Apples Tim Cook heads to Brussels to talk privacy amid ongoing tax fight
When Tim Cook shows up in Brussels on Wednesday, the stage will be set for a triumphant return to Europe two years after the Apple CEO clashed with Margrethe Vestager, the EUs antitrust czar, in the Belgian capital.
Back then, the iPhone maker was the regions latest tech bad boy after allegedly failing to pay €13.1 billion in taxes due to unfair treatment by the Irish government. Now, its Google and Facebook that are squarely in Europes regulatory sights — while Cook can tout Apples long-standing concern for privacy as badge of honor that sets his company apart, and in some ways above, other Silicon Valley giants.
As Cook gives a keynote speech to many of the worlds data protection regulators gathered in Brussels — a town increasingly at the forefront of the worlds regulation of tech — he is even expected to go so far as to call for a comprehensive U.S. privacy law, according to prepared remarks seen by POLITICO.
“We will never achieve technologys true potential without the full faith and confidence of the people who use it,” Cook will tell the Brussels audience Wednesday. “We are optimistic about technologys awesome potential for good. But we know that it wont happen on its own.”
And yet, theres a problem lurking in the background of Cooks privacy message, which is aligned with Apples focus on selling hardware and not on harvesting peoples digital information. The companys tax woes in Europe have not gone away.
Both Apple and Dublin are appealing the 2016 multibillion-euro tax ruling, and the company refutes allegations that it shirks its obligations, claiming its the worlds largest corporate taxpayer. Still, the European Union is not slowing down, with officials now haggling over new digital tax proposals that would force many of Silicon Valleys biggest names to fork over an even greater slice of their revenue generated inside the 28-member bloc.
Such digital policymaking — seen by its proponents as necessary to rein in techs perceived excesses, or as a protectionist grab by its opponents to support Europes legacy industries — has made Brussels, more than Washington, the center of the battle over who gets to set the rules of the road for the global digital economy.
With its stance toward privacy and tax, Apple finds itself at the center of this tussle, one that has pitted many of Silicon Valleys tech giants, let alone national lawmakers, on different sides when it comes to handling peoples data online, paying taxes worldwide and promoting competition across the digital world.
Focus on privacy
Cooks strategy to focus on privacy is a practical one. Unlike Facebook and Google, whose advertising-based businesses have both been recently hit with scandals over how they handle peoples data, Apple has sidestepped much of the recent so-called techlash.
The iPhone maker generates almost all of its income from selling hardware like smartphones and laptops, and so has not fallen into the same privacy-related traps that have engulfed others. Facebook publicly acknowledged this summer that up to 87 million of its users may have had their information illegally handled by Cambridge Analytica, a British data firm.
European Commissioner for Competition Margrethe Vestager | Emmanuel Dunand/AFP via Getty Images
For Apple, whose high-priced gadgets made the Cupertino, California-based company the worlds most valuable firm, a strong stance on data protection — once seen as a topic in which only the most tech-savvy users were interested — has become a strong selling point.
“Apple is a different animal compared to Googles search engine or a social network,” said Giovanni Buttarelli, the European Data Protection Superviseor, who first met Cook last year in Milan and invited him to speak in Brussels this week. “He will surprise others in the debate around digital ethics.”
Play down tax
Cook is likely to take a lap of honor among global data protection officials who have gathered in Brussels this week.
But the uncomfortable question about how much tax Apple pays worldwide will not be far from the surface — particularly as EU officials move steadily closer to agreeing to new digital taxes aimed mostly at U.S. tech companies.
In announcing the record state-aid tax charge against Apples activities in Ireland, Vestager, Europes competition czar, accused the company of paying less than a 1 percent corporate tax rate on its European profits in 2014, allegations that Apple vehemently denies. (The company claims its effective global tax rate over the last 10 years is 26 percent).
“A digital tax is coming, like it or not. Fighting it is like trying to keep back the tide” — James Stewart, adjunct associate professor of finance at Trinity College, Dublin
One of Europes highest courts will now decide whos right. Hearings are expected to begin sometime next year.
After Washington revamped the U.S. tax code earlier this year, Apple repatriated almost $300 billion in cash held overseas to the United States, as well as paid a one-off corporate tax charge to U.S. officials of a eye-watering $38 billion. Apple says that almost all of the value from its products worldwide is created in the U.S., so it should pay tax there, and not in other countries.
Such thinking has not gone down well with EU officials, many of whom openly grumble that Apple should pay more on its local operations (U.K. and Italian authorities have already squeezed out hundreds of millions of euros in tax revenue from the company).
Now, European policymakers are finishing up new digital tax proposals that would charge tech companies a levy of 3 percent on digital revenues generated within the 28-member bloc.
Apple has largely escaped the “techlash” that other Silicon Valley heavyweights have suffered | Justin Sullivan/Getty Images
The plans, which still must be unanimously approved by member countries and will affect the likes of Google and Facebook significantly more than Apple, have already been criticized by U.S. officials, who claim it would harm transatlantic trade just as tensions mount between Washington and Brussels.
Yet with EU officials hoping to reach agreement on the proposals potentially by the end of the year, the specter of tax hangs heavy over Brussels — just as Cook arrives to champion Apples privacy record.
“A digital tax is coming, like it or not,” said James Stewart, an adjunct associate professor of finance at Trinity College, Dublin. “Fighting it is like trying to keep back the tide.”
Mark Scott is chief technology correspondent at POLITICO.
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