Of course they did (the loophole is now closed), but the point here is that this scheme was entirely legal. The EC is now saying that even though it was legal, they owe the tax anyways. That is not how things should work in a system based on the rule of law and fairness.
Imagine for a moment that your own government raised your personal tax rate and said that since they felt the previous tax rate was too low, you also owe taxes from the past.
"Member states cannot give tax benefits to selected companies - this is __illegal__ under EU state aid rules," the commissioner said.
"The Commission's investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years."
It seems hard to believe that Apple was receiving special treatment when practically every MNC has been using this very same loophole. But at this point it is he said/she said. This loophole is now closed, so the EC pursuing this feels more vindictive than anything (especially since the EU has had it out for US tech companies for awhile now).
It's likely that Google, Facebook, Ikea, et al. will receive similar consequences in the near future. Apple is just the first to receive a slap in the wrists. Hopefully this will reach beyond Ireland and similar investigations will be done in Netherlands and Luxemburg.
A lot of Europeans (me included) are not at all happy to see massively profitable companies operating in Europe without paying practically any taxes. This makes it impossible for European companies to compete with them and I'm very glad the authorities are looking to level the playing field and bring in some tax revenue while doing so.
You do understand it's a two way street? There is a trade imbalance between EU and US aprox 30% in favor of EU. If your point of view prevails EU will loose tax revenue and US will gain tax revenue :).
Of course it does. Volkswagen has gotten hundreds of millions of dollars worth of incentives from the state of Tennessee for its Chattanooga plant, for example.
"Combined with other property tax breaks, TVA incentives, road projects and other potential tax credits, Volkswagen could qualify for more than $300 million of grants"
Indeed that's the case though I can't say that I agree with them. The main reason is because these 'special' deals stifle competition and I think that's what the EC rule is all about. I guess it's legal in the US but that doesn't make it "right"(at least in the EU) so I don't mind if the US would tax EU companies more. It would be a win-win for the most of the citizens(EU and US).
I think it would be a win for ordinary citizens(both EU and US) and perhaps each individual state too(unless you consider tax a bad thing) because the taxes help the governments to develop the infrastructure(i.e. schools, logistics etc) thus they can create more value.
I have doubts that these MNCs help the society that much to be eligible for these tax breaks. They are not charities... The loss for the EU as a economic partner is negligible.
The bigger problem is that it's a two way street within the EU.
The "smaller" economies have to give incentive to large corporations so they could set up shop.
Ireland did it with various incentives, Poland, Estonia and the likes are also doing it with others.
Ireland is in the Eurozone so they can't set up their own monetary policy so they can't offer much in terms of favorable interest and conversion rates to large corporations.
If they can't offer tax incentives companies would be less inclined to set up shop in Ireland if their operating costs would be similar to those in Germany or France.
English gives Ireland some advantage but it's not nearly as big as people think, the culture in Germany or France is close enough and you can train people to speak English and with the shared market even import a few 1000's Irish to man the phones.
Apple and the other big guys set up their shop in Ireland because the Irish government gave out huge incentive both direct and indirect it provided funding for training and education for its residents to meet the specific requirements that companies like Apple, Google, and Facebook had.
It provided financing, loans and tax breaks to those companies to come in and employ Irish workers and it did it because it's the only way it could compete with the likes of Germany.
Tax loopholes are bad, laws that prevent smaller countries from being competitive are even worse, an equal playing field works when the players are equal, when they aren't "equality" is only advantageous to the strong and established players.
I am a Luxembourger and I fully agree that the EU must close these kinds of tax loop holes. In the past my country made a little money out of these tax loop holes, this was immoral money that my country did not even need. Doing this, other European countries lost a lot of tax income. The only ones winning big time in scheme were the international companies abusing the EU and its people.
Just out of curiosity, why would tax competition be considered bad? It is generally accepted that monopolies and cartels are bad for the free market, but when it comes to governments and the services they provide, we're completely OK with tax cartels. These EU and OECD tax agreements basically amount to a tax cartel, where governments agree they'll fix their tax rate regardless of the infrastructure and level of services they provide...
Because cartels means something specific to a group of market players and tax means something specific to a nation state.
The two are vastly different, and the first is tolerated only by the latter because it's the best way we know to bring order and organization to trade.
It is bad because it decorrelates the country you make a profit out of from the country you pay taxes on this profit.
The people paying for your product are able to buy it because they live in a country that provides for them, through added value, jobs, health care, infrastructure and so on. If you want to profit from these people's buying power, then you have to conform to that country's rules of business, that's all.
Apple is very happy to make huge sells of iPhones thoughout France, Germany, Italy and such countries, siphoning money from their people to Ireland, without ever contributing as much into the local economy. They employ a few hundred people in Apple stores and hotlines, but compared to their profit it is just ridiculous.
"decorrelates the country you make a profit out of from the country you pay taxes on this profit": taxes are due where value creation took place. That's called a rule. The EU decided the rule should be changed after the fact, retroactively.
"people paying for your product are able to buy it because they live in a country that provides for them": wow... really? I know governments love considering people's money as theirs, people's lives as theirs, but that's a bit far stretched maybe? I'm not any country's liability. I'm a free man in a free society. Aren't you?
"Without the Glorious State, you wouldn't have had any consumers to make you wealthy!"
Here's a business producing commerce-enabling technology in an extremely valuable manner, hence the profit. Consumers exchanged their earned, post-tax savings for those things and paid additional tax along the way. To act like governments were short-changed is preposterous. It's "you didn't build that" taken to the extreme, and borderline extortion.
Is that really the case? Apple operates in Ireland and it pays taxes there based on a certain competitive rate it has. If Apple sells phones in certain countries, it has a network of suppliers there and it pays taxes on their business operations there. It seems that you're making the argument that the phones have to be produced in every country where they're sold in order to eliminate trade deficits (the so-called decorrelation of profits and taxes that would result from the importing of a product). But the only way for the other countries to get that tax revenue would be to be competitive enough (through competitive tax rates, availability of talent, infrastructure, legal system, etc.), so that Apple would be incentivized to open offices and move their R&D and pay taxes there. It seems you're arguing that these other countries shouldn't have to compete on these criteria, but should somehow be entitled to that tax revenue or at least to protectionist measures that would make sure that Apple has no incentive to go anywhere else, purely based on the fact that willing buyers purchase Apple's products there. I'm not sure that's a very strong argument because it basically amounts to saying that if you don't force Apple to give some form of a discount to these buyers, they won't be able to buy the product in the future...
The thing about transfer pricing is that it makes the "location where value is created" completely arbitary. It's not where the R&D is done, it's where the shell company that holds the patents is registered.
Apple subsidiaries in random countries selling phones don't pay taxes because they don't make any profit. They don't make any profit because they're "charged" an amount for the phones (and IP, branding etc) that exactly equals the sales.
> Just out of curiosity, why would tax competition be considered bad?
This is not about tax competition, this is about abusing tax loop holes and trying to avoid paying any tax at all. E.g. before 2015 Amazon declared their entire European income in Luxembourg and payed about 1 percent of tax on that money. This way other (much bigger) European countries like Germany and France lost billions.
> Just out of curiosity, why would tax competition be considered bad?
In the European union, where funds are easily transferred between subsidiaries in different countries, tax competition by individual member states can have particularly harmful effects on the public economy as a whole.
In a typical multinational corp tax avoidance scheme, a coproration has a subsidiary A in e.g. Ireland and has a very small corporate tax rate on profits. Then another country, e.g. Netherlands gives subsidiary B a tax break on some commodity, typically an IP licensing scheme of some kind.
Subsidiary A licenses some IP from B, and the licensing fees are conveninently 100% of the profits of A, so they're not making a profit in Ireland and don't have to pay tax there. Subsidiary B gets all their profits from IP licensing that pays hardly any tax in the Netherlands.
Add a few subsiriaries and loan arrangements between them (free movement of capital in Europe is one of the fundamental pillars of the EU), and no taxes get paid and all of the profits get funneled into a tax haven such as Bahamas or Caymans.
So while you'd think that tax competition would just be a fair competition when talking about individual countries, at EU scale it ends up being a race to the bottom where a few select countries (Ireland, Netherlands, Luxemburg) get a nominal fee from the multinationals but all European states end up losing billions in tax revenue.
And then there's also the corruption aspect. These tax deals aren't a gesture of goodwill.
You can't have tax competition and freedom of movement of companies, goods and capital. It's the tradeoff in the EU for removing all protective internal tariffs.
(The US avoids much inter-state tax competition through federal taxes)
The US has tons of inter-state tax competition; federal taxes just comprise the base rate, not the total taxation rate. State governments fall all over themselves to offer special incentives for companies to come in. Or stay, in some cases - a local employer has been here almost 80 years, yet the state and local governments still feel they need a massive multimillion dollar tax break or they'll pick up and leave.
No, it is not. Before 2015 many companies (one prominent example being Amazon) declared their entire European income in Luxembourg and payed about 1 percent tax on that money. This tax loop hole has since been closed by the EU, Luxembourg lost about 10 percent of its budget because of this. Today when somebody from e.g. Germany buys a product from Amazon.de, Amazon pays tax in Germany for this product.
This isn't only ongoing, this is by design, and being actively pushed further, because in the EU if you are by definition an equal opportunity tax haven like Luxemburg you are golden.
Luxembourg is like the delaware of Europe, it's a banking and financial institution state and both its own laws and the EU laws and policies it lobbies (and when you effectively are not only Delaware but also the DC of the EU it kinda helps) for ensure that it would continue to operate as one.
The bad thing that Ireland and is a big no-no in the EU is to go to the likes of apple and say:
Hai Apple I really want you inside of me!
I know I'm small, and I don't have a huge workforce and internal market, I'm not like Germany.
I also don't have a huge economic and financial infrastructure like Luxembourg, Switzerland or UK (London) but I'm a really hard worker!
Tell me what skills you need, and I'll educate my people, I'll give you low interest loans to build your shiny offices and I will give you tax deduction if you employ my peeps.
I would do all that I can to make sure it will be easy for you to operate here because I really don't have much to offer and I need to compete with the bigger countries since the euro is expensive and the price stability is managed by the ECB and my people need to eat and loans I've been taking on are becoming harder and harder to pay.
Now this is the only way that Ireland can really attract large corporations and make it more lucrative to invest in its industry, this is what effectively every country on the planet does when it wants to grow.
And since Ireland can't control it's own monetary policy and currency it also can't just be a cheap place to be, while there is some local variation because of the mandate of the ECB to control the price stability within the Eurozone the prices of many goods and services are quite similar (Ireland is actually more expensive than Germany because it's an island which increases the costs of logistics and it has lower production which means more imports which add costs even if they import within the EU) it needs boost its economy in order to match the salary level of the other Eurozone states and to do it it needs to offer something to corporations.
It can't offer them a huge workforce because it doesn't have one, It can't offer them access to financial and banking infrastructure because it doesn't have that either, what it can offer is English, fund both academic and vocational education and training based on the skills those companies need and give them tax incentives to come and employ Irish people.
Ireland isn't Luxembourg Apple didn't set up effectively a "shell" there that's pretty much there for easy tax loopholes and actually employes no one, Apple employees directly over 6000 people in Ireland and indirectly 4-5K more, same goes for Microsoft, Google, Facebook, Amazon and the likes.
This isn't some tax break Island that those companies incorporate in by name only and don't actually have staff, companies have "real" employees in Ireland because the Irish "incentives" are tied to direct employment.
Ireland isn't trying to create tax loopholes to make a quick buck to split it between a few 100's residents, it tries to keep it's 5M people employed, forcing them to play by the "same rules" as 4 of the world's 10 largest economies is asinine.
In Europe they are effectively 'state level' - making the problem worse for Europe than for state-by-state tax competition in the US.
Re: your Ireland comment - yes - I see your point, but the issue here is not Ireland having a 'lower tax rate' of 12.5% - rather than they allowed Apple to have 'special privileges' thereby paying next to nothing, right?
It's going to depend very much on where you are, how you're organized, what tax breaks you get, and how much money you make, but states generally have both a) many different kinds of tax: income tax, property tax, sales tax and b) a cumulative higher tax rate. A much higher proportion of my money personally goes to the state than it does to the feds.
In Europe, there are no 'Federal' taxes i.e. at the European level. All taxes are to the 'State'. So it doesn't matter if my analogy is a little bit off.
I am not sure I understand why it makes a difference. If the baseline (federal taxes) are the same everywhere, it's just the same as if there were no federal taxes. States compete and offer special tax breaks on a state level; that's the same situation we had here in Europe, except that the federal government, unlike the EU, doesn't seem to care if states offer a company crazy tax breaks, subsidies, or loans, even if said breaks are a special deal for that company alone.
There are no 'Federal Taxes' in Europe. Corporations don't pay a corporate tax at the European level - just to the states. So there is tax competition.
Right...but the existence of a federal tax is irrelevant; there is still tons of tax competition because the states assess their own taxes. The federal tax rate, from the competitive perspective, is irrelevant because everyone pays it. But every state has different taxes and they compete with each other to give the biggest tax breaks.
For for example you might have:
State A:
State income tax: 5%
Property tax: 5%
Sales tax: 5%
State B:
State income tax: 6%
Property tax: 6%
Sales tax: 5%
Yes, everyone in both State A and B pay, let's say, a federal 7% income tax and payroll taxes. But the state taxes make a huge difference. State says to Wal-Corp - build a store here and you'll be exempt from property taxes and sales tax for 5 years, and we'll give you a special state income tax credit that reduces it to 3%. That's the kind of deal making we have going on with states, except the federal government doesn't intervene to stop it like the EU did here.
