
The Story of Apple's $14B Tax Bill - antimuon
https://www.bloomberg.com/news/articles/2016-12-16/the-inside-story-of-apple-s-14-billion-tax-bill
======
sandstrom
It's good that multinationals are forced to pay taxes. Otherwise they get an
unfair advantage over small companies (since only large ones can afford to pay
lawyers and accountants to help them cheat on taxes).

A common scheme is that companies pretend to have 0 profit in a market (using
various tricks) and then argue they shouldn't pay any tax on their profit in
said country, because they don't have any profit there.

But it doesn't make any sense. If Apple actually made 0 profit in Europe for
the past 10 years, it wouldn't stick around. But they have opened hundreds of
new stores and hired scores of people. Everyone know they make boatloads of
money in Europe (just as everywhere else). Of course they should pay taxes on
this profit.

~~~
muninn_
Nah it's not really good. We need to just tax rich people if that's what we're
going to do. Taxing a corporation takes operating money away from that
corporation to spend on other things. Normally this is where people say
"they'll just enrich their shareholders", to which I reply, then tax rich
people.

~~~
paulddraper
> Taxing a corporation takes operating money away from that corporation to
> spend on other things.

(1) Does that mean rich people should incorporate?

(2) Taxing a rich person takes operating money away from that rich person to
spend on other things.

[https://en.wikipedia.org/wiki/Luxury_tax#Luxury_tax_in_the_U...](https://en.wikipedia.org/wiki/Luxury_tax#Luxury_tax_in_the_United_States)

Rich people were taxed, the industries that depended on them suffered (I'm
from Florida, and yacht manufacturing industry alone laid off tens of
thousands in the state).

\---

Your distinction is arbitrary (especially considering point #1).

~~~
muninn_
(1) Nonsense. (2) Trickle down economics doesn't work.

I would also like to add that a luxury tax is very different than taxing rich
people. I am not a fan of luxury tax at all.

~~~
paulddraper
> Trickle down economics doesn't work.

Trickle up economics (is that what you call a luxury tax?) doesn't work.

> August 1993, the Congress decided to eliminate the “luxury tax” since it did
> not achieve its main objective...According to the tax's critics, these
> revenues were disappointing and unsatisfactory and also negatively impacted
> the incomes of the sellers of the luxury items.

~~~
muninn_
Yes the luxury tax is foolish. I Made that comment

------
wav-part
> _Though Apple will have to pay its tax bill within weeks, the money will be
> held in escrow, and the issue will probably take years to be resolved._

Am I the only one outraged by this ? There is no guarntee your money is safe.
You hire tax advisors. You go as far as to get confirmation from Finance
Minister. Its apparently not enough. This level of legal uncertainity is just
insane.

~~~
Whitestrake
Outrage is perhaps not the right term.

It's important to keep in mind that Apple, being a business, is doing exactly
what the primary function of a business is - making money. Reducing tax burden
is effectively making money they otherwise wouldn't have.

So while as a consumer and citizen I'm happy that Apple is being held to
account, I agree with your concern that not even Apple, having gone to such
lengths to ensure that such an approach is ostensibly a legal and legitimate
method of doing business, can effectively have the authority turn around and
say "We change our mind, you owe us fourteen billion dollars." It creates much
uncertainty in the legal and administrative processes.

I would prefer to see them simply close the hole for future endeavours.

------
bcheung
> I can’t see why the tax liability is in Ireland.

Because it's cheaper. Duh.

If a company charges too much people don't buy their products and go to a
competitor. Likewise if a government charges too much tax businesses change
their tax nexus to somewhere else.

It's unreasonable to expect a business to operate against its own self-
interest. Any system that requires it is bound to fail.

Governments must design their tax systems to be competitive if they want
revenue.

Arguing that companies should opt to pay more in taxes is like arguing that
consumers should buy a product that costs more. It makes no sense. It's the
reason why Walmart exists and why people don't buy local. It's a matter of
practicality.

