
Commission says Ireland granted undue tax benefits of up to €13B to Apple - Oletros
http://www.rte.ie/news/2016/0830/812819-apple-tax-ireland/
======
shaqbert
What Apple, Amazon, Google, Microsoft, and most other big US company do is the
so called "double Irish"[1]. Essentially is a clever way of using two quirks
of some EU countries loopholes in tax laws, from treating IP licensing fees
(of course the brand and intellectual IP is owned by a British virgin island
tax haven, where else could this stuff be created/invented), and the net
result is that Apple et al end up paying single digit cents on the dollar in
EU profits.

And with another quirk - this time in US tax laws - the do not even have to
pay taxed in the US on those earnings, as they have not repatriated the funds.

How to pay dividends/fund buybacks, without repatriating those funds? Easy:
Just issue debt (which your own subsidiary in the British Virgin islands
making a killing on IP licensing might want to buy) or have your BVI IP trust
fund buy those shares.

Now why would other EU countries let Ireland and the Netherlands get away with
these accepted loopholes is a mystery to me, especially since Ireland had to
ask for a bailout lifeline, and was in no position to negotiate firmly.

Why the US would allow their truffle pigs to not pay taxes on oversea earnings
is clearly the result of expert lobbying.

[1]:
[https://en.wikipedia.org/wiki/Double_Irish_arrangement](https://en.wikipedia.org/wiki/Double_Irish_arrangement)

~~~
doctorpangloss
> the result of expert lobbying.

You don't need expert lobbying. Look at this forum, full of tax-evasion
apologists who conflate pragmatism with pedantry.

Pedantry is the one of the most intellectually and emotionally bankrupt moral
frameworks. It basically states that if you just think about the rules a lot,
then you will find the solution.

I mean, obviously all these politicians and normal people, they've just been
getting it wrong all along! To quote other commenters, "Apple did nothing
illegal!" The "Tax law is a system of rules!" Just look more carefully at
those random tiny rules and then, we don't have to have a discussion anymore!
People who don't read the rules carefully enough: "it makes my brain hurt!"
Then blame the people who write the rules, or petition for the rules.

Pedantry is the disease, not lobbyists.

I don't know how to convince the pedants though that sometimes, it's ethical
to reinterpret the rules.

To clarify, I think we should be asking whether or not what Apple does is
ethical. And the answer to that question shouldn't depend on whether or not
we're wondering the same about other corporations.

The answer is obviously no, tax evasion / avoidance isn't ethical.

~~~
haneefmubarak
What exactly are the point of rules if you can reinterpret them in your favor
as you see fit? It would be perfectly reasonable to rewrite rules going
forward, but to retroactively change what the law says invalidates the point
of having laws to begin with.

~~~
sgift
There is no reinterpretation going on here. Apple never asked the EU. Apple
went to Ireland "hey, guys, do you think it is okay to do this?" .. Ireland
said yes, but Ireland has no authority here. The EU, which has authority,
checked it and said "nope, your interpretation is wrong." \- Simple as that.

If I ask someone on the street if its okay to steal from the rich, he says
"yes" and I steal from the rich, no one would bat an eye if the courts didn't
agree with my "interpretation" of the law and put me behind bars. And no one
would accept it as a legal defense if I said "but hey, that guy over there
said it is okay to do this!" \- why should it be different for companies?

~~~
johnnyhillbilly
Ireland does have the authority, but:

1\. They have applied their own laws in a way that amounts to subsidies, and

2\. The corporate structure turned out to be fictional, and allocations of
profits were therefore also fictional. ("Arm's length" and all that.)

They even open the door for national tax authorities to use their findings and
evaluate for profit shifting.

This is an inspirational moment - too long have tax treaties favoured those
willing to break the spirit of the law and weigh down the little man with the
consequences!

------
noir-york
Apple engage(ds) in aggressive tax planning - and they, along with FBK,
Google, etc - deserve to be smacked down with a heavy bill.

An effective tax rate of 0.005% - when your next door business neighbour is
paying 20% - is morally wrong and damaging to society and the common good.

~~~
madeofpalk
Morals are irrelevant in this story.

Tax law is a system of rules. There should be no second arbitrary standard
people (and companies) should be expected to follow.

~~~
cryoshon
>Morals are irrelevant in this story.

ah, the capitalist angle. unfortunately, the consequences of acting this way
are poor for the rest of society.

~~~
madeofpalk
Change the laws to suit the morals most have.

~~~
andrepd
I wish I could, unfortunately I have no power or money, while multinationals
have armies of lobbyists and bags of money a la Scrooge McDuck to help write
the laws to suit them.

------
kharms
If you're American, don't celebrate.

The US government came out against this ruling, suggesting that US
corporations are disproportionately targeted by the EC tax rulings.

>The commission has initiated investigations into tax rulings that Apple,
Starbucks Corp., Amazon.com Inc. and Fiat Chrysler Automobiles NV. received in
separate EU nations. U.S. Treasury Secretary Jacob J. Lew has written
previously that the investigations appear “to be targeting U.S. companies
disproportionately.”

