Written: January 28, 2017
US tech companies have for years maintained elaborate tax structures in Europe and other regions around the world, intended to ensure that they pay the lowest possible amount of tax overseas and repatriate as many profits as possible to the US, where they can apply more favorable tax rates. This has meant the creation of shell companies and other structures designed to domicile European operations in low-tax countries or in other cases to ensure that European operations are merely funnels for sending most of the money back to the US.
This has been a subject of frequent articles in the European press for years now, with outrage over the very small amounts big companies like Apple, Amazon, and Google pay in Europe. But no European government ever took meaningful action on this point until the EU began investigating Apple in 2014, and eventually released its findings in 2016. That particular case is being appealed and we don’t yet know the final outcome, but it’s quite possible that we’ll see similar cases against other big US tech companies in time if the EU ultimately prevails.
The broader context here is the fact that some of these companies are keeping large hoards of cash offshore while awaiting a potential future tax holiday on repatriated earnings, and so they are not paying taxes either in the US or overseas in the short to medium term. Since that cash is essentially sitting around in overseas jurisdictions, it makes an easy target for authorities there looking to claim their fair share. But this also plays into broader battles over tax authority and protectionism, with smaller European tech companies often complaining about the relative power of big US tech firms that compete with them. Neither of those longer-term conflicts is likely to go away.