> Since June 2013, the Commission has been investigating the tax ruling practices of Member States. It extended this information inquiry to all Member States in December 2014. In October 2015, the Commission concluded that Luxembourg and the Netherlands had granted selective tax advantages to Fiat and Starbucks, respectively. In January 2016, the Commission concluded that selective tax advantages granted by Belgium to least 35 multinationals, mainly from the EU, under its "excess profit" tax scheme are illegal under EU state aid rules. The Commission also has two ongoing in-depth investigations into concerns that tax rulings may give rise to state aid issues in Luxembourg, as regards Amazon and McDonald's.
> A lot of Europeans (me included) are not at all happy to see massively profitable companies operating in Europe without paying practically any taxes.
From the letter, it seems Apple thinks it should be paying taxes in California rather than were the profits are coming from (the EU). Excepts from the letter: "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."
The second half of the sentence seems to be a non-sequitur, or intentional misdirection -nothing about it follows from the first half.
Bullshit. Yes, all MNCs are dodging taxes where they can, but it's not like their finances are so easy that all you need is One Weird Trick and poof!, gone are the taxes. One of the multitude of measures Apple (and apparently nobody else) used was found illegal. The rest aren't, and Ireland is still a tax haven compared to the rest of Europe.
> It seems hard to believe that Apple was receiving special treatment when practically every MNC has been using this very same loophole.
Right. MNC have, but local companies had no way to do that. That's the crux of the issue. In fact, some people started an inquiry how to replicate that scheme.
The EU has been pursuing companies, including domestically based ones, under "illegal state aid" rules for years. Why should US tech companies get special dispensation to avoid repaying state aid ruled illegal that the likes of Real Madrid and Estonian Air (which went bankrupt when faced with the repayments) didn't?
"especially since the EU has had it out for US tech companies for awhile now"
Sorry but this is typical American FUD, European companies are scrutinised on the same terms and when breaking the law or dodging stuff are getting (high) fines as well.
It is not Europe's fault that this kind of news doesn't find its way in the US... .
It was illegal all the way, only Apple wants to make it legal.
"why wasn't it stopped 25 years ago, when it started?"
If murdering is illegal, why wasn't it stopped 5000 years ago? Don't know. People do illegal things all the time, most people doing illegal things do not get prosecuted for various reasons, fashion, society, not enough prosecutors.
The argument "I was not prosecuted some years, so it was not illegal" doesn't work with any court.
"Statutes of limitations"
I don't know the time frames and for what time frame Apple needs to pay fines. Could you share the time frames where you think Apple got illegally fined?
I'm no expert in tax law but would assume, here in Germany, there is no "Statutes of limitations" for taxes. Countries lose all their humor when it's about taxes.
> The argument "I was not prosecuted some years, so it was not illegal" doesn't work with any court.
That's exactly how it works. Look up statute of limitations.
Most civil violations have stringent limits.
> I'm no expert in tax law but would assume, here in Germany, there is no "Statutes of limitations" for taxes. Countries lose all their humor when it's about taxes.
I didn't know German law applied in Ireland. Perhaps that's the entire point of the EU, I don't know.
Anyway, Ireland explicitly says that nothing is owed. Maybe you should read a bit more about this issue before commenting?
Apple innocently, and unknowingly, buy a stolen and ringed car. A chance check reveals the car to be stolen - Apple lose the car regardless of them believing it legitimate.
Apple innocently, and unknowingly[1], accept an illegal tax benefit. Apple lose the benefit of the illegal activity.
What's the difference? Caveat Emptor for both. Even if you want to consider them the innocent victim they don't get to keep the benefit of a crime.
[1] I'm less convinced it's unknowing here - Apple probably have a surfeit of international taxation experts and lawyers.
In the first case you mentioned, you can absolutely sue the person who sold you a stolen car for your money back. In this case doesn't it follow that Apple could sue Ireland?
Maybe they should have asked the EU? If a deal looks to be good to be true it might not be true. If you buy a stolen car from some shaddy guy for much less then it is actual worth it is also your fault.
Did you get the okay from Obama and the Supreme Court when you purchased that smartphone from South Korea? I heard maybe they'll decide next year to retrospectively ban all goods from the peninsula.
[The following reply doesn't make any sense anymore as the parent did retroactively change his reply.]
It depends who do you mean with everyone? In this case the only party which should have been asked would have been the EU, which doesn't sound mad at all in my opinion.
Your analogy fails as it's an irrelevant reference, we're talking about taxes here, not every possible law that could ever exist.
If you want to get an opinion from the US Federal Government on how to account for a transaction for tax purposes there is in fact a procedure for that: https://en.wikipedia.org/wiki/Private_letter_ruling
One in the business of importing phones from another country who has questions about competing taxation and tariff rules has many options for getting guidance on the implications of their accounting.
And nothing that happened in this matter was shocking or surprising to Apple. They have elaborate tax avoidance schemes. For example, they didn't like trip and fall and land on a convoluted Double Irish arrangement by accident: https://en.wikipedia.org/wiki/Double_Irish_arrangement
Want to know how you can tell this didn't happen to Apple innocently and unknowingly? If they were actually innocent and unknowing they'd certainly say so, and make a coherent legal argument to back up that point of view.
The post we're all commenting on has some bullshit black and white pictures and stories about shit that happened in Cork Ireland in 1980 and Steve Jobs feelings and whatnot.
From what I'm reading the comparison seems more like after finding out that a person innocently, and unknowingly, borrowed a stolen car that not only are they losing use of the car, they are being forced to buy the car that they won't keep as well.
Losing the benefit, sure. Paying back taxes that don't exist nor asked for? There's a problem in there somewhere.
they are being forced to buy the car that they won't keep as well.
So Apple is being forced to buy Ireland? No.
Following your borrowed car analogy, Apple finds a gas card in the glove box on the first day and uses the car every day for 4 years and uses the gas card. When it's discovered that the borrowed car is stolen and the gas card wasn't Ireland's, who has to pay the gas card off?
A better analogy would be finding that someone deliberately and knowingly claim mileage expenses at an absurdly high cost per mile in lieu of a larger annual bonus after discussing tax efficient solutions with HR. Would they face a revised tax bill for past years and be expected to stop overclaiming for future years if an authority with more standing than their employer got involved? Of course. Does Apple's team of tax law specialists have more understanding of the potential for such a scheme to be ruled illegal than the average employee? Of course.
Then Ireland should be paying the bill... It's like punishing a student for having a hall pass a teacher admitted writing.
There was a discussion yesterday about this on HN. It's pretty much a corporations responsibility to try to avoid as much tax legally as it can. In this case, Ireland gave them LEGAL tax break (at least that was what the Irish believed at the time) and now Apple is getting blamed..?
It just doesn't make sense, put the blame where the blame is due.
The government maintains that even if it were to take the
cash, European rules mean it would have to use the money
to pay down some of its 180 billion euros of national debt
rather than fund spending.
Then lets sanction all murders by state in Syria, because they are only murdering traitors and terrorists so it's LEGAL also because they say so. There is something like international law in case of Syria and there is something like EU law for member countries. While being a member of EU you have access to whole EU market. So no, what they did was ILLEGAL. Apple exactly knew what they were doing and knew it was against EU law, they only thought they will get away with it.
> It's pretty much a corporations responsibility to try to avoid as much tax legally as it can.
That's a popular falsehood. It is a corporation's responsibility to fulfill the wishes of its shareholders. That doesn't even necessarily mean maximizing profits, and it certainly doesn't mean avoiding taxes to a degree that incurs both legal and reputational risk. If the shareholders want the company to act as a mature and respectable person would, then the corporation's duty is to do so.
Unless Apple's a benefit corporation, it's only responsiblity to share holders is long and short term profit. I distinguish between the two to make the point that it shouldn't break laws or go out if business because that hurts long term profits, it also should avoid taxes it can, and pay all taxes it can't avoid to maximize short term profits, and minimize longer term tax penalties.
You're simply wrong, in a way that only a person who has never cracked open a book on corporate law or history could be. Profit is not, and never has been, the only duty of a corporation. Corporations routinely forego opportunities to maximize profit, even in ways they believe they could get away with, for the sake of safety or social/environmental responsibility or even crazier reasons (e.g. faux religious freedom). Activist shareholders of the Trump/Shkreli variety might try to sue for that, but their record of success is spotty at best because the people who are actually in the courtroom have a more mature understanding.
Ugh, it's kind of ironic you bring this up, because I'm actually pretty familiar with corporate law... I'm particularly well versed in taxes, as well as wealth management.
Dodge v. Ford Motor Co., 170 N.W. 668, 684 (Mich. 1919)
> A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end. The discretion of directors is to be exercised in the choice of means to attain that end, and does not extend to a change in the end itself, to the reduction of profits, or to the nondistribution of profits among stockholders in order to devote them to other purposes.
Although, there are examples where a court did recognize that helping employees will maximize profit, or not putting up bright lights next to a neighborhood is "moral". All of the decisions had to relate back to helping the shareholders. Most courts in the U.S. view shareholder profit as the #1 responsibility of the board of directors, others argue public safety might be #1, profits #2.
All of them agree that the primary purpose is to make/maximize profits, without which you can do nothing.
The primary purpose is to make/maximize profits because that's what the shareholders want, not as an essential part of being a corporation. Instead of trying to explain concepts like "duty of care" and "duty of loyalty" and "business judgment" further myself, I'll just leave that to someone better qualified.
Did they ask the EC if it was legal in the first place? If they wanted a guarantee they should not rely solely on the approval from the government in Ireland.
> the point here is that this scheme was entirely legal
That is maybe your legal analysis of european union state aid legislation, but in the end it's the commission and the court of justice who have to assess it.
If you evade tax, you know full well what you are doing, even if it's technically legal you should expect to be retrospectively taxed, especially if you are exploiting the system to such an extreme.
The entire argument against "retroactive" corrections sounds a lot like "you can't punish us because we've been doing this for a really long time and getting away with it until now".
My reading of the ruling is that the EU are saying that it's always been illegal under EU law, but that the Irish government had pretended that it wasn't.
What it looks like they are trying to do is apply a legally compliant level of taxes retroactively, not laws.
(Yeah, I know you're saying it was legal under Irish law, but the whole point is that some Irish laws take precedence over others. In this case, their treaty obligations to the EU, codified in their laws, take precedence. If this wasn't the case there wouldn't even be a court case, much less a judgement.)
That's a broken argument since what they are stating is that a higher law was broken. It's also not always the case that laws do not apply retroactively:
But you can, because the tax breaks we unlawful this whole time! That is the entire point. If I break into a warehouse and steal a TV every day for years can I just argue "ok I'll stop but you can't punish me because you can't apply the law retroactively"?
It's not retroactive! The law was not passed today! It was there from the beginning. It's just that Apple didn't care until today when they were told to pay. So suddenly they don't want to pay what they own because the 'didn't know' so they call this "retroactive" even if it's very much not retroactive at all.
So you're saying, if I rob you today and you don't get around to reporting the crime until next year, I should walk free?
There are actually limits to how far back the dodged taxes can be collected. That's why it's only $13bn. That's what has been due since 2003. This entire thing actually goes back since the 1990s.
Also, we're not even talking about criminal charges or fines here. Apple isn't being sued or facing any punishment. The EC has merely ruled that Apple didn't pay all the taxes it legally owed Ireland and Ireland didn't have the authority to allow them not to pay the taxes in the first place.
This is akin to a janitor charged with collecting rent for the landlord telling you for years that it's okay for you to pay pennies to live in your mansion until the landlord finds out about it and now demands you pay the $$$ you owe him because the janitor was never legally in a position to make that kind of deal and you're actually a highly paid expert in rental contracts and were fully aware of the deal having no legal basis to begin with.
This decision can't have been a surprise to Apple. Seeing this kind of thing coming is what they pay very expensive legal experts for. They knew EU law overruled the Irish laws that supposedly allowed this deal in the first place. They're only crying foul because they were caught.
How very sad, another erosion of fundamental common law principles in the UK. In the last couple of decades, the UK has abolished the right to remain silent, the right to a public trial by jury, the protection against double jeopardy, the writ of habeas corpus, and the lack of ex post facto laws. Freedom of speech has become very qualified as well, with bans on various forms of "hate speech", and the freedom of assembly has also been seriously curtailed.
Criminal Justice Act 2003, abrogated double jeopardy in cases with "new and compelling evidence".
Serious Organised Crime and Police Act 2005, created an offence of inciting religious hatred, an advanced notification scheme for protests up to 1 kilometre from Parliament.
Terrorism Act 2006, following the bombings in London on the 7th of July, this legislation allows for people suspected of terrorist offences to be detained without charge for up to 28 days.
LOL. There's no "even if it's technically legal". It's legal or it's not. The police aren't going to let you go from something because you were only "technically breaking the law."
It's possible to for something to be technically legal according to the letter of the law, but still be breaking the spirit of the law and consequently considered illegal by some.
There's a big difference. The latter is legal, the former is not.
Apple did not do anything wrong from what I can see: they were given a good deal, they took it. It turns out that deal was illegal so they have to pay some money to rectify the error.
Doesn't seem very fair but governments are pretty unforgiving when it comes to taxes overall.
The EU's argument is that it was always illegal under EU law. In their view the analogy would be you local council say the you don't have to pay income tax, and then a court finding they didn't have the right to make that agreement.
I don't really have a view which is correct, but I think it's important to note that the EU doesn't accept it is acting retrospectively.
According to press release, the scheme could be legal according to some Irish laws, but it violated EU law, which also applies to Ireland as a member of treaty. If government of Ireland didn't take EU law in account when applied tax rulings, that doesn't mean it was acting legally. So it more looks like the tax office lost your tax declaration and you decided you have your own personal tax rate of 0. No surprise, when the declaration will be found you'll be charged.
They gave tax benefits they weren't actually (legally) able to give. So those benefits are entirely void and never existed to begin with.
IMO they should be able to sue the agency (or agency's employees) that supposedly granted them the tax benefits for damages because they misrepresented the actual tax situation, but they still owe the unpaid taxes and have to pay them back.
