The European Commission has nailed Apple/Ireland sweetheart deal?

GlennB said:
I wonder why they're doing this now? Seems Cook has been refusing up till now.

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For one thing, he didn't really say how much, so it could just be a trivial amount. The purpose would be to send a signal to other foreign governments who might get ideas about retroactive taxation as a valid way to loot these funds.

Secondly: I think they're joining some other internationals' conclusion that there won't be another repatriation tax holiday, so might as well take the hit now and spend the money where it contribute to growing the business. The money invested overseas is only a competitive ROI because of the tax deferral offsetting opportunity costs. It's operationally rational, but may not be strategically justifiable with Google and Amazon aggressively competing in their core market.
 
GlennB said:
I wonder why they're doing this now? Seems Cook has been refusing up till now.

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That makes eminently sense. The article says they only paid $400mn in 2014 in US corporate tax. If Apple wants to deduct the $14bn the EU now has imposed on them from their US taxes, they'll have to pay that amount to the IRS in the first place.

blutoski said:
Yes, but it will have to be paid eventually. The IRS considers the overseas cash hoarde to represent future revenue, as it will probably be repatriated. If the EU claims a portion of the taxable value, then the US gets less. It diminishes something they consider to be an IRS asset.
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Apart from the EU now forcing Apple's hand, isn't that a bit of a pipe dream? Apple (and many other multinationals) don't stash their loot in a treasure chest on the Caymans in order to then repatriate it a couple of years later and pay the IRS their dues. As Tim Cook says in the Guardian article linked by GlennB:
Until now, Cook had consistently said Apple would not repatriate profits to the US until Washington slashed the US tax rate.
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And probably you can add to that: or until they find another tax loophole to repatriate it without being liable for US corporate tax.

(and sorry I got carried away with a bit of pirate terminology. It is the Caribbean after all).
 
ddt said:
That makes eminently sense. The article says they only paid $400mn in 2014 in US corporate tax. If Apple wants to deduct the $14bn the EU now has imposed on them from their US taxes, they'll have to pay that amount to the IRS in the first place.
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Seems logical, but I admit I was anticipating a 5-year legal battle to see whether Apple would pay those $14B back-taxes.
 
blutoski said:
It sounds like it would give them an 'angle' to deny the expense as foreign taxes, but I doubt they'd be 'fine' with it, because they consider the implications problematic. Firstly, because this is probably not just about Apple, but about any EU branch of a US business - they feel the EU is retroactively assessing taxes, many of which will not be interpretable as 'fines' and the IRS will have to absorb these new transfers.

And secondly, that their ruling that the retroactive taxes are a criminal fine could be overturned by the courts, which means they consider it a chance that this will ultimately be a cost to the US taxpayer. There's about a third of a trillion dollars at stake.
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Of course, Congress could try to rush a "Lex mala" (pun intended) to close this loophole.

One thing about why the IRS would absorb a loss is not clear to me. I thought the Irish profit was only from revenues from sales in the EU, not those in the US, or am I mistaken in that?

blutoski said:
I think the comparison with underreporting is not a great analogy. It's more like you applied for a tax credit that was on the form and the form also said you were entitled to it. Then suddenly, the Dutch Tax Office decides that tax credit on the form should not have existed in the first place, so they slap a fine and retroactive back tax charge on everybody who received it. I feel that would be unfair.

However, that's not really what's happening: What the EU is accusing Apple of is being aware that they were colluding with the Irish government for a series of tax exemptions that both parties must have known were illegal. This is why Apple and Ireland are objecting to the ruling, they are saying the incentives were legal.
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So, the EU's stance is: Apple knew they got an illegal tax exemption, they knowingly violated the law (in this case, European Directives). From the EU's point of view, it would be eminently reasonable to slap a fine on it as well. From their point of view, they could also slap a fine on the Irish Tax Office for violating the law.
 
blutoski said:
The EU is not offering to refund Apple any costs they spent implementing the European facilities that qualified them for the now-denied tax exemptions, or compensate the IRS for lost income tax from jobs transferred overseas. In the meantime, those operations were exported from the US. That was the Americans' main concern: jobs were being bribed overseas, the IRS does not get their income tax.

