Apple tax increases delayed until 2024, as OECD says global tax deal behind schedule

Apple tax increases in Ireland and elsewhere were expected to take effect in 2023, but will now likely be delayed until 2024 as a result of slow progress on agreeing a global digital tax deal.

The delay is good news for Apple, whose European headquarters is based in Ireland, where it currently pays a tax rate of just 12.5% …

Why Apple tax increases?

Different countries charge different levels of corporate tax – the tax paid on profits declared in that country. Ireland has one of the lowest rates, at just 12.5%.

This has resulted in tech giants like Apple and Google basing their European headquarters in the country. That’s good for Ireland, bringing in cash it otherwise wouldn’t have had, but bad for other countries – especially when Apple funneled the profits of all sales in European countries through Ireland to avoid paying corporate tax in the countries in which sales were made.

The US proposed a minimum corporate tax rate of 21%, but was unable to gain widespread agreement for this. Instead, a 15% rate was agreed by the G7 nations – the US, the UK, France, Germany, Canada, Italy, and Japan – and the European Union. As an EU member, Ireland would be bound by this, and would have to increase its rate from 12.5% to 15%.

G7 deal agreed; OECD deal pending

While the G7 nations and EU agreed on the 15% minimum, the holy grail for business tax reform has been a fully global deal. The Organization for Economic Cooperation and Development (OECD) first announced plans for this in 2019, with three aims:

• All companies to pay tax in each country in which they sell goods or services
• Companies to pay a minimum tax rate of 15% in every country
• Digital goods (eg. App Store sales) to be taxed in the customer’s country

This would mean that arrangements like that used by Apple – where it claimed that all profits from European sales were actually made in Ireland, where its regional campus was based – would no longer be legal.

An OECD agreement would apply in 137 countries. Negotiations began in 2020, and an agreement was expected to be signed this year, taking effect in 2023.

OECD head tells Davos to expect a 2024 start date

Speaking at the World Economic Forum in Davos, OECD secretary general said that implementation of the increased tax rate was now likely to be delayed until 2024. Reuters reports.

OECD Secretary-General Mathias Cormann told a panel at the World Economic Forum in Davos, Switzerland, that progress on ironing out technical details on the digital tax deal was going less quickly than planned.

“We deliberately set a very ambitious timeline for implementation initially to keep the pressure on … but I suspect that it’s probably most likely that we’ll end up with a practical implementation from 2024 onwards,” he said.

The US is one of the countries posing a challenge to reaching agreement.

Congress would need to approve changes to the current 10.5% U.S. global overseas minimum tax known as “GILTI,” raising the rate to 15% and converting it to a country-by-country system.

The changes were initially included in U.S. President Joe Biden’s sweeping social and climate bill, which stalled last year after objections from centrist Senate Democrats.

But prospects for a slimmed-down spending package with the tax changes look increasingly difficult as midterm congressional elections approach and as lawmakers voice concerns about more spending amid high inflation

Photo: Brett Jordan/Unsplash