The European Union is trying to steal taxes that ought to belong, at least in part, to California.
The EU made news with its demand that Ireland collect $13 billion from Cupertino-based Apple, which has used its presence in Cork to avoid taxation.
But the taxation it’s been avoiding isn’t really European—it’s American and Californian. And what was striking about the controversy over the EU’s tax demand is that Apple effectively admits this.
Apple CEO Tim Cook, in a statement, argued that the EU is retroactively changing tax rules to get Apple to pay taxes to a country, Ireland, that says Apple doesn’t owe it taxes. But he went on to add the following:
Taxes for multinational companies are complex, yet a fundamental principle is recognized around the world: A company’s profits should be taxed in the country where the value is created. Apple, Ireland and the United States all agree on this principle.
In Apple’s case, nearly all of our research and development takes place in California, so the vast majority of our profits are taxed in the United States. European companies doing business in the U.S. are taxed according to the same principle. But the Commission is now calling to retroactively change those rules.
Read the beginning of that second paragraph again: “nearly all of our research and development takes place in California.” If our state is where the value is created, shouldn’t any tax dodging be recouped by California, and the U.S.?
Of course, the details of this conversation get into California’s complicated tax system, and the long-debate over how California taxes corporations. But this seems like an opening. As the state and various interest groups seek more taxes from those Californians who can’t shelter profits and avoid taxes in Ireland, shouldn’t this be a moment for the state to make sure Apple, having admitted that its value derives from California, is taxed more here?