Now on top of that, while the jobs cannot be retroactively returned to the USA from 1991 onward without a time machine, the EU expects to get the incentives Apple was promised returned to them, by decree, and the IRS takes a hit again.
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What costs exactly?

Apple has 115,000 employees worldwide. Only 3,300 work in Cork in their EMEA HQ and worldwide (= non-USA) sales and distribution center. They would have needed an EMEA HQ anyhow, and for that Ireland would most probably have been the most attractive place even without any tax exemptions. On the grand scale of the company, it isn't many jobs that were possibly bribed overseas.
 
blutoski said:
It benefits countries overseas by encouraging US profits to invest there. This is probably why the EU had to make a tough call... the repatriation delay has encouraged US investment in Europe, so the EU likes it. What the EU doesn't like is a few countries poaching that opportunity from others within the EU by creating special deals that favour one country over another, and are not available to European rivals so favour one company over another.

The EU probably thought long and hard about this, and have come down on the side of risking provoking US tax reform, which will impact all European member states, in order to bring what they feel are some rogue European states back in line with the principle of a unified European economy.
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Yes, and that's one thing I like about the EU: that it can impose solidarity on its member states (yes, that's a deliberate oxymoron :)).

With all the talk about US tax reform, there's another culprit in here: Irish tax law. That allows to incorporate a company in Ireland and then say: no, it's not resident in Ireland but in the Caymans, so we don't pay Irish tax on it. That is, as I understand it, an essential precondition for the "Double Irish arrangement" to work.
 
ddt said:
Yes, and that's one thing I like about the EU: that it can impose solidarity on its member states (yes, that's a deliberate oxymoron :)).

With all the talk about US tax reform, there's another culprit in here: Irish tax law. That allows to incorporate a company in Ireland and then say: no, it's not resident in Ireland but in the Caymans, so we don't pay Irish tax on it. That is, as I understand it, an essential precondition for the "Double Irish arrangement" to work.
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The double Irish was abolished two years ago.
 
ddt said:
Thank you setting me straight. Wiki says it will be abolished for existing cases in 2020.
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In your defense, it's related to this Apple ruling, as Apple is still using this strategy as one of the grandfathered businesses, and was using it during the disputed timeframe.

However, that's not what the EU is saying entitles them to back taxes. Their specific accusation is that Apple received additional special tax incentives from the Irish government that were not available to other companies, which contravenes EU tax law.

Ireland says this is not true, the incentives were available to other businesses of that type and therefore legal, and that is the basis of their appeal.
 
ddt said:
Thank you setting me straight. Wiki says it will be abolished for existing cases in 2020.
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That's correct. Wiki has this to say about the Netherlands...

National and foreign companies known to have special agreements with the Dutch tax service include Starbucks, Microsoft and PostNL. A 2015 FOI request by de Volkskrant to unearth the agreements failed, because these secret agreements are not centrally administered by the Tax and Customs Administration; with even the House of Representatives not having access to them.[11]
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https://en.wikipedia.org/wiki/Corporate_tax_in_the_Netherlands

Apparently the EU commissioner doesn't read Wikipedia. ;)
 
Strawberry said:
That's correct. Wiki has this to say about the Netherlands...

https://en.wikipedia.org/wiki/Corporate_tax_in_the_Netherlands

Apparently the EU commissioner doesn't read Wikipedia. ;)
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She does; as the wiki page also states, the Starbucks case was pursued by the EU Commissioner and handled in the same way as the Apple case (though with a smaller amount). I also mentioned it up-thread, and if you re-read my posts you'll see I explicitly mentioned the NL among the worst offenders in corporate tax issues.

