Apple should repay Ireland €13bn, European Commission rules

[MowCowWhoHow III]

Source: BBC

Ireland should recover up to €13bn (£11bn) from Apple in back taxes, the European Commission has ruled.

After a three-year long investigation, it has concluded that the US firm's tax benefits are illegal.

The Commission said this enabled it to pay substantially less than other businesses, in effect paying a corporate tax rate of no more than 1%.

Ireland's finance minister, Michael Noonan, said that he disagreed "profoundly" with the decision.

Read more: http://www.bbc.co.uk/news/business-37220799

---

Wow x13 the pre-ruling estimate!

[LittleGirl]

1. shut them down

those cheating bastards. Pay your freaking taxes!

[Lunabell]

2. And pay them in the US!

[Adrahil]

3. Read the ruling... Apple did not "cheat"

The Irish government struck a deal with them. The EU has ruled that deal amounted to illegal government aid under EU rules. Apple paid Ireland what Ireland said they owed.

Now, now can agree with the EU ruling, and I do to some measure, but this amounts to retroactive taxation. But 13 billion euros? That's pretty unlikely, IMO.

[peasant one]

5. while they may not have cheated they gamed the system

And the system was willing because of the promise of jobs. I do not like tax incentives like this, because I believe paying your fair share of taxes is important to a civilized and just society.

[LittleGirl]

6. exactly! n/t

[Adrahil]

8. I don't disagree in general....

but this cannot be classified as illegal activity by Apple, whatever you think of the deal.

And if the EU thinks Apple is going to fork over $14.5 BILLION, they are smoking some primo dope. And in the end, if Apple withdraws from Ireland and the EU, does that do them any good? Seems like the thing to do here is set new rules going forward. After all, it was Ireland at "fault" for agreeing to this deal.

FWIW, this is why the EU is a mess.... a central authority setting economic policy without political accountability. It was a terrible idea for Greece, it's a terrible idea for Ireland.

[peasant one]

14. Ireland set this policy

The central authority is trying to correct an unfair policy set by the Irish government. States provide tax incentives all the time to get corporations to relocate and I think it is an unwise practice. The corporations are playing everyone here. It is time someone had the gumption to intervene and stop this practice. How many incentives do we have to give to these corporations to keep them? When will it end? What if Apple wants a better deal down the road and threatens to withdraw if Ireland doesn't comply?

[Adrahil]

34. I don;t disagree with you on the basic point.

I think Apple is taking advantage of the situation for sure. But it is the Irish government that created that situation. I agree that the "race to the bottom" created by corporate tax incentives is a problem. There are, I think, a number of ways to deal with it. However, empowering an external body to supersede national law is very, very bad idea, IMO, especially when that body claims the sovereign role of determining taxation.

[Blue_Tires]

38. +1

[LittleGirl]

7. see what peasant one said below. n/t

[muriel_volestrangler]

10. "But this amounts to retroactive taxation"; no, it says the laws weren't correctly enforced

The commission said Ireland’s tax arrangements with Apple between 1991 and 2015 had allowed the US company to attribute sales to a “head office” that existed on paper only and could not have generated such profits.

The result was that Apple avoided tax on almost all profits from sales of its products across the EU’s single market by booking the profits in Ireland rather than the country in which the product was sold. The figure of €13bn is the equivalent of the annual budget for the Irish health service and campaigners are also calling for the windfall to be invested in public housing.

https://www.theguardian.com/business/2016/aug/30/apple-pay-back-taxes-eu-ruling-ireland-state-aid

Apple incorporated subsidiaries in Ireland but said they were not tax-resident in the country. Of particular note are Apple Operations Europe (AOE), which makes MacBooks and provides shared services to Apple’s EMEA subsidiaries, and Apple Sales International (ASI), which handles the import and distribution of Apple products after their manufacture in China—everywhere outside the Americas. The latter is responsible for most of the unpaid back taxes.

According to the Commission, these two companies attributed almost all sales profits to a “head office” that “existed only on paper and could not have generated such profits.” An Irish tax loophole, which is no longer in force, allowed the allocated profits to be untaxed in any country.

This was all because the Irish tax authorities struck deals with Apple in 1991 and 2007 that allowed the company to pay far less than the country’s standard corporate tax rate—already the lowest in the EU at 12.5%. The Commission’s investigations found that Ireland gave Apple this special treatment so as not to risk the thousands of jobs that the company provided in the country.

That’s effectively a state subsidy, and there is a limited range of circumstances in which those are permitted in Europe—after all, the EU is very big on not letting its member states distort the all-important single market. This was not one of those circumstances.

http://fortune.com/2016/08/30/apple-tax-ireland-ruling/

[Adrahil]

12. The government of Ireland disagrees.

This is an OUTSIDE entity claiming that there was a "special deal." Ireland denies this, as does Apple.

