the effect of allowing Apple to earn large amounts of income in Europe that was not subject to tax in any jurisdiction. This was deemed to be a violation of the principle that a state has the right to tax income earned within its jurisdiction measured under an arm’s-length principle. The authors describe Apple’s operations in Europe and how it was able to achieve such tax favorable results. They then discuss the Commission’s attack on Apple’s structure, and Apple’s potential defense.

Keywords: international taxation, worldwide income tax, territorial income tax, controlled foreign corporation, non-resident corporation, domestic-source income, foreign-source income, tax subsidies, transfer pricing rules

Affiliations:  1: Montclair State University; 2: Montclair State University.

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