I don't know about the Microsoft deal, but the PostNL deal has been in the news. I'm not sure if it really has a European angle. But the deal is particularly vile. There's a general tendency in the Netherlands that a lot of people get pushed from being an employee to being a subcontractor (as a one-man-company that basically only sells its labor). PostNL has done this with the postmen who deliver the packages. Suddenly they were required to buy their own vans - but with PostNL lettering on the outside - and their own uniforms - also visibly PostNL-styled - and their contracts with PostNL stipulated, IIRC, even that they couldn't work for competitors (e.g., FedEx or DHL). That goes against everything in Dutch law about what entrepreneurship entails, as you can imagine, but the Tax Office agreed with this construction. It saves PostNL on paying pension premiums for those people as well as mandatory sick pay, and they can also skimp on the contractual pay because non-incorporated entrepreneurs get a tax deduction compared to employees.

Of course, when various of these postmen realized they were stiffed, and went public with it, coincidentally the contracts with the complainers were discontinued. But due to the public outrage, PostNL has decided earlier this year to discontinue this scheme; at least, with new hires to hire people as employees and not as subcontractors. There's still various cases pending in court of postmen who were tricked into this scheme and got into debt for their investments and want PostNL to backpay pensions and sick days.

Personally, I think the people at PostNL who thought this out and the people at the Tax Office who signed off on it should be taken behind the shed, but unfortunately, there´s case law from 1998 (Pikmeerarrest, Dutch link) that the government cannot be criminally prosecuted for tasks that are the exclusive domain of the government.
 
^That's terrible, I hope the postmen win their case.

I think Microsoft may have an Irish angle, and also Google who use the Double Irish with the Dutch Sandwich. You'd wonder why the EU commission has only started cracking down on these things now, they've been going on for years.
 
ddt said:
So, the EU's stance is: Apple knew they got an illegal tax exemption, they knowingly violated the law (in this case, European Directives). From the EU's point of view, it would be eminently reasonable to slap a fine on it as well. From their point of view, they could also slap a fine on the Irish Tax Office for violating the law.
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Is it? I could see tax unpaid due to illegal exemptions still being repayable if the exception was taken in good faith, in the same way that stolen goods will be confiscated and returned to their owner even if a third party has purchased them in good faith.
 
P.J. Denyer said:
Is it? I could see tax unpaid due to illegal exemptions still being repayable if the exception was taken in good faith, in the same way that stolen goods will be confiscated and returned to their owner even if a third party has purchased them in good faith.
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It was blutoski's assertion that Apple knew these exemptions were illegal, and I just ran with it. Of course, the Irish Tax Office cannot in any way claim they didn't know the law. I think it would only be justice if the EU slapped a 100% fine on the respective tax offices. They didn't want the tax in the first place, so why let them keep it now?
 
It annoys me that private, corporate entities can set sovereign states to arguing with one anther over which scraps they can have from the multinational table.
 
ddt said:
It was blutoski's assertion that Apple knew these exemptions were illegal, and I just ran with it. Of course, the Irish Tax Office cannot in any way claim they didn't know the law. I think it would only be justice if the EU slapped a 100% fine on the respective tax offices. They didn't want the tax in the first place, so why let them keep it now?
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If they do that, I think Ireland might as well tell the EU to go and sing for their bank debt and leave the EU altogether. In the last few years we've had 42% of the EU's bank debt loaded on to the Irish tax payer, the imposition of water charges which we were already paying for through general taxation, and now it seems an EU commissioner is risking all the US investment in our economy to boot. If we're not even going to get the 13 billion she says they should have paid after all that, the EU can sod off.
 
Strawberry said:
^That's terrible, I hope the postmen win their case.
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Yep.

Strawberry said:
I think Microsoft may have an Irish angle, and also Google who use the Double Irish with the Dutch Sandwich. You'd wonder why the EU commission has only started cracking down on these things now, they've been going on for years.
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Just a wild guess. It's only been under Monti and Smit-Kroes that the DG Competition became a toothed tiger that was able to effectively take on companies and bust cartels. Now that they've established their reputation, it's time to take on the next bigger thing - collusion between companies and member states. Going against (multinational) companies is one thing; going against member states is another thing. Just look at your own personal reaction below and the reaction of the Irish government. And keep in mind, this investigation against Apple was already started under the previous Commissioner, a couple of years ago.