The only people this will ultimately benefit are lawyers.

And this reiterates why sovereign nations must not cede their sovereign authority to an unaccountable third party.

If the people of Ireland don't like what their government is doing they can express their dissatisfaction with their vote.

[muriel_volestrangler]

15. No, this reiterates why sovereign nations must cooperate with each other to stop multinationals

playing them off against each other. If the only people who think internationally are the corporations, then the unelected corporations will win, and the people (who need tax revenue) will lose. The people will benefit because they get that revenue.

The EU is not 'unaccountable'; there are elections, and the Commissioners are appointed by the elected heads of government of member states (and confirmed by the MEPs).

Ireland has been trying to be a tax haven, while getting the benefits of EU membership. The people of Ireland have not been saying "oh, please, Apple,, pay a rate under 1% for corporation tax, we love you that much". This was a sweetheart deal.

You are advocating that Apple should get away with paying effectively no tax.

[Adrahil]

18. Cooperating does not mean ceding soveriegnty.

Let's put it this way... I do not want some international body telling us what we can and cannot do in terms of tax policy, and I DEFINITELY do not want them to have the power to retroactively tax anybody becuase they do not agree with teh decisions of our elected officials.

[muriel_volestrangler]

20. " I do not want some international body telling us what we can and cannot do in terms of tax policy"

Unless, of course, that international body is called "Apple, Inc.". That is what you're advocating - multinationals getting to set their own tax by playing governments, and the politicians in them, against each other.

The Irish government agreed in international treaties, before the period concerned, that it could not give corporations state aid, and that the EU was the competent body to decide if it was doing so. The EU has now ruled.

[Adrahil]

26. That is NOT what I said.

According to both Apple AND the government of Ireland, no special deal was struck. Now let's be clear, I do not agree with the benefits Apple received, but they received them from a sovereign nation, that has the right to set its own tax policy. And the idea now is that apparently the EU claims the authority to review any and all past tax policy and substitute its own judgement for teh judgement of the sovereign government.

This is the kind of thing many are worried about with trade deals. That some international body then has sovereign authority over the nation. I opposed Brexit (for whatever good that does, as an American), but this kind of thing fuels that kind of response.

[muriel_volestrangler]

28. The 'idea' that the EU rules if members are giving chosen firms state aid has been established

for many years, by EU treaties, including the entire period under discussion. Yes, the Irish government claims there was no deal, but it seems unlikely that all other companies are also paying a corporate tax rate of 0.005%. The special treatment:

(The tax advisor’s employee representing Apple) mentioned by way of background information that Apple was now the largest employer in the Cork area with 1,000 direct employees and 500 persons engaged on a sub-contract basis. It was stated that the company is at present reviewing it’s worldwide operations and wishes to establish a profit margin on it’s Irish operations. (The tax advisor’s employee representing Apple) produced the accounts prepared for the Irish branch for the accounting period ended (…) 1989 which showed a net profit of $270m on a turnover of $751m. It was submitted that no quoted Irish company produced a similar net profit ratio. In (the (tax advisor’s) employee representing Apple)’s view the profit is derived from three sources-technology, marketing and manufacturing. Only the manufacturing element relates to the Irish branch.

(The representative of Irish Revenue) pointed out that in the proposed scheme the level of fee charged would be critical. (The tax advisor’s employee representing Apple) stated that the company would be prepared to accept a profit of $30-40m assuming that Apple Computer Ltd. will make such a profit. (The computer industry is subject to cyclical variations). Assuming that Apple makes a profit of £100m it will be accepted that $30-40m (or whatever figure is negotiated) will be attributable to the manufacturing activity. However if the company suffered a downturn and had profits of less than $30-40m then all profits would be attribitable (sic) to the manufacturing activity. The proposal essentially is that all profits subject to a ceiling of $30-40m will be attributable to the manufacturing activity.

(The representative of Irish Revenue) asked (the tax advisor’s employee representing Apple) to state if was there any basis for the figure of $30-40m and he confessed that there was no scientific basis for the figure. However the figure was of such magnitude that he hoped it would be seen to be a bona-fide proposal.
...
And whether it relates to the 1991 deal or the 2007 deal, which also put a cap on the company’s taxable profits in Ireland, EU investigators haven’t seen an analysis explaining how those caps were reached, but they suspect that the justification isn’t related to the actual economic value produced by the subsidiary.

http://qz.com/273631/how-apple-got-its-2-tax-rate-in-ireland/

[Adrahil]

35. yes, I know that. I think it is a terrible idea.

IMO, that authority must exist at the level of sovereignty. Once BIG problem the EU has is that is attempts to claim some sovereign authority, but without the full accountability. We saw this in Greece, for example. Greece cedes some of its sovereignty to the EU, but because it is a small player, it retains virtually no sovereign control at the EU level, leaving them vulnerable to EU economic decisions. Now it's Ireland's turn.

