Half the comments here refer to Ireland offering Apple some special deal. To the best of my ability to determine (IANAL), there is NO special deal. Apple is simply using a bog-standard Double Irish arrangement. It's a very common income-structuring arrangement for transnational corporations.
Every comment that says "this'd be fine if Ireland let every company do it"? Guess what, Ireland lets any company do it. No signup required. It's just how corporate income tax law works in Ireland.
I agree that tax havens are bad for civilization, and it seems to me that the EU's ruling is in a generally pro-civilization direction (whether or not it is, in fact, legal, under current EU law).
Also, when people say "why is the EU allowed to rule on this", the answer to such questions is always "because the member state (in this case Ireland) first agreed to a treaty, and then ratified that treaty by creating an Irish law saying that Ireland had to obey the rulings". That's how treaties work. I'm not saying that's a good thing (I have serious concerns about the interaction between international treaty processes and what's left of democracy, but repairing it isn't helped by misunderstanding the mechanism). Again, the EU high court has jurisdiction because Irish law says it does, backed up by the probability that if Ireland flouts it hard enough, long enough, other member states are likely to jointly retaliate.
I believe Ireland is failing to even charge Apple its statutory tax rate, which is why the the whole kerfluffle over Europe claiming back taxes are owed to Ireland, Apple claiming they don't, and Ireland claiming they don't want the taxes because they fear it will trigger a move by Apple from its shores.
I assume offering deals like that runs afoul of international trade agreements.
To the best of my knowledge, Apple, Ireland, and the EU all claim that Irish tax law is being obeyed. Do you have any reference to this claim of yours?
Europe claims that Ireland's tax law is EU-illegal, and thus Ireland must retroactively enforce an EU-legal tax law, and thus the back taxes.
I certainly agree with you about Ireland and Apple's motivations.
The "special deal" the EU is claiming exists might be legal according to Irish tax law, but that doesn't matter because according to them,
"it gives Apple a significant advantage over other businesses that are subject to the same national taxation rules"
and
"On this basis, the Commission concluded that the tax rulings issued by Ireland endorsed an artificial allocation of Apple Sales International and Apple Operations Europe's sales profits to their "head offices", where they were not taxed. As a result, the tax rulings enabled Apple to pay substantially less tax than other companies, which is illegal under EU state aid rules.
This decision does not call into question Ireland's general tax system or its corporate tax rate."
I agree with you about "EU is claiming exists might be legal according to Irish tax law, but that doesn't matter [to the EU]", and your source is helpful.
I think if you read the actual claim they make, and then you go read the description of the Double Irish accounting trick on wikipedia, you'll notice that to the untrained eye (such as mine), there's nothing special about the deal that Apple is getting; we are publicly aware of dozens of transnationals that get that deal, and there are probably hundreds or thousands.
The EU's claim, I think, is not that the deal is special in its entirety, but that Ireland's ruling on the exact fiddly details of how profits are allocated to different Apple subsidiaries is, uh, irregular. It's a pretty technical accounting point.
e.g. the following assertion, from Vestager, some months ago: "This is not about transfer pricing, it is about allocation of profits so it is different to the decisions on Starbucks and Fiat".
In standard terms, from discussing this with several tax accountants in Ireland, the issue lies in
Ireland applied 13.5% tax on a certain percentage of the profits, those declared in Ireland at the time, but did not apply it to all the profits. Although the book-keeping was done in an Irish company the sales where not all in Ireland. At the time Ireland sought clarification from the EU on how the tax should be applied, and were told they could only tax the profits generated in Ireland. Now, after discovering there is a sum of money in off-shore accounts that had not had the tax deducted, they have told Ireland to retrospectively apply the 13% tax on all profits unless another EU country could claim the profits were generated there.
So the original ruling was to use Ireland as a tax collector that the rest of Europe could then ask for the taxes they were due.
It seems that the Irish gov are seeking to overturn the original ruling as, according to the original information sought at the time, they were not doing anything illegal. In hindsight the accounting irregularity, refereed to as the double Irish, meant that Apple could accumulate these profits. The main issue is that these monies have not been declared in any EU country, so now because of the EU's ruling Trump has decided it belongs to America because American companies should only declare profits in America :D
It seems the main argument seems to be that the tax ruling from Ireland to Apple was not based on objective criteria but more of a negotiation like "we'll give you 1000 of jobs if you give us a discount". It seems reasonable to me to treat every ruling on that basis as "special treatment", even if they are commonly given.
To quote:
--------------------
The Commission notes, in the first place, that the taxable basis in the 1991 ruling was negotiated rather than substantiated by reference to comparable transactions. Moreover, according to the excerpt reproduced at recital (37), the authorities did not seem to have had the intention of establishing a profit allocation based on transfer pricing. Instead, according to that excerpt, Irish Revenue accepted the calculation of profit attributable to the branch of AOE on the basis of actual costs without this choice being reasoned in any way. The fact that the methods used to determine profit allocation to ASI and AOE result from a negotiation rather than a pricing methodology, reinforces the idea that the outcome of the agreed method is not arm’s length and that a prudent independent market operator would not have accepted the remuneration allocated to the branches of ASI and AOE in the same situation, which serve as a basis for calculating the tax liability.
-------------------
They then go on to mention many irregularities with the ruling which seem to be reverse-engineered to get a desired tax basis, instead of based on the economic reality.
> I think if you read the actual claim they make, and then you go read the description of the Double Irish accounting trick on wikipedia
Apple doesn't actually employ the double Irish as traditionally defined - the second half of the double Irish arrangement involves transferring profits to a company outside of Ireland (typically in a Caribbean tax haven). Apple doesn't do this. Their overseas profits remain in their Irish subsidiary, where they have a very low tax rate (which is what is being challenged by the EU).
I think, ironically, that if Apple had fully implemented the double Irish arrangement (like many other multinational companies), the EU commission would not be able to go after Apple using this "favorable treatment" line of inquiry.
>The EU's claim, I think, is not that the deal is special in its entirety, but that Ireland's ruling on the exact fiddly details of how profits are allocated to different Apple subsidiaries is, uh, irregular. It's a pretty technical accounting point.
Yes, the claim is that it is "irregular" in the sense that Apple got it and other companies may not get it. That's the special deal.
Whether or not the EC is right is for the court to decide. But the fact that the ruling is on the question of a special deal means that it cannot at the same time be a ruling on the compliance of Irish law with EU law.
This sounds like dispute between Ireland and EU. Please remind me why is Apple dragged into this ? Specifically laws.
There is also the concern of how 13B Euros of Apple will-be/have-been seized/escrowed for the duration of the case which may takes years. In case EC loses, will EC/EU pay to Apple for temporary loss of their property ?
You can start by reading the sources in other comments here. This is a ruling about a deal between Apple and Ireland and how it is structured to minimise tax and avoid tax in other countries.
The Commission, in simple terms, makes sure that a single market doesn't mean that one country helps companies avoid tax in other countries while still allowing completely free trade.
And like other comments have suggested. You cant sue for following the laws. If EC/EU does not like laws then change the laws. If EU does not like Ireland laws then kick Ireland out. But holding 13B euros hostage cannot be tolerated.
"It's illegal for a government in the EU to strike a so-called "sweetheart deal" with a company. The European Commission classes those deals as illegal state aid, and it has decided that Ireland's deal with Apple is exactly that."
So it seems it's not typical "double Irish" or does the EU simply go after the biggest offender?
The EU Comission seems to be tackling the issue with test trials. Netherlands was already chastised last year with refrence to Starbucks[1]. With respect to EU law it's the country that's the problem (although technically the corporation could also be pursued if there's undue influence cough lobbying cough) so the EU seems to be using the most high profile cases to close the loophole and then countries themselves will properly enforce the law for the other offenders.