Strawberry said:
If they do that, I think Ireland might as well tell the EU to go and sing for their bank debt and leave the EU altogether. In the last few years we've had 42% of the EU's bank debt loaded on to the Irish tax payer, the imposition of water charges which we were already paying for through general taxation, and now it seems an EU commissioner is risking all the US investment in our economy to boot. If we're not even going to get the 13 billion she says they should have paid after all that, the EU can sod off.
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I doubt this is going to risk the US investment in the Irish economy. Even without special perks to those companies
(1) Ireland has the lowest regular corporate tax rate in the EU;
(2) Ireland has a population that is native English speaking. That's still a considerable advantage over countries like NL or Sweden where the natives have a good working knowledge of English;
(3) A company like Apple doesn't just move a European HQ with 3,000 employees to another country,
 
ddt said:
Yep.


Just a wild guess. It's only been under Monti and Smit-Kroes that the DG Competition became a toothed tiger that was able to effectively take on companies and bust cartels. Now that they've established their reputation, it's time to take on the next bigger thing - collusion between companies and member states. Going against (multinational) companies is one thing; going against member states is another thing. Just look at your own personal reaction below and the reaction of the Irish government. And keep in mind, this investigation against Apple was already started under the previous Commissioner, a couple of years ago.


I doubt this is going to risk the US investment in the Irish economy. Even without special perks to those companies
(1) Ireland has the lowest regular corporate tax rate in the EU;
(2) Ireland has a population that is native English speaking. That's still a considerable advantage over countries like NL or Sweden where the natives have a good working knowledge of English;
(3) A company like Apple doesn't just move a European HQ with 3,000 employees to another country,
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Apple won't go anywhere, but it will very likely damage our ability to attract US investment - not because of inability to give special deals but because they're being told by the EU Commission that they can't trust the advice given to them by the Irish government on Irish tax law. They could be hit with a multi billion dollar bill a few years down the line after being assured by everybody in Ireland that they were paying the right amount.

If, after causing that damage to the Irish economy, on top of the bank bailout and the water charges, the EU then take the money off us then we should leave. Its beginning to feel more like the EU is exploiting us like a colony instead of treating us like a member state.
 
Strawberry said:
Apple won't go anywhere
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I think it depends on how true the EU's allegations are. If this is not a 'real HQ' then shuttering it once the tax benefits evaporate would be swift on Apple's part.


Strawberry said:
, but it will very likely damage our ability to attract US investment - not because of inability to give special deals but because they're being told by the EU Commission that they can't trust the advice given to them by the Irish government on Irish tax law. They could be hit with a multi billion dollar bill a few years down the line after being assured by everybody in Ireland that they were paying the right amount.
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This is what the EU was probably weighing, yes... not just Ireland, but did the EU want to telegraph this risk to potential global investors looking at European opportunities. Because it's not "a few years down the line" - the EU is saying this goes back a quarter century. That's a retroactive tax recovery spanning a generation's timeframe. If I was considering investing in Europe, that would give me pause.



Strawberry said:
If, after causing that damage to the Irish economy, on top of the bank bailout and the water charges, the EU then take the money off us then we should leave. Its beginning to feel more like the EU is exploiting us like a colony instead of treating us like a member state.
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Well, in this specific ruling, I think if Ireland actually violated their membership terms, it's not exactly colonialism, since they agreed to them when they applied for membership. We'll have to see how the appeal works out.
 
blutoski said:
I think it depends on how true the EU's allegations are. If this is not a 'real HQ' then shuttering it once the tax benefits evaporate would be swift on Apple's part.
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Apple has a real HQ in Cork which employs 5,500 people mostly in finance, marketing and tech support for the entire EU, and they've also bought up property in Galway with a view to expanding. Apple isn't a shell company in Ireland, it has its real European headquarters here. The fictional "headquarters" which existed on paper only is, according to Apple, where they store their revenue waiting to be repatriatred to the US.


