Feds, lobbyists draw battle lines over Apple's EU $14.5B tax bill

There has been no shortage of commentary about the $14.5 billion European Commission tax investigation ruling. Apple has weighed in, and so has Ireland, with both opposing the European Union's meddling in a business arrangement that has existed since 1980.

Since Tuesday's determination, Washington D.C. is gearing up for battle about the matter. Most are in support of Apple's cause, but not necessarily for Apple's reasons.

The U.S. Treasure Secretary is expecting "large and punitive retroactive recoveries" as a result of the ruling.

Strange bedfellows

Shortly after word of the ruling came down, Republican Speaker of the House Paul Ryan spoke out against the retroactive bill. He was joined by prominent Democrat leader Senator Chuck Schumer (D-N.Y.).

"The European Union is going to grab this money, instead of the U.S.," Schumer said. "It's a big signpost here for us."

Schumer also said that he and Ryan had begun discussions about corporate tax overhaul.

"This decision is awful," Ryan said in a statement about the ruling. "Slamming a company with a giant tax bill — years after the fact — sends exactly the wrong message to job creators on both sides of the Atlantic."

Dissenting voices

Not all U.S. governmental officials are on Apple's side, however. Democrat Carl Levin has led the charge against Apple's international tax strategies for many years, and blames the Internal Revenue Service as well.

"Royalties Apple collects for its overseas sales of products designed and developed in the U.S. should be taxed in the U.S.," said Levin, reiterating his long-held position on the matter. "But Apple has avoided the billions of dollars of taxes it owes the U.S. by transferring its intellectual property to itself in Ireland."

Levin added that "it is understandable that Europe would try to go after them."

Inside the D.C. Beltway, outside the government

Responses have also started emerging from lobbyist groups and Washington D.C. watchdogs about the ruling, which is already the largest of its kind, before interest is accrued. Comments are as expected, with little alteration from party lines about the matter, but groups watching for fraud and abuse are particularly riled up about Apple's earnings

"It's remarkable to think that the administration has been flying over to Brussels on taxpayers' dollars to lobby the European Union against collecting taxes owed in Europe when they're not collecting the taxes owed here," said the bipartisan Financial Accountability and Corporate Transparency Coalition's (FACT) Deputy Director Clark Gascoigne. "It's terribly ironic."

Educators and scholars are picking sides as well. While the government is seeking cash repatriation easements to draw large pools of cash back into the U.S., the matter is not so cut-and-dried economically.

"This is not taking 13 billion euros out of the U.S. Treasury's pocket and U.S. taxpayers' pocket and putting it into Europe," University of Washington School of Law lecturer Jeffery Kadet told the New York Times. "They wouldn't be bringing this money back to the U.S. anyway."

Apple will use its overseas cash reserves to fund repayments on its bond sales. The bond sales in turn give the company money to buy back its own stock.

Taxation with representation

U.S. Treasury Secretary Jack Lew commissioned a report in April about the issue, before meeting with the head of the European Commission Margrethe Vestager. The Treasury report said that a large ruling against Apple would create an environment where regulatory agencies and governments in the E.U. would pursue "large and punitive retroactive recoveries from both U.S. and E.U. companies."

Following the study, Congressional officials urged Lew to double taxes on E.U. companies in the US as a retaliatory move to the array of investigations underway against U.S. helmed international companies.

Lew believes that whoever ends up as the next U.S. President will spearhead corporate tax reform, which would make it more palatable for international companies to repatriate income to the U.S. The treasury secretary is expecting movement on the issue early in the next administration, given that it was a cornerstone of one failed presidential candidate, and a frequent speaking point for the remaining ones.

The European Commission's investigation on Apple's tax arrangement with Ireland concluded on Tuesday, with the comission demanding Apple pay 13 billion euro ($14.5 billion) to Ireland in back taxes, which could swell to over $21 billion if the appeal process fails. A FAQ lays out Apple's path to an appeal, and notes that the process will take several years to wrap up.

Irish governmental officials have commenced discussions on how to fight the ruling.