Not knowing the law doesn't protect you from breaking it. In this case, they're not even being punished -- the $$ owed aren't a fine, just the taxes (and interest) they should have paid to begin with.
This is similar to buying stolen goods: sure, you may not actually have known they were stolen, so you might not be directly punished, but you still don't legally own the goods (even though you paid for them) so they will be confiscated and returned to their rightful owners. You can sue the seller for damages, but the state is under no obligation to reimburse you for handing over "your property" (because it isn't).
It is not as though Apple knocked on the door and were welcomed in with tea and cake. This deal (these deals?) were the result of much planning and lobbying by Apple.
And you're right, it's not a punishment, just asking them to pay what was owed. If you owe the taxman £20000, it's a big problem for you. If you owe the taxman £13,000,000,000, then it's definitely a problem for the taxman :)
As a concrete example: German celebrity and football manager Hoeneß was found to have withheld about € 30 million in taxes. He was charged with tax evasion and punished with a prison sentence of 5 years and six months but no additional fine.
He did eventually pay back the entire amount (plus interest) but he was released from prison after having spent only roughly half his sentence (which actually didn't confine him to prison for his entire "stay" anyway).
but the point here is that this scheme was entirely legal
Yes and no - the EC's argument makes a bit more sense imo: Yes, it was legal in the sense that Apple broke no irish tax laws. But the tax laws themselves have violated some higher-level EU laws that Ireland had pledged to obey - at least that's how the EC sees it.
Perhaps a more fitting (but still horrible) analogy were if you make an employment contract far below mandatory minimum wage. Neither you nor your employer is violating the contract and both of you might be perfectly happy with the conditions - but your contract might stil cause disadvantages to third parties (other workers) and might violate state laws.
In this analogy the worker is Ireland and the employer Apple. The analogy would be that the worker must now receive, and the employer now pay, the difference between the contract and the minimum wage. Just like Apple must now pay and Ireland now receive the extra tax.
Ireland gave Apple tax breaks that were not theirs to give. Just as a worker can't give a break to an employer and work for less than minimum wage (even if they want to, and even if they wrote the contract!). The ruling was effectively saying "Apple does actually owe those taxes to Ireland, even if they were willing to forgo them, since it is against EU rules for Ireland to give tax breaks of that nature." It actually is reasonably equivalent to a court declaring a company needs to give backpay to a worker to make their wages equivalent to minimum wage, even if the worker doesn't want the money.
It was illegal under EU law but Apple and the Irish government didn't seem to care much. Now, that imaginative case doesn't make me cry because we talk about corporations with preferential deals that stifle competition. It's definitely not fair for mere mortals to pay 20% and Apple 0.0005%. How could a such system be fair?
Why is it unfair? You're automatically jumping to the assumption that individual people should pay the same tax rate as a corporation. Why? Just because most countries do it now? It wasn't done through most of history though. What about the notion that corporations should pay no tax at all, and the only taxes should be on individuals.
> Why is it unfair? You're automatically jumping to the assumption that individual people should pay the same tax rate as a corporation.
I didn't say that corporations should be the same tax as individuals. I've said that's unfair for Apple to pay less tax than any other EU corporation/company. How can you compete with Apple if they pay no tax and your start-up pays 20% ? How could Apple have succeeded if they were to pay 20% tax and all the others (i.e. IBM) was to pay no tax?
> What about the notion that corporations should pay no tax at all, and the only taxes should be on individuals.
That would be basically slavery of foreign people(not nice).
The burden of the taxes they don't pay winds up on others, who have to make up the difference. What is when you are forced to work for a powerful company that pays you nothing? Extortion, fraud?
When I say mere mortals I mean companies of mere mortals(i.e. like your start-up and mine). Do you find it fair for your company to pay more tax than Apple? How can you compete with them on price?
Shouldn't they be taking this up with Ireland? Like, Apple pays Ireland, Ireland pays the EC. Ireland failed to collect the correct amount of money owed to the EC. It's Ireland who's at fault, and "oops, GFY EC we're brexiting." (assuming that the EU and the EC are related)
Seems like interesting timing. They've decided to go after back taxes right before the UK leaves the party.
> Ireland failed to collect the correct amount of money owed to the EC
Just for your info this isn't what happened, it's Ireland's tax money. The EC doesn't collect taxes. Instead the EC ruled that Ireland was providing illegal state aid (under EU rules) to Apple through its tax arrangements. So this loophole was nullified and Apple have to pay the back taxes to Ireland. The EU gets nothing (the EC is the executive body of the EU).
This investigation into dodgy corporate tax deals has nothing to do with Brexit (note that this is about Ireland, not the UK), and it's been going on for most of a decade now.
> Shouldn't they be taking this up with Ireland? Like, Apple pays Ireland, Ireland pays the EC.
No. This isn't over money owed to the EC, it's over state aid perceived as manipulating the Single Market in a company's favour, which is [to an extent] undone by requiring that company to repay the money
> Seems like interesting timing. They've decided to go after back taxes right before the UK leaves the party.
It's the culmination of a three year investigation and legal process, and they've been going after companies with other special tax arrangements with local governments for years. I don't think Brexit had anything to do with it.
> That is not how things should work in a system based on the rule of law and fairness.
Not all law needs to be 100% formalist. It's perfectly possible to have a blanket law that says "If some tax evasion scheme is generally considered to be unfair/unreasonable, it can be annulled no matter what the letter of the law says".
> not how things should work in a system based on the rule of law and fairness.
The problem here is that the rule of law and the rule of fairness had diverged, and there was a higher-level law forbidding that. This kind of conflict happens all the time. In the US, the most common manifestation is laws being struck down as unconstitutional. Governments are bound by laws too. When they break those laws by treating people unfairly, correction is needed.
"That is not how things should work in a system based on the rule of law and fairness". If you find a loophole in the fiscal system and exploit, you are following the rules, but at the same time, you are clearly robbing the society as a whole. In France, this is a fraud. see https://xkcd.com/1494/
> That is not how things should work in a system based on the rule of law and fairness.
Something doesn't jive here. If it is that clear cut, didn't EC read its own laws before asking Apple to pay? If there is a paragraph they skipped someone should point to that, Apple should perhaps.
It would seem to me EC is implying what has happened in the past was not entirely legal somehow. Then it is not obvious what should happen next.
Notice Apple mentions how they "asked govt. of Ireland" for guidance. That means they might have documentation of a govt. official advising it to act that way. That is very important because it is building the case of Ireland here doing something illegal against the EC laws. So Apple is washing their hands here of this case.
Imagine for a moment that you enter into an extremely complicated tax arrangement aimed to reduce your tax burden, quite aware of the risk that at a later date the authorities will judge you to owe that tax regardless and you will end up with a massive bill.
Tax judgements often don't occur immediately. Just ask any one of the 50,000 IT contractors in the UK that are facing this exact situation right now with respect to EBT arrangements. Some owe tax dating back over more than a decade.
They knew the risk, they took it, they lost. No-one is naive here, certainly not Apple.
The letter is fucking pathetic.
They are literally trying to conscript fanboys to cause some drama so they are off the hook. For a company that literally has hundreds of billions floating about its just pathetic
"A company’s profits should be taxed in the country where the value is created."
"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."
And yet the value creation seems to be happening mostly in tax havens... and NOT in the US. Nice try, Timmy.
Be a sport and put your money where your mouth is, and repatriate all that foreign stash cash to the US, and I am happy to side with you. Yet somehow, I believe this won't be on the menu anytime soon...
So trying to classify Ireland a tax haven isn't correct. It might be popular amongst certain political classes and media in the US to do so but it doesn't stack up. Ireland has a flat corporation tax rate of 12.5%. Many other EU countries have rates which can, and often do, end up even lower. Look at France for example where the tax rate drops down to an effective 8% for many of the CAC40 companies (according to the OECD).
The 0.005% rate is NOT the corporate tax rate Ireland charged Apple, its the rate Apple managed wrangle on all their European wide profits by arranging their corporate structures to take advantage of various loopholes in several countries, not just in Ireland. This was perfectly legal under Irish, EU and importantly, US law at the time. Now the EU wants to effectively rewrite history and even the US agrees with Irelands position on this.
That's a graph of cash reserves, not revenues. It's highly likely that Apple spends most of the revenue it accrues in the Unites States. You know, on expensive shit like Apple Campus 2.
The slope of the graph is effectively a lower bound on profit-not-returned-to-shareholders. Spending it would make it no longer count as profit. $200bn buys you a lot of HQ buildings. It would probably buy you all the HQ buildings in SF.
I concur 100%. BTW, Apple doesn't pay the tax they owe in this country either due to moving IP to Ireland and other tax favorable countries. Of course, they'll just move to Panama.
You are wrong. Actually right, but why should you pay back? There must be agreement going forward. How about your family pays new taxes for the last 100 years, taxes that are invented TODAY?
Did you read the article? They are forced to pay retroactively. It's like if the government raised income tax rates and tried to collect the difference for the last 12 years from your taxes. Would you like that?
IT Contractors in the UK right now are facing demands to pay retroactively for tax stretching back over a decade in some cases that they purposefully avoided at the time using a scheme called EBT (or, being paid in loans by a trust because loans aren't taxed).
They had advice at the time that these schemes were legit (though every adviser would deliver that with a wink), any adult human must have known there was a large risk HMRC would disagree eventually (just as Apple knew they were running a risk), and now they face demands to pay the tax they failed to pay in the first place.
Are they the victims? Certainly they will tell you so. Sympathy I have for them? Nil.
I'm not a lawyer, but as far as I know the European law is prioritary before its nations'laws (except constitution). Apple took advantage of Irish law.
What is retroactive here is the payment of taxes, not the law.
"Is the EC actually trying to apply a retroactive law?"
No. The whole agreement between Apple and Ireland was deemed illegal by EC[1], so now they must pay avoided taxes. You can't demand keeping stolen goods after being caught stealing.
In a sense: yes. Apple made a deal with Ireland as to their taxation; the EU ruled it illegal, and judged that both parties must act like the agreement was never there.
That means Apple is due taxes to Ireland.
In a sense, Ireland is the guilty party. They entered the EU; that means they agreed with its rules. Later they made an agreement with Apple that is now ruled illegal in the EU. Yet, they will profit (in the short term) if this ruling will stand.
Note that Apple's only published issue is with the retroactive part.
Open question is whether Apple handled in good faith making that deal. I do not rule out judges would rule they did, because there are zillions of such deals, and because the EU doesn't mention anything about fining Apple (they 'just' have to pay the taxes they are due, with interest)
The fact is that it was illegal. It didn't need a rule to decide its legality. I can only speculate that they didn't expect to be forced to pay all the tax back. Perhaps they expected a kind of warning given the local government was on their side. There were/are others doing this (i.e. Microsoft,Google etc) so they decided to stick with the herd.
"The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process."
The most specific and IMHO damming allegation was how they avoided paying tax.
From the EU press release:
[Ireland] endorsed a split of the profits for tax purposes in Ireland: Under
the agreed method, most profits were internally allocated away from Ireland
to a "head office" within Apple Sales International. This "head office" was
not based in any country and did not have any employees or own premises.
[...]
The remaining vast majority of profits were allocated to the "head office",
where they remained untaxed [...] an effective tax rate of about 0.05% on
its overall annual profits.
So, at the advice of Ireland, Apple was able to attribute sales to 'Apple Sales International', which was not based in any country and thus was not subject to tax.
I gather that European tax law prosecution must differ from other kinds, because if me and five of my buddies did a crime we'd all be in trouble simultaneously.
Just a note, precedent has little impact on law outside of countries that don't practice common law. Common law originates from the UK and Germany and France don't practice it, therefore precedence has little to no impact.
This is not entirely true. Precedence works different, sure. But saying precedence has no impact is (at least in the German legal system I know) absolutely false. For example, the German criminal code is sparse on detail and enforcement in courts is largely based on earlier decisions by higher courts. The important difference is that judges are not legally bound by those decisions and they usually don't directly refer to those (except for high-profile decisions) but just re-use the same arguments. But if they don't follow earlier decisions and have no good reason their verdict is going to be thrown out (again, by re-using old arguments instead of directly referring to precedence.)
To bring this back to topic: Litigation one example to establish a known interpretation of the law and then going after similiar cases (which are then decided on a low level based on the work in another case already done) is absolutely common in Germany.
Courts don't want to flip-flop on very similiar cases with no reason - in fact they are not allowed to by the constitution.
That's not entirely accurate when talking about the French and German forms of private law, which are the most popular non-common-law private law systems in the European Union (there are others, such as the Swedish system).
In both systems, periodic codification of the body of private law is made by the judiciary, executive and legislative branches working together at regular intervals with a goal of producing a nearly complete set of relevant rules for dealing with lawsuits between private persons.
The contrast is most keenly seen in landlord-tenant law, which in France is fully codified in a single document, while there are many Acts of Parliament and case law that apply in England and Wales.
In the French and German systems, matters that cannot be fully decided by reference to the relevant codified law are dealt with by the court of first instance writing down a decision with logic similar to that done in county courts in the UK. The parties generally have an automatic right of appeal from the court of first instance to a court that behaves very similarly to either the High Court in England or the Court of Appeal for England and Wales when it hears evidence sua sponte. The rulings of these appellate courts will almost always form the basis for a revision of the relevant code, and in the interim the appellate courts will generally reverse any ruling by a court of first instance that conflicts.
Codification also happens in public law, both administrative law and criminal law. Many common-law countries other than England and Wales -- most notably Canada and the United States (federally, and in several of the states) have a criminal code that is amended and revised from time to time. The German system of codification in criminal law also incorporates points of what in the U.S. would be doctrinal (i.e., wholly maintained by the judiciary) directly into the code, so that most criminal cases do not have to make reference to any other document even where there are controversies over the behaviour of the police or other authorities.
