The European Union’s antitrust regulator ruled Monday that Apple Inc. (NASDAQ:AAPL) must repay roughly $14.5 billion worth of taxes to the Irish government. The charge: Ireland’s tax agency gave the company unfair tax breaks.
The decision marks a major milestone in the EU’s efforts to keep firms from avoiding corporate taxes in Europe. It also added fuel to arguments that the region has been using its regulatory powers to put pressure on U.S. firms.
While Apple’s tax troubles are grabbing the headlines today, it’s not the only firm in the EU’s firing line. Other U.S. multinationals are under investigation, too. And if Apple is any indication of things to come, the tax man will cometh for Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOG) and McDonald’s Corporation (NYSE:MCD).
Amazon.com, Inc. (AMZN)
Online retail giant Amazon has struggled with a similar tax situation in Luxembourg.
Like Apple, Amazon’s European headquarters in Luxembourg translated into a “capped” tax rate that saved AMZN millions of dollars. Although the exact sum hasn’t been released, it is believed that regulators will demand Amazon to repay about €400 million to Luxembourg, saying the e-tailer received preferential treatment.
Amazon officials claim the company has done no wrong and that it followed the same tax rules as other companies headquartered in Luxembourg. But critics say the retailer set up its EU headquarters there specifically to avoid taxes. They also say Luxembourg’s tax breaks have unfairly stifled competition from other online retailers, whose tax bills are higher.
Alphabet Inc (GOOG, GOOGL)
Alphabet is dealing with a whole host of problems with EU regulators, battling everything from privacy concerns to monopoly accusations. However, the tech giant is also putting out fires stemming from its taxation arrangements throughout Europe.
Earlier this year, GOOG succumbed to pressure from EU officials to rework its accounting system. Essentially, Alphabet will register a larger proportion of its sales activity in the U.K. rather than in Ireland, where its European headquarters are located and corporate taxes are much lower. Alphabet struck a deal with U.K. regulators, agreeing to pay £130 million to compensate for years of paying very little tax in Britain.
But Google’s tax issues didn’t stop there.
French authorities are questioning the company’s accounting practices, and French Finance Minister Michel Sapin has said the nation won’t be as forgiving as the U.K. was. France claims GOOG owes €1.6 billion worth of unpaid taxes — a considerably higher figure than U.K. officials agreed to.
McDonald’s Corporation (MCD)
Tech firms aren’t the only ones caught up in EU regulatory drama. Fast-food giant McDonald’s also is being accused of having a “sweetheart” tax deal with Luxembourg. Earlier this summer, the European Commission revealed that McDonald’s and the grand duchy were misusing EU and U.S. tax treaties so royalties from European MCD franchises were not taxed anywhere in the world.
McDonald’s, like Amazon and Apple, claims the money would eventually be taxed upon repatriation, MCD also insists its arrangement in Luxembourg was completely legal. However, with many U.S. firms holding on to billions of dollars worth of foreign income in hopes that American taxes will be reformed and foreign income taxes lowered, EU officials say these tax deals favor certain companies and hurt competition.
As of this writing, Laura Hoy was long AAPL.