The actual problem here is that no, it's not EU law.
The EU has a fixed set of "competencies", i.e. areas of law it controls. Taxation is very very explicitly not one of them. Member states did not ever sign up to letting the EU Commission control their local tax rates.
The EU is now trying to work around the treaty-defined limits on its own power by redefining low tax rates as "aid". Beyond the Orwellian doublethink required to define taxation as aid, this is a problem because if it's allowed to define tax rates France and Germany don't like as "state aid" then the EU has effectively increased its own powers far beyond what the treaties were written to allow, without any kind of democratic process or even consent of the national leaders.
It is simply not true that there is no legislative basis for the EU prosecuting Ireland. The relevant document is the "Treaty on the Functioning of the European Union", especially article 107 (http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A1...), which is quite explicit about what is allowed and what is not in terms of government subsidies:
"Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market."
Taxation is explicitly mentioned in the text as a form of subsidy, hence the EU does not overreach when it tries to enforce the regulations that the member states have agreed upon. It is of course debatable when a taxation is too low, but an effective tax rate of 0.005 percent provides enough evidence of a hidden subsidy to justify the punishment (IMHO).
Thanks for the link. Like a lot of EU law, that text is so vague as to be meaningless.
Perhaps this counts:
3. The following may be considered to be compatible with the internal market: aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment ... aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest;
Or perhaps it doesn't, given that this is stated as "may be incompatible" not "shall be incompatible".
Though I did get a laugh out of the explicit exception for Germany that can only be removed if the Commission allows.
Like I said - as written this text could be seen as forbidding even very basic things like VAT, as it doesn't apply to all types of goods or applies at different rates and thus "favours certain undertakings".
The exception for Germany is to account for subsidies that are given to East Germany, which had to be "pulled" to the level of the West after the reunification, but which still lags behind even to this day. BTW the commission is currently pursuing Germany for being too lax with Volkswagen after Dieselgate (and I'm happy they do this). So, for me the fact the EU commission can do this is one of the positive sides of the European Union.
AFAIK all large trade treaties have such a clause and it does come up quite often in disputes (See NAFTA for example). It's what the elected representatives of the Irish people signed up for.
It is well in the commission's responsibilities to ensure countries don't help companies avoid taxes on other countries, that is a natural element of free trade deals.
No, Ireland is still a country it has to follow EU laws because Ireland law says so. They could leave the EU at any time with a single change to their laws. Brexit is going to take time for various reasons, but legally they could have left the next day.
A country cannot make a law that it's part of the EU and expect the rest of the world to accept it. The EU has to agree and can stipulate the conditions, like following the EU laws.
I did not say Ireland needs to follow EU laws if it leaves the EU, but that isn't relevant.
Retric > Ireland also has a law on the books saying it must comply with the EU.
akvadrako > Ireland has to follow EU laws because the EU says so
Retric > No, Ireland ... has to follow EU laws because Ireland law says so
My (modest) understanding of treaty law is that Retric is right, that the laws that require Ireland to obey EU rulings are Irish laws. In particular, presumably some members of various executive branches negotiated some treaties, and then asked their respective legislative branches to "ratify" those treaties, i.e. pass laws binding the signatories to obey the treaties, by their own respective legal systems.
My non-lawyer understanding is that EU legal theory recognizes the sovereignty of nations, and the EU's authority is derived from the sovereign authority of nations.
Do you actually disagree with any of this? If you do disagree, how do you understand international law to work? i.e. why would Ireland ever care what EU law says, other than via the legal chain I just outlined?
Specifically, it takes time to wind it down in a way that does not damage both parties. As you said, Brexit could have happened 100% in a day, but then trade and movement would likely be negatively effected until new deals were worked out. Much better for everyone involved to work out those new deals first, then execute the exit.
Which makes one wonder why doesn't Ireland just take the $14B. That is a lot of money , surely more than what apple is going to pay ireland in the next 20 years. They can say "sorry apple, they forced us". How likely is apple to leave Ireland for another country? There few countries that will offer such sweet deals.
> (whether or not it is, in fact, legal, under current EU law).
It was looked into, for years, by a team of lawyers on behalf of the ECC (as you could read in the other recent article).
The article in this HN thread also links to an analysis by US lawyer Richard A. Epstein. Here it is once more [1]. Interestingly, Epstein is a critic of the EC: "My initial judgment—always subject to revision on the strength of additional information—is that the EC was correct in its decision. In making this assessment, I admit that I harbor a deep suspicion of the EC in its multiple roles. In general, there is much to the charge that the EC’s policies are prejudiced against American companies that do business in the EU. But it is one thing to start with a strong presumption, and another to put the pieces together in a prudent fashion." and "At its root, the Apple decision rests on premises far removed from Warren’s progressivism. It makes a classical liberal argument in favor of free trade across national boundaries. Though the EC often acts as a statist institution, it has made a sound economic decision by taking on an American icon that deserves to have its wings clipped." (Note, the article is interesting far beyond what I quote, and I highly recommend reading it, but I have to quote selectively to make my point.)
If Apple believes it is unlawful they should argue that, but as the article says they're playing the pity card and resort to other fallacies. If your opponent uses appeal to pity and ad hominem attacks that says enough since that is the two lowest of Graham's hierarchy of disagreement (the disagreement pyramid) [2]
I'm only going off what I've read in these comments (most of which are pretty suspect, to be honest). But it sounds like Ireland have opted to not enforce their own transfer pricing rules by making some kind of special administrative ruling (despite it being inconsistent with the law and previous administrative practice). Truly bizarre, if I've understood the situation correctly.
For starters, it's not like Ireland have a particularly onerous corporate tax rate, so engaging in illegal transfer pricing carries less reward. But, and again I might have the wrong end of the stick here, why in god's name would you undermine the rule of law like that? If there's one thing that governments seem to universally understand, it's that you don't want to do anything to undermine the legitimacy of legal tax collection. It has historically tended to result in either public sector bankruptcy, or revolution...
As for the sovereignty issues, I suspect Ireland (and Luxembourg even more so) are fortunate to be on the inside of the system here. Because the typical response to tax-haven like policies (which suck capital out of other countries and erode their tax bases), tends to be a lot less friendly than being hauled before a EU court.
At any rate, it's just continuing evidence that the EU is an untenable proposition in its current state. Free trade and free movement makes sense on its own. But it's insane to thing you can have a monetary union with any corresponding process of horizontal-fiscal equalisation. Either the monetary union will be dissolved, or EU member countries will have to give up a whole bunch more sovereignty over their national fiscal policy.
That paper says that Ireland did have a limited transfer pricing regime (which they hadn't really enforced, or in PWC's words "Owing to these uncertainties, it is not believed that this section [1036] is applied in practice.").
...the European Commission has concluded that two tax rulings issued by Ireland to Apple have substantially and artificially lowered the tax paid by Apple in Ireland since 1991. The rulings endorsed a way to establish the taxable profits for two Irish incorporated companies of the Apple group (Apple Sales International and Apple Operations Europe), which did not correspond to economic reality: almost all sales profits recorded by the two companies were internally attributed to a "head office".
The Commission's assessment showed that these "head offices" existed only on paper and could not have generated such profits. These profits allocated to the "head offices" were not subject to tax in any country under specific provisions of the Irish tax law, which are no longer in force. As a result of the allocation method endorsed in the tax rulings, Apple only paid an effective corporate tax rate that declined from 1% in 2003 to 0.005% in 2014...
Yep, that sounds like either transfer pricing or just direct income mis-attribution to me.
