There’s good news and bad news for Apple Inc. (NASDAQ:AAPL) on the tax front today. First, regulators with the European Union are investigating their recent tax deal with Ireland, a popular tax haven for international corporations. The New York Times reports that Joaquin Almunia, the EU’s competition commission, has opened a formal investigation.
Apple’s Ireland tax deal probed
Apple Inc. (NASDAQ:AAPL) isn’t the only one that’s having its tax dealings investigated. The EU is also looking into Starbucks Corporation (NASDAQ:SBUX)’s dealings in the Netherlands and Fiat Finance and Trade’s in Luxembourg. However, the probe could have even wider-reaching effects. If the investigation results in changes to tax laws in the EU, then numerous technology companies will be affected because they’ll have to change their business structures.
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Technology companies often put their international headquarters in Ireland because the Irish government gives them concessions and extremely low corporate tax breaks. Often the government even gives them a lower rate than the standard Irish rate of 12.5%, which is already one of the lowest in the world.
The EU said investigators will be looking into “transfer pricing arrangements” in the three countries.
Apple might get to bring its cash home on the cheap
But the good news for Apple Inc. (NASDAQ:AAPL) is that the U.S. Senate is considering offering a tax holiday for major corporations. There’s been a lot of debate on Wall Street about what Apple should do with the piles of cash it is sitting on. The big issue has been that the greatest portion of that cash is still located overseas because it would be extremely expensive to repatriate it.
However, Reuters reports that the Senate is considering offering a one-time tax break to corporations to repatriate their international cash. Lawmakers are considering this because they believe it would bring in revenue that could use to pay for federal transportation projects.
The reason Apple Inc. (NASDAQ:AAPL) has refused to repatriate its cash in the past is because it would have to hand over 35% of its revenue to bring it back into the U.S. The company has been under scrutiny for its tax practices for quite some time, and CEO Tim Cook has defended their practices, saying that they comply with all U.S. tax laws. Cook also said he thinks the current 35% rate is just too high.