EU grills Google, Apple, other US firms over tax issues

March 16
5:08 AM 2016

European lawmakers have started questioning multinational companies such as Google, Apple, Alphabet and McDonald's on their tax structures being practiced in Europe. European nations are in the process of wringing out more revenues from corporate taxes. European Commission, EU's antitrust watch dog, is probing several tax issues being adopted by multinational companies.

Tax practices by US multinationals are keeping more political pressure on European governments. European legislators are accusing companies of using complex structures to siphon out most of the profit out of Europe. This practice is resulting in avoiding fair amount of corporate tax.

Market Watch reports that US firms answered several questions raised by European legislators. Google said it was following the European laws and making use of tax incentives. Tax incentives and tax structures being offered by European nations are known across the bloc.

Criticizing the tax structures adopted by US firms that pump most of the revenues out of the Europe, Paul Tang, a Dutch member of the Socialists and Democrats alliance, asked a Google executive: "Does this activity embarrass Alphabet or you? Do you feel embarrassed?"

Responding to this, Adam Cohen, head of economic policy for Google in Europe, stated "we make use of tax incentives, tax structures that are well known, that are widely accessible and used by most multinationals."

The Wall Street Journal (WSJ) further adds that Google and Apple operate through their units in Europe. For instance, Apple manages most of the sales of gadgets through its Apple Sales International. Google collects its revenues from European clients from its Irish headquarters, but not from units in individual European nations. Irish headquarters would pay hefty royalties to a unit based in Bermuda. 

Apple Inc has tax structure in Ireland and it's under probe by European Commission. Google, Apple and McDonald's have defended their tax policies and replied back that they're following current laws of the land. Cathy Kearney, Vice President of European operations at Apple, said "We feel we've paid every cent of tax that is due in Ireland. We don't believe there has been any state aid."

Recently, Google has settled a controversial tax dispute with British government. The US company had agreed to pay GBP 130 million ($188mln) in back taxes to HMRC, which conducted an open audit of the company. Subsequently, the deal sparked a debate over the UK's tax system and how to fairly charge foreign multinationals operating in the UK, as reported by International Business Times.

Considering the latest situation in corporate laws and siphoning of revenues from EU, the European governments are favoring to change national laws and amendments in international tax treaties. They want multinational firms to pay more in income tax and corporate tax in countries where they have customers and operational base.

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