A Bloomberg article mentions a special formula for taxing Apple that may be the source of the issue:
"To comply with European rules, Ireland finally ended its zero-tax policy in 1990. After that, Apple and Ireland agreed that the profit attributed to a key Ireland-based unit, the division discussed in Tom Connor’s letter, be capped using a complex formula that in 1990 would have resulted in a taxable profit of $30 million to $40 million."
In America, AFAIK, if the court wanted to declare that, as the article claims, "Irish law is [not] in compliance with [EU charter] Article 107", it would be forced to strike down the whole law; for example, Brown v. Board of Education did not desegregate one school in Arkansas but rather the whole system.
That the court can declare the law invalid as applied to Apple while retaining it for every other company in Ireland is clearly a violation of the ideal of fair treatment, if not the rule of law in the first place.
Ireland's appeal gets into the meat of it. I've been reading about this case as well as others against Luxembourg and Netherlands and I suspect it's very likely these decisions by the EC will not survive appeal. The use of state aid laws in this way is novel and the precedent it would set if they somehow prevailed would be a massive shift in sovereignty from member states to the EU.
Low tax member states like Ireland have been under political assault for decades and this is the latest attempt to redress something the EU has no power over. If the EU wanted a unified tax regime across all members it should have been designed that way from the outset, but then the EU project may not have ever taken off if it required ceding so much sovereignty.
Politically it seems like these cases can backfire massively. I suspect that when the EC began these investigations they didn't expect Brexit could happen. The implicit gamble they're making is popular support for combatting tax avoiders will be greater than rising Euroscepticism.
EDIT: Just to be clear because it seems my comment is being misunderstood by several people, my second paragraph is my comment specifically about this case. The third paragraph is my explanation of the political context in which these cases have been brought. It's obvious these cases aren't about tax rates (it is indirectly, which was my point) because the EU pretty clearly has no authority over that.
> Low tax member states like Ireland have been under political assault for decades and this is the latest attempt to redress something the EU has no power over. If the EU wanted a unified tax regime across all members it should have been designed that way from the outset,
You're wrong, this is not about harmonizing tax rates. Ireland already has one of the lowest corporate tax rates which is 12.5%. However, through the Ireland deal/loophole, Apple was paying an effective rate of 0.0005%. Rectifying that is the point[1]. The EU specifically put these anti-state aid laws on the books decades ago, it's not new. Ireland will still have the ability to set their tax rates for all coporations
So, the thing I am curious about.. what will happen when the first member state lowers its corporate tax rate to 0%? I can easily see that happening within the next decade or so (Hungary is at 9%, Malta at 5%, etc).
Governments fund their spending with more sensible tax methods? The incentives of a corporate income tax are wacky. It basically disincentives economic development. Also it's possible for multinationals to push income around and largely evade income taxes anyway, making them very unfair to non-multinationals.
I agree. I think it's better to tax dividends higher, but say, not tax corporate profits. That would allow you reinvest most of those profits back into the business without taking a hit.
If a company has made a profit then it's too late to reinvest that money.It is money that the company didn't find a way to spend.
Profits sit in bank accounts or are distributed to shareholders. It might make sense to grant companies a tax-free allowance equivalent to six months of operational costs, but corporation tax is designed to deter hoarding and thereby force money into circulation
There is no such thing as companies hoarding money. They don't stick billions of Euros in a big vault somewhere. They deposit it in bank accounts (or other similar investments), and then the banks put some multiple of the deposits into circulation through fractional reserve lending.
It is absolutely relevant. This is the fundamental basis of the modern monetary system, yet people here are asking for policy changes without even understanding how it works.
Interesting budget question, how will government fund itself?
I guess nations like malta could rely on exporting state owned ventures like taboo, but what about Hungary? They happen to have the highest value added tax in Europe, and Tax revenue in Hungary stand at 39.3% of GDP. One way or the other, taxes are being paid.
Income taxes (i.e. personal taxes, dividend taxes, capital gains taxes), VAT, etc etc. Corporate taxes tend to not bring in that much money for most countries.
Question is that how does a state fund itself with that low of corporate tax? The entity that Apple is shuffling the money through in Ireland has 0 employees and no office and thus doesn't generate any other tax revenue.
0.0005% is > 0% which is what they would get without this arrangement. In effect Ireland set's things up to collect a token payment by letting companies dodge other companies taxes. (ed: taxes paid by other companies.) This presents zero problems for Ireland and pisses off other countries.
> by letting companies dodge other companies taxes
I think you mean "by letting companies dodge other country's taxes"!
Not many people here seem to appreciate that that's what Apple is doing. It's basically a scam.
(1) Avoid paying taxes in the UK, Germany, France etc by claiming you're taxed in Ireland.
(2) Once in Ireland, channel the money into a fake company (0 staff, 0 offices) that is stateless and isn't taxed anywhere.
> This presents zero problems for Ireland and pisses off other countries.
Exactly. It's a fraud on EU taxpayers outside Ireland. Apple gets all the benefits of state spending in EU countries -- education, health, police, roads etc -- and avoids paying its fair share of the costs.
> I think you mean "by letting companies dodge other country's taxes"!
No, I was thinking companies dodge the taxes other companies pay. Saying they dodge other countries taxes is not really correct as these companies are following the other countries tax laws. France etc. could have different laws which prevented companies from benefiting from Ireland's tax laws.
Basically, "by claiming you're taxed in Ireland" only works because France, and Germany etc have laws saying it works.
It works because EU laws says that if you operate in one EU country you can operate in any EU country from it. And due to this EU has very strict laws about giving preferential treatment to companies.
Sure. The problem is Apple telling France, Germany etc that they're taxed in Ireland, and then the money not being taxed in Ireland because it's funneled into some stateless figment of Apple's corporate imagination....
Corporate taxes tend to only be a small amount of the amount of incoming tax. Personal taxes, i.e. on salaries / dividends / capital gains taxes tend to generate the bulk of tax revenues.
Irish corporate tax rate is 13.5% and has been since 1980's and was set to try and encourage business to come to Ireland and to get the country out of a recession.
The ruling is not that novel, and can be seen as just an other in a long list of fair trade laws. If EU allows nations to give subsidy to specific companies, then what stop other nations from using tariffs, preferential treatment, quotas, or other things which international trade law has fought against in the last few hundred years. Sovereignty over fair trade has been given up by most nations, including the U.S. (through they are also the ones that have been active in pushing such laws).
Ireland has a clear alternative, which is to grant such tax law for every company within their border. It would kill their budget, and bring down their own government, but they could do as is their right under sovereignty. Low tax is not illegal within fair market rules, so long everyone is competing on equal ground.
Ireland DOES grant that tax law to all companies within their borders, as the article clearly outlines.
From TFA, among other relevant paragraphs:
> It is important to note that the words “any aid” covers not only one-off deals between Ireland and Apple, but also any general provision of the Irish Tax Code that would encourage favorable treatment.
Corporate tax in irland is NOT 0.005 percent. It is, as you even quoted, a one-off deal between Ireland and Apple.
The EU article simply covers any deal which would create such favorable treatment, and the key word is "distort competition".
"any aid granted by a member state or through state resources in any form whatsoever which distorts or threatens to distort competition by favoring certain undertakings or the production of certain goods shall … be incompatible with the internal market.”"
There are no one-off deals, and Apple doesn't pay 0.005%.
Apple pays Ireland 12.5% of all taxable-in-Ireland income. That's because that's Ireland's corporate income tax rate. Conveniently, because of the structure of Irish tax law, very very little income is taxable in Ireland. And that's more than is taxable in any other EU country. And, in fact, there's no country where very much of their income is taxable. Pretty awesome for them, I guess.
When the bullshitters say "paying 0.005% effective tax rate", they mean "when you take all their revenue everywhere [in the EU], they pay 0.005% on that". That's not how tax works for any corporation ever.
