Apple boss Tim Cook paid an unscheduled call on France’s president Emmanuel Macron at the Elysee Palace in October.But only now, four months later,
Apple boss Tim Cook paid an unscheduled call on France’s president Emmanuel Macron at the Elysee Palace in October.
But only now, four months later, has the true purpose of that meeting become clear.
The head of the world’s biggest company – which has a market value of more than £700billion – was finally willing to resolve a long-standing confrontation between the French government and his Californian digital behemoth over tax avoidance.
Tax chat: Apple boss Tim Cook paid an unscheduled call on France’s president Emmanuel Macron at the Elysee Palace in October
The Paris government has long been an outspoken critic of the failure of Silicon Valley companies to pay their proper share of taxes, and was one of the main supporters of the European Commission in 2016 when it fined Apple £12.7billion for alleged illegal tax breaks secured by funnelling income, research and branding costs through low-tax Ireland.
To stop the digital giants avoiding tax on income in this way, France has been a major advocate of an EU plan to impose a 3 per cent tax on the turnover of the European operations of the FAANGS: Facebook, Apple, Amazon, Netflix, Google and Spotify.
This proposal has, however, met with resistance from low-tax EU countries such as Ireland and Luxembourg.
They have prospered on the back of the tech giants, which use them to maximise their profits. In the meantime, France has been particularly outspoken about the iniquitous behaviour of Apple and co.
Cook no doubt met Macron with a view to persuading France to turn down the volume of its complaints about tax avoidance, and to try to slow the EU march towards a tax based on company turnover.
The end result was a victory for France, with Apple agreeing to pay back taxes of some €500million (£440million) in return for closing the book on a dispute dating back ten years.
The tough-minded approach by the French could not be in greater contrast to the velvet glove treatment the FAANGS have received in Britain.
Apple, however, says that the tax bill paid to France and that agreed with Britain are not strictly comparable.
‘The tax settlement in the UK covered the years 2011 to 2015, whereas the settlement in France covered the years 2008 to 2017,’ a spokesman noted.
But Silicon Valley was aggressively courted by the Cameron government. Google, among others, was granted open access to Downing Street.
The fact is that in their efforts to woo the tech giants to Britain, our own politicians turned a blind eye to tax avoidance.
Indeed, the digital giants were so impressed with the Government’s forbearance that Facebook decided that former deputy prime minister Nick Clegg was just the person to hire as communications director last year to deflect critics of the company’s misuse of data and exploitation of tax loopholes.
Apple finally acknowledged it had a back-taxes problem in the UK and entered into negotiations with Her Majesty’s Revenue and Customs.
The company’s accounts, published in January 2018, record that HMRC reached a settlement under which Apple UK would pay £81million in unpaid taxes and Apple Europe Ltd £137million.
The settlement followed a five-year period when the company handed over just £22.6million in tax to the Exchequer, in spite of making profits of £289.5million.
What is particularly galling about Apple’s low tax burden in the UK is that it comes during a period when HMRC has become far more aggressive in clamping down on tax wrongdoing.
Philip Hammond’s October 2018 Budget revealed that by taking action against tax avoidance, tax evasion, aggressive tax planning and non-compliance, the Exchequer had secured an astonishing £185billion of revenues which would otherwise have gone unpaid.
But it is not just in the UK that Apple has lived a charmed tax life. Before the arrival of Donald Trump in the White House, the US had some of the highest corporation taxes in the Western world, at up to 37 per cent.
To avoid paying its fair whack, Apple held a cash pile of an estimated $285billion offshore in tax havens in the Caribbean and elsewhere.
It was only after Trump slashed the corporate tax rate to 21 per cent in his first year in office that Apple announced it would be repatriating up to $200billion from these tax havens.
Britain is fearful of coming down too hard on Apple. It employs 6,500 staff here directly, but it is estimated that Apple’s iOS – or iPhone Operating System – is responsible overall for as many as 242,000 jobs in the UK, the highest of any European country.
Because of its cult-like status among users, Apple is regarded with awe by politicians. And until the European Commission challenged Apple over its Irish tax arrangements, the company looked untouchable.
The raids on Apple, led by the EC and France, demonstrate that doggedness and willpower can eventually frighten Silicon Valley’s juggernauts into submission.