This is what the EU was probably weighing, yes... not just Ireland, but did the EU want to telegraph this risk to potential global investors looking at European opportunities. Because it's not "a few years down the line" - the EU is saying this goes back a quarter century. That's a retroactive tax recovery spanning a generation's timeframe. If I was considering investing in Europe, that would give me pause.
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Exactly.

Well, in this specific ruling, I think if Ireland actually violated their membership terms, it's not exactly colonialism, since they agreed to them when they applied for membership. We'll have to see how the appeal works out.
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Its colonialism to impose nearly half the EU's bank debts on the Irish, impose water charges that we're already paying for, and then if it turns out the Irish tax payer has actually been cheated by some dodgy deal with Apple they take the money off us. Who do they think has been paying for all this austerity in terms of increased taxation and depleted public services all these years?

As for own shower of gombeens in government, they're just lucky we haven't started building a guillotine. Yet.
 
Strawberry said:
Apple won't go anywhere, but it will very likely damage our ability to attract US investment - not because of inability to give special deals but because they're being told by the EU Commission that they can't trust the advice given to them by the Irish government on Irish tax law. They could be hit with a multi billion dollar bill a few years down the line after being assured by everybody in Ireland that they were paying the right amount.
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This is a bit of exaggeration, IMHO.

It's not like Apple respectfully asked an opinion of the Irish tax office with "is this legal and how much do we have to pay in taxes then?" No, it's more like Apple played hard-ball and said "Look guys, if we bring a couple of thousand jobs to your country, how much tax rebate do you give us? If your offer is not good enough, we'll look at your neighbours". They got a special deal and they very well know it; and every US company knows that.

Strawberry said:
If, after causing that damage to the Irish economy, on top of the bank bailout and the water charges, the EU then take the money off us then we should leave. Its beginning to feel more like the EU is exploiting us like a colony instead of treating us like a member state.
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It's not like the EU lets you deliberately starve while there's food in the harbour, like that real colonial power once did.

blutoski said:
I think it depends on how true the EU's allegations are. If this is not a 'real HQ' then shuttering it once the tax benefits evaporate would be swift on Apple's part.
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As far as I can see, the "HQ" which allows Apple to stash all their profits in the Caymans is fake, but the EMEA HQ and distribution center with its 3,300 employees is very real. And that is not going anywhere. They'll need such a regional HQ somewhere in Europe, and everywhere else (except Bulgaria) has higher corporate tax rates.
 
It's not like the EU lets you deliberately starve while there's food in the harbour, like that real colonial power once did.
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No, they're just demanding that an already beleaguered population pays through the nose for water in a country where water falls on our heads uninvited 365 days a year. Anybody would think Ireland was the Sahara desert the amount they're trying to charge us.
 
Strawberry said:
No, they're just demanding that an already beleaguered population pays through the nose for water in a country where water falls on our heads uninvited 365 days a year. Anybody would think Ireland was the Sahara desert the amount they're trying to charge us.
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Maybe they should up their corporate tax rate, that'd collect more revenue.
 
Strawberry said:
Which Ireland already does.
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'Does' perhaps and, technically, 'did' too. But when, in one year, all they got was 0.005% of applicable Apple profits in corporation tax it seems they weren't asking for very much, were they?
 
GlennB said:
'Does' perhaps and, technically, 'did' too. But when, in one year, all they got was 0.005% of applicable Apple profits in corporation tax it seems they weren't asking for very much, were they?
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The profits attributable to Apple Ireland were taxed at 12.5% the same as any other company operating in Ireland. The 0.005% figure that's being bandied around is reached by attributing all the profits for the HQ that only existed on paper to Ireland. That's rubbish, and even the EU commission knows it rubbish because if they really thought those profits should have all been taxed in Ireland they wouldn't be openly inviting other countries to queue up and take a share of it.
 
Strawberry said:
The profits attributable to Apple Ireland were taxed at 12.5% the same as any other company operating in Ireland. The 0.005% figure that's being bandied around is reached by attributing all the profits for the HQ that only existed on paper to Ireland.
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According to the Guardian article in the OP:
The world’s largest company was presented with the huge bill after the European commission ruled that a sweetheart tax deal between Apple and the Irish tax authorities amounted to illegal state aid.