You're missing several stages in how the creative accounting works, and each of those stages are, separately, probably good things, which is why they exist in the first place.
Note, for example, that the UK and Germany and France all have laws that make it okay to avoid paying taxes by claiming (truthfully) that you're taxed in Ireland, according to the laws of tax residency of those respective countries.
But yes, it's an undesirable-to-collective-civilization loophole, and it'd be nice for it to be closed. I'd love for Apple to be compelled to pay more taxes. Yes yes yes! I'm surprised that the EU is making so much headway in this round, but if they fail in this round, I resoundingly hope they pass some new laws, such that they can win in the future.
The "head office" company isn't stateless, btw, and btw it technically has an office (usually a P.O. Box) and some people do work for it. There are maybe a dozen companies involved, including the actual-work-doing companies in the UK and Germany and France, and every one of those companies have an HQ in a state. I think that the "head office" is even located legally in Ireland.
It's not a scam as much as it's a loophole. The other countries allow for corporations to not pay taxes if they are paying taxes in another country. Apple is paying taxes in Ireland, so they are not required to pay taxes in those other countries. In Ireland, though, the law there says that you can only be taxed on income that's actually generated in Ireland. Since Apple only generates sales income in Ireland from things like online sales and regional sales, they only get taxed on those amounts. It's a loophole. The loophole should be closed, but I don't think Apple should have to pay anything in back taxes because what they were doing was completely legal and allowed by all the laws currently in place.
You surely don't mean that Apple accidentally created a stateless company with no staff and no buildings to swindle taxpayers out of billions? I'm pretty sure a lot of planning went into it.
If it's arguably legal, there's nothing ethical about going out of your way to devise and exploit these "loopholes".
Frankly, it's just what you'd expect from a brutal multi-national corporation that mercilessly exploits underpaid Chinese workers, despite having over $200 billion in cash....
I never said that planning didn't go into it nor did I suggest that there was any accident. It's a loophole, though. It's a creative way to use the current, lawful tax codes. Why would a company pay more than what they're legally entitled to pay? That's literally throwing money away. As I said, in my last comment, the loophole should be closed but to suggest that Apple should pay back taxes on it is ridiculous.
Edit: I also want to push back on your comment about them exploiting Chinese workers. Apple doesn't exploit the workers, the factory owners do. Apple does everything it can to minimize the exploitation of the workers including random factory audits and employee surveys. No other electronics company in the US does this and, frankly, Apple doesn't have to. They pay someone to make components for them and if the company they pay say that they can make those components, then that's really the end of the story. Apple realizes that Chinese culture and law don't support human rights and well-being so they go above and beyond to try and correct the situation. If they were as monolithic and uncaring as you claim, they wouldn't even do that.
You need to do more research. Apple says it does have responsibility for workers in its supply chain, and some of your statements are not factually correct.
Here's an example of how Apple actually works. (1) Enough Foxconn workers commit suicide to put pressure on Apple. (2) Foxconn increases pay and improves working conditions. (3) Apple moves some iPhone production from Foxconn to Pegatron, which is cheaper, because Pegatron workers earn less and are treated worse.
Apple moved some production from a company that made real efforts to stop child labor (school-children bussed in for "work experience" on production lines) to one where it still goes on.
Given that Apple has a $200 billion cash mountain and the workers get peanuts, this is a shitty way to behave.
If you want to take the line that Apple can be as unethical as it likes in exploiting Chinese workers and tax loopholes -- because profits -- then I guess you have bigger problems.
Except that's not at all what I said and none of your statements are factually correct. You have no evidence for any of what you just said and ignored evidence that Apple has done more than either company to raise the standards at these factories. They moved production from Foxconn exactly because of these faults.
And I never said they can be as unethical as they like either, so I won't be replying further as you can't make your point without being deceptive and straw-manning.
Haha. As I said, you need to do more research. You could start with China Labor Watch. You'd also do better if you approached this with an open mind.
> They moved production from Foxconn exactly because of these faults.
Love to see your evidence for that, if there is any.
> ignored evidence that Apple has done more than either company to raise the standards at these factories
Depends how you measure it. Apple makes the most money and, because it needs to maintain a false image, it has the most to lose. However, it's been aware of child labor since 2008, if not earlier. It must also be aware that companies engineer around its guidelines, so they are more of a PR stunt than anything else.
A hugely rich company like Apple could certainly make a difference if it were serious. Pity it isn't.
I do approach this with an open mind and I have looked at China Labor Watch extensively. Unfortunately, they're not unbiased either and their "research" has, in the past, included production lines that were not producing Apple products but products of other manufacturers. In addition, even CLW has had to admit that conditions improved drastically for Apple's manufacturing lines due to their random audits. Apple also was the only company to initiate an investigation into Foxconn via the FLA to prevent exactly what you're describing.
Again, it's not a magic wand that they can wave and magically remove all child labor. The only thing they can do is contract their suppliers under fair working conditions and audit them to make sure that the contract is keeping their word. Apple doesn't own those factories, they don't hire the employees, and they don't run the lines. They simple order product from these companies under certain conditions (including workers protections) and are promised that those conditions will be met. I don't know what else you expect them to do and I'm curious if you're this vehement about all the other manufacturers that use the same factories and don't make contractual guidelines, don't audit the factories, and don't actively investigate them.
Apple wasn't the first to audit production lines, but it does have some special problems. For a start, its "big bang" event-based marketing model puts exceptional stress on pre-launch production, and on Foxconn when it needs to find 200,000 or so extra staff.
There are other aspects, too.
(1) Apple markets itself as a "good" company, which invites criticism when it behaves like any other brutal capitalism corporation, or worse;
(2) Apple's $200 billion cash pile means it has no excuse for the frequently appalling treatment of Chinese workers;
(3) Tim Cook has said that Apple is responsible for everyone in its supply chain.
So the lame excuse that "everyone does it" doesn't apply.
The bottom line is that Apple knows perfectly well that its guidelines are not being followed, and that it can afford to treat its workers better. But if it's not being hammered in the press for it, it really doesn't care.
This case is not about lower or higher taxes. This is not the EU telling member states what tax rates they should have.
This is purely about whether or not Apple got special treatment that is not available to other companies.
The EU cannot allow the biggest corporations to go shop around for sweetheart deals that smaller companies have no chance of getting.
[EDIT] Your EDIT contradicts your second paragraph. This case is about special treatment for a specific company. Whichever way it is decided by the courts, it does not affect the sovereign rights of member states to make tax laws as they see fit. They just have to apply those tax laws in a non-discriminatory fashion.
This is not the EU telling member states what tax rates they should have.
How is it not that? The EU is not supposed to have any power over tax at all. Yet here it is, telling Ireland to charge Apple "back taxes" against its will.
The EU cannot allow the biggest corporations to go shop around for sweetheart deals that smaller companies have no chance of getting.
Of course it can. And in fact it must, because tax is not an EU competency.
Tax _law_ is not EU competency, but this case is not about Irish tax law.
This case is about a specific ruling by the Irish tax authorities concerning Apple and only Apple.
If a country were to give special favors to some companies and not others then that would violate EU rules that are supposed to create a level playing field for all.
If you completely exclude tax rulings from consideration when it comes to competition regulation, then competition law would not be worth the paper it's written on.
Every country could then use special tax deals instead of subsidies to help specific companies. That's exactly what state aid rules are supposed to prevent.
[Edit] Please note that I have no opinion on whether or not Apple did actually get special treatment.
And what if a country passes a law saying that industry sector X is taxed less than industry sector Y, or companies over or under a certain size are taxed less? These things are quite common. Wouldn't that also be "state aid"? Well, maybe it would and maybe it wouldn't, depending how the Commission feels that day.