And let me reiterate that I think the deal struck between Ireland and Apple was terrible for Ireland. I'm not arguing that Apple OR Ireland aren't in the wrong here at some level. I'm arguing that EU should not have the authority to tell Ireland that it must enforce the law as the EU sees fit, rather than as Irish law determines. If the Irish government broke its own law, then the government is accountable to its own law, and ultimately the Irish people.... not someone in Brussels. Brussels COULD suspend certain Irish privileges in the EU as punishment. That would be within their sovereign scope, IMO.

[OnDoutside]

37. And the Irish Government will now appeal that decision. It is not Irish policy to be

a tax haven, they work within the line of what is acceptable International Tax practices. Yes you are right in what you said, but they have the right to appeal, under those structures.

This is the Irish Revenue Service's statement on Tax Competence

1.2. The competent authority function

Transfer pricing is one of the most significant tax issues being considered at a global level by governments, tax administrations and international bodies such as the Organisation for Economic Co-operation and Development (“OECD”) and EU. It is also a major issue for Multinational Enterprises (MNE’s) and is an important factor in decisions made by enterprises in respect of FDI projects.
The competent authority function seeks to resolve international transfer pricing disputes through negotiations with tax authorities of treaty partner jurisdictions. Due to the Base Erosion and Profit Shifting (BEPS) project, it is envisaged that there will be an increase in the number of mutual agreement procedures (“MAP’s”) and requests for advance pricing agreements (“APA’s”). Therefore, it is increasingly important that Revenue has a strong, well-resourced competent authority team to resolve cases effectively. When deciding on where to establish/ expand operations, MNE’s place increasing emphasis on the jurisdiction having a strong, experienced and well-resourced competent authority function.

An interesting article here

http://www.irishtimes.com/business/economy/ireland-risks-being-trampled-in-us-eu-corporate-tax-fight-1.2771081

[closeupready]

22. Not a retroactive tax; a penalty for underpayment.

[Adrahil]

27. I disagree.

How can it be a penalty for underpayment when the sovereign tax authority says Apple does not owe it, and the EU even acknowledges that Ireland struck this deal? That would be creating a crime where none had previously existed. The EU is attempting to usurp Ireland's sovereign authority.

[peasant one]

16. You forget the low information voter

These tax issues are not sexy enough for most voters to spend time thinking about, all a politician would have to say would be "Benghazi" (or the Irish equivalent) to distract the voter.

[Adrahil]

19. I do not forget....

yep... sometimes low info voters elect morons. That is the price of a democracy.

[Xithras]

40. Not an "outside" entity, it's a "superior" entity.

Ireland joined the EU. When they joined, they agreed to cede the ultimate authority over their trade and tax agreements to the EU, and to ensure that their national laws did not violate EU laws.

Claiming that "outsiders" are overriding Irish law is akin to states righters whining about the federal government overruling state laws that violate federal laws. The states agreed to take that subordinate position when they joined the union. And so did Ireland.

And your claim that the EU is unaccountable belies your lack of understanding about how the EU works. The EU Parliament has been elected by the people in its member nations since the 1970's. The citizens of Ireland elect and send 11 MEP's to the EP through direct elections. In proportion to its population, Ireland is actually over-represented in the EP, allowing the Irish to wield more power in the drafting of these laws than its small population should allow (per capita, the Irish have twice as much representation as the French, Germans or British).

Ireland joined the EU in 1973, and in doing agreed to place its tax and trade laws under EU jurisdiction. If it later crafted tax exemptions that were illegal under EU law, those exemptions need to be wiped out and the losses associated with those illegal exemptions need to be recovered.

If Ireland doesn't want to live under the EU's laws, they can always follow Britain's lead and leave the EU. Unlike the United States, EU members retain the right to leave the union. But Ireland does NOT get the choice to remain in the EU and reap its benefits while simultaneously flouting its laws and regulations.

[Nihil]

42. +1. Too many people here whinging about the EU without knowing enough about the subject.

(No change there I suppose ...)

[Spider Jerusalem]

41. The EU isn't an "outside entity"

and Ireland agreed to single market rules when it signed up.

[FarrenH]

44. Apple DID cheat

Last edited Wed Aug 31, 2016, 09:12 AM - Edit history (6)

Although that's not what the ruling deals with. The ruling deals with the sweetheart deal that allowed them to cheat. But cheat they did, through transfer pricing, facilitated by the sweetheart deal.

