On August 30, the European Commission ruled that Apple would have to pay €13 million ($14.5 billion) in back taxes to the government of Ireland because it believes the country gave the company special tax treatment. The European Union (EU) says Apple paid taxes at a one percent rate between 2003 and 2014, well below Ireland’s 12.5% corporate tax rate. That rate, and even Ireland’s 12.5% tax rates, pales in comparison to the United States’ 39% tax on corporations.
As Americans, we should ask ourselves why we are taxing corporations at among the highest rates in the world —a rate that is nearly six percent higher than socialist France and Venezuela, an entire 19% more than the United Kingdom, and 22% more than Switzerland. These, with the exception of Venezuela, are all viewed as highly developed countries.
For reference, other countries that punish corporations at comparable levels to the U.S. include the United Arab Emirates, Chad, Suriname, and Congo. These are not countries the United States usually models itself after.
Americans complain about domestic companies moving offshore, while also arguing that we should tax those same companies at an even higher rate. Opponents of lowering the corporate tax rate say that lower taxes don’t spur growth and only serve to increase profits, without creating more jobs.
American companies are doing exactly what they would be expected to do when given the incentives that have been presented to them.
Companies such as Apple, Google, and Amazon are moving operations overseas where their investment isn’t punished. That’s what taxes are: a punishment. The higher the tax on something, the less produced; and the lower the tax, the more produced.
The EU is not only punishing Apple, but also Ireland. Apple had 5,000 employees in Ireland in 2015 and was expanding. It should be noted that Apple is the largest single taxpayer in the country, and the largest employer in Ireland’s second biggest city, Cork.
The EU wishes to force Apple to pay taxes that neither the company, nor the Irish government, agreed were due. Those jobs that Apple created would not have been available in Ireland without their low corporate tax rate, and Ireland would have continued to be an agriculturally dependent, developing nation without their presence. Ireland knows this, and is looking to appeal the EU’s decision.
Even worse for American taxpayers, we will be the ones held accountable for the tax bill being charged to Apple and other companies targeted by the EU, as we make up for Apple’s losses claimed as deductions in their home nation, the United States. This could not have happened if America had not incentivized Apple, and other companies, to be offshore in the first place by their astronomical corporate tax rate.
If Americans want the domestic economy to grow and an increase in available jobs, we should lower the corporate tax rate at least to a similar level as the EU average of 23% in order to be competitive in the globalized market for investment.