There's certainly an element of truth there, but it's a bit of a smoke screen. The fact that there are grey areas doesn't detract from the concept that a dividing line can be devised and enforced. We do it all the time. Age of consent laws, tax brackets, and a million other particular cases all involve us saying that we're drawing a line that's arbitrary near the boundary but profoundly meaningful if one takes a step or two back from the fine details.
So I see nothing wrong with saying, "Apple paying 0.005% obviously constitutes 'state aid', and we'll work out the complicated instances if we need to".
No, that would would not be special treatment or illegal state aid, because it is based on objective criteria. A specific company either is or is not in a particular industry. A specific company has a particular size or it doesn't.
It's not negotiable on a case by case bases depending on what a specific company offers in return.
But of course there can always be disputes and differences in opinion, so ultimately a court will decide whose interpretation of the law is correct, just as it would be done on the national level.
OK, so all Ireland has to do is pass a law that says "Whoever the Finance Ministry decrees doesn't have to pay income tax, is exempt". That's an entirely objective criteria: a company is either exempted or it's not.
Now don't tell me this is different because the Ministry's decisions might not be "objective". Such is the case for all political decisions, including varying tax rates across different industries.
A law like that would effectively be the abolition of the rule of law itself. No self respecting constitution would allow it. It would be incompatible with most international treaties and a violation of human rights.
Laws are by definition different from ruling by decree on a case by case basis. If a government had the right to pass laws such as the one you suggest without limits, it would effectively expempt itself from complying with any law at all. All other laws would simply cease to exist.
It could for instance decide to give tax breaks to relatives of ministers or to anyone who bribes the prime minister or apply different tax rates depending on color of skin or slap punitive taxes on opposition media to destroy them.
If a majority in a country were to give its government such powers, say in a constitutional referendum, it would mean that democracy has been abolished.
Democracy is impossible without the rule of law, without minority rights, without human rights, without balance of power.
I think the problem here wasn't even the low tax rate, but the special arrangements they made with select companies.
Because that allows them to offer Luxembourg-style almost-zero tax rates to a few international giants without sacrificing their domestic tax base.
Individual subsidies have been illegal under most circumstances for quite a while now, and giving them a 95% tax rebate is obviously almost identical in effect and morality (law to be determined).
It's also a pretty classic case: Apple is going to have European headquarters somewhere, and any tax rebate they get is a loss of X in European tax revenue and a plus of the same magnitude for Apple's shareholders. It'd be stupid for the European countries not to cooperate (with the understanding of transfers to those countries whose competitiveness suffers)
> Low tax member states like Ireland have been under political assault for decades and this is the latest attempt to redress something the EU has no power over
The ruling explicitly says that there is no problem with Irish tax system if it is open to ALL the companies.
This is allegedly ilegal state aid because it is a sweetheart deal yo ONE company
Apple might be able to get away here for now, but laws will continue to be adjusted in order to make it harder and harder to arbitrarily move profits around. This is an ongoing process that has started years ago. These legal adjustments are all aimed towards making sure that profits are taxed in the country in which they are actually generated. In the worst case, this will end up as a cat-and-mouse game between governments and corporations and lead to a bureaucratic nightmare, which would be entirely avoidable if companies like Apple were more honest to begin with. And don't tell me that companies have a "fiduciary duty" to avoid as much taxes as possible in order to maximize profits. That's a myth. Shareholders are completely free to define the purpose of a company in its articles. And in fact, the articles usually don't say "maximize profits at all cost", but are kept general enough to allow for paying taxes as it was intended by the law.
Forget about 'fiduciary duty'; it's just plain dumb to pay more taxes than what you minimally owe according to the letter of the law. It's literally giving away your money.
Apple doesn't pay the VAT the consumer does. That is why Apple products costs roughly 30% (24% VAT + some extra due to fucking up the dollar to euro conversion) more in Finland when compared to US even though they ship directly from a factory in China.
Yes, the consumer technically pays the tax. However, Apple acts as the collector of the tax from the consumer, and is responsible for "passing it on" to the appropriate tax authority. So, the reform the asked question: What tax authority does Apple report and pay the taxes to?
And the answer is that the EU regulations state that VAT taxes are to be paid in the country in which the transaction takes place. If the transaction is online (and potentially therefore spanning multiple countries), the customer's location is used as the place of transaction.
Sure, there is a separate line item on the bill, but if Apple collects the wrong amount they are on the hook to pay the correct amount not the consumer.
It depends. If they sell it to a business they don't pay VAT at all.
For sales to consumers they would now pay the customer's country , I believe that just changed about a year ago. Amazon and Luxembourg may or may not have been responsible for that change :)
Really? I seem to remember that they paid VAT to Luxembourg, but had made a pretty good deal with the authorities that reduced their effective VAT rate to below 1%.
I think it applied only to Prime and to mp3's, at least after 2008 or so. This was also the reason why Skype, eBay and others had their European HQ in Luxembourg.
I'd like to add that Apple doesn't pay VAT, the consumer does. It's just Apple's responsibility to collect the VAT from the consumer and forward it to the tax authority.
The question why there were flaws in current law in first place. I think they were there because politicians like to strut around with CEOs who bring employment opportunities(however dubious) in those areas which help them win votes. Governments sign MOUs and preferential treatment agreements to bring companies in their areas.
Instead of Apple if governments were more honest they would have told locals that companies are not looking to set up base here because they are seeking tax benefits and as upright people we will not do that.
In some cases it's because .005% on billions of dollars is a better deal than 12% on zeros of dollars. These countries are competing with other countries on who offers the better deal to get a piece of the Apple/Google/whoever pie.
Of course I agree with that. It is kind of cognitive dissonance in people that I should be able to negotiate a sweet deals for my 'humble needs' but companies must take most expensive deals for themselves.
The nullification of a member state's unfair tax law seems fine, but the retroactive application of the new/old tax law seems odd to me. How long were the EU getting their hackles up about Apple in the years preceding this charge (a citation would be nice)?
The problem, to me, lies in the fact that a multinational company gets punished because a member state fucked up. How is that fair to the company?
Say I'm a balling billionaire, wanting to invest, and politicians in an EU country are willing to attract me by giving me a very generous tax break. There is no reason to say no. However, in this particular case, if ruled that this is state aid, a country gets rewarded with additional tax revenue for doing a bad job / acting like an amateur. They need to find a different punishment mechanism, because in its current state this just incentives countries to introduce half assed laws and systems.
I'm quite sure Ireland didn't give the tax break to Apple without asking. If they asked they should have known that even asking for it is illegal in EU (and has been for a long time now). Or they are just plain stupid for having incompetent people deciding how their money flows.
So it's the responsibility of a company to make sure then that laws are properly made / voted / etc? Where does this end? Why exactly do we still need politicians then?
Second, while such a ruling does indeed fix the situation, there are usually plenty of alternative ways of structuring a transaction to achieve a similar tax rate. Why would I ever bother making a deal with a country that has "screwed" investors over in the past?
Not really. We're talking avoidance, not evasion. But that's me speaking, from an EU perspective. If you don't break any laws, there's no way you'll end up in jail. Maybe it's different in the US.
> The nullification of a member state's unfair tax law seems fine
Given the climate around Brexit and the fact that Ireland is fighting back on this ruling with Apple, it is astounding to me that you think this is "fine".
They have 231 billion cash on hand. So not really a big deal for them to pay a small fraction of that as taxes, as they should have done and therefore should not have this much cash on hand.
I can't tell if you are sarcastic. Just because they have money doesn't mean they need to give it away. I'll bet Apple will spend it in a more productive way than any EU government would.