Precedent -- not precedence -- therefore differs mainly in the use of extra-statutory material in courts of first instance.
Note that in this particular case, European Administrative and Procedural Law (and particularly with respect to member-states' compliance with the Treaty of the European Union) is the relevant system, and while it strives to codify after the fact, typically a Directorate-General of the European Commission holds quasi-judicial hearings and writes down a detailed analysis and order in a process that in English Law would be considered secondary or delegated legislation, or something very very roughly similar to an Executive Order of a form explicitly allowed by an Act of Congress (one might compare decisions of e.g. the FCC). These orders are reviewable by the Commission as a whole, and in principle references may be made to the Council on an ad hoc basis. Parties subjected to adverse orders have a right to go to the Court of Justice of the European Union (CJEU) on various grounds, and there is an appeals process within the CJEU.
This system stems from (among others) Articles 41 and 47 of the Charter of Fundamental Rights of the European Union and Article 298 of the Treaty on the Functioning of the European Union.
With respect to precedent under this system, in general if an administrative decision by the Commission is not appealed or is not overturned on appeal, it remains part of secondary law until and unless the CJEU or the legislature (both parts, the European Parliament and the European Council) changes it. That means that Commission decisions that elucidate a general principle is binding on future Commission decisions. I can't imagine what to call that other than binding precedent.
>because if me and five of my buddies did a crime we'd all be in trouble simultaneously.
Probably not if you are not part of the same crime. If you and your five buddies commit a crime together, you'd be in trouble simultaneously. If you all commit a crime individually, you are not.
It's not like all thefts in a country are in trouble simultaneously, just because everyone committed their individual crime at the same time.
They didn't use the exact same structures. Therefore there must be a separate investigation for each company. Apple is probably the largest case so they started there.
Do you think that's how IRS and SEC investigations work? That they won't come after you specifically, as long as there are other people doing the same suspicious thing?
Of course not. In white-collar and corporate crime, they pick the cases they want to pursue. It doesn't matter if it's "fair" to you that everybody else isn't getting investigated.
Works as a test case, now they go after Google and can say they have already established that there was evasion, Google can decide to fight it or pay up, while the legal cost to Google may be minimal it may not be worth the hassle if ultimately you have to pay.
"Apple Sales International supplies and distributes Apple products. Apple Sales International was formerly known as Apple Computer International. The company is based in Hollyhill, Ireland. Apple Sales International operates as a subsidiary of Apple Inc."
It relies on the fact that Irish tax law does not include transfer
pricing rules. Specifically, Ireland has territorial taxation, and
does not levy taxes on income booked in subsidiaries of Irish
companies that are outside the state.
Funny - when it's phrased like this it seems a whole less clear about what Ireland (and Apple) has done wrong.
It's also worth noting that Ireland has passed tax reform to render this not possible any more.
[...]
In subsequent years, Apple Sales International's recorded profits continued to increase but the profits considered taxable in Ireland under the terms of the tax ruling did not. Thus this effective tax rate decreased further to only 0.005% in 2014.
And to use Cook's words "A company’s profits should be taxed in the country where the value is created." By this logic maybe the EU should get only VAT, which is paid by Apple's customers and not by Apple, but the US is left without a huge amount of tax money.
That statement itself means very little. I would argue the value is created where thousands of workers turn designs into millions of individual devices; Tim Cook might argue value is created where slapping an Apple logo on the device transforms it from a regular gadget into a luxury status symbol. Either way the issue here isn't where Apple should pay tax, but that they should be taxed fairly. There are many international tax treaties to prevent double taxation, Apple simply need to pay tax like (most) everyone else.
You see, if there's no clear answer to where the value is created, then there's no clear answer to where the profits are taxed! So it kinda clips through the cracks. Whoops!
Seems simple enough, but money is changing hands throughout the production process. Apple and its suppliers' wages are taxed. What's left over is taxed when spent or invested for a return.
Given the leviathan tax systems out there, it's no wonder tax havens exist in the first place. Before judging this activity as unethical and shifting the tax avoidance to some other place though, governments really need to perform a cost-benefit analysis of their tax laws and make it clear to companies what's expected from them in return for access to their market.
I think this is the best way to tax corporations. Corporations can move around where they produce goods, but it's much harder to move where they sell them.
Money can change hands where you want it to change hands, and profit can occur where you want it to occur. In this case, Apple Ireland buys an iPhone from the manufacturing division for (say) $300, sells an iPhone to Apple Italy for $800, and Apple Italy sells it to a consumer for $800. Apple Ireland made $500 profit, Apple Italy makes $0 profit, and so pays taxes in Ireland and not Italy.
> ASI, formerly Apple Computer International and originally Apple Computer Accessories Ltd., is a 100% subsidiary of AOE. ASI is an Irish-incorporated non-resident company that is carrying on a trade through a branch in Ireland
Those with money and/or power get to make the rules. Dotcom certainly has neither compared to the corporations that he pissed off.
I'm starting to understand how vital unions were for being a lobbyist to the gov. That spoke from the people's perspective. There is a lot that I dislike about unions but their voice representing the people is missed.
> "As responsible corporate citizens, we are also proud of our contributions to local economies across Europe, and to communities everywhere. As our business has grown over the years, we have become the largest taxpayer in Ireland, the largest taxpayer in the United States, and the largest taxpayer in the world."
Nice logical fallacy here, positively reframing / dumbing down a company's obligation to pay taxes in ${countries_of_activity} as "we have become the largest taxpayer in Ireland". That's precisely what Apple is condemned for: for consolidating fiscal activity in a tax haven, Ireland, in order to pay ridiculously-small taxes for Euro zone Apple activity, rather than paying (bigger) taxes in each EU country.
Also, Cook mentions "6,000 people across Ireland [...] performing a wide variety of functions as part of Apple’s global footprint.". I have no idea what that number represents, scaled to a multinational like Apple. I'd be curious to know what you think of this number.
We had a similar case in the Netherlands with Starbucks.
The European Commission has the argument that if a company has a treaty with a countries tax office that results in them paying less tax than other companies without such a treaty would, then the EC regards that as a state subsidie of a company by that government.
A European government is prohibited to subsidise companies in a free market (there are exemption under law), they declare this an illegal subsidie and the government must get the illegal subsidie back.
As fare as I am aware, Apple is not being fined in this case, the Irish government is. Its up to the Irish government to continue this subsidy, they just will be fined again if they do.
Apple seems to say here that they might withdraw from Ireland because of the uncertainties around their tax evasion strategies, not because they will actually be taxed more.
Apple writing a rebuttal to the EC decision and addressing it to "the community" seems a lot like Twitter celebrities writing rebuttals addressed to their followers. Anyone else get the feeling this is Apple trying to mobilise its loyal fans against the EC?
I think it has an adverse effect because Apple literally steals from EU citizens regardless being british, irish, spanish etc. How could can someone sympathise with their message which is not only insulting but also divisive ? I for sure will think twice before to get the new i-device.
If so, that's insane. Why would EU citizens side with Apple against the EC if the only benefit is that Apple has to pay less taxes?
Against the FBI it worked because it actually had direct implications for their customers. But in this case there's no implications for their customers other than a vague threat that Apple will punish them (by punishing the EU market) if they have to pay more taxes -- that's not a rallying call, that's blackmail.
"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."
So is R&D the only part of the company they believe creates any value? Why operate in Ireland at all if so? Should just outsource it all...
Of course they know better. The value is right there in the first paragraph:
"Thirty-six years ago, long before introducing iPhone, iPod or even the Mac, Steve Jobs established Apple’s first operations in Europe. At the time, the company knew that in order to serve customers in Europe, it would need a base there."
Yup. The question is -- where do you create "value", only in R&D or also through the manufacturing and distribution chain?
If only R&D created taxable value, there would be no need to tax anyone after the research stage. Of course that's not the case (and it's actually the opposite of what you want, as a society). This is a very weak argument; if that's all they have, they're going to lose any appeal.
European governments already collect 20% VAT (equivalent to sales tax) on all Apple's products sold in their countries. Their employees in Ireland pay about 40% income tax, and similar levels in other European countries. They pay VAT on all the utilities they consume in the countries they operate in. It seems insane that the EU is chasing them for corporation tax as well. I smell French communists in Brussels running amok.
Corporation tax is supposed to be a tax on the profits of a company levied by the government of the country that the company is domiciled in. Apple is not domiciled in the EU. It has to have subsidiaries to employ people in those countries, but I absolutely agree with their position that their profits should be taxed in the US, not in the EU. If the EU wants a bigger slice of the pie, it can impose tariffs. That's what countries did in the past, and that's what they are trying to do now, but they are just claiming it's a legitimate corporation tax, and whipping the austerity-weary locals into a frenzy by pushing stories into the media about all the "profits" the large multinationals make in Europe and claiming they don't pay any tax. This is just not true, nor is there any basis in history for this kind of taxation. If they want to, they should at least be up front and say they want to impose a tariff. I just can't believe the HN crowd, who supposedly are interested in startups and running their own companies, are being drowned out by the lefties on an "evil corp" soapbox.
US companies holding cash offshore is a separate issue. Not the same. Different. The top 50 companies now hold about $1.5 trillion offshore. This is a US tax loophole that the US govt can decide what it wants to do about it. It does not mean that every country in the world can suddenly decide that they should be able to levy corporation tax on multinationals. I mean, apart from anything else, how they hell would they even do that, given that they don't have the full set of accounts covering all the company's operations, to even know whether the company was profitable or not. You can be profitable in a lot of countries and loss-making in a lot of others - so in the new fantasy land, do we need to pay corporation tax in all the profitable countries and get a paper tax-loss in the unprofitable ones? I can't believe I'm this far into debating such a ridiculously stupid idea.
>how they hell would they even do that, given that they don't have the full set of accounts covering all the company's operations, to even know whether the company was profitable or not.
But they have the accounts of the local subsidiary.
And that local subsidiary either makes a profit or not.
And, the company is taxed in each country of operations, for relevant operations.
Local subsidiaries are not usually resellers, and even if they were, the parent company can set an arbitrary price, so they just say that every iPhone cost $1000 and is sold at $599 locally, so the subsidiary makes a massive loss - there are plenty of other reasons, think it through and you'll see that the subsidiary can't operate like a reseller.
The subsidiary will usually have accounts that have costs like salary and premises, and no direct revenues, just a big cash transfer to fund the costs from the parent company.
>Local subsidiaries are not usually resellers, and even if they were, the parent company can set an arbitrary price
The main reason why subsidiaries are set up is to enter a market and sell stuff.
The main reason tax is discussed is because sales/revenue/profit is generated in one place.
And they do set up arbitrary prices within the limits of anti-dumping laws.
But then again, someone somewhere will tax something.
>no direct revenues, just a big cash transfer to fund the costs from the parent company
In Apple (and many others' case), the local subsidiary has revenue. They actually bill consumers and collect payments.
Sure, and if it did, the parent would make a massive profit they would have to pay taxes on.
Someone at some point has to pay taxes on the profits. Apple just pressured Ireland into looking the other way and granting a tax scheme that is not actually valid and the EC has corrected that by pointing out Apple failed to pay taxes it legally owed.
Apple do not have to pay taxes on the billions they choose to amass in Ireland in "every country".
They have to pay them in Ireland where they decided to locate it.
Had they pay the same rate as every other company located in Ireland, that would have been €13 billion over all those years. (Ireland has low taxes, so this is just an hint that Apple Europe is very big).
Instead "Apple paid an effective corporate tax rate that declined from 1% in 2003 to 0.005% in 2014 on the profits of Apple Sales International".
They achieved that using a tax scheme that is on its way to be declared illegal by the international treaties Ireland is part of.
How is that "ridiculously stupid"?
Because Apple Sales International is a proxy for a US domiciled entity. This is what Apple needs to fix, the EU has correctly pointed this out many years ago, and Apple are dragging their heels on fixing it because it's one way they have of keeping the cash offshore (from the US), but it doesn't change the fact that the profits were not created in Ireland and should not be subject to corporation tax there.
That statement is just not correct. When you buy a product of Apple in Europe you buy it in Ireland and not in the US. When you buy a VW in the US you also buy it from a US retailed who bought it at a US subsidiary in the US which pays american corporate tax.
Eh, no, if I buy an Italian suit in Macy's, Macy's has bought it from the manufacturer in Italy. They have imported the suit. They pay the Italian producer. The Italian producer is taxed on their profit in Italy. Macy's is taxed in the US. One or other party may have to pay a tariff on the import. Why do you think the product has to move through a subsidiary domiciled in the local country? When did that become a requirement?
> Why do you think the product has to move through a subsidiary domiciled in the local country? When did that become a requirement?
Apple is free to import the products from the US and to then pay import duty, sell it off to local merchants and then to pay american corporate tax on their earnings. Apple did not want to do that.
* European governments collect whatever VAT they have instituted in their countries
* Their employees pay whatever tax they pay just like anybody else
* They pay VAT on all utilities they consume like every company ( shocker )
* They pay almost NO TAX over their profits unlike 99% of the companies, and that's the problem.
And if you think you'll benefit in any way from them not paying taxes, you're just as delusional as the "French communists in Brussels" ( whatever that even means?!)
>> They pay almost NO TAX over their profits unlike 99% of the companies, and that's the problem.
What companies that are domiciled outside of the EU pay corporation tax in the EU? Corp tax is levied by the govt of the country of domicile, always has been. Why is it suddenly up for debate?
Because there is an Apple-owned company in Ireland.
And that company makes profits from operations that would be much harder (may be impossible) to setup as a US-based company.
Eh, no, not quite, Apple has set up several companies in Ireland. They do some assembly and some customer support, and some sales and administration. Generally, a multinational has to set up a company domiciled in any country that they have direct employees, because governments don't really like when you have employees without a company, because there's no such thing. These companies don't really have a PnL in the same way as the parent company, even though they will have filed statutory accounts in the country of domicile, the fact is that they don't originate the product they are selling. The services they provide could be outsourced to a third party; for example, a US company could design and manufacture a product, and just use Amazon to manage fulfillment globally. Manufacturing of electronic goods is often outsourced as well, so that's not a counter-argument.
