The United States doesn‘t have a lot of standing to criticize Europeans for cracking down on Apple’s tax shenanigans in Ireland.

If anything, the European Commission’s finding that Apple owes more than $14 billion in taxes should push the US to fix its own tax policies, under which its biggest companies stash most of their cash overseas to avoid domestic taxes.

As highlighted by the presidential election, globalization and its negative effects on the US are a concern across party lines. Lack of funds for infrastructure and the deficit are also pressing issues.

Those problems are exacerbated when America’s largest and most profitable companies reduce their contributions and use accounting schemes that shift money to little countries offering special tax breaks.

You can’t begrudge companies for pursuing options made available to them by policymakers.

But the disproportionate benefits they’ve received and the influence they wield over those policymakers feed the growing cynicism about international trade. Fixing this tax problem is necessary to begin restoring faith in the benefits of globalization.

The US fretted that the European Commission crackdowns on Apple and others are a departure from standard practice and will “undermine the multilateral progress made towards reducing tax avoidance.”

Given the glacial pace of that progress, and the unacceptable status quo, one might be glad the Europeans are shaking things up and being more assertive. That should push the next US president and US Congress to expedite tax reform in 2017.

This is urgent. Apple‘s case signals that other governments are closing loopholes and collecting taxes that have been evaded for years.

At stake are taxes on an accumulated $2 trillion that Apple, Microsoft, Facebook, big pharmaceutical companies and others earned and stashed in foreign countries.

If the US continues dawdling on reforms as foreign countries tighten their rules, the US will lose out. Companies get credit on their US tax bill for taxes paid abroad, so it becomes a question of which country will collect, and how much. In other words: Taxes collected overseas are taxes the US won’t get from its top-tier companies.

Since companies like Apple and Microsoft owe much of their success to the schools and infrastructure in the US, where they are headquartered and do most of their product development, they should pay more US taxes.

This is not about gouging companies. It‘s about collecting what they owe -- their fair share to support countries in which they operate. Reforms should level the playing field and eliminate elaborate breaks that pencil out for only the richest and most sophisticated companies. Taxes on foreign earnings shouldn’t be permanently deferrable.

In Ireland, Apple was not only deferring US taxes on foreign earnings, it allegedly was avoiding the 12.5 percent tax due in Ireland.

Apple disputes the findings and is appealing, but the European Commission said the company attributed sales to an office that existed only on paper and paid almost no taxes. This enabled its effective tax rate on an Irish subsidiary to decline from 1 percent in 2003 to 0.005 percent in 2014, according to regulators.

As elected officials pursue reforms in the US, they should also resist pressure to give Apple and others a sweetheart deal to repatriate foreign earnings and finally pay US taxes on them. These companies have been getting sweet deals for years.

Fixing this problem would benefit everyone. Shareholders and global companies would get more certainty, taxpayers would see more fairness and the US would have better standing, more revenue and a stronger defense of globalization‘s positive effects.

Editorial
The Seattle Times

(Tribune Content Agency)