Wow, you're going at this from completely opposite sides, but in almost identical superficiality :)
The EU is pretty damn efficient, by the way. Mostly because it's one of the few governments that doesn't derive its impact from the power to tax & spend.
But the money wouldn't even go to the EU. It goes to it's rightful owner: Ireland.
Clearly corporations shouldn't have to pay taxes. The money they spend already fosters the economy so they're already at least as good as any government.
I'm not saying that they shouldn't have to pay taxes. I'm saying they should have to pay what is required by law in the jurisdiction that they are in. The EU going after them as a special case because they have a lot of money doesn't help anything. The EU should focus on fixing the source of the issue, which is the concept of a tax haven within the EU. Going after Apple doesn't fix the root cause.
First you have to promise you'll provide at least a 4% employment boost in my town. e.g. (total jobs 5,500 and total population 119,230 or 4.6% in the case of Cork Ireland)
Then assuming you agree to keep those jobs in my town for the next 10 years and considering the average salary of the employee you hire is a bit more than most in the area. There income tax combined with the increase in aggregate sales on goods and services it might be a good deal for the area. At least this is the typical rational for tax incentives. The issue with tax incentives is IMO is they create the perception of corruption (and in many cases maybe real corruption) - favoring one business over another etc...
Is there some kind of tax rule I missed where tax discounts are linked to other economic indicators? If I reduce unemployment, or reduce pollution, or plan a tree on a roundabout, or whatever, do I get some discount on my corporate tax?
and this isn't just about 1 or 2 man bands or little startups, whatever. This should apply to any company of any size. Apple, MS, Google, etc. are massive and get massive tax discounts, and I understand why, but if they get a discount on the basis of some special thing they do, this should be on the basis of a public formula that is applicable to all companies.
You need a bit of context around Ireland, too. Ireland has been suffering from a mass exodus of young workers over the last few years. At its height, 10,000 young adults a week were leaving the country. Nobody wants to live in cold, rainy mountains working as a miner or fisherman. The thought was that if they could attract some swanky tech companies, the next generation of workers would be more enthused about staying in the country.
I believe "the last few years" is the wrong context. These tax deals began in the late 70ies, at a time where Potato and Fish were the dominant industries of Ireland. It's easy to forget that they've experienced massive economic improvements since joining the European Union.
The problem is that it creates a race to the bottom.
If you're Lithuania or whatever, you have a 0% chance of getting a company like Apple to build its European headquarters in your country if they decide on factors like accessibility, talent pool etc. So you can offer them whatever you want, and if that means they rent a mailbox in your capital and pay you 500$ of taxes per year, you're 500$ minus a mailbox ahead.
Of course London just lost 10 Billion $ in yearly tax revenue... And that's where cooperation really starts making sense: you don't make tax deals, London pays one or two of those billions to you and everyone comes out ahead (except Apple).
Technically it's a cartel, but the effects are limited because countries still have a vital interest to allow cooperations to flourish.
(Also: I know Ireland actually had a lot more to offer than a mailbox, and it's actually quite a success story)
Special deals for adjusted tax rates are most assuredly pure corruption even if they increase the income the city would get (ie, over zero) because they're one-off deals.
It's equivalent to if I said I'd do the personal equivalent of corporate inversion [1] and then got a sweetheart deal from the IRS just because they'd "make more than if I left".
Not only that, all the other EU countries where Apple stuff is sold actually 'pay' all those employees in a roundabout way, meaning all the other EU countries are effectively subsidizing Ireland.. screw that.
I think it is about as flawed as negotiated salaries by well qualified software engineers. I do not see clamoring for standard salary rate for $73K or some such in silicon valley because it is much more accessible to everyone. Instead we will negotiate and settle for 2-5x of that amount. Companies or people negotiate to get much better deal for themselves.
C'mon Politico writers. Do you really not know the difference between and 0.005 percent and 0.005? You are off by a factor of 100! Apple is allegedly taxed at half a percent! Not 0.005 percent!
I guess there's a reason journalists are known for their writing and not basic math skills.
I hope the EU wins. Tax havens need to be illegal. In the US they have created a race to the bottom between economically struggling states. States compete with each other to offer the most incentives and the only ones who win out of this are the corporations.
Nope because the state is subsidizing the companies and who pays for the state to run? They do. So they end up with infrastructure and education budget shortfalls.
Yes there's a huge problem, your analogy is terrible. I get why you think it's a good one, but it doesn't hold up to any real scrutiny.
The biggest problem is your equivalence of corporations to customers. Corporations aren't the customers of states, and states aren't corporations. States don't exist to make a profit, they exist to serve the needs of the citizens.
Corporations don't pay taxes because they are purchasing services with them, they pay taxes because we all have to pay taxes to do the things we want to do (provide education for our kids, have a police force to deal with crime, build and maintain bridges and roads, etc.)
If you want my money you have to tell me what I am getting otherwise its just extortion. You could argue that state sell market access (which is perfectly ok) then yes its ok for states to compete.
> they pay taxes because we all have to pay taxes to do the things we want to do
What others do with their money is not my business.
> (provide education for our kids, have a police force to deal with crime, build and maintain bridges and roads, etc.)
I would argue that it does not cost that much and the services/goods being discuessed are _extremely_ overpriced. And the price does not just include money but personal freedoms.
But ofcourse how would we know that its overpriced. Hence why I suggest compitition between states is good thing and should be encouraged or It might be you who become the next target for majority's whim and then nowhere to go.
I am not judging people who want to live under socialism/capitalism/any-ism. I am just saying more choices/compitition is better for everyone.
Yeah, sorry, Libertarianism is more like a religion than a system of governance. Leaving everything to the "free market" just frees those who already have wealth and power to do whatever they want and shackles the rest of us who's only power at the moment is our vote (and even that has been eroded over the last 40 years.)
> If you want my money you have to tell me what I am getting otherwise its just extortion.
You do get told what your tax money will be used for. Constantly. If you choose not to pay attention and choose not to vote, that's on you.
> Yeah, sorry, Libertarianism is more like a religion than a system of governance.
Though I support Libertarianism, my post was not about it. I am saying, 10 small socialist nations > 1 big socialist nation. 10 small Apple > 1 big Apple. My point is big state or corporation is risky and can abuse their powers. We have anti-competition organisations for corporations. We should have for states too. If people of a region wants to secede out of a socialist/capitialist/etc regime we should all support.
> Leaving everything to the "free market" just frees those who already have wealth and power
No not just weathly but _everyone_.
> to do whatever they want and shackles the rest of us
Like, maybe, all Libertarians, I support non violence. I dont see how that would happen.
> who's only power at the moment is our vote
Vote is not power. The elected may have powers. But not voters. A widespread misunderstanding.
Vote in exchange for personal freedom only favours elected & friends. People are now realizing this.
> (and even that has been eroded over the last 40 years.)
Yes the world is correcting itself. Vote is not a power. Its productiveness or how useful/neccessery you are to others. To gain productivity you need freedom, thats what I advocate for.
> You do get told what your tax money will be used for.
Thats not really same as Apple wooing me for iPhone.
> Constantly. If you choose not to pay attention and choose not to vote, that's on you.
I am from India and I voted for Modi. I have never felt more cheated than now. Look at what a circus India is now. If thats not a case for Libertarianism/Microstates I dont know what is.
My wife is a CPA and works for one of the "Big Four" AND her engagement currently involves auditing an investment firm in Ireland, and the EU.
After speaking with her, and getting her opinion, it seems most comments about this situation are rooted in too many arbitrary feelings without an understanding of how the tax law actually works.
The crux of this issue is that US has a global tax code while EU has a localized tax code. What EU is proposing is really interesting because, if they win, Apple would be taxed twice, once on the money that their holding company has in Ireland and again once that money is brought over to the US.