The EU has correctly pointed out that Apple's arrangement in which the "head office" of Apple Sales International is not actually the US parent company, and it looks like it should be.
> What companies that are domiciled outside of the EU pay corporation tax in the EU? Corp tax is levied by the govt of the country of domicile, always has been. Why is it suddenly up for debate?
Apple is domiciled in the EU for their European operations. What are you suggesting?
OK, let me give you a simpler example. BMW is domiciled in Germany. It builds cars there. When it exports a car to the US, it has a US subsidiary company that employs people and helps to sell the car in the US. BMW doesn't sell the car to its subsidiary, it sells it to a dealer (a separate company domiciled in the US, think "Jacks awesome BMWs, Toledo"). The profits that the dealer makes when it sells the car are taxed in the US, because it is a US domiciled company. BMW will probably pay something like sales tax and in some countries there will be import tariffs to pay. But the profit that BMW makes on the sale of the exported car, the difference between the price the US dealer pays them and the cost of all the raw materials, labour, marketing etc, is realised in Germany, and that's where they pay corporation tax. Because, where the hell else could it happen??
Apple collects VAT on behalf of the EU governments when selling products and passes those on to the respective governments. Other companies collect VAT on behalf of the same governments when selling products or services to Apple; Apple gets reimbursed by the same governments for the VAT it paid. It's effectively a zero sum game.
The customers pay VAT, Apple only collects it on behalf of the governments and passes it on (after deducting whatever VAT they already paid on their expenses).
This is why in EU countries prices for end users are typically presented as flat sums (VAT included) but prices for businesses are generally presented with VAT listed separately (because businesses don't care about the VAT they pay themselves).
VAT is not irrelevant for companies, because the consumer pays the all-in price. If I have a product that I can manufacture for $90, and I know that I can sell retail for $100, VAT at 20% means I don't have a profitable business.
Edit: why do you think business lobby groups are constantly asking the govt to reduce VAT? Have you ever heard of the demand curve?
VAT is irrelevant, EXCEPT in B2C retail. But only from a private customer's point of view (which is of course relevant in pricing, especially at low profit margins).
You're not selling the product for $100, you're selling it at $83.33 plus VAT. That means your customer will have to part with $100, though. If your customer is not willing to pay >= $108 for the product (i.e. $90 plus VAT), of course you're operating at a loss.
You could argue this is just semantics but B2C retail is the only major example where VAT matters. And considering we're talking about Apple I'm not convinced Apple's profit margins have Tim Cooke worried about EU VAT.
The exact same issue arises in enterprise software sales, the customer is subject to many of the same issues of value perception and price justification as a regular consumer, and the demand curve exists as you would expect for any product. Sometimes it's easier because it's convention to quote the price without VAT, but many companies will structure budgets for departments that are not VAT-aware, so if I'm selling to Bill in operations, the total spend including VAT is taken out of his operations budget for the year (this makes some sense because the client doesn't always know whether they will be VAT neutral or not, and tracking the allocations by department is not something anyone I've met does.
In the vast majority of cases, an enterprise software company will collect far more VAT than it pays out, so it's not zero sum.
Yuck. Old black and white photos, emotional appeal to some sort of corporate heritage. Posturing as some sort of victim. Only thing missing is a tiny violin playing on that webpage.
Apple's been paying virtually no tax for years because it's argued it's legal to do so. Now the EC deems it was illegal. GG WP - you lose. Time to pay up now.
I'm sure due to the amounts involved that this potential event was in someone's "risks" column and hasn't come completely out of the blue for Apple.
According to the letter Apple is the largest taxpayer in Ireland, in the United States and in the world, surely that statement is incompatible with the statement that "they've been paying virtually no tax for years". One of these statements must be false.
If tax is % of revenue (def simplified for corporations) - does it matter if they paid the most if they make the most money?
I haven't confined that they have the largest revenues, but paying the most is a weak argument in the face of what the governing body decides as what is a "fair" amount to pay.
Whether or not this decision is fair is another conversation altogether...
Because people have this weird notion that everyone should pay the exact same proportional amount of taxes. So if I pay 20% of my income as taxes and someone rich pays 10%, it doesn't matter that his 10% is few million dollars. It's like renting an apartment for $1000/month, and having a roommate that pays $900 a month - and then insisting that he is not paying his fair share because $900 is only 1% of his income, while the remaining $100 is 20% of yours.
I'm sure they are counting all of the taxes paid by their employees. I've seen other large corporations use the same language and logic when justifying special tax exemptions.
If what you say is true, that wouldn't be a case of slippery language, but rather an outright lie. Taxes paid by their employees (your words) would be by definition not included in a summation of taxes paid by Apple.
Apple is probably referring mainly to VAT and employee payroll taxes. However, the EU action is only concerned with corporation taxes. Apple confuses the issue by convolving the two.
Not at all - there's some clever wording at play here. Apple may well be the "largest" taxpayer in the world. But that doesn't require that they are the singular entity paying the largest total sum of taxes. It's pretty common to measure the size of corporations by market value - Apple is pretty much the "largest" corporation by that measurement, and since they do pay some taxes (a laughable amount, but it nevertheless wins them this checkmark) they technically are a taxpayer, too.
Apple pays VAT, employment tax in Ireland and certainly a couple more. They avoid paying corporate tax by using a Irish sandwich Double Dutch tax structure (where you create subsidiaries of subsidiaries, and pretend all the value creation happened in over-seas territories where corporate tax is negligible).
Apple is probably right in saying that the total of VAT, employee tax, etc. is the largest in Ireland, the US and World: they are the largest company in the world, so that statement should be fairly obvious. If someone who makes 1M$ per year pays 0.5% taxes, he still pays more than someone who pay 20% of their 24k$. That’s why this statement is seen as disingenuous: the ratio to your revenue is was matters.
The European Commission, the vast majority of observers and almost all Hacker News members are right in saying that they paid virtually no (0.005%) corporate tax, because that was the point of the statements they made to tax authorities around the world.
On whether what Apple did was legal: the stated that their all their value creation happened in the Dutch Antilles, which is patently false. That is nothing short of lying on your tax form. The Irish government accepted it because they were strong-armed into accepting that or seeing jobs go elsewhere. That type of coercion is also something that this letter lies about.
In the US, John Oliver pretending he is the Head of a Church whose main tenet is his personal enrichment is widely accepted as a legal, and deserving of a tax break; in the EU, such statements are considered disingenuous (that’s the fancy word for “bullshit”) and treated accordingly.
That is incorrect. Apple doesn't pay VAT, they offset any notional VAT bill against the total of VAT collected from customers and pass-through the residue to the revenue agency.
Generally, each such trader in the chain of supply from manufacturer through to retailer charges VAT on his or her sales and is entitled to deduct from this amount the VAT paid on his or her purchases.
The difference between the VAT that Apple collects and the VAT that is reversed to their provide is what is considered paid by Apple — at least, I assume it was in their lawyer’s math claiming they pay more taxes than anyone else.
You seem familiar with the principle of VAT. In reality, many companies who practice tax optimisation scheme are happy to play with that notion beyond recognition.
In Europe, Amazon aligns some of its prices to local prices including VAT, but they only collect Luxembourg VAT, pocketing the difference. The tax accountant of any (international) travel agent would be happy to dazzle you with how much money they are making from creative interpretation of international rules on VAT. If a good is not sold, the last buyer still owe the VAT on it, even when they are not a user of that good, end user or otherwise.
VAT is paid by companies: I’ve had enough issues with my own tax to confirm that you don’t need to collect it to owe it to unscrupulous governments.
As ludicrous as it sounds, when Starbucks was caught not paying any tax in the UK for over a decade it claimed VAT, NI and PAYE (later excluded) as taxes that it has paid.
You say "yuck" but that open letter does contain more than just a few historical points. Set aside the "emotional" stuff and there are some statements worth taking seriously.
"we have become the largest taxpayer in Ireland, the largest taxpayer in the United States, and the largest taxpayer in the world."
An impressive feat for a company that has around 13% of the smartphone market and 7% of the computer market. Yes they're a big company with lots of revenues, but I find it hard to believe that if Apple was so aggressively dodging tax that they'd still be the world's largest taxpayer.
"the vast majority of our profits are taxed in the United States"
Is this true? Are a majority of Apple's profits taxed in the United States at normal business tax rates? If so, that would put the flurry of accusations into some degree of proportionality.
"The opinion issued on August 30th alleges that Ireland gave Apple a special deal on our taxes. This claim has no basis in fact or in law. We never asked for, nor did we receive, any special deals."
"It is effectively proposing to replace Irish tax laws with a view of what the Commission thinks the law should have been."
Which if this is the case, the UN has a problem with Ireland's laws, not with Apple. This is the first piece of news that has made me wonder if the UK was right to brexit.
Last year, Apple had $72.5B in worldwide pre-tax profits and paid $19.1B in US corporate income taxes. That's an effective rate of ~26%, even thought > 60% of their revenue is from sales outside the US.
Kudos for them for finding that photo. I bet the guy who dug it up is getting high-fives all round and is feeling really smug. Tries to promote the idea that Apple (who put 'Designed by Apple in California. Assembled in China' on every phone) is as Irish as Guinness.
Saying that "It (Apple) has helped create and sustain more than 1.5 million jobs across Europe" is a far stretch if the majority of that number are app developers for who it makes no difference where Apple is located.
What effect might this have on Apple (and others) repatriating overseas monies back to the US now. If it's going to be taxed overseas anyway, the argument for holding large amounts outside the US seems to be reduced.
Granted, there will still be other non-US tax havens, and I'm guessing the lower rates may still be a factor. But might this have any impact at all? Or will this just be seen as a small fine and companies will carry on as before?
All EU countries will be subject to the same law, and I doubt they would just stop selling their product on the european market (it would still make them money even when paying normal taxes).
Paying customs tariffs would probably be worse than paying taxes in the EU, too.
I don't think that there's anywhere they can go but that's the feeling I get from this message. I see it as Apple trying to strong arm the EU with a possible threat and trying to justify their actions.
In a way, the EC's decision actually acts as a safeguard against this kind of blackmail: a country may be pressured into making a bad deal like this, but EU law renders the deal invalid. And because the EC is not controlled by any single member state, it can't treat any single nation different from the others.
You can phrase your post another way - the EU "safeguards" members against making their own decisions and possibly becoming more attractive than the others.
And because the EC is not controlled by any single member state, it can't treat any single nation different from the others.
Tell that to Jean-Claude "it's different because it's France" Juncker!
I'm guessing if Ireland wasn't part of the EU then Apple probably wouldn't have to pony up 2bn. Ergo, the idea of a country leaving/not being part the overlord EU looks more like a good idea than a bad one. Given my absolute lack of political and economic experience, I could be horribly wrong. But I thought it would be fun to post my opinion nevertheless.
> a devastating blow to the sovereignty of EU member states
This is bad, bad PR. Maybe let the EU citizens be the judge of that?
IMHO, it is a huge no-no for a company to make a political statement, especially in a troubled time like now (does Apple have any comments on Brexit, too?).
Or it might play well on rising nationalist anti-EU sentiments throughout Europe. The EU has a lot of battles to fight at the moment so Apple might be betting that they back off to an extent. That said I agree it will likely blow up in Apples faces. It strikes me as a line that would play well in the US (replace EU with US and re-read it) that they've not realised won't work over here.
Honestly since brexit I've been constantly amazed how little Brits and Americans understand continental Europe's opinion on the EU.
On the continent euro-sceptics operate on the extreme political fringe, they never got into any parliament in numbers and are considered toxic as coalition partners.
The EU won't blow apart, the EU is a fact of life and an economic necessity, Brexit was so shocking because it is indeed unbelievable that anyone would try to quit the EU.
Lots of big companies commented on Brexit (before the vote). I agree it didn't do them much good in the public eye, but Apple didn't choose to dive into a political debate, it is being dragged into one.
I see a bunch of comments from non-Irish people here saying how badly this letter is going down. But it's aimed at the Irish. Ireland has benefited to the tune of tens of thousands of jobs (perhaps way more) from just a handful of big tech firms, in a country with a population of just 4.5 million. It is one of the things that contributes to the falling Irish unemployment rate.
If the EU starts trying to systematically move big, rich employers out of Ireland (and that's the purpose of these moves, to eliminate Ireland's "unfair" appeal), then there's a risk Irish sentiment will start to turn against the EU, just like it did in the UK over the issue of immigration. If the EU systematically attacks their primary competitive advantage in order to satisfy the high-tax French and high-debt Spanish, then what becomes of Ireland?
What a disgusting, pathetic piece. If you get caught with your pants down, you should stop shitting instead of enumerating the benefits of natural fertilization.
Not much, so far at least. This latest round of trouble over Apple in Ireland predates the Brexit vote. And of course the Republic of Ireland is not in the UK.
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[ 2.5 ms ] story [ 296 ms ] threadYou shift profits to avoid tax, don't play coy.
The era of tax being optional for multinationals is drawing to a close. You make your profit, you pay for access to the market, no exceptions.
Imagine for a moment that your own government raised your personal tax rate and said that since they felt the previous tax rate was too low, you also owe taxes from the past.
"The Commission's investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years."
http://www.rte.ie/news/2016/0830/812819-apple-tax-ireland/
A lot of Europeans (me included) are not at all happy to see massively profitable companies operating in Europe without paying practically any taxes. This makes it impossible for European companies to compete with them and I'm very glad the authorities are looking to level the playing field and bring in some tax revenue while doing so.
http://www.timesfreepress.com/news/business/aroundregion/sto...
what is different about this?
