The European Commission's ruling that Apple should pay Ireland €13 billion in taxes has reignited the discussion of how much tax large companies should pay. Competition Commissioner Margrethe Vestager won wide support from MEPs when explaining the Commission’s approach in a plenary debate on 14 September. A week earlier we talked to German EPP member Markus Ferber, one of the Parliament's leading members on tax issues. Read on to find out what he had to say about the Apple ruling and tax deals.
Apple and other large multinationals have explained their position to Parliament’s special tax rulings committees. What do they think of the principle that taxes have to be paid where the economic activity takes place?
They have made it very easy for themselves. They say that we have these special tax rulings and we pay the taxes the state is asking for, so everything is legal. They are right from their point of view.
This is why the Commission did not investigate Apple, IKEA, Fiat or Starbucks. The Commission investigated the Netherlands, Luxembourg and Ireland. Companies only have to pay their taxes the same way as every other company in these countries.
This is what the member states have to understand. They can of course attract investment to their country, but they have to learn that doing so by granting tax deals is illegal under EU rules. As long as the national governments don’t understand this, we can’t complain about the companies.
Does the Commission’s ruling on Apple and Ireland send out a strong message that everyone has to comply with the state aid rules and pay their fair amount of tax?
International companies are said to only have one third of the tax burden of small and medium-sized enterprises. If this is true, then this is something that we have to change. Those who generate profits in a certain country have to pay tax on that. It’s not happening at the moment.
How does the Commission's rulings change the situation for the industry? Does Europe still offer a stable business climate for foreign investment?
Europe is the world's most developed single market offering access to 500 million people. No other region in the world can deliver that kind of benefits. In addition the EU guarantees legal certainty. There are only a few markets as legally developed as the EU.
How will the situation develop? Will we see a reconstruction of the international tax system?
It’s a difficult question. After 2008 I thought that all states in the world had a willingness to move towards proper and equal taxation. But so far at the international level we only have the agreement on base erosion and profit shifting.
State aid cases in the EU cause market distortion and these distortions have to be resolved within the EU. We can’t be a good negotiator with other parts of the world while we have improper rulings in place.
Therefore I really appreciate what the Commission’s directorate-general for competition and Commissioner Margrethe Vestager are doing regarding Apple and other state cases. She has the full support of the European Parliament from all political groups.
This is something that we have to deliver to citizens. We can’t have a situation where a few companies benefit from special rulings and the majority don't have a chance.
This interview was first published on 6 September 2016 and updated following the debate in plenary on 14 September.
- Member of the two special committees for tax rulings and the inquiry committee looking into the Panama papers
- First vice-chair of the economic affairs committee
- Head of the economic affairs committee's working group on competition policy
- Responsible for Parliament's position regarding member states automatically exchanging information on tax rulings