EU Apple Tax

[eytonxav]

Seems to me that EU hitting Apple with back taxes based on what Ireland agreed to with Apple is unfair. If anything, I would think Ireland should be on the hook to the EU, not Apple. With the world economy what it is, this is not a good thing.
Europe hits Apple with $14.6 billion tax bill - Aug. 30, 2016

 

[explanade]

I'm a shareholder.

Ireland signed the treaty to join the EU. Pretty sure they've received aid over the years, in exchange for complying with the various terms imposed by the EU.

Does Ireland have the right to give tax breaks to businesses to encourage them to base their operations there? Up to a point but can they undercut other EU countries in order to make these deals?

One of the advantages in being in the EU is access to the common market, making it easy for Irish citizens and workers to transit to other EU countries. This enhances Ireland's appeal to companies like Apple and others from outside the EU which want to access lucrative markets in the EU.

Ireland has said it will appeal, because they don't want to risk losing Apple's business. Note that the appeal will be within the EU. They're not saying they will leave the EU like Britain.

So it sounds like EU does have the right to require member nations to comply with laws about competitiveness.

Now in the US, states undercut other states with lower taxes or no taxes in many cases. The federal govt. won't intervene because of these special tax deals. But if certain states offered companies special enticements like allowing them to pay below minimum wage or ignore certain environmental or workplace safety rules, then you might have a different story.

 

[eytonxav]

The bill for this retroactive taxation goes back to 2003 and they want interest. Such a lengthy delay to impose this tax seems rather ludicrous to me and again, unfair that Apple alone would have to pay the tab and not Ireland.

 

[Texas Proud]

The bill for this retroactive taxation goes back to 2003 and they want interest. Such a lengthy delay to impose this tax seems rather ludicrous to me and again, unfair that Apple alone would have to pay the tab and not Ireland.

Have not idea since today is the first I saw anything about this... and still am pretty ignorant on the facts... but, the talking heads on CNBC were saying that Apple has been in discussion for years... so it is not like it is a big surprise to them...

Let's take a look at it if it were a US federal tax... you have the option of paying the tax and suing to get it back... that stops all interest and penalties... but, you also have the option of fighting it and not paying... but interest and penalties continue to accrue... I wonder if Apple had this option....

 

[gerntz]

So the EU wants Apple's taxes versus the US ultimately getting them. Amusing.

 

[Fermion]

This is not just Apple. Microsoft has a large (5000 ppl) headquarters in Ireland (my wife did a three month stint there) and would definitely move their operations out of Ireland if the tax benefit evaporates (evidently it is quite a pain to operate in Ireland aside from the tax benefit).

 

[marko]

I'm pretty sure that the UK has a tax rate structure that's similar to Ireland.

If so, with the UK leaving the EU, Brittain could be the big winner as companies might move their tax base to the UK once they fully depart.

As I've mentioned many times here, big money has options.

 

[Totoro]

Just posting to clear some (potential) confusion: As a member state of the EU you are not allowed to give selective tax advantages to specific companies. Such agreements are unenforceable.

There are specific subsidies and incentives you can give as far as I know (e.g. to keep a steel-dependent area employed), but they need to be cleared with the EU first and based on economic necessity.

Reason being that said deals are considered to create an uneven playing field for those companies that do not get it, especially SMEs.

So Ireland can set the tax rate wherever they want it to be, as long as it's equally applied to all companies. No issue there.

If a country violates said rules in a specific arrangement, they are obliged to correct the situation and the specific tax deal is null and void under EU rules. So Ireland is forced to collect the tax as if the agreement doesn't exist. They didn't have the right the offer the deal, so they have to collect. They made a promise they weren't legally able to make. At least that's what the judge seems to have said.

Apple and Ireland aren't the first and only by the way. Starbucks, Fiat, Amazon, a specific Belgian regime applying to several multinationals are also targeted.

 

[gerntz]

I'm pretty sure that the UK has a tax rate structure that's similar to Ireland.

I'm pretty sure you're wrong till you provide data showing this. Apple picked Ireland for its low tax rate.

 

[Meadbh]

I'm pretty sure you're wrong till you provide data showing this. Apple picked Ireland for its low tax rate.

Well, yes and no. You are correct in stating that Ireland and the UK do not have similar tax regimes.

