Hey everyone, it's Nat in Brussels. When a European buys one of Apple Inc.'s iPhones, should Europe get to take a cut of the cash?
It's a question symptomatic of the long-running dispute between the U.S. and the European Union about who should be taxing big U.S. tech companies, and one set to intensify in the coming weeks.
French President Emmanuel Macron in July signed in a law to impose fresh levies of 3% on technology firms that generate at least 750 million euros in global annual revenue from digital activities like targeted advertising. That's about $830 million, meaning the likes of Facebook Inc., Amazon.com Inc., and Alphabet Inc.'s Google could be severely impacted.
The U.S. is not happy, and it wants trade tools to punish France for its decision. The trio of social media, e-commerce and search giants were all scheduled to testify in Washington Monday to back the Trump administration's retaliation efforts -- which could take place as soon as Aug. 26.
That's only one event in Big Tech's summer calendar of tax arguments. In September, representatives for Apple will appear in a top EU court in a bid to convince judges that the iPhone maker shouldn't have to pay a 13 billion-euro bill imposed on it by the EU for unpaid taxes.
In fact, Apple and Ireland are both appealing the August 2016 decision by the European Commission, which said Ireland granted unfair deals that resulted in Apple paying too little tax for more than a decade. In 2014, those advantages allowed Apple to pay an effective tax rate of 0.005% on its European profits, the EU says. Apple says its profits should be taxed in the U.S., as that's where its main research operations are.
The U.S. at the time in 2016 called the decision "unfair" and "contrary to well-established legal principles." The hearing at the EU's second-highest tribunal, which begins Sept. 17, is likely to tear open that old wound and further stoke tension around Europe's attempts to extract more money from U.S. tech giants.
Shortly after the 2016 decision, Apple Chief Executive Officer Tim Cook called the EU's order "total political crap," adding "they just picked a number from I don't know where." The 13 billion euros the EU ordered Ireland to retrieve from Apple are in an escrow account until a final ruling, which could take years.
The U.S. sought to intervene in the court case on Apple's behalf, but lost the bid last year because the court said it failed to show it had a direct interest in the case.
Maybe the U.S. will have better luck checking European efforts to tax tech through trade. But when trade relations go sour -- as with the U.S. and China -- America's technology giants often become the collateral damage.
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