EU doesn't seem to care what other tax codes there are as their tax code is upheld by each conuntry in the EU and then there are EU panels that test for anti-competitive practices, etc.
This raises issues in soveirnty of Nations if EU can supersede their tax code. It also raises a bunch of ethical issues within the EU when a company (investment institution) is based in one country while investing in another.
To minimize the words written, from what I gather is this:
Apple's situation is difficult because their argument is that they did not create (IP) in Ireland so they do not owe full corp tax on holding their money there. However, they pay all sales, (current) corp, etc. tax for all of their products where the item is sold or employees are working. Hence, this tax isn't a sales but a different classification of corp tax. They are being asked to pay taxes as if they are an Irish company that creates or manufactures their product in Ireland. Not as a holding company that pays their standard tax rate. There a lot of semantics in that statement and it's difficult to reiterate the explanation without a full blown essay.
For the rest of EU, their tax code is a clusterfuck (for lack of a better term). Companies have to pay taxes in the country they do business + country that's their "Home". So an investment firm will have separate tax rates/brackets as the money moves acoss borders. This gets really complicated when countries are doing business outside of the EU but have their base there. There is also an issue with which currency the taxes have to be paid in (seems trivial except the exchange rate isn't stable).
By all accounts, this looks like a pissing contest between EU and US firms and their stance can have global ramifications that are not foreseeable. One interesting perspective my wife raised is that because taxes are paid in "home county" currency, manipulation of the market becomes a viable option for multi-national EU/US/Workd orgs to lower/raise their taxes paid. This seems far fetched but a tiny change becomes big money on something like 14B (I doubt Apple will resort to such tactics because of money involved).
TL;DR Apple pays taxes they are suppose to pay per Irish tax code. The money held there would be taxed if they move to US or if they invest/purchase items in Ireland/EU. Currently proposal is using a loophole within a loophole to attempt to double tax Apple (or any other company they choose to go after).
> small addition: the Irish tax code was found to be illegal.
By Whom? If the Irish found their tax code to be illegal, that makes no sense.
If the EU found Irish tax code to be illegal then the word "illegal" becomes ambiguous as it involved Sovereignty of a National tax code vs EU guidelines.
EU doesn't have a standardized tax code so finding something illegal would imply there are rules and unifications, which there aren't.
Here [0] is a 10 page summary of every tax code that is in the EU. By 10 page summary I mean 10 pages of actual tax code that then leads to the actual code that is per country.
> If the EU found Irish tax code to be illegal then the word "illegal" becomes ambiguous as it involved Sovereignty of a National tax code vs EU guidelines.
translation: I choose to accept the court that agrees with me and bluntly question the higher ones that don't
> EU doesn't have a standardized tax code so finding something illegal would imply there are rules and unifications, which there aren't.
Point #1 is my favorite:
"1. Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favoring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market."
What they're basically saying is that if I don't agree, it's wrong. Tax code is complex precisely because of statements from Article 107.
#3.e
"(e) such other categories of aid as may be specified by decision of the Council on a proposal from the Commission."
In your assumption, you are correct: I am questioning a higher court that over rules a lower sovereign court based on an elastic clause without limits.
> The "lower sovereign court" has absolutely no meaning when the whole operation was set up to make use of the EU joint market.
So why not have a joint EU tax code to simplify life? That's the issue what all corporations face at the moment. Read the white paper that was linked in a previous comment, it's not too dense and makes the correct points. G20 have been working on a unified world accounting system but EU has t accepted it. Instead, they'll use arbitrary rules that only govern EU and apply to multi-national corporations.
In my opinion the discussion is focused on Apple (clearly because of the articles the comments are on) with strong opinions rooted in some kind of thievery that they're participating in. However, the root analysis is that the tax system is just FUBAR and the 14B levy won't fix it. Once that ruling was filed, the money goes into escrow so Apple is already out. They're fighting for a regulatory change that all companies (regardless if they're in the EU/US or elsewhere) will benefit from.
Setting emotions aside, the issue is a change in tax system is required. Otherwise, all they're doing is putting lipstick on a pig.
It's really bizarre: if the EU creates the rules directly, it is "overreach" that interferes with "sovereignty" (despite the fact that these powers were ceded willingly, never mind...), if, on the other hand, the EU leaves things to member states and just imposes principles for those rules, it's "too complicated".
> , if they win, Apple would be taxed twice, once on the money that their holding company has in Ireland and again once that money is brought over to the US.
This is not true, the taxes paid in the EU are deducted from the 35% TAX that has to pay in the US if they repatriate the money.
So then you're still paying taxes twice. In addition, what you're saying is not 100% accurate as US does not have tax treatise with EU but with EU members.
Here[0] is a friendly, 2000+ page summary from region to region on the EU taxes and how US corp tax credits are applied.
They're two separate taxes, paid by two different entities. Nobody is "paying taxes twice". VAT is paid by the end consumer. It is generally collected by the retailer and forwarded directly on to the government, because otherwise enforcement would be too difficult.
The manufacturer has a variety of taxes that may be due, depending on jurisdiction, on its profits, revenues, payroll, or other aspects of the business. In conventional retail setups, where you have a manufacturer supplying goods to a distributor or wholesaler, wholesaler to retailer, retailer to customer, there are corporate taxes due on each company in the chain. But none of them pay VAT on the intermediate goods; that's on the final consumer.
VAT is basically a tax on consumption; corporate taxes are taxes on (usually) income, and can be seen as the price one pays to a country for the use of its legal system and for the privilege of creating liability-shielding legal entities there.
> But none of them pay VAT on the intermediate goods; that's on the final consumer.
This is not true. This describes how sales taxes work in the US - sales taxes are due on retail but not wholesale transactions.
VAT is due on each transaction in the chain - manufacturer to wholesaler, wholesaler to retailer, retailer to consumer. However, the wholesaler can deduct the VAT that it paid to the manufacturer from the VAT that it passes to the government and the retailer can do the same for the VAT that it paid to the wholesaler. In this way, there is no multiple taxation of the retail sale. GST and PST (despite the latter's name) in Canada work the same way.
I might not have been clear in my original response. I wasn't referring to VAT with regard to double taxation but on paying corp taxes in an EU country and then again when the funds are transferred back to the US.
Even though US does provide some tax credits to companies that pay corp tax in EU, the amount is based on individual agreements between the two countries.
Dude, if Apple wanted to pay those taxes to the US gov. they wouldn't even have the Ireland and Luxembourg subsudiaries, they would be a 100% US based corporation.
I don't think there are very strong legal foundations for the case against Apple, but I think that in terms of public opinion, Apple is in a very weak position.
People are sick of these corporate tax schemes; we need someone's head on a stick (at whatever cost). Brexit and Donald Trump have shown us that people care less and less about doing the right thing "by the book" anymore; people just want to do the right thing for the majority - Even if that is politically incorrect and will mess up the world order.
I think that just like Brexit and Trump, this is just a continuation of the same rebellious movement against globalization and the elite establishment.
Why is the EU going after Apple now? They knew of this tax haven for years. It's the EU's fault for letting one of its members do this. The fact that they are trying to change the tax code in Ireland AND retroactively apply those laws is bananas.
If I take advantage of a tax loophole and the government closes that loophole, can they throw me in jail? Obviously people aren't companies but it sets dangerous precedent.
> The key point rests on language in Article 107 of the 2007 Treaty on the Functioning of the European Union, which provides that “any aid granted by a member state or through state resources in any form whatsoever which distorts or threatens to distort competition by favoring certain undertakings or the production of certain goods shall … be incompatible with the internal market.”
I don't get this, to be honest.