I have doubts that these MNCs help the society that much to be eligible for these tax breaks. They are not charities... The loss for the EU as a economic partner is negligible.
The "smaller" economies have to give incentive to large corporations so they could set up shop. Ireland did it with various incentives, Poland, Estonia and the likes are also doing it with others.
Ireland is in the Eurozone so they can't set up their own monetary policy so they can't offer much in terms of favorable interest and conversion rates to large corporations.
If they can't offer tax incentives companies would be less inclined to set up shop in Ireland if their operating costs would be similar to those in Germany or France. English gives Ireland some advantage but it's not nearly as big as people think, the culture in Germany or France is close enough and you can train people to speak English and with the shared market even import a few 1000's Irish to man the phones.
Apple and the other big guys set up their shop in Ireland because the Irish government gave out huge incentive both direct and indirect it provided funding for training and education for its residents to meet the specific requirements that companies like Apple, Google, and Facebook had. It provided financing, loans and tax breaks to those companies to come in and employ Irish workers and it did it because it's the only way it could compete with the likes of Germany.
Tax loopholes are bad, laws that prevent smaller countries from being competitive are even worse, an equal playing field works when the players are equal, when they aren't "equality" is only advantageous to the strong and established players.
[1] http://www.bbc.co.uk/news/business-30844962
[2] http://ec.europa.eu/competition/elojade/isef/case_details.cf...
[3] http://ec.europa.eu/competition/elojade/isef/case_details.cf...
EDIT: Formatting
The two are vastly different, and the first is tolerated only by the latter because it's the best way we know to bring order and organization to trade.
The people paying for your product are able to buy it because they live in a country that provides for them, through added value, jobs, health care, infrastructure and so on. If you want to profit from these people's buying power, then you have to conform to that country's rules of business, that's all.
Apple is very happy to make huge sells of iPhones thoughout France, Germany, Italy and such countries, siphoning money from their people to Ireland, without ever contributing as much into the local economy. They employ a few hundred people in Apple stores and hotlines, but compared to their profit it is just ridiculous.
"people paying for your product are able to buy it because they live in a country that provides for them": wow... really? I know governments love considering people's money as theirs, people's lives as theirs, but that's a bit far stretched maybe? I'm not any country's liability. I'm a free man in a free society. Aren't you?
Here's a business producing commerce-enabling technology in an extremely valuable manner, hence the profit. Consumers exchanged their earned, post-tax savings for those things and paid additional tax along the way. To act like governments were short-changed is preposterous. It's "you didn't build that" taken to the extreme, and borderline extortion.
Apple subsidiaries in random countries selling phones don't pay taxes because they don't make any profit. They don't make any profit because they're "charged" an amount for the phones (and IP, branding etc) that exactly equals the sales.
This is not about tax competition, this is about abusing tax loop holes and trying to avoid paying any tax at all. E.g. before 2015 Amazon declared their entire European income in Luxembourg and payed about 1 percent of tax on that money. This way other (much bigger) European countries like Germany and France lost billions.
In the European union, where funds are easily transferred between subsidiaries in different countries, tax competition by individual member states can have particularly harmful effects on the public economy as a whole.
In a typical multinational corp tax avoidance scheme, a coproration has a subsidiary A in e.g. Ireland and has a very small corporate tax rate on profits. Then another country, e.g. Netherlands gives subsidiary B a tax break on some commodity, typically an IP licensing scheme of some kind.
Subsidiary A licenses some IP from B, and the licensing fees are conveninently 100% of the profits of A, so they're not making a profit in Ireland and don't have to pay tax there. Subsidiary B gets all their profits from IP licensing that pays hardly any tax in the Netherlands.
Add a few subsiriaries and loan arrangements between them (free movement of capital in Europe is one of the fundamental pillars of the EU), and no taxes get paid and all of the profits get funneled into a tax haven such as Bahamas or Caymans.
So while you'd think that tax competition would just be a fair competition when talking about individual countries, at EU scale it ends up being a race to the bottom where a few select countries (Ireland, Netherlands, Luxemburg) get a nominal fee from the multinationals but all European states end up losing billions in tax revenue.
And then there's also the corruption aspect. These tax deals aren't a gesture of goodwill.
(The US avoids much inter-state tax competition through federal taxes)
In the past?
This is ongoing - enabled by Junker himself ...
No, it is not. Before 2015 many companies (one prominent example being Amazon) declared their entire European income in Luxembourg and payed about 1 percent tax on that money. This tax loop hole has since been closed by the EU, Luxembourg lost about 10 percent of its budget because of this. Today when somebody from e.g. Germany buys a product from Amazon.de, Amazon pays tax in Germany for this product.
Luxembourg is like the delaware of Europe, it's a banking and financial institution state and both its own laws and the EU laws and policies it lobbies (and when you effectively are not only Delaware but also the DC of the EU it kinda helps) for ensure that it would continue to operate as one.
The bad thing that Ireland and is a big no-no in the EU is to go to the likes of apple and say:
Hai Apple I really want you inside of me! I know I'm small, and I don't have a huge workforce and internal market, I'm not like Germany. I also don't have a huge economic and financial infrastructure like Luxembourg, Switzerland or UK (London) but I'm a really hard worker! Tell me what skills you need, and I'll educate my people, I'll give you low interest loans to build your shiny offices and I will give you tax deduction if you employ my peeps. I would do all that I can to make sure it will be easy for you to operate here because I really don't have much to offer and I need to compete with the bigger countries since the euro is expensive and the price stability is managed by the ECB and my people need to eat and loans I've been taking on are becoming harder and harder to pay.
Now this is the only way that Ireland can really attract large corporations and make it more lucrative to invest in its industry, this is what effectively every country on the planet does when it wants to grow. And since Ireland can't control it's own monetary policy and currency it also can't just be a cheap place to be, while there is some local variation because of the mandate of the ECB to control the price stability within the Eurozone the prices of many goods and services are quite similar (Ireland is actually more expensive than Germany because it's an island which increases the costs of logistics and it has lower production which means more imports which add costs even if they import within the EU) it needs boost its economy in order to match the salary level of the other Eurozone states and to do it it needs to offer something to corporations.
It can't offer them a huge workforce because it doesn't have one, It can't offer them access to financial and banking infrastructure because it doesn't have that either, what it can offer is English, fund both academic and vocational education and training based on the skills those companies need and give them tax incentives to come and employ Irish people. Ireland isn't Luxembourg Apple didn't set up effectively a "shell" there that's pretty much there for easy tax loopholes and actually employes no one, Apple employees directly over 6000 people in Ireland and indirectly 4-5K more, same goes for Microsoft, Google, Facebook, Amazon and the likes. This isn't some tax break Island that those companies incorporate in by name only and don't actually have staff, companies have "real" employees in Ireland because the Irish "incentives" are tied to direct employment. Ireland isn't trying to create tax loopholes to make a quick buck to split it between a few 100's residents, it tries to keep it's 5M people employed, forcing them to play by the "same rules" as 4 of the world's 10 largest economies is asinine.
But most taxes in the US are Federal.
In Europe they are effectively 'state level' - making the problem worse for Europe than for state-by-state tax competition in the US.
Re: your Ireland comment - yes - I see your point, but the issue here is not Ireland having a 'lower tax rate' of 12.5% - rather than they allowed Apple to have 'special privileges' thereby paying next to nothing, right?
Are you sure about that?
It's going to depend very much on where you are, how you're organized, what tax breaks you get, and how much money you make, but states generally have both a) many different kinds of tax: income tax, property tax, sales tax and b) a cumulative higher tax rate. A much higher proportion of my money personally goes to the state than it does to the feds.
For for example you might have:
State A: State income tax: 5% Property tax: 5% Sales tax: 5%
State B: State income tax: 6% Property tax: 6% Sales tax: 5%
Yes, everyone in both State A and B pay, let's say, a federal 7% income tax and payroll taxes. But the state taxes make a huge difference. State says to Wal-Corp - build a store here and you'll be exempt from property taxes and sales tax for 5 years, and we'll give you a special state income tax credit that reduces it to 3%. That's the kind of deal making we have going on with states, except the federal government doesn't intervene to stop it like the EU did here.
http://www.newsworks.org/index.php/local/brandywine-to-broad...
> Since June 2013, the Commission has been investigating the tax ruling practices of Member States. It extended this information inquiry to all Member States in December 2014. In October 2015, the Commission concluded that Luxembourg and the Netherlands had granted selective tax advantages to Fiat and Starbucks, respectively. In January 2016, the Commission concluded that selective tax advantages granted by Belgium to least 35 multinationals, mainly from the EU, under its "excess profit" tax scheme are illegal under EU state aid rules. The Commission also has two ongoing in-depth investigations into concerns that tax rulings may give rise to state aid issues in Luxembourg, as regards Amazon and McDonald's.
http://www.dailymail.co.uk/news/article-3688861/Jean-Claude-...
https://en.wikipedia.org/wiki/President_of_the_European_Comm...
From the letter, it seems Apple thinks it should be paying taxes in California rather than were the profits are coming from (the EU). Excepts from the letter: "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."
The second half of the sentence seems to be a non-sequitur, or intentional misdirection -nothing about it follows from the first half.
http://www.nytimes.com/2012/04/29/business/apples-tax-strate...
Right. MNC have, but local companies had no way to do that. That's the crux of the issue. In fact, some people started an inquiry how to replicate that scheme.
Sorry but this is typical American FUD, European companies are scrutinised on the same terms and when breaking the law or dodging stuff are getting (high) fines as well.
It is not Europe's fault that this kind of news doesn't find its way in the US... .
If this tax activity was illegal, why wasn't it stopped 25 years ago, when it started?
It was illegal all the way, only Apple wants to make it legal.
"why wasn't it stopped 25 years ago, when it started?"
If murdering is illegal, why wasn't it stopped 5000 years ago? Don't know. People do illegal things all the time, most people doing illegal things do not get prosecuted for various reasons, fashion, society, not enough prosecutors.
The argument "I was not prosecuted some years, so it was not illegal" doesn't work with any court.
"Statutes of limitations"
I don't know the time frames and for what time frame Apple needs to pay fines. Could you share the time frames where you think Apple got illegally fined?
I'm no expert in tax law but would assume, here in Germany, there is no "Statutes of limitations" for taxes. Countries lose all their humor when it's about taxes.
That's exactly how it works. Look up statute of limitations.
Most civil violations have stringent limits.
> I'm no expert in tax law but would assume, here in Germany, there is no "Statutes of limitations" for taxes. Countries lose all their humor when it's about taxes.
I didn't know German law applied in Ireland. Perhaps that's the entire point of the EU, I don't know.
Anyway, Ireland explicitly says that nothing is owed. Maybe you should read a bit more about this issue before commenting?
Apple innocently, and unknowingly[1], accept an illegal tax benefit. Apple lose the benefit of the illegal activity.
What's the difference? Caveat Emptor for both. Even if you want to consider them the innocent victim they don't get to keep the benefit of a crime.
[1] I'm less convinced it's unknowing here - Apple probably have a surfeit of international taxation experts and lawyers.
Once they pay their 14B in taxes.
lol
Should Tesla be worried that the United States Federal Government might deem Nevada's special tax deal invalid?
Yes, what you said is that ridiculous.
It depends who do you mean with everyone? In this case the only party which should have been asked would have been the EU, which doesn't sound mad at all in my opinion.
If you want to get an opinion from the US Federal Government on how to account for a transaction for tax purposes there is in fact a procedure for that: https://en.wikipedia.org/wiki/Private_letter_ruling
One in the business of importing phones from another country who has questions about competing taxation and tariff rules has many options for getting guidance on the implications of their accounting.
And nothing that happened in this matter was shocking or surprising to Apple. They have elaborate tax avoidance schemes. For example, they didn't like trip and fall and land on a convoluted Double Irish arrangement by accident: https://en.wikipedia.org/wiki/Double_Irish_arrangement
Hell yes, they better have a plan should that happen.
Want to know how you can tell this didn't happen to Apple innocently and unknowingly? If they were actually innocent and unknowing they'd certainly say so, and make a coherent legal argument to back up that point of view.
The post we're all commenting on has some bullshit black and white pictures and stories about shit that happened in Cork Ireland in 1980 and Steve Jobs feelings and whatnot.
Q.E.D.
Losing the benefit, sure. Paying back taxes that don't exist nor asked for? There's a problem in there somewhere.
Following your borrowed car analogy, Apple finds a gas card in the glove box on the first day and uses the car every day for 4 years and uses the gas card. When it's discovered that the borrowed car is stolen and the gas card wasn't Ireland's, who has to pay the gas card off?
Come on, really?
A better analogy would be finding that someone deliberately and knowingly claim mileage expenses at an absurdly high cost per mile in lieu of a larger annual bonus after discussing tax efficient solutions with HR. Would they face a revised tax bill for past years and be expected to stop overclaiming for future years if an authority with more standing than their employer got involved? Of course. Does Apple's team of tax law specialists have more understanding of the potential for such a scheme to be ruled illegal than the average employee? Of course.
Yeah - but this arrangement has been going on for more than 20 years, no?
A little late in the game to be declaring it 'illegal'?
I'm not against the ruling, but it's clear that the EU is messed up.
Make no mistake - the only reason Apple was under investigation is because they were making so much money.
This thing should have been brought up the moment it was implemented.
Also - the EU is structured to incent governments to screw other governments by creating crazy tax schemes.
You know who spearheaded this? Jean-Claude Junker - the same guy who spent 10 years developing tax avoidance schemes for Luxembourg!
You are wrong. From EC statement: Ireland gave ILLEGAL tax benefits to Apple worth up to €13 billion [1]
[1] http://europa.eu/rapid/press-release_IP-16-2923_en.htm
There was a discussion yesterday about this on HN. It's pretty much a corporations responsibility to try to avoid as much tax legally as it can. In this case, Ireland gave them LEGAL tax break (at least that was what the Irish believed at the time) and now Apple is getting blamed..?
