The South Korean government plans to “move quickly to impose taxes on Apple, Amazon, Google, and other global IT companies following growing criticism that the firms earn billions of dollars in sales here annually but pay no taxes, reports The Korea Times.
Under current corporate law, the government doesn’t tax global companies as they don’t have to pay taxes unless they have fixed places of business in the country. This law has provided global companies with an excuse to avoid taxes while they expand their businesses rapidly here as their bases are established in other countries such as the United States, China and Ireland. The Korea Times says that this has provoked criticism that these companies are contributing little to Korea through taxes and corporate social responsibility activities although they are doing business here on a large scale.
This isn’t the first tax brouhaha Apple has faced abroad. The European Commission (EU) has told Apple to repay €13B (about $18 billion) in back taxes to the country, which had given Apple unfair tax breaks. The EU, Europe’s anti-trust and consumer investigation agency, claimed that Ireland, Luxembourg and the Netherlands have attracted investment and jobs by helping big companies avoid tax in other countries, including EU members.
The commission suspects Ireland was too lenient in rulings it gave to Apple and which helped the company shield tens of billions of dollars in profit from taxation. At 12.5%, Ireland’s corporate tax rate beats the U.S. rate of 35%. However, participating companies don’t pay that 12.5% under the double Irish structure.
Reuters notes that Apple has made two payments of 4.5 billion euros (about $5.2 billion) into an escrow account for the back taxes the European Commission has ordered it to pay Ireland. The money will remain in the escrow account pending appeals by Apple and Ireland against the Commission’s ruling, which are expected to take several years.