Doesn't every financial aid distort the competition, by design? What am I missing.
edit:
OK there is the whole article. It makes slightly more sense, but I would argue it's still hard to guess which aid falls where.
1. Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.
2. The following shall be compatible with the internal market:
(a) aid having a social character, granted to individual consumers, provided that such aid is granted without discrimination related to the origin of the products concerned;
(b) aid to make good the damage caused by natural disasters or exceptional occurrences;
(c) aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division. Five years after the entry into force of the Treaty of Lisbon, the Council, acting on a proposal from the Commission, may adopt a decision repealing this point.
3. The following may be considered to be compatible with the internal market:
(a) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment, and of the regions referred to in Article 349, in view of their structural, economic and social situation;
(b) aid to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of a Member State;
(c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest;
(d) aid to promote culture and heritage conservation where such aid does not affect trading conditions and competition in the Union to an extent that is contrary to the common interest;
(e) such other categories of aid as may be specified by decision of the Council on a proposal from the Commission.
Apple is being singled out. Politicians create this kind of loophole for their friends (giant industries like oil, defense, etc. - that are "invisible" to the public eye - and sometimes to benefit politicians themselves to put their dirty money in tax shelters) and then complain when a very visible business like Google or Apple uses it.
Apple here is making threats, but they're threats the commission should listen to carefully.
I mean, if the Commission wants to drive US tech companies out of the EU on the specious grounds that it might help the moribund EU startup scene, go ahead. But let's just say I have no doubt the UK government is quietly watching.
I doubt it would be enormously difficult for Apple to relocate from Dublin to London.
Eh? this is not specious, a one off 0.005% deal is anti-competition and illegal under EU law, Apple doesn't get to decide what EU competition laws it can and cannot ignore. Ask Microsoft, ask Google... both tried, both failed.
Nobody is rushing to incorporate as a startup in the UK right now, quite the opposite - there's lots of talk of moving to Berlin/Paris/Stockholm. There are numerous reasons for this but I'll mention two strong disincentives:
1.) Impending `Brexit` and loss of access to the EU single market
2.) The 'Britain is Closed for business' nature of the new snoopers charter which compels online companies based in the UK to get government approval for any new technology that uses encryption, and also compels them to build backdoors for the government spooks if asked.
The EU would be fine with Apple moving its money to the US and paying their fair share of taxes there.
But you can't tell the US that profits are generated in Ireland while agreeing with Ireland that profits are generated in the US, just so you end up paying taxes nowhere.
> The EU would be fine with Apple moving its money to the US and paying their fair share of taxes there.
Why would it be fine with this? Taxes are paid where the revenue is generated. If money were to be repatriated without tax to HQ's resident country, then all companies would be registered in tax havens and pay no tax. Apple is trying to play off the EU against the US - they ought to pay the due taxes in both jurisdictions.
Why not? Apple doesn't produce any tax income for them, Apple has zero R&D in EU, and Apple not selling to EU consumers would only benefit the local companies like BQ, Sony and Alcatel.
They don't create jobs, so they should not be taxed? What a surprising statement! It's possible to make a point that a company that creates jobs should not be taxed (although I think that's wrong, too).
I am talking about short term effects, and not claiming this is a very sane argument.
But you should understand that Apple was given a competitive edge against other companies that did pay their EU taxes. If Apple decided to leave the EU market tomorrow, it would in short term result in economical gain for the EU members since people would by buy the same amount of phones/tablets/laptops but now from companies that (hopefully) pay their corporate taxes.
If Apple moves to London they would need to move back to the EU in few years. London is soon not to be part of the EU.
Also the EU startup scene is most certainly not moribund. I guess you are misinformed.
And at last. The Commission doesn't want to drive out a US company. The European Union just has the expectation that companies doing business in Europe should pay taxes in Europe.
While it would probably be relatively easy for Apple to move to London, I think the British stance on privacy (Investigatory Powers Bill etc.) would make Apple less interested than one might expect from simple tax rules.
Then there are all the Brexit related questions about export of services, and I have no idea at all how that might or might not change things.
"Then there are all the Brexit related questions about export of services, and I have no idea at all how that might or might not change things."
I suspect noone has a clear idea about that at this stage. Negotiations yet to start &c and the negotiation stance that HM Government appears to take is itself a highly political question within some quarters in the UK.
The UK is leaving the EU. Having the EU HQ in the UK would not only be silly, it'd also be a huge headache (as many EU organisations are finding out with Article 50 approaching).
Also, what would Apple gain from withdrawing? They weren't paying taxes in Ireland, but they're also not paying taxes in the US. If they pulled out of Ireland they'd still have to pay taxes somewhere, which is exactly the situation they're facing now (just in the US instead of Ireland).
> I doubt it would be enormously difficult for Apple to relocate from Dublin to London.
Obviously it is not. Tax sheltering does not require much physical presence at all. It probably requires no more than changing a few contract between subsidiaries to initiate the cash movement to their fiscal haven of choice.
The real problem for Apple is for the money that is already there.
More generally this generation of tax avoidance is probably coming to an end: both the EU and the US are looking at it those days, and Ireland is one regulation away to have to find another way to print money.
Not quite sure what's the big deal. Tax avoidance scheme are rarely stable long term. Extracting tax money is a global competitive market between state and large companies/rich individual. You should sleep peacefully knowing that in all the possible resolution of this affair, Apple will always have to effectively pay less tax than possible to your little startup stuck in a single country tax system.
You don't understand, they would gain nothing by moving to London. Either London stays in the EU market in which case it must not give Apple unfair advantage or London does not stay in the EU market in which case Apple must pay tax for EU sales in EU.
Yes and no, maybe. You are right that this current flavour of tax avoidance is not going to work anymore and moving to London now or in the future will not change the outcome for the money mentioned here, only future money.
However about London, once outside the EU they will have the opportunity to position themselves as a tax haven with clever new tax avoidance scheme for large companies.
Now you probably automatically dismissed the idea because that's a crazy idea. Setting up yourself as a tax haven does not scale to the size of the UK economy, and the UK would need to do it at a time of intense scrutiny by the global community and the EU will certainly see that as a aggressive negotiation tactic which is not going to help the Brexit negotiation. But well, there were better arguments for not leaving the EU in the first place, and yet the UK seems to merely go for the hardest Brexit possible. So who knows ? McDonald (fiscal) move to London is worrying. Nissan and others are a bit too happy after their secret chat with the PM.
London would be outside the EU though. Apple is based on Ireland because it 1) is in the EU, and 2) offers low corporation tax, not the other way around. If Ireland left the EU today, Apple would up sticks and move tomorrow, even if the tax rate stayed the same
> if the Commission wants to drive US tech companies out of the EU
Apple has very few research and development or production jobs in the EU. It's mostly sales. For those sales they should pay taxes. The EU has nothing to loose here.
Every comment that says "this'd be fine if Ireland let every company do it"? Guess what, Ireland lets any company do it. No signup required. It's just how corporate income tax law works in Ireland.
I agree that tax havens are bad for civilization, and it seems to me that the EU's ruling is in a generally pro-civilization direction (whether or not it is, in fact, legal, under current EU law).
Also, when people say "why is the EU allowed to rule on this", the answer to such questions is always "because the member state (in this case Ireland) first agreed to a treaty, and then ratified that treaty by creating an Irish law saying that Ireland had to obey the rulings". That's how treaties work. I'm not saying that's a good thing (I have serious concerns about the interaction between international treaty processes and what's left of democracy, but repairing it isn't helped by misunderstanding the mechanism). Again, the EU high court has jurisdiction because Irish law says it does, backed up by the probability that if Ireland flouts it hard enough, long enough, other member states are likely to jointly retaliate.