It just doesn't make sense, put the blame where the blame is due.
Ireland will probably not see a penny from it.
There's certainly some merit to that argument.
> It's pretty much a corporations responsibility to try to avoid as much tax legally as it can.
That's a popular falsehood. It is a corporation's responsibility to fulfill the wishes of its shareholders. That doesn't even necessarily mean maximizing profits, and it certainly doesn't mean avoiding taxes to a degree that incurs both legal and reputational risk. If the shareholders want the company to act as a mature and respectable person would, then the corporation's duty is to do so.
Unless Apple's a benefit corporation, it's only responsiblity to share holders is long and short term profit. I distinguish between the two to make the point that it shouldn't break laws or go out if business because that hurts long term profits, it also should avoid taxes it can, and pay all taxes it can't avoid to maximize short term profits, and minimize longer term tax penalties.
Dodge v. Ford Motor Co., 170 N.W. 668, 684 (Mich. 1919)
> A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end. The discretion of directors is to be exercised in the choice of means to attain that end, and does not extend to a change in the end itself, to the reduction of profits, or to the nondistribution of profits among stockholders in order to devote them to other purposes.
Although, there are examples where a court did recognize that helping employees will maximize profit, or not putting up bright lights next to a neighborhood is "moral". All of the decisions had to relate back to helping the shareholders. Most courts in the U.S. view shareholder profit as the #1 responsibility of the board of directors, others argue public safety might be #1, profits #2.
All of them agree that the primary purpose is to make/maximize profits, without which you can do nothing.
https://medium.com/bull-market/there-is-no-effective-fiducia...
As far as I understand, the EU is saying that it never was legal under EU law.
That is maybe your legal analysis of european union state aid legislation, but in the end it's the commission and the court of justice who have to assess it.
If you evade tax, you know full well what you are doing, even if it's technically legal you should expect to be retrospectively taxed, especially if you are exploiting the system to such an extreme.
What it looks like they are trying to do is apply a legally compliant level of taxes retroactively, not laws.
(Yeah, I know you're saying it was legal under Irish law, but the whole point is that some Irish laws take precedence over others. In this case, their treaty obligations to the EU, codified in their laws, take precedence. If this wasn't the case there wouldn't even be a court case, much less a judgement.)
https://en.wikipedia.org/wiki/Ex_post_facto_law
There are actually limits to how far back the dodged taxes can be collected. That's why it's only $13bn. That's what has been due since 2003. This entire thing actually goes back since the 1990s.
Also, we're not even talking about criminal charges or fines here. Apple isn't being sued or facing any punishment. The EC has merely ruled that Apple didn't pay all the taxes it legally owed Ireland and Ireland didn't have the authority to allow them not to pay the taxes in the first place.
This is akin to a janitor charged with collecting rent for the landlord telling you for years that it's okay for you to pay pennies to live in your mansion until the landlord finds out about it and now demands you pay the $$$ you owe him because the janitor was never legally in a position to make that kind of deal and you're actually a highly paid expert in rental contracts and were fully aware of the deal having no legal basis to begin with.
This decision can't have been a surprise to Apple. Seeing this kind of thing coming is what they pay very expensive legal experts for. They knew EU law overruled the Irish laws that supposedly allowed this deal in the first place. They're only crying foul because they were caught.
That only applies to new laws.
https://en.wikipedia.org/wiki/Civil_liberties_in_the_United_...
Selections:
Criminal Justice Act 2003, abrogated double jeopardy in cases with "new and compelling evidence".
Serious Organised Crime and Police Act 2005, created an offence of inciting religious hatred, an advanced notification scheme for protests up to 1 kilometre from Parliament.
Terrorism Act 2006, following the bombings in London on the 7th of July, this legislation allows for people suspected of terrorist offences to be detained without charge for up to 28 days.
Here's someone's blog post listing things that would be legal in the US but not in the UK, citing the specific laws or constitutional provisions in each that make it so. https://prestonbyrne.com/2016/01/06/the-american-english-civ...
https://en.wikipedia.org/wiki/Letter_and_spirit_of_the_law
Oh wait, actually even the people who wrote a system for unchangeable, code-backed legal documents don't believe in the letter of the law.
There's a big difference. The latter is legal, the former is not.
Apple did not do anything wrong from what I can see: they were given a good deal, they took it. It turns out that deal was illegal so they have to pay some money to rectify the error.
Doesn't seem very fair but governments are pretty unforgiving when it comes to taxes overall.
I don't really have a view which is correct, but I think it's important to note that the EU doesn't accept it is acting retrospectively.
See also https://news.ycombinator.com/item?id=12388945
IMO they should be able to sue the agency (or agency's employees) that supposedly granted them the tax benefits for damages because they misrepresented the actual tax situation, but they still owe the unpaid taxes and have to pay them back.
Not knowing the law doesn't protect you from breaking it. In this case, they're not even being punished -- the $$ owed aren't a fine, just the taxes (and interest) they should have paid to begin with.
This is similar to buying stolen goods: sure, you may not actually have known they were stolen, so you might not be directly punished, but you still don't legally own the goods (even though you paid for them) so they will be confiscated and returned to their rightful owners. You can sue the seller for damages, but the state is under no obligation to reimburse you for handing over "your property" (because it isn't).
And you're right, it's not a punishment, just asking them to pay what was owed. If you owe the taxman £20000, it's a big problem for you. If you owe the taxman £13,000,000,000, then it's definitely a problem for the taxman :)
He did eventually pay back the entire amount (plus interest) but he was released from prison after having spent only roughly half his sentence (which actually didn't confine him to prison for his entire "stay" anyway).
Yes and no - the EC's argument makes a bit more sense imo: Yes, it was legal in the sense that Apple broke no irish tax laws. But the tax laws themselves have violated some higher-level EU laws that Ireland had pledged to obey - at least that's how the EC sees it.
Perhaps a more fitting (but still horrible) analogy were if you make an employment contract far below mandatory minimum wage. Neither you nor your employer is violating the contract and both of you might be perfectly happy with the conditions - but your contract might stil cause disadvantages to third parties (other workers) and might violate state laws.
No it was clearly not. How did you come up with that?
I didn't say that corporations should be the same tax as individuals. I've said that's unfair for Apple to pay less tax than any other EU corporation/company. How can you compete with Apple if they pay no tax and your start-up pays 20% ? How could Apple have succeeded if they were to pay 20% tax and all the others (i.e. IBM) was to pay no tax?
> What about the notion that corporations should pay no tax at all, and the only taxes should be on individuals.
That would be basically slavery of foreign people(not nice).
Seems like interesting timing. They've decided to go after back taxes right before the UK leaves the party.
Just for your info this isn't what happened, it's Ireland's tax money. The EC doesn't collect taxes. Instead the EC ruled that Ireland was providing illegal state aid (under EU rules) to Apple through its tax arrangements. So this loophole was nullified and Apple have to pay the back taxes to Ireland. The EU gets nothing (the EC is the executive body of the EU).
This investigation into dodgy corporate tax deals has nothing to do with Brexit (note that this is about Ireland, not the UK), and it's been going on for most of a decade now.
No. This isn't over money owed to the EC, it's over state aid perceived as manipulating the Single Market in a company's favour, which is [to an extent] undone by requiring that company to repay the money
> Seems like interesting timing. They've decided to go after back taxes right before the UK leaves the party.
It's the culmination of a three year investigation and legal process, and they've been going after companies with other special tax arrangements with local governments for years. I don't think Brexit had anything to do with it.
Not all law needs to be 100% formalist. It's perfectly possible to have a blanket law that says "If some tax evasion scheme is generally considered to be unfair/unreasonable, it can be annulled no matter what the letter of the law says".
The problem here is that the rule of law and the rule of fairness had diverged, and there was a higher-level law forbidding that. This kind of conflict happens all the time. In the US, the most common manifestation is laws being struck down as unconstitutional. Governments are bound by laws too. When they break those laws by treating people unfairly, correction is needed.
No, it was not legal, this is what the ruling says
Something doesn't jive here. If it is that clear cut, didn't EC read its own laws before asking Apple to pay? If there is a paragraph they skipped someone should point to that, Apple should perhaps.
It would seem to me EC is implying what has happened in the past was not entirely legal somehow. Then it is not obvious what should happen next.
Notice Apple mentions how they "asked govt. of Ireland" for guidance. That means they might have documentation of a govt. official advising it to act that way. That is very important because it is building the case of Ireland here doing something illegal against the EC laws. So Apple is washing their hands here of this case.
Tax judgements often don't occur immediately. Just ask any one of the 50,000 IT contractors in the UK that are facing this exact situation right now with respect to EBT arrangements. Some owe tax dating back over more than a decade.
They knew the risk, they took it, they lost. No-one is naive here, certainly not Apple.
According to Tim Cook/Apple's PR team.
"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."
And yet the value creation seems to be happening mostly in tax havens... and NOT in the US. Nice try, Timmy.
Be a sport and put your money where your mouth is, and repatriate all that foreign stash cash to the US, and I am happy to side with you. Yet somehow, I believe this won't be on the menu anytime soon...
http://www.cnbc.com/2016/08/14/tim-cook-addresses-apples-us-...
"Cook added that it was up to Congress and the president to enact tax reform, which he is "optimistic" will take place sometime next year."
I am actually both scared and biased, you got me!
What I was wondering was if any politician had spoken publicly on this issue. It seems, unsurprisingly, they haven't.
The 0.005% rate is NOT the corporate tax rate Ireland charged Apple, its the rate Apple managed wrangle on all their European wide profits by arranging their corporate structures to take advantage of various loopholes in several countries, not just in Ireland. This was perfectly legal under Irish, EU and importantly, US law at the time. Now the EU wants to effectively rewrite history and even the US agrees with Irelands position on this.
That's not even true! As you say, they keep their profits offshore to avoid US taxes: http://uk.businessinsider.com/apple-taxes-offshore-ireland-e...
That's a graph of cash reserves, not revenues. It's highly likely that Apple spends most of the revenue it accrues in the Unites States. You know, on expensive shit like Apple Campus 2.
They had advice at the time that these schemes were legit (though every adviser would deliver that with a wink), any adult human must have known there was a large risk HMRC would disagree eventually (just as Apple knew they were running a risk), and now they face demands to pay the tax they failed to pay in the first place.
Are they the victims? Certainly they will tell you so. Sympathy I have for them? Nil.
Ireland accession to the EU => 1973
I don't think http://curia.europa.eu/ will be very impressed by those arguments
What is retroactive here is the payment of taxes, not the law.
No. The whole agreement between Apple and Ireland was deemed illegal by EC[1], so now they must pay avoided taxes. You can't demand keeping stolen goods after being caught stealing.
1. http://europa.eu/rapid/press-release_IP-16-2923_en.htm
That means Apple is due taxes to Ireland.
In a sense, Ireland is the guilty party. They entered the EU; that means they agreed with its rules. Later they made an agreement with Apple that is now ruled illegal in the EU. Yet, they will profit (in the short term) if this ruling will stand.
Note that Apple's only published issue is with the retroactive part.
Open question is whether Apple handled in good faith making that deal. I do not rule out judges would rule they did, because there are zillions of such deals, and because the EU doesn't mention anything about fining Apple (they 'just' have to pay the taxes they are due, with interest)
You pay your army of lawyers avoid that. You want to walk extremely close to the edge, but not drop from it.
Wow, strong stuff.
Pay.
[0] https://en.wikipedia.org/wiki/Eats,_Shoots_%26_Leaves
From the EU press release:
So, at the advice of Ireland, Apple was able to attribute sales to 'Apple Sales International', which was not based in any country and thus was not subject to tax.And has been used by many multinationals e.g. Google, Facebook, Ikea, Coke for many years.
I gather that European tax law prosecution must differ from other kinds, because if me and five of my buddies did a crime we'd all be in trouble simultaneously.
To bring this back to topic: Litigation one example to establish a known interpretation of the law and then going after similiar cases (which are then decided on a low level based on the work in another case already done) is absolutely common in Germany.
Courts don't want to flip-flop on very similiar cases with no reason - in fact they are not allowed to by the constitution.
In both systems, periodic codification of the body of private law is made by the judiciary, executive and legislative branches working together at regular intervals with a goal of producing a nearly complete set of relevant rules for dealing with lawsuits between private persons.
The contrast is most keenly seen in landlord-tenant law, which in France is fully codified in a single document, while there are many Acts of Parliament and case law that apply in England and Wales.
In the French and German systems, matters that cannot be fully decided by reference to the relevant codified law are dealt with by the court of first instance writing down a decision with logic similar to that done in county courts in the UK. The parties generally have an automatic right of appeal from the court of first instance to a court that behaves very similarly to either the High Court in England or the Court of Appeal for England and Wales when it hears evidence sua sponte. The rulings of these appellate courts will almost always form the basis for a revision of the relevant code, and in the interim the appellate courts will generally reverse any ruling by a court of first instance that conflicts.
Codification also happens in public law, both administrative law and criminal law. Many common-law countries other than England and Wales -- most notably Canada and the United States (federally, and in several of the states) have a criminal code that is amended and revised from time to time. The German system of codification in criminal law also incorporates points of what in the U.S. would be doctrinal (i.e., wholly maintained by the judiciary) directly into the code, so that most criminal cases do not have to make reference to any other document even where there are controversies over the behaviour of the police or other authorities.
Precedent -- not precedence -- therefore differs mainly in the use of extra-statutory material in courts of first instance.
Note that in this particular case, European Administrative and Procedural Law (and particularly with respect to member-states' compliance with the Treaty of the European Union) is the relevant system, and while it strives to codify after the fact, typically a Directorate-General of the European Commission holds quasi-judicial hearings and writes down a detailed analysis and order in a process that in English Law would be considered secondary or delegated legislation, or something very very roughly similar to an Executive Order of a form explicitly allowed by an Act of Congress (one might compare decisions of e.g. the FCC). These orders are reviewable by the Commission as a whole, and in principle references may be made to the Council on an ad hoc basis. Parties subjected to adverse orders have a right to go to the Court of Justice of the European Union (CJEU) on various grounds, and there is an appeals process within the CJEU.