Apple established operations in Ireland in 1980.

Timeline: A history of Apple in Cork

At that time, corporate tax was 32%. Low corporate taxes were not introduced till the late 1990s.

"In the 1998 Budget (in December 1997) Finance Minister, Charlie McCreevy[citation needed]introduced the legislation for a new regime of corporation tax that led to the introduction of the 12.5% rate of corporation tax for trading income from 1 January 2003. The legislation was contained in section 71 of the Finance Act 1999 and provided for a phased introduction of the 12.5% rate from 32% for the financial year 1998 to 12.5% commencing from 1 January 2003."

https://en.m.wikipedia.org/wiki/Corporation_tax_in_the_Republic_of_Ireland

 

[marko]

I'm pretty sure you're wrong till you provide data showing this. Apple picked Ireland for its low tax rate.

Heard it on TV, that's why I qualified with "pretty sure" and "similar".

My point was that the UK could reap benefits by being out of the EU coupled to lower taxes than the US.

Not interested enough to dig up data.

 

[Meadbh]

I'm pretty sure that the UK has a tax rate structure that's similar to Ireland.

I'm afraid you are mistaken. Let me Google that for you (two clicks each):

The UK:
https://www.gov.uk/government/publications/corporation-tax-main-rate

Ireland:
Corporation Tax

 

[eytonxav]

As Meadbh indicated, Apple has had operations in Ireland dating back to 1980 and has enjoyed favorable tax treatment since then. I can't find the reference, but I thought I read somewhere that Apple was given another tax concession in 1991 which kept its tax rate in the single digits. Its interesting that the EU was formed in 1993, so much of this was retroactive to the EU.

Any how, this whole mess is bigger than Apple, and while it will take years to resolve, I suspect it potentially could bode badly for the EU with both the companies getting hit pulling jobs and even additional countries leaving if they dig in.

 

[marko]

I'm afraid you are mistaken. Let me Google that for you (two clicks each):

The UK:
https://www.gov.uk/government/publications/corporation-tax-main-rate

Ireland:
Corporation Tax

Much appreciated.

My main point was that once the UK secedes from the EU, as an English speaking nation literally next door to Ireland, they'd be well positioned to accept companies seeking taxes lower than the US, which I suspect would/should be viewed as a positive for them.

 

[BeachOrCity]

Whats most interesting to me is this "race to the bottom" where various countries (and their "customers": big companies), vie to see who can give the companies the best tax deal. The countries that dont play along lose out.

Since so much of the economy (and cost of goods) these days is based on the 'value' of the intellectual capital within said goods, companies are able to play games with this valuation and pay lower taxes. Example: where is apples intellectual property primarily generated? Answer: california! But somehow they play the tax laws and tax treaties to make it like the profit from all the work being done in california is actually overseas not in the usa. Thus they pay the lower foreign tax rate.

Ultimately it is the individuals, globally, who have to pay for this as by the companies having lower rates necessitates individuals having higher rates.

Sad.

 

[Texas Proud]

Much appreciated.

My main point was that once the UK secedes from the EU, as an English speaking nation literally next door to Ireland, they'd be well positioned to accept companies seeking taxes lower than the US, which I suspect would/should be viewed as a positive for them.

There are other factors when it comes to location... cost of employees, cost of facilities, taxes on other purchases etc. etc.


One of the things that really surprised me when I worked in London was the cost of real estate... the annual cost per sq ft of space in Texas (and in most all states and even NYC) was the monthly cost for London... there was one building that was allocated at $450 per month to the divisions in mega...

The company also have to pay VAT taxes on everything... and the cost of employees are maybe twice as high in London as the rest of the UK...

Maybe there will be some movement, but it also matters what final agreement the UK and the EU ends up with...

 

[explanade]

Brexit people think they can cherry pick the best benefits which come with EU membership, such as access to the single market and pas sporting for the City of London but get rid of the things they don't like, like emigration of workers from Poland and other poorer EU countries.

Basically have their cake and eat it.

Why would the EU agree to such a deal?

 

[gerntz]

Whats most interesting to me is this "race to the bottom" where various countries (and their "customers": big companies), vie to see who can give the companies the best tax deal. The countries that dont play along lose out.