The commission said the deal allowed Apple to pay a maximum tax rate of just 1%. In 2014, the tech firm paid tax at just 0.005%. The usual rate of corporation tax in Ireland is 12.5%.
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A maximum tax rate of 1% is not the same as the usual 12.5% that the rubes pay. And those "rubes" include also most Irish companies that provide Ireland with a couple of thousands jobs each, but don't pull tax shenanigans.

Strawberry said:
That's rubbish, and even the EU commission knows it rubbish because if they really thought those profits should have all been taxed in Ireland they wouldn't be openly inviting other countries to queue up and take a share of it.
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??? What do you mean by the latter?
 
GlennB said:
Summary, The Guardian. $13B is due, subject to 'terms and conditions'

Well, paying 0.005% of profits of Apple Sales International and Apple Operations Europe in tax (2014) - all funneled through a non-existent Irish 'head office' - does seem a little extreme, when Ireland's standard corporation tax rate is 12.5%

Ireland, predictably, trotted out the usual mantra of "They paid all tax legally due", but the EC is saying the deal was illegal all along and back taxes are due.

I imagine there will be a 5-year legal battle and a much reduced bill.
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Apple is threatening to stop investing in Ireland. [emoji3]
 
blutoski said:
For one thing, he didn't really say how much, so it could just be a trivial amount. The purpose would be to send a signal to other foreign governments who might get ideas about retroactive taxation as a valid way to loot these funds.

Secondly: I think they're joining some other internationals' conclusion that there won't be another repatriation tax holiday, so might as well take the hit now and spend the money where it contribute to growing the business. The money invested overseas is only a competitive ROI because of the tax deferral offsetting opportunity costs. It's operationally rational, but may not be strategically justifiable with Google and Amazon aggressively competing in their core market.
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Corporate tax is more or less 35% in USA IIRC, so yeah i doubt that this will signal companies to dump the 12.5% and instead chose the 35%.
 
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Ireland would be wise to leave the EU. National governments should be able to control their own tax affairs in keeping with the wishes of their voters.

This is just another example of the Commission interfering.
 
ddt said:
According to the Guardian article in the OP:

A maximum tax rate of 1% is not the same as the usual 12.5% that the rubes pay. And those "rubes" include also most Irish companies that provide Ireland with a couple of thousands jobs each, but don't pull tax shenanigans.


??? What do you mean by the latter?
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The Guardian has simply repeated the EU commission's mistake of attributing all the profits to Apple Ireland including profits that were supposedly waiting to be repatriated to the US. Apple and the Irish government say differently....

http://www.independent.ie/business/irish/apple-and-ireland-against-the-world-35018709.html



The commissioner invited other EU countries to apply for a share of the 13 billion for sales of Apple products that were made in their countries.
 
Airfix said:
Ireland would be wise to leave the EU. National governments should be able to control their own tax affairs in keeping with the wishes of their voters.

This is just another example of the Commission interfering.
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Government are allowed to control their tax, in fact this is whay Ireland has the lowest corporate tax of EU and EU is not asking them to increase.

What they are not allowed to , is break their own rule and make special dumping case for some corporation.

I get the feeling you are anti EU no matter what no matter the reason no matter the fact that Ireland is in the wrong.
 
The Great Zaganza said:
and what "investment" would that be?
given the size of Apple, the Ireland office is little more than a lettterbox-office.
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Apple employs 6000 people in Ireland and is currently expanding their offices into Galway where they plan to recruit approximately 1000 more. That's not a letter box office.
 
Strawberry said:
The Guardian has simply repeated the EU commission's mistake of attributing all the profits to Apple Ireland including profits that were supposedly waiting to be repatriated to the US. Apple and the Irish government say differently....

http://www.independent.ie/business/irish/apple-and-ireland-against-the-world-35018709.html



The commissioner invited other EU countries to apply for a share of the 13 billion for sales of Apple products that were made in their countries.
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Apple never rapatried any profit in the last 10 years. The EU made no mistake. .
 
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