This system stems from (among others) Articles 41 and 47 of the Charter of Fundamental Rights of the European Union and Article 298 of the Treaty on the Functioning of the European Union.
With respect to precedent under this system, in general if an administrative decision by the Commission is not appealed or is not overturned on appeal, it remains part of secondary law until and unless the CJEU or the legislature (both parts, the European Parliament and the European Council) changes it. That means that Commission decisions that elucidate a general principle is binding on future Commission decisions. I can't imagine what to call that other than binding precedent.
Probably not if you are not part of the same crime. If you and your five buddies commit a crime together, you'd be in trouble simultaneously. If you all commit a crime individually, you are not.
It's not like all thefts in a country are in trouble simultaneously, just because everyone committed their individual crime at the same time.
Of course not. In white-collar and corporate crime, they pick the cases they want to pursue. It doesn't matter if it's "fair" to you that everybody else isn't getting investigated.
Apple is not the first case, it is just more mediatic and has a bigger sum
"Apple Sales International supplies and distributes Apple products. Apple Sales International was formerly known as Apple Computer International. The company is based in Hollyhill, Ireland. Apple Sales International operates as a subsidiary of Apple Inc."
It's also worth noting that Ireland has passed tax reform to render this not possible any more.
[...] In subsequent years, Apple Sales International's recorded profits continued to increase but the profits considered taxable in Ireland under the terms of the tax ruling did not. Thus this effective tax rate decreased further to only 0.005% in 2014.
Given the leviathan tax systems out there, it's no wonder tax havens exist in the first place. Before judging this activity as unethical and shifting the tax avoidance to some other place though, governments really need to perform a cost-benefit analysis of their tax laws and make it clear to companies what's expected from them in return for access to their market.
> ASI, formerly Apple Computer International and originally Apple Computer Accessories Ltd., is a 100% subsidiary of AOE. ASI is an Irish-incorporated non-resident company that is carrying on a trade through a branch in Ireland
I'm starting to understand how vital unions were for being a lobbyist to the gov. That spoke from the people's perspective. There is a lot that I dislike about unions but their voice representing the people is missed.
How can I do it?
Nice logical fallacy here, positively reframing / dumbing down a company's obligation to pay taxes in ${countries_of_activity} as "we have become the largest taxpayer in Ireland". That's precisely what Apple is condemned for: for consolidating fiscal activity in a tax haven, Ireland, in order to pay ridiculously-small taxes for Euro zone Apple activity, rather than paying (bigger) taxes in each EU country.
Also, Cook mentions "6,000 people across Ireland [...] performing a wide variety of functions as part of Apple’s global footprint.". I have no idea what that number represents, scaled to a multinational like Apple. I'd be curious to know what you think of this number.
Against the FBI it worked because it actually had direct implications for their customers. But in this case there's no implications for their customers other than a vague threat that Apple will punish them (by punishing the EU market) if they have to pay more taxes -- that's not a rallying call, that's blackmail.
So is R&D the only part of the company they believe creates any value? Why operate in Ireland at all if so? Should just outsource it all...
Of course they know better. The value is right there in the first paragraph:
"Thirty-six years ago, long before introducing iPhone, iPod or even the Mac, Steve Jobs established Apple’s first operations in Europe. At the time, the company knew that in order to serve customers in Europe, it would need a base there."
If only R&D created taxable value, there would be no need to tax anyone after the research stage. Of course that's not the case (and it's actually the opposite of what you want, as a society). This is a very weak argument; if that's all they have, they're going to lose any appeal.
Europe is the most communist region in the world and that's why European economy just keeps on declining.
That's not their position, that's their words. Or why do they hide the billions since years if they want their profits to be taxed in the US?
But they have the accounts of the local subsidiary. And that local subsidiary either makes a profit or not.
And, the company is taxed in each country of operations, for relevant operations.
The subsidiary will usually have accounts that have costs like salary and premises, and no direct revenues, just a big cash transfer to fund the costs from the parent company.
The main reason why subsidiaries are set up is to enter a market and sell stuff. The main reason tax is discussed is because sales/revenue/profit is generated in one place.
And they do set up arbitrary prices within the limits of anti-dumping laws. But then again, someone somewhere will tax something.
>no direct revenues, just a big cash transfer to fund the costs from the parent company
In Apple (and many others' case), the local subsidiary has revenue. They actually bill consumers and collect payments.
Sure, and if it did, the parent would make a massive profit they would have to pay taxes on.
Someone at some point has to pay taxes on the profits. Apple just pressured Ireland into looking the other way and granting a tax scheme that is not actually valid and the EC has corrected that by pointing out Apple failed to pay taxes it legally owed.
That statement is just not correct. When you buy a product of Apple in Europe you buy it in Ireland and not in the US. When you buy a VW in the US you also buy it from a US retailed who bought it at a US subsidiary in the US which pays american corporate tax.
Apple is free to import the products from the US and to then pay import duty, sell it off to local merchants and then to pay american corporate tax on their earnings. Apple did not want to do that.
* Their employees pay whatever tax they pay just like anybody else
* They pay VAT on all utilities they consume like every company ( shocker )
* They pay almost NO TAX over their profits unlike 99% of the companies, and that's the problem.
And if you think you'll benefit in any way from them not paying taxes, you're just as delusional as the "French communists in Brussels" ( whatever that even means?!)
What companies that are domiciled outside of the EU pay corporation tax in the EU? Corp tax is levied by the govt of the country of domicile, always has been. Why is it suddenly up for debate?
They are billing locally. They have local accounts in which local payments are made.
so no, they have local revenue. Value is created there.
Apple is domiciled in the EU for their European operations. What are you suggesting?
Apple doesn't. (or rarely does). Amazon doesn't. Microsoft does less and less.
I doubt that. I'm pretty sure BMW US is a local LLC that might owned by the parent but is fully taxed on their operations in the US.
VAT is irrelevant for companies.
Apple collects VAT on behalf of the EU governments when selling products and passes those on to the respective governments. Other companies collect VAT on behalf of the same governments when selling products or services to Apple; Apple gets reimbursed by the same governments for the VAT it paid. It's effectively a zero sum game.
The customers pay VAT, Apple only collects it on behalf of the governments and passes it on (after deducting whatever VAT they already paid on their expenses).
This is why in EU countries prices for end users are typically presented as flat sums (VAT included) but prices for businesses are generally presented with VAT listed separately (because businesses don't care about the VAT they pay themselves).
Edit: why do you think business lobby groups are constantly asking the govt to reduce VAT? Have you ever heard of the demand curve?
You're not selling the product for $100, you're selling it at $83.33 plus VAT. That means your customer will have to part with $100, though. If your customer is not willing to pay >= $108 for the product (i.e. $90 plus VAT), of course you're operating at a loss.
You could argue this is just semantics but B2C retail is the only major example where VAT matters. And considering we're talking about Apple I'm not convinced Apple's profit margins have Tim Cooke worried about EU VAT.
In the vast majority of cases, an enterprise software company will collect far more VAT than it pays out, so it's not zero sum.
It reads as the Apple Head of State trying to rally the troops, trying the "foreign aggression because they're so jealous" angle.
Apple's been paying virtually no tax for years because it's argued it's legal to do so. Now the EC deems it was illegal. GG WP - you lose. Time to pay up now.
I'm sure due to the amounts involved that this potential event was in someone's "risks" column and hasn't come completely out of the blue for Apple.
I haven't confined that they have the largest revenues, but paying the most is a weak argument in the face of what the governing body decides as what is a "fair" amount to pay.
Whether or not this decision is fair is another conversation altogether...
Therefore, [citation needed]
When I say virtually no tax, I mean the relationship between the % they pay and the % everyone else pays.
Apple is probably right in saying that the total of VAT, employee tax, etc. is the largest in Ireland, the US and World: they are the largest company in the world, so that statement should be fairly obvious. If someone who makes 1M$ per year pays 0.5% taxes, he still pays more than someone who pay 20% of their 24k$. That’s why this statement is seen as disingenuous: the ratio to your revenue is was matters.
The European Commission, the vast majority of observers and almost all Hacker News members are right in saying that they paid virtually no (0.005%) corporate tax, because that was the point of the statements they made to tax authorities around the world.
On whether what Apple did was legal: the stated that their all their value creation happened in the Dutch Antilles, which is patently false. That is nothing short of lying on your tax form. The Irish government accepted it because they were strong-armed into accepting that or seeing jobs go elsewhere. That type of coercion is also something that this letter lies about.
In the US, John Oliver pretending he is the Head of a Church whose main tenet is his personal enrichment is widely accepted as a legal, and deserving of a tax break; in the EU, such statements are considered disingenuous (that’s the fancy word for “bullshit”) and treated accordingly.
That is incorrect. Apple doesn't pay VAT, they offset any notional VAT bill against the total of VAT collected from customers and pass-through the residue to the revenue agency.
Generally, each such trader in the chain of supply from manufacturer through to retailer charges VAT on his or her sales and is entitled to deduct from this amount the VAT paid on his or her purchases.
http://www.revenue.ie/en/tax/vat/
The non-corporate end-user is stuck with paying VAT because they're not 'adding value'.
However, I’d be surprised if Apple buys enough things in Ireland to offset the sales of iPhones in Europe.
You seem familiar with the principle of VAT. In reality, many companies who practice tax optimisation scheme are happy to play with that notion beyond recognition.
In Europe, Amazon aligns some of its prices to local prices including VAT, but they only collect Luxembourg VAT, pocketing the difference. The tax accountant of any (international) travel agent would be happy to dazzle you with how much money they are making from creative interpretation of international rules on VAT. If a good is not sold, the last buyer still owe the VAT on it, even when they are not a user of that good, end user or otherwise.
VAT is paid by companies: I’ve had enough issues with my own tax to confirm that you don’t need to collect it to owe it to unscrupulous governments.
Apple do not pay VAT, consumers pay VAT.
You don't also count the PAYE each of Apples employees pay as "tax that Apple pays" do you?
Apple tax lawyers probably do count it, when asked to inflated the number.
http://www.starbucks.co.uk/blog/starbucks-commitment-to-the-...
Thanks for eloquently wrapping my initial reaction: "DISGUSTING"!
Or narration by Sir Jony Ive.
"we have become the largest taxpayer in Ireland, the largest taxpayer in the United States, and the largest taxpayer in the world."
An impressive feat for a company that has around 13% of the smartphone market and 7% of the computer market. Yes they're a big company with lots of revenues, but I find it hard to believe that if Apple was so aggressively dodging tax that they'd still be the world's largest taxpayer.
"the vast majority of our profits are taxed in the United States"
Is this true? Are a majority of Apple's profits taxed in the United States at normal business tax rates? If so, that would put the flurry of accusations into some degree of proportionality.
"The opinion issued on August 30th alleges that Ireland gave Apple a special deal on our taxes. This claim has no basis in fact or in law. We never asked for, nor did we receive, any special deals."
"It is effectively proposing to replace Irish tax laws with a view of what the Commission thinks the law should have been."
Which if this is the case, the UN has a problem with Ireland's laws, not with Apple. This is the first piece of news that has made me wonder if the UK was right to brexit.
https://finance.yahoo.com/quote/AAPL/financials?p=AAPL
Done http://hadalin.me/apple-customer-letter/
What effect might this have on Apple (and others) repatriating overseas monies back to the US now. If it's going to be taxed overseas anyway, the argument for holding large amounts outside the US seems to be reduced.
Granted, there will still be other non-US tax havens, and I'm guessing the lower rates may still be a factor. But might this have any impact at all? Or will this just be seen as a small fine and companies will carry on as before?
- We bring work and employ a lot of people so we are good.
- Be careful because if we don't get it our way we are going to go away and you are the one that will suffer.
All EU countries will be subject to the same law, and I doubt they would just stop selling their product on the european market (it would still make them money even when paying normal taxes).
Paying customs tariffs would probably be worse than paying taxes in the EU, too.
Any country that would give them large amounts of tax credits. I'm sure some countries would be willing to negotiate.
> I doubt they would just stop selling their product on the european market (it would still make them money even when paying normal taxes).
They could sell to resellers who would sell in Europe, if it came to that.
You can phrase your post another way - the EU "safeguards" members against making their own decisions and possibly becoming more attractive than the others.
And because the EC is not controlled by any single member state, it can't treat any single nation different from the others.
Tell that to Jean-Claude "it's different because it's France" Juncker!
This is bad, bad PR. Maybe let the EU citizens be the judge of that?
IMHO, it is a huge no-no for a company to make a political statement, especially in a troubled time like now (does Apple have any comments on Brexit, too?).
I think this will deeply hurt the fanboyism.
On the continent euro-sceptics operate on the extreme political fringe, they never got into any parliament in numbers and are considered toxic as coalition partners.
The EU won't blow apart, the EU is a fact of life and an economic necessity, Brexit was so shocking because it is indeed unbelievable that anyone would try to quit the EU.
I see a bunch of comments from non-Irish people here saying how badly this letter is going down. But it's aimed at the Irish. Ireland has benefited to the tune of tens of thousands of jobs (perhaps way more) from just a handful of big tech firms, in a country with a population of just 4.5 million. It is one of the things that contributes to the falling Irish unemployment rate.
If the EU starts trying to systematically move big, rich employers out of Ireland (and that's the purpose of these moves, to eliminate Ireland's "unfair" appeal), then there's a risk Irish sentiment will start to turn against the EU, just like it did in the UK over the issue of immigration. If the EU systematically attacks their primary competitive advantage in order to satisfy the high-tax French and high-debt Spanish, then what becomes of Ireland?