Basically Apple Ireland has been over-billing Apple in other countries for services rendered, so that on paper, Apple made no profit in those countries and all their profit in Ireland - where they pay virtually no tax. The commission even talks about a "head office that existed only on paper and could not have generated such profits". Of course Apple Ireland employs 6,000 people, so its not an entirely fictional entity. That's one of the benefits to Ireland for waiving their normal corporate tax rate and giving Apple an effective tax rate of 1%. But its being fraudulently claimed that those 6,000 people provide services which consume all of the profit from Apples extensive business in many other jursidictions.

In material effect what they are doing is fraudulently stating that profits made in one jurisdiction were made in another jurisdiction. It's fraud and theft. They're literally stealing tax from the USA and other EU countries and Ireland is helping them to do it in return for jobs and other benefits.

Such fraudulent use of transfer pricing to avoid tax obligations is common among multinationals and is extremely difficult to police. It could be ameliorated a lot more through international trade forums like the WTO, but the fact that influential special interests in G8 powers like the UK and USA also benefit from such tax havens (the crown territories, Delaware) impedes reform.

Tax avoidance through transfer pricing allows multinationals to get the full benefit of government services in each jurisdiction where they profit (road maintenance, security, power, water, refuse disposal and so on) without paying their fair share for those services and use of other public goods. It's estimated that in Africa, developing economies lose 30-40% of tax rightly owed to them through transfer pricing. Multinational corporations are robbing developing countries blind under the current WTO regime and getting away with it because those countries lack the means to stop it.

This kind of bullshit drives increasing inequality and its criminal behaviour. Thomas Picketty has suggested that the only way to stop it is collective action from the G8 at the very least, with strong and enforceable treaties prescribing severe penalties for the smaller jurisdictions that act as tax havens to attract business.

Apple was such an egrerious and chronic offender in Europe that it finally attracted this response. Also because Ireland's economy grew massively on the back of massive EU subsidies to uplift the so-called PIIGS nations in the EU, then they turned around and effectively helped several companies avoid enormous taxes in the countries who did most of the subsidising (France, Germany) which naturally caused a lot of tension.

But there is a lot more of this going on than just the Apple case. In fact most multinationals are doing it, and the chorus of calls for co-ordinated, collective action by the richest countries to address it is growing.

Also, there are no sovereignty issues here. Ireland's membership of the common market is contingent on treaty obligations that amount to binding domestic law (ratification entails making it domestic law). This ruling, from a body that Irish law recognizes as having the proper authority for such cases, says that Ireland in effect broke its own law.

[Dorian Gray]

11. Ireland is fighting the ruling

saying that this ruling questions their tax laws and sovereignty.

[NWCorona]

17. Kinda late for that now

[OnDoutside]

23. No, this appeal could go on for years more.

[NWCorona]

33. Agreed! With the amount of money being discussed. There's no doubt this will go on for years.

[Dorian Gray]

30. How so?

[NWCorona]

32. They joined the EU.

[Kablooie]

36. Apple's not exactly the company I would like to see shut down.

Disciplined, sure, but there are a lot of companies who don't provide any useful services to average people that game things a lot more than Apple does.

[ucrdem]

4. That's a lot of green!

[Adrahil]

13. well, it's Euros, so LOTS of colors, really. :) NT

[ucrdem]

31. with a pot of gold at the end of the rainbow?

[MynameisBlarney]

9. If a corporation can't exist/operate without paying taxes

then they should not exist.

Too big to tax, too big to exist.

[closeupready]

24. Yes, that is the textbook definition of "parasite".

[MynameisBlarney]

29. For real though

And it ain't just Apple.

[closeupready]

21. K&R

[harun]

25. A profitable corporation pay taxes ???? WTF they think this is EUROPE ??? (Oh wait)

[proverbialwisdom]

39. Reuters via CNBC: White House 'concerned' EU tax penalty on Apple may hit US taxpayers

http://www.cnbc.com/2016/08/30/white-house-concerned-eu-tax-penalty-on-apple-may-hit-us-taxpayers.html

White House 'concerned' EU tax penalty on Apple may hit US taxpayers

Reuters
59 minutes ago

The White House said on Tuesday it was concerned about a European Commission order for Apple to pay billions in unpaid taxes to Ireland because it seemed to undermine joint U.S.-EU progress on creating a more fair international tax system.

White House spokesman Josh Earnest said it was possible the EU order for Apple to pay 13 billion euros ($14.5 billion) in back taxes could be unfair to U.S. taxpayers because Apple might be able to claim it in the United States as a tax deduction.

"We are concerned about a unilateral approach ... that threaten to undermine progress that we have made collaboratively with the Europeans to make the international taxation system fair," Earnest told a briefing.

Meanwhile, U.S. Trade Representative Michael Froman will travel to Europe in mid-September to try to push forward a free trade pact with the EU that some European officials have said is all but dead, the White House said on Tuesday.

<>

[moondust]

43. Gee, I wonder

if Apple's army of handsomely paid, highly professional tax evasion attorneys can plead ignorance of the law?