After an in-depth investigation, the European Commission concluded Ireland granted tax benefits of up to €13 billion to Apple in violation of the state aid rules. Ireland must now recover the illegal aid. That decision has been criticized by Treasury Secretary Jacob Lew, who believes that only the IRS has the right to tax Apple's foreign income, since most of the company's R&D took place in the U.S. However, that is not how the big EU countries, where sales are made, see things. Who is right?
This article seeks to answer that question by analyzing the impact of the U.S. check-the-box regulations and EU directives on profit shifting from high-tax countries to jurisdictions with lower or no taxes on certain items of income. Thus, the Apple case might be seen as an attempt to improve source-based taxation of active income in response to the void that the U.S. Treasury Department inadvertently or deliberately created in 1996 by weakening the subpart F rules at the expense of EU trading partners.
Avi-Yonah, Reuven S., co-author. "Apple State Aid Ruling: A Wrong Way to Enforce the Benefits Principle?" G. Mazzoni, co-author. Tax Notes Int'l 84, no. 9 (2016): 837-45.
Available for download on Saturday, November 28, 2026