You can make all the moral arguments you want but the facts are that people
and companies are going to act in their own self-interest. Until we can be
frank and accept this as fact, we can't design moral, legal, and tax systems
that work effectively.

~~~
sandstrom
Yes, companies will act in their own self-interest. No-one is denying that.

The issue here is that a small hardware startup competing with Apple cannot
use shady tax-dodging techniques. Thus they are at a disadvantage.

> Likewise if a government charges too much tax businesses change their tax
> nexus to somewhere else.

Apple still want access to European customers. So it's fair that they follow
the European law. It would be fair if Apple ceased selling in Europe and also
didn't pay taxes there. But they don't want to leave the worlds second largest
economy.

~~~
bcheung
What law are they breaking and what would be a fair solution that works for
all parties?

~~~
lhc-
There's a whole article above about what laws were not followed and a solution
that works for both parties: Apple pays the taxes it owes. If it is unhappy
with that burden, it can leave Ireland and the EU, but I suspect that will not
happen.

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ooqr
I don't think it's fair for Apple to evade taxes even if it's legal. I don't
think it's fair for the EU to claim those taxes from an American company. But
I also don't want the taxes to go to a Trump administration, just to be blown
on a wall.

What am I supposed to feel?

~~~
edblarney
1)

'Tax evasion' is illegal - it implies you're doing something like hiding money
offshore, and not declaring it.

Apple is doing nothing more than not paying the taxes they are not supposed
to.

If you claim your 'moving expenses' on your tax form, are you 'evading taxes'?
No - you're just playing by the rules.

Apple basically played by the rules. Nothing they did was illegal until the EU
change their laws 25 years retroactively.

2)

Europe definitely has a right to tax business activity in Europe.

3)

The US does have a right to also tax business overseas, but it needs to be
reasonable. Today, the laws are whack and US companies are double-taxed. If
they weren't all that money would be coming back.

Your comment about Trump are unfortunate, I don't like him either, but he was
elected. Also, the bureaucracy has not changed.

But consider this: Trump is actually going to change the repatriation laws,
and you'll likely see a Trillion dollars parked overseas come back to the US.
A good chunk of it will go to investors as dividends, but still, even that
money will circulate back into the economy, and that's not all of it.

It's surprising Obama did not do this - if he made repatriation laws
consistent with the rest of the world ... it could have been a big bump to the
economy when the US needed it the most.

Edit: to be clear (thanks to Marzan, below) 'double-taxation' is not quite the
appropriate term, as US companies are given credit for taxes overseas.

~~~
Marazan
US companies are not double taxed. Any corporation tax they pay in a foreign
jurasdicuon is deducted from their us tax bill.

~~~
ChrisBland
I think OP is referring to places that have tax % lower than the US. Say
Country A had a rate of 10%, you get the deduction of the 10% but you still
owe 25% more due to the US 35% tax rate when you repatriate the $.

~~~
amitdeshwar
How is that "double taxation"?

------
edblarney
This is 100% the fault of EU and American legislators.

Apple was mostly only doing what's reasonable (aside from, I think a 'special
tax deal' \- which is unfair).

The EU makes the rules. They created the gaping loophole.

Then they decide they want to 'change the law retroactively 25 years back' [1]
- this is gong-show Chavista banana republic type property theft. Apple should
sue them aggressively.

What should have happened:

A) The EU should have closed the loophole, long ago, and set some
harmonization rules. When the closed the loophole, it should not have been
retroactive.

B) American leegislators are at fault as well. Why? Because insane US tax laws
prevents US companies from just bringing the money home.

Two problems:

    
    
      i) Corp tax rates are too high in the US 35%
    

Because of this, there's a lot of loopholes in the US tax code, instead, they
should close them and just reduce the tax rate to be consistent with the
international averages

    
    
      ii) US 'double taxes' foreign profits. A US company that pays 25% corp tax in France, brings the money back - is hit with another 35% tax. US is the only country that does that. Everywhere else, they pay a repatriation fee. The US system is basically designed as though the rest of the world does not exist. US should have a repatriation fee - it can even be commensurate with level of taxes paid in country of origin to be smart about it.
    

Large US companies are not really 'American' \- they often have the majority
of their staff, majority of sales, possibly majority shareholders overseas. So
we need to grasp this new world order.

The only thing really sneaky that Apple did was pressure the Irish to give
them a special deal, but it's still legal, and rational.

The EU is a terrible organization, they're incompetent, ideological, and they
work against us as often as they work for us.

If there 'was a problem' with Apple's taxes, it was 100% their own fault -
Apple was just following the law.

You can't change laws and have them apply retroactively for 1/4 century, it's
totalitarian.

To be clear: I don't think that Apple should have been given a special deal,
but it's not their fault for trying, or for having been given it.

It's quite common: Ontario just gave a huge subsidy to Cisco to open an office
in Toronto. It could have very well been in the form of tax subsidy. EU
massively subsidizes Airbus. Auto manufacturing incentives etc. etc. it's all
common. Agree or not with them, but they're not nefarious.

[1] [http://europa.eu/rapid/press-
release_IP-16-2923_en.htm](http://europa.eu/rapid/press-
release_IP-16-2923_en.htm)

"Following an in-depth state aid investigation launched in June 2014, 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"

~~~
uiri
_The only thing really sneaky that Apple did was pressure the Irish to give
them a special deal, but it 's still legal, and rational._

If Apple did get a sweetheart deal, that _is_ illegal under EU rules. That is
what the whole dispute is about. But I don't think that they got such a deal.
I think that Apple may have forum shopped for the best tax regime in the EU.
Ireland has extremely low corporate tax rates period; no sweetheart deal
required.

~~~
soneil
I don't believe there was any pressure - it's simply the Irish system to
incentivise companies who'd otherwise have no business here.

80% of all corporate tax paid in 2015 came from non-irish businesses. 40% of
all corporate tax paid in 2015 came from 10 companies. Apple are the largest
single taxpayer in Ireland.
([http://www.revenue.ie/en/about/publications/corporation-
tax-...](http://www.revenue.ie/en/about/publications/corporation-tax-
receipts-2014-2015.pdf))

So the Irish strategy is to be nice to multi-nationals, in return for that
80%. The understanding is that if we taxed more, they'd move somewhere else
and we'd actually receive less. e.g., biting the hand that feeds you.

(This is also why the Irish govt are going to defend Apple in this - this
isn't just about Apple for them, it's about scaring off 80% of corporate
revenues)

~~~
lhc-
Consider the pressure / race to the bottom this puts on the rest of the EU
though. The EU has an incentive to try to keep things fair between the states
(disallowing sweetheart deals to lure companies away from other members),
because this sort of competition is harmful to the EU as a whole. It's not
like Apple is going to stop selling to Europe; they'll be somewhere if not
Ireland, and the EU benefits as a whole if Apple is not allowed to skip out on
paying its share.

~~~
soneil
The problem is, no-one's offered a sane alternative.

The top employment sectors in Ireland are Food&Drink, Pharma, and Tech. The
latter two of those are massively dominated by multinationals. Combine that
with multinationals contributing the bulk of corporate taxes, and we simply
can't afford to scare them away. Without these MNCs, Ireland's economy would
be basically beef, beer, and American tourists. There simply isn't enough
native industry to make up the short-fall (which is the part I think should
actually be addressed, rather than the symptoms).

(And away they will - Ireland is not the lowest corporate tax rate in the EU.
Liechtenstein and Cyprus have the same rate, and 3 more states have a lower
rate.)

I do understand the desire for a level playing field. It's a noble goal. But
we're basically being told "We'd like you to drive your economy back to the
1950s, because France feels it'd be more fair". It's not a particularly
enticing proposal - all stick and no carrot.

Ironically, they're championing our post-bailout growth as a success, while
they retroactively make the mechanisms behind it illegal.

------
module0000
Or, the IRS could butt out, and stop shaking down businesses that manage to
turn a profit without one bit of government assistance.

Would that be so bad? I mean, obviously we'd have to find some other way to
fund our wars, state surveillance, and other "think of the children" endeavors
- but at least "tax lawyers" would finally be _out of a job_ ; the final
solution.

~~~
elastic_church
yeah this article has nothing to do with the IRS or the United States. The IRS
isn't raising any issue at all. They're pretty cool with it.

