Britain may cut tax to tempt Apple after £11bn EU demand
BRITAIN could cut corporation tax to attract major international companies under post-Brexit plans being considered by Theresa May after Apple was hit with a record payment demand by Brussels.
Downing Street said it would “welcome” Apple to the UK after the European Commission demanded Ireland claw back £11 billion in back payments.
In a report published yesterday, the commission found that a deal with Ireland meant the technology giant paid as little as 0.005 per cent tax on its European profits for more than a decade. The rate of corporation tax in Ireland is 12.5 per cent.
In the wake of the decision, Tim Cook, Apple’s chief executive, accused the European Union of trying to rewrite history and said that the decision represented a “devastating blow to the sovereignty of EU member states”.
He said the decision would have a “profound and harmful effect” on investment and jobs in the EU.
The US Treasury added its voice to the criticism, complaining that the EU was acting unilaterally in effectively deciding tax policy for member states. Last night British ministers said the European Commission’s decision could represent a significant “opportunity” for Britain as it seeks to attract business after leaving the EU.
The Prime Minister’s spokesman responded to news of the fine by saying that “Britain is open for business”.
Asked if the UK would like to see Apple locate here, the spokesman said: “Britain is open for business, we welcome any company wishing to invest in Britain and Britain’s workforce.”
Philip Hammond, the Chancellor, is considering plans for further cuts to corporation tax to attract businesses after Brexit which could result in it falling from 20 per cent to 15 per cent by 2020. Under the plans, which are being considered for the Autumn Statement, Britain’s corporation tax rate would be nearly as low as Ireland’s. But it would not be subject to oversight by the European Commission.
It comes as Mrs May holds a meeting today of her Cabinet at Chequers, her official residence. She has challenged
each Cabinet minister to identify Brexit opportunities in their areas of responsibility.
Iain Duncan Smith, a former work and pensions secretary, said: “Britain is going to prosper enormously when we leave the EU because we can be a place where people want to do business. We can offer investors certainty about our tax policy, unlike EU nations.”
Mark Littlewood, director general of the Institute of Economic Affairs, said: “The state aid rules are being interpreted so widely that it is basically incinerating tax competition across the EU.
“Britain should be rolling out the red carpet for Apple. The EU is hell bent on creating a tax environment unattractive to business and hey presto, Brexit Britain has a wonderful opportunity to attract more inward investment into the UK rather than less.
“We should say to Apple, pop on over the Irish Sea and relocate here. This is a huge opportunity for Britain.”
The European Commission said that between 2003 and 2014 Apple paid a rock bottom Irish tax rate on most of its profits outside the US before sending it to a tax haven where it paid no tax at all.
Margrethe Vestager, the EU Competition Commissioner, said: “Member states cannot give tax benefits to selected companies. This is illegal under EU state aid rules.” The commission claimed Apple’s Irish arrangements al- lowed them to pay just €500 in tax on every €1 million they made. It said that Apple’s headquarters in Ireland existed “only on paper”.
Apple accused the commission of “making up” the figures. Mr Cook said: “Beyond the obvious targeting of Apple, the most profound and harmful effect of this ruling will be on investment and job creation in Europe. Using the Commission’s theory, every company in Ireland and across Europe is suddenly at risk of being subjected to taxes under laws that never existed.
“This would strike a devastating blow to the sovereignty of EU member states over their own tax matters, and to the principle of certainty of law in Europe.”
The ruling, which both Apple and the Irish state will appeal against, also provoked anger in Washington. Robert Stack, deputy assistant secretary at the US Treasury, said it set a “bad precedent for tax policymakers around the world”.
The European Commission is examining tax deals awarded by Luxembourg to both McDonald’s and Amazon. Michael Noonan, Ireland’s finance minister, said he disagreed with the verdict and would challenge it in the courts.
John Redwood, a Eurosceptic Conservative MP, said: “Once we’re out of the EU we will be able to stick to our word on our tax regime.” One minister said: “There are opportunities here for the UK. This should help sharpen minds.”