We often accuse authorities of going after the small, while leaving the big offenders free.
The average individual working person has no negotiation when it comes to what taxes they pay. The average business has to be very careful, fully aware that they are at an extra competitive disadvantage compared to the international mega-corporations who are effectively given huge financial subsidies by entire nation states.
It’s not personal. Tim Cook knows that what's happening is right, but nevertheless he is required to defend the tax advantage, same as the Ireland, as with the US where mega-business and corporations have a strangle-hold on government and law.
Every individual should support the EU. If the EU is defeated here it will be a loss to the small man and small business. If defeated it will enshrine by default the creeping imbalance of power that corporations have over the individual nation and people.
It boggles my mind that there are people supporting Apple in this. There are so many of us that like to cheerfully screw themselves over to protect rich corporations.
As an Apple customer I am not sure what to do in the future, if I should continue to support them by buying their products. I hope