>“There is a possibility that any repayments ordered by the Commission will be
considered foreign income taxes that are creditable against U.S. taxes owed by
the companies in the United States,” the paper said. “If so, the companies’
U.S. tax liability would be reduced dollar for dollar by these recoveries when
their offshore earnings are repatriated or treated as repatriated as part of
possible U.S. tax reform.”

[http://www.bloomberg.com/news/articles/2016-08-24/u-s-
treasu...](http://www.bloomberg.com/news/articles/2016-08-24/u-s-treasury-
steps-up-pressure-on-eu-over-apple-tax-dispute)

~~~
abduhl
That's fine - sounds like an incentive for companies to bring money back to
the US.

The reduction in tax liability happens when the earnings are repatriated per
this quote. If these companies are storing this cash overseas in a bid to
avoid paying taxes on it with no intention of repatriation until a tax holiday
then why should we care?

~~~
res0nat0r
I would very much care if I were Apple and going to be taxed a second time
trying to bring my money back to the USA. If that silly rule was eliminated
much of all of this would be moot.

~~~
jandrese
They only get taxed on the difference. It's not really a second tax, it's just
bringing the tax rate back up to non tax haven levels.

------
Luc
Every country in Europe has some sort of wacky tax exception for
multinationals. Every state is locked in this race to the bottom with its
neighbouring countries.

It's great that there is a supra-national authority forcing the states to
cooperate on getting multinationals to pay reasonable taxes, because it
wouldn't happen otherwise.

~~~
cel1ne
I'm not sure about that. I think most multinationals follow the same double-
irish structure [0] which is based on laws in Ireland, the Netherland and the
Bermudas.

According to Wikipedia (just listing the IT-companies):

* Adobe Systems

* Apple Inc.

* Facebook

* Google

* IBM

* Microsoft

* Oracle Corp.

* Yahoo!

[0]
[https://en.wikipedia.org/wiki/Double_Irish_arrangement](https://en.wikipedia.org/wiki/Double_Irish_arrangement)

~~~
wsc981
Also bands like U2 make use of such structures to avoid taxes:
[http://www.economist.com/news/business-and-
finance/21625444-...](http://www.economist.com/news/business-and-
finance/21625444-irish-government-has-announced-plans-alter-one-its-more-
controversial-tax-policies)

~~~
furilo
At least they are Irish...

------
noir-york
People here are commenting on Ireland (and other jurisdictions) engaging in
tax arbitrage to attract companies and jobs.

Competing on tax rates and negotiating tax deals were a huge MNC like Apple
pays a ridiculous 0.005% is bad: morally wrong, cuts to public services,
increases unjustifiable economic inequality and is just not fair on other much
smaller firms who have to pay full whack on the tax.

Apple, FBK, etc don't see it like that - they will engage in aggressive tax
planning to minimise their tax, hoarding billions of dollars. And its not like
they do anything productive with their cash pile; its not like it goes to
higher pay checks for their Asian workers. Instead, its spent on share
buybacks to prop up sagging share prices and keep Wall St happy.

Here's a better approach: tax companies on their profits and remove or reduce
income tax and capital gains tax. This aligns incentives to:

1\. encourage and reward founders to start new business

2\. the most valuable employees tend to be mobile ones - a core EU principle
is free movement so compete for the best employees by lowering taxes and
giving them great public services. Companies will follow.

3\. tax company profits and everyone is on the same level playing field:
provides an incentive for companies to reinvest their profits into growth (and
indirectly jobs).

~~~
khuey
Companies are already taxed on their profits. The hard question is determining
what is a profit and where it is located.

And share buybacks are returning capital to the owners of the business, which
is why they invested in it in the first place. The owners can then make their
own choices about how to allocate capital productively.

~~~
noir-york
> Companies are already taxed on their profits

In theory.

We are having this debate because in practice some are taxed at 20% and others
practically nil.

I'm arguing for no negotiated tax arrangements, indeed I have been giving
thought to a progressive tax regime for companies. That would be interesting
to evaluate.

> And share buybacks are returning capital to the owners of the business

Which is why I am not sure buy backs should be taxed. Either a company invests
its earnings, or else it returns them to shareholders who can decide to
identify growth opportunities, as you suggest.

~~~
makomk
Companies like Apple achieved a tax rate of almost zero by exploiting the
definition of "profits" to argue that they didn't earn more than a trivial
amount of profits in any of the countries they operated in. The definition is
the problem here.

------
beilabs
6% of total Irish national debt...

I wonder how much Irelands payroll taxes would have been were the corporations
not to have set up shop in Ireland, they would have just gone somewhere with a
decent tax arrangement.

Unemployment in the 70's and 80's was brutal in Ireland, personally, I think
the government at the time made the right choice, however, this "selective
treatment" allowed Apple to pay tax rate of 1% on European Union profits in
2003 down to 0.005% in 2014, FFS.

~~~
legulere
> I wonder how much Irelands payroll taxes would have been were the
> corporations not to have set up shop in Ireland, they would have just gone
> somewhere with a decent tax arrangement.

A better question is where the world would be if nation states wouldn't allow
multinational companies to pay only negligible taxes by taking part in a race
to the bottom.

With tax deals like this one you're just ripping other countries off.

~~~
refurb
_by taking part in a race to the bottom_

You mean countries competing for business? Why is that bad?

It would sound ridiculous if you applied it to companies "Car companies
offering lower and lower prices is just a race to the bottom! If this keeps up
we'll have no car companies as they'll all be bankrupt!".

~~~
legulere
Countries are not companies.

Also your comparison is pretty bad. The direct cost per unit is pretty high
for a car in a car company, the one for a company in a country is negligible.
So it's more like a publisher selling digital goods, except that there's no
copyright, preventing the others from selling exactly the same for a lower
price.

~~~
refurb
Countries provide a service (infrastructure, social programs, court system)
based on a price (taxes). There is a floor for those costs. There is a minimal
amount of tax required to provide those services.

I think it's a bad idea to tell a country that they can't charge a lower price
(taxes) in order to sell more business (have companies move there).

~~~
legulere
> There is a minimal amount of tax required to provide those services.

And you can go lower than that amount if you attract an abnormal amount of
companies through an abnormally low tax.

~~~
refurb
You could have a lower tax rate and make it up with volume, but you can't go
below a certain tax revenue and still keep a level of infrastructure or social
programs.

Overall I'm happy that gov'ts have to compete for companies. It's a great way
to force them to be more efficient. If they never have to worry about their
spending, why would they ever control it?

~~~
legulere
If this is about efficiency can you explain me then how Ireland is more than
1000 times more efficient than other countries (0.005% effective tax rate in
Ireland for Apple, pretty much everywhere you pay more than 5% in corporate
taxes)?

~~~
refurb
You're ignoring the tax implications of additional jobs in Ireland.

My only point is that countries competing for business is a good thing, not a
bad thing.

~~~
legulere
My point is that competition only leads to lower taxes and worse governmental
service by the countries on a global scale (though single countries can
benefit on the cost of other countries).

Even without competition Governments have the drive to keep taxes as low as
possible to boost the economy and keep local businessmen happy.

------
astaunton
It seems a lot of people think this ruling has something to do with 1) the
"double irish" which is doees not or 2) Irelands 12.5% corporate tax, which it
doesnt either.

The ruling, as far as the EU are concerned, is that Ireland gave Apple a deal
more beneficial than anyone else. But the basis for this claim is how the tax
was charged. Instead of charging Irish tax for all income for the company,
they charged what was reported in Ireland. The issue that needs to be resolved
is did they pay tax anywhere else on the remaining profits. The US said they
did but the EU say they dont think so.

------
alphadevx
All of that will go back to Ireland's national debt repayments under EU rules
from what I understand, which includes large repayments due to the EU for the
recent loans provided to Ireland for propping up banks, so really EU is
collecting this money by proxy of Ireland. Interesting play.

~~~
raverbashing
Debt, not depth ;)

~~~
alphadevx
Thanks, fixed ;-)

------
jcrei
I only wish that countries would compete for people the same way they compete
for businesses. If they were to provide the best services, quality of life, in
exchange for the lowest income taxes. That way people would move there and
companies would follow. Wishful thinking?

~~~
JumpCrisscross
They do. Why do you think New York City and London get to tax at the rates
they do?

Taxes (at least personal taxes) are a user fee. Every time an employee snuffs
at an offer in Missouri or Bangladesh, they are implicitly signalling a
preference for quality-of-life elements.

~~~
dsacco
You don't have an email in your profile, but I'd like to get in touch with
you. Would you mind letting me know the best way to do so? My email is in my
profile.

~~~
JumpCrisscross
Shot you an email

------
philoye
Apple responds with an open letter: [http://www.apple.com/ie/customer-
letter/](http://www.apple.com/ie/customer-letter/)

------
300bps
I don't think this was planned but it could become a great bait and switch
scam for countries.

1\. Negotiate special tax privileges for a company

2\. Have them set up shop in your country

3\. Allow them to pay little tax for several years

4\. Have federal authority sue saying that the deal in #1 is illegal

5\. Collect back taxes based on normal tax rate and not the special deal in #1

~~~
chronid
They will not collect back 100% anyway, maybe maybe 1/3 of the total amount.

~~~
Oletros
Why they won't collect all the due taxes?

~~~
gambiting
Imagine you had an agreement with your local tax authority that they agree for
you to pay X in taxes. Then few years later tell you that actually, they were
wrong and you have to pay more - you would fight this for as long as possible,
wouldn't you?

~~~
k-mcgrady
You can try, you'll probably lose. When the figure is so low it should be
blatantly obvious it is wrong you won't get far arguing that you did what you
were told and didn't realise something was wrong. When you pay 0.005% tax over
a year when the corporate tax rate in the country is 12.5% who can you argue
you thought you were paying what you were required? They will try of course
and I think Ireland and Apple have both said they will appeal to the European
Court but I don't think they'll get very far.

------
nradov
We should cut corporate income taxes to 0%, and increase income taxes on
investors and highly-paid employees to make the change revenue neutral. This
will eliminate the incentive to waste resources on corporate tax avoidance and
allow businesses to focus on creating customer value.

------
pulse7
Companies try to pay the taxes by the "legal minimum" principle: pay what is
required, but not more. If you have 2 parking slots in the downtown next to
each other and one of them is cheaper, you will park where is cheaper... Why
pay more if not required?

Question is: Did politicians, who created such laws, received bribes?

~~~
tobltobs
The double irish is more like parking your car on the bicycle lane.

~~~
osi
.. which means only the bicyclists will complain. everyone else thinks there's
no problem :)

------
estel
From the press release:

> The amount of unpaid taxes to be recovered by the Irish authorities would
> also be reduced if the US authorities were to require Apple to pay larger
> amounts of money to their US parent company for this period to finance
> research and development efforts.

I wonder how much of the 14B could be offset by this? I suppose there's a
chance that it all might be.

------
kagamine
Most of you should probably read the EU press release which is full of juicy
details before commenting.

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

------
DanielBMarkham
"...The findings are a result of the culmination of a three-year investigation
by Competition Commissioner Margrethe Vestager into tax arrangements for
Apple, dating back 25 years..."

I have no love in my heart for Apple.

At the same time, it's not like they don't have enough lawyers. So I have to
assume that anything involving billions of dollars would be strenuously
vetted. I might be wrong, but I'm starting from there.

And if they were supposed to pay taxes, they were supposed to pay them.
Purposefully evading taxes is wrong. _Avoiding_ taxes is another matter.
Complex tax codes to change society work because we assume that people will be
actively avoiding them. So good for them. They're playing the carrot and stick
game that governments like us all to play.

If true, this means that they did the right thing that the best-informed legal
minds could offer in order to legally avoid taxes. It worked for a while then
suddenly the rules changed. And they changed not just for the future, but
retroactively.

What occurred to cause a rules change? It wasn't the law. It wasn't Apple's
behavior. It became a story in the U.S. about how companies are getting away
without paying their "fair share". The EC was the one that acted, and the only
thing that makes sense to me is that the EC saw an opportunity and appointed a
commission. Not arbitration, not a criminal or civil trial. A commission.

Quite frankly, this looks like a stick-up. Apple's a big company and can take
care of itself. I really hope that the same kind of thing doesn't happen to
mid-sized and smaller companies trying to eek it out in the EU. It's not just
bad for the companies involved: it's bad for the reputation of the union as a
whole. You can't keep changing the rules up if you're trying to tweak
regulatory issues to promote long-term growth. Nobody with any sense is going
to trust you.

~~~
einarfd
I'm not convinced that even if Apple have the money and probably employ some
of the best tax lawyers around. That they always go for the solution that is
unambiguous above board and guaranteed to follow the law. This might be one of
the times they went for something that looked good and they thought they could
get away with, but that didn't pan out in the end.

~~~
fulldecent
Close. They did something that WAS good and perfectly legal. It was a
perfectly valid agreement between consenting adults. Then other countries got
jealous and intervened. These are the types of attitudes that are fueling the
current separatist movement.

~~~
Marazan
_that was against the laws that one of the parties had signed up to_ is
missing from your statement.

------
chrisacky
Can someone clarify where this money will eventually end up (assuming it's
paid)?

The article says that it will be paid back to Ireland, yet it looks like
Ireland was somewhat complicit in allowing this fraud to continue for so long?
' Is this just how it works, money goes to Ireland, and then recovered by
Europe?

~~~
pluma
AIUI the money is owed to Ireland but Ireland originally refused it, EC is now
saying "no, really, you have to take it". Might be followed up by Ireland
getting into trouble if they unfairly benefited from the deal?

That said, I think Ireland owes the ECB money too, so they'll probably use
that money to repay their debt?

EDIT: Corrected EU->ECB as pointed out below.

~~~
giovannibajo1
If you're referring to the public debt, that's towards the ECB (private bank)
not the EU (public institution).

------
dekhn
So, if I understand correctly, EC's argument hinges on the idea that Ireland
gave "special favors" to Apple in terms of the tax deal. In particular, that
Ireland offered things which nearly all other companies were not. If that is
not the case (IE, if it can be proved apple received no special treatment),
then the conclusions of the case, and the penalty, are false.

------
andmarios
In 2014 Apple's effective tax rate was 0.005%. That is 5 cents for every $1000
in profits.

Even a patent troll could do better than Ireland...

~~~
tinkerrr
Why this blatant falsification of facts? In 2014, Apple's earnings before
interest and taxes was $53,483,000 and the income tax expense was $13,973,000.
That's 26.12% effective tax rate. All data from Yahoo! Finance:
[https://finance.yahoo.com/quote/AAPL/financials?p=AAPL](https://finance.yahoo.com/quote/AAPL/financials?p=AAPL).
It's a similar tax rate in other years too.

~~~
cowls
This article is regarding Apple's EU profits, the Yahoo statement (I think?)
is global profits.

Also the income statement says: All numbers in thousands

So you need to add 000 to the end of those numbers

~~~
jandrese
It seems silly to price in thousands when you're talking about billions.
Either go all the way and show billions, or show dollars. Don't try to do some
halfassed compromise.

------
cs702
US corporate profits as a percent of GDP are near their all-time highs. Take a
look at this historical plot:

[https://fred.stlouisfed.org/graph/fredgraph.png?g=6ThF](https://fred.stlouisfed.org/graph/fredgraph.png?g=6ThF)

I wonder how much of that is due to tax avoidance, whether legal or
"unexpectedly illegal" (as in Apple's case).

If governments around the world follow the lead of the EC, I would expect a
noticeable decline in corporate profitability over the next five to 10 years.

Note: I just generated the plot above as a png at the St. Louis Fed's FRED
website, and I don't know how long the image will remain available. To
recreate it, plot the "Corporate Profits, Adjusted" series divided by the
"Gross Domestic Product" series, using the same units for both series (e.g.,
nominal billions).

------
rdslw
Good. Read how Tim Cook publicly considers Nobel economist Joeseph Stiglitz as
a one who do not know what he (Stiglitz) is talking about. Eye opening.

Excerpts from:
[http://www.washingtonpost.com/sf/business/wp/2016/08/13/2016...](http://www.washingtonpost.com/sf/business/wp/2016/08/13/2016/08/13/tim-
cook-the-interview-running-apple-is-sort-of-a-lonely-job/)

Q: What do you say in response to Nobel economist Joseph Stiglitz’s comments
on Bloomberg [television], where he called Apple’s profit reporting in Ireland
a “fraud”?

Tim Cooks answer: I didn’t hear it. But if anybody said that, they don’t know
what they’re talking about. [...]

Apple evaded taxes and consider it right :(

~~~
eru
Apple paid taxes according to Irish laws. Is it Apple's problem that Irish law
disagrees with EC agreements? (Seems to be Ireland's problem.)

If people want companies to pay certain taxes, they should vote for
politicians that pass laws that require companies to pay those taxes..

In any case, we should be taxing land value. That's harder to avoid: you can't
hide land.

~~~
rdslw
What actually happened between IE and AAPL is on the verge of extortion and
bribery - the only difference is not on personal level but on Gov vs Bus.

We should heavily penalise this, as AAPL literally stole money from both US
and EU people. Because of this arrangement: Apple paid less taxes in US, hence
US people have worse roads, healthcare etc. To the same in EU (but here by bad
IE decision). Money taken is on AAPL accounts now.

Long story short: Apple promised IE to incorporate there, to do a lot of
business through IE, to open job positions. In exchange they asked for low
special tax. They also said: if no low tax for us, we will do all this things
in different country.

Questions: 1\. how far is this from extortion? Should we allow this? 2\. did
IE gov make a good decision (14mld is of lesser value than apple benefits
given to IE) ? 3\. why this was decided non publicly? 4\. should we allow
corpos to make such decisions (dodge taxes) ?

~~~
calg
Companies make deals with governments __all the time__ for tax breaks and
government subsidies. Governments want jobs and investment, companies want the
best deals they can get.

This is NOT extortion or bribery, just everyday business. It happens every
single day even between US states, not to mention nation-states. Business is
competitive and that's a good thing.

AAPL in this case has deferred taxes on profits with their structural
arrangement, NOT avoided them. To call it theft is extremely ignorant of how
taxes and governments work.

~~~
rjtavares
> Companies make deals with governments __all the time__ for tax breaks and
> government subsidies. Governments want jobs and investment, companies want
> the best deals they can get.

And it's honestly one of the bigger problems of the world today. There was a
Planet Money episode where they presented the data from jobs "created" in
Kansas and Missouri through tax breaks. It was something like: Kansas stole
5000 jobs from Missouri through relocation of offices in Kansas City, and
Missouri stole 4000 jobs from Kansas the same way. So millions offered to
companies to get a net benefit of basically zero.

~~~
threeseed
It is a problem but unfortunately not a solvable one.

It's the equivalent of paying everyone the same wage. Countries are going to
aggressively compete for talent just like companies do. And whether it's
offering them different tax rates, amending employment laws, building
infrastructure for them etc countries are going to bend over backwards.

~~~
rjtavares
> It is a problem but unfortunately not a solvable one.

It is solvable through international agreements between countries.
Unfortunately those tend to defend companies more than individuals.

But hey, maybe the recent TTIP backlash and apparent failure is part of a
positive trend.

------
Oletros
And here the press release from the European Commission

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

~~~
estel
Jeez, an effective tax rate on profits in Ireland of 0.005% is pretty
inexcusable.

~~~
eru
Why? 0% tax on profits would seem fair and reasonable.

(There's lots of stuff that's not taxed. Eg not a lot of people complain about
not taxing capital gains of home owner/occupiers.)

~~~
marcospri
Because the Pub next door pays a higher effective tax

~~~
eru
They sell alcohol after all.

But fair point. And because the bigger players who can hire expensive
accountants can always mask their profits, we shouldn't tax profits. It's too
malleable. Hey, even VAT is a better tax.

~~~
lorenzhs
VAT is not a fair tax, as it favours the rich at the disadvantage of the poor.
It's everyone paying the same rate on basic necessities, independent of their
financial situation. Sure the rich buy more stuff and thus pay more VAT, but
raising VAT doesn't hurt a rich person. It hurts poor people, though.

~~~
eru
Not every tax has to be progressive. It's enough to make the whole tax system
progressive to achieve overall progressiveness. (Tautologically..)

Income taxes or even refunds or a basic income can fix that up.

VAT is mostly flat.

(I am in favour of taxing land by value for most or even all government
expenditure. That's highly progressive, impossible to evade, and does not
distort the economy at all: land's supply is fixed.)

------
throw2016
I don't see why commentators here are so divided, presuming they are not
beneficiaries of this system.

The government gets revenue from taxes to provide services. If everyone were
to do what Ireland is doing then goverments either have to raise money by
increasing other taxes or reducing services.

Either way individuals and society lose. Nobody wins from this race to the
bottom.

The bigger question is the presence of these convenient loopholes in the
global financial system that benefit the wealthy and privileged but leave
everyone else facing clear cut laws that cannot be evaded without serious
consequences.

Questioning the legitimacy of taxes, or even society, and getting pedantic
about laws in this context seems little more than a self serving tactic to
avoid admitting this is obviously wrong. Especially when everyone else without
exception is paying their fair share. Here is a better idea, pay your share
and then start a debate about taxes and society if you want.

~~~
Armisael16
This feels an awful lot like a scam; Apple is explicitly told by the Irish
government (the presumable authority on Irish taxes) that what they're doing
is fine, then over a decade later the EU steps in and says "you can't do that.
pay more taxes retroactively (to us)".

This stinks of ex post facto lawmaking in order to get money from a
corporation, and it seems there are a few of us who object to that. I'm all
for changing the laws in the present, but I consider ex post facto laws a far
worse solution than the disease.

------
johnnyhillbilly
Here's how to fix this:

1\. Foreign deductions are taxed based on the difference between the locale
where the earnings are made and the locale the service/product is provided
from. Where the sales division is located has no relevance to taxability, and
deductions for sales costs are treated as any other internal service.

2\. IP is enforced on the national level, and should not be eligible as a
foreign deduction. Good-will also follows the local market.

3\. Documentation should be provided that foreign costs are real, and that
they are actually taxed. Tax agreements should be null and void if systematic
abuse is uncovered.

The problem right now is that no company can compete against these cheats.

Personally, I think Ireland has scammed the rest of Europe for long enough by
now.

Likewise, I wouldn't be surprised if a large part of India's competitiveness
in asses-in-seats outsourcing is created by artificial tax rule phenomena -
and various constructs to exploit these.

------
nodamage
The more I read about this the more likely I think this decision could be
appealed and overturned.

The initial implication is that Apple specially negotiated a lower tax rate
for itself in Ireland. But if you read through the European Commission press
release[1], it's not that a special rate was negotiated, but rather Apple
Sales International (the Irish Subsidiary) only pays Irish income tax on the
portion of its income that comes from within Ireland, which is correct
according to Irish tax law. But there's nothing particularly special about
this setup that applies only to Apple, and from what I can tell, any other
corporation operating in Ireland could have also set up this arrangement and
is subject to the same rules.

It doesn't make sense to me that the EU can compel Ireland to collect more
taxes from Apple, if according to Irish tax law, they've already paid what
they owe for Irish sales, and they don't owe taxes for non-Irish sales. Now,
there is a separate question, which is can/should every other EU country go
after Apple's local subsidiaries for failing to pay sufficient income tax in
their own countries (by transferring the profits over to Ireland)? The answer
to that is probably yes. If Apple sells an iPhone in Italy for a profit, it
should pay Italian taxes on those profits, and should not be able to avoid
Italian taxes by booking the profit in Ireland. This is touched upon in the
press release:

> _The amount of unpaid taxes to be recovered by the Irish authorities would
> be reduced if other countries were to require Apple to pay more taxes on the
> profits recorded by Apple Sales International and Apple Operations Europe
> for this period. This could be the case if they consider, in view of the
> information revealed through the Commission’s investigation, that Apple 's
> commercial risks, sales and other activities should have been recorded in
> their jurisdictions. This is because the taxable profits of Apple Sales
> International in Ireland would be reduced if profits were recorded and taxed
> in other countries instead of being recorded in Ireland._

It seems more logical to me to conclude that that Apple doesn't owe more taxes
to Ireland, instead they owe more taxes to all the other countries in the
world where they operate but have avoided taxes by transferring their profits
into Ireland.

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

------
omarforgotpwd
If both Apple and Ireland are opposed to this I see little chance Apple
actually pays this. Ireland's government obviously setup this tax structure
intentionally to bring capital into Ireland and will want to preserve this.

------
satysin
I am not too sure how I feel about this. On the one hand I do think Apple (and
many other companies) should pay more taxes.

However on the other hand Ireland enticed many big companies to their country
on the promise of lower tax. You can't blame Apple for taking advantage of
such an offer. They followed the letter of the [Irish] law as far as I can
tell (unless someone can correct me?).

I think this could end up being terrible for Ireland in the longer term. Then
again perhaps the EU knows that they can't really go anywhere else now so will
just have to put up with the new rates or not do business?

It is far from a cut and dry situation IMHO.

~~~
creshal
> However on the other hand Ireland enticed many big companies to their
> country on the promise of lower tax. You can't blame Apple for taking
> advantage of such an offer. They followed the letter of the [Irish] law as
> far as I can tell (unless someone can correct me?).

There's two separate issues. One, Ireland is cutting taxes far below the EU
average to attract all companies they can. That's a dick move, but welcome to
politics, it's fully legal. Two, _Apple_ has received _further_ tax breaks on
top of that, reducing their tax rate from a crippling, communist 1% to an
effective 0.005%. The European Commission found only the second deal to be
illegal, and Apple just has to repay the tax difference to the regular Irish
levels.

Ireland is still a tax haven, just slightly less unfairly advantageously to
Apple.

~~~
patrickaljord
> Ireland is cutting taxes far below the EU average to attract all companies
> they can. That's a dick move

Allowing people and their companies to keep more of their money while creating
tons of jobs in a high unemployment country. What a dick move indeed. /s

~~~
creshal
> people and their companies

Oh? Apple, Google and other US-based multinationals are owned by their
European employees?

> creating tons of jobs in a high unemployment country

Less creating, more shifting them from other countries. It benefits Ireland at
the expense of the rest of the Union.

~~~
FilterSweep
I'd also argue there's very little "Creating" OR "Shifting" going on from
Apple in this tax haven.

They can keep the vast "majority" of the (read: "well paid") jobs in Cupertino
with Stanford, UCBerkeley, CalTech, etc grads. All the while reaping the tax
haven benefits abroad.[0]

[0] Found a better source, 6.5K employees in Ireland:
[http://www.independent.ie/business/irish/25pc-of-apples-
euro...](http://www.independent.ie/business/irish/25pc-of-apples-european-
workforce-based-in-cork-30487720.html) , with 1000 to be added by 2017.

Their center in Cork, Ireland is a distribution base, which is different than
the product design, R&D, and development that goes on in America. Compared to
the amount, in billions, of taxes avoided, the "Tons of jobs" grandparent is
claiming doesn't seem to be true.

------
allendoerfer
Even with these baby steps, I like to see that the EU is unifying its
corporate tax code. Of course, we do not need to worry about Ireland, Great
Britain already made sure their position as English entrance to the EU will
stay strong regardless of tax-breaks.

The Netherlands are naughty, too, due to a strange coincidence Ikea Germany
has to pay fees of exactly its profits to Ikea Netherlands each year. I think
the bigger countries should use their power to end this ruthlessly, since in
the end also the smaller countries would benefit if the race to the bottom
stops.

~~~
jakozaur
Just to be fair: 1\. Netherlands profit tax rate is 20%-25%, where Germany:
30-33%. Companies, may take advantage of those difference, but it less obvious
evasion than paying 0.005% rate in some tax heaven.

2\. Ikea Netherlands has several offices and a lot of employees in
Netherlands. They likely provide some services to Ikea Germany.

3\. Licensing cost, may have profit component. E.g. I can sell you the
franchise for restaurant which takes base cost + some % of your profits.

There are far more obvious tax loopholes that should be closed first, before
worrying about taxation shifting between developed countries which taxes on
roughly same scale.

~~~
allendoerfer
> 1\. Netherlands profit tax rate is 20%-25%

Not for foundations [0]. This is not about some procentual differences, it is
a big loophole in the Dutch tax code, Ikea benefits from.

[https://en.wikipedia.org/wiki/Stichting_INGKA_Foundation](https://en.wikipedia.org/wiki/Stichting_INGKA_Foundation)

------
everydaypanos
I live in Europe and I can certainly see how this seems like a mess and how
can a company obey the laws in one country and at the same time being
illegal...

I just want to point out something that is often neglected. EU Commission is
basically a referee entity. It all starts with someone making a formal
complaint about Apple or Google or Amazon and then they check into it. And in
MOST cases the complainers are other US companies that feel that their
complaints are being neglected in their own country(ex Yelp)

------
justinv
$14.5bn to be recovered.

~~~
tener
Plus interest or not?

~~~
semigroupoid
"Ireland must now recover the unpaid taxes in Ireland from Apple for the years
2003 to 2014 of up to €13 billion, plus interest." (from the official press
release)

------
fulldecent
Maybe Apple spent $10M or whatever in taxes in Ireland over the past 10 years.
And of course corporate profits are imaginary so you can imagine them
happening anywhere on the globe.

If I owned a small country on an island, I would be more than happy to allow
Apple to imagine its profits were on my island and I would only charge $5M for
the privilege. And I would be grateful for the $5M.

What would you do with your small island?

------
jernfrost
I don't get how the US government can so strongly advocate in favor of Apple
in this case. I am a big Apple fan, but clearly the law was broken. This seems
like a slam dunk case. And Apple isn't fined, they just have to pay normal low
Irish taxes like everybody else.

------
c0g
Given Ireland broke the law, not Apple, shouldn't they get the punishment?

~~~
lucideer
Apple broke the law. Ireland provided Apple with false assurances that they
were tax compliant, but there was nothing stopping Apple being fully aware of
applicable EU tax laws.

Perhaps Ireland should be punished (though the government is already arguing
there is reputational damage), but you really cannot reasonable argue that
Apple is not culpable.

------
Marazan
Duplicate
[https://news.ycombinator.com/item?id=12385232](https://news.ycombinator.com/item?id=12385232)

------
singularity2001
One might wonder whether multinationals paying 0.005% tax contributes to the
horrible proliferation of oligo/monopolies.

------
nepthar
"European Commission tells Apple to spend €13B arguing against them"

------
retube
Mess with our banks, and we'll mess with your tech firms!

------
nxzero
Given the stakes, unclear to me why multinationals don't find a way to create
there own country, that would be free of any non-member decent.

~~~
tonyedgecombe
Because other nations wouldn't recognise it.

~~~
nxzero
Unlikely, that they'd not recognize it; multinationals have to much leverage
internationally and many have sway over the masses too.

What reasons would make you believe that?

------
meira
So Ireland, the tech hub that would replace London, isn't going anymore?

~~~
notahacker
Suspect Dublin will do quite well in the fintech sector if Brexit means
passporting agreements are difficult to arrange for London based startups...

------
gjolund
This is all over the news like something is actually going to come of this.

What can Ireland/EU actually do? Apple is a bigger player in the world economy
than Ireland.

------
jdimov10
Time for Ireland to leave the EU too, I think.

~~~
_delirium
Ireland's entire strategy when it comes to attracting foreign businesses to
domicile there depends on being both 1) in the EU, but 2) lower-tax than most
of the rest of the EU (excluding a few micronations). They're selling a tax
arbitrage within the EU common market, which doesn't work if they aren't in
it! Ireland's domestic market in itself isn't large enough to really attract
major international companies to set up European headquarters there.

~~~
SmellyGeekBoy
> Ireland's entire strategy when it comes to attracting foreign businesses to
> domicile there depends on being both 1) in the EU, but 2) lower-tax than
> most of the rest of the EU...

Spot on. I'd also add:

3) English-speaking 4) Close ties to the UK

------
chvid
The US smacks Volkswagen - the EU smacks Apple.

------
known
Tax Apple revenues, not profits;

------
tmaly
Ireland uses lower taxes to attract companies to create jobs.

This has worked, but I wonder if the EU is going to cause another country to
exit with this ruling?

Seriously, what does Ireland gain if it loses a ton a jobs due to this?

~~~
tmaly
Why the down votes? Does a promise of lower taxes not attract jobs?

~~~
twblalock
I suspect you are getting downvoted because the prospect of Ireland leaving
the EU over this is farcical.

------
Shivetya
Okay, the EC is wrong in that lower tax burdens are a form of state aid.
Higher corporate taxes also tend to cause all sorts of new ways to lower tax
burdens which can mean even less tax revenue, let alone simply up and moving
to a more tax friendly environment. The EU needs to worry about Africa soon
scarfing up companies looking for a way out.

Then last of all, they are fooling themselves if they don't think EU based
companies aren't receiving similar deals. This seems concentrated only on US
based companies for the time being.

Finally consider this, countries which lowered their corporate rates found
increases in wages and taxes. This includes Canada and Japan

~~~
Someone
_" This seems concentrated only on US based companies for the time being."_

AFAIK, Fiat isn't US based ([http://www.wsj.com/articles/eu-rules-that-
starbucks-fiat-ben...](http://www.wsj.com/articles/eu-rules-that-starbucks-
fiat-benefited-from-illegal-tax-deals-1445419279\);) neither are FC Barcelona,
Real Madrid, and several other Spanish football clubs
([http://europa.eu/rapid/press-
release_IP-16-2401_en.htm](http://europa.eu/rapid/press-
release_IP-16-2401_en.htm)), or Amsterdam, Antwerp, and other ports
([http://europa.eu/rapid/press-
release_IP-16-124_en.htm](http://europa.eu/rapid/press-
release_IP-16-124_en.htm))

Significantly lower amounts, yes, but certainly not "only on US based
companies"

Taking it broader than tax rulings, many other examples exist.

Meanwhile, I read that both Ireland and Apple are going to appeal this ruling,
so one can see this as a shot very close to the bow that doesn't make the ones
shot at surrender.

I hope the result will be that the ruling that the deal is illegal will stand,
with a smaller payback. Reasons? I think it is immoral that large companies
can negotiate such deals, and applaud the EU for standing up against their
pressure when smaller countries do not have the spine to do so, but do not
think all blame lies with Apple.