Which is why "race to the bottom" is good for companies; i.e., their owners/shareholders.

 

[gerntz]

Ultimately it is the individuals, globally, who have to pay for this as by the companies having lower rates necessitates individuals having higher rates.

Sad.

That's an opinion not supported with data. And I for one don't accept without data.

 

[Meadbh]

My main point was that once the UK secedes from the EU, as an English speaking nation literally next door to Ireland, they'd be well positioned to accept companies seeking taxes lower than the US, which I suspect would/should be viewed as a positive for them.

Yes, but the attractiveness of the UK as a place to set up shop will be reduced if companies (a) do not have easy access to European markets and (b) cannot access European labour. There is evidence that this is already taking place. A friend of mine has a son who works in finance in London. The day after the Brexit vote, a $100 million M&A deal he was working on was cancelled. London financial institutions may partly decamp to Paris, Frankfurt or Dublin in order to continue to freely access the EU.

Brexit is already affecting small businesses.

https://www.ft.com/content/c5782176-436d-11e6-b22f-79eb4891c97d

Theresa May is under pressure from the EU to hurry up and leave. They have made it clear that Britain cannot have its cake and eat it. And there are no guarantees that the US or Japan will prioritize the UK as a trading partner.

http://www.theguardian.com/world/20...k-economy-after-brexit?CMP=Share_iOSApp_Other

 

[Texas Proud]

I think we are getting a bit far afield from the Apple tax issue... but hey, I might as well do it also...


I think it silly that the US and Japan are talking about the negatives of Brexit... it is not like everybody is going to stop trading with one of the larger economies out there... I do not see the EU saying 'screw you' and not allow the UK to trade... they will more than likely get similar (or at least close) to the same terms as the US or Japan... not free flow of workers etc., but easy enough to get things done...

As for Apple, there are enough stories out there that says the US taxpayer will pay it since they will get a foreign tax credit... but, I bet there are other things involved that these articles are missing... or there is no benefit to being in Ireland in the first place...

 

[Totoro]

I think it silly that the US and Japan are talking about the negatives of Brexit... it is not like everybody is going to stop trading with one of the larger economies out there... I do not see the EU saying 'screw you' and not allow the UK to trade... they will more than likely get similar (or at least close) to the same terms as the US or Japan... not free flow of workers etc., but easy enough to get things done...

Similar to the US and Japan is not enough to avoid major negatives for the UK. It's a.o. about being able to count and operate as a EU country for manufacturing and financial purposes (single EU financial services passport).

If the UK doesn't get that a different country will be chosen as base for European operations.

Japan released a set of "requests" yesterday:
https://www.theguardian.com/world/2016/sep/04/japan-brexit-demands-range-from-possible-to-fanciful

How bad it will be, no idea, and certainly not world ending, but it will hurt.

 

[NW-Bound]

Exactly what taxes was Apple accused of evading? The only thing I have found is on a Bloomberg article, which says Apple booked all profits from EU sales to an Ireland phantom headquarter, which is then levied a tax rate of 0.005%.

The following graphics was released by the EU commission, then republished in Bloomberg article.

See: http://www.bloomberg.com/news/artic...5-billion-eu-tax-ruling-what-you-need-to-know.

 

[Totoro]

Exactly what taxes was Apple accused of evading? The only thing I have found is on a Bloomberg article, which says Apple booked all profits from EU sales to an Ireland phantom headquarter, which is then levied a tax rate of 0.005%.

The way I understand is that Apple didn't evade anything. Ireland wasn't allowed to offer the 0.005% tax rate since it didn't apply the rate to all companies.

So Ireland was in the wrong, not Apple. As a consequence they have to apply the correct tax rate. Illegal contracts cannot be enforced. So Apple's deal is null and void, and they have to pay the 'normal' rate.

 

[theOAP]

The way I understand is that Apple didn't evade anything.

+1

The terminology is important. The EU commissioner has not accused Apple of evading tax, nor has anyone else. The commissioner has accused Ireland of providing a structure which unfairly allows Apple to avoid tax.

The reading of the opinion is important and may require ignoring how it is reported in the media. Does the EU commissioner order Apple to pay the tax, or does the commissioner order Ireland to collect the tax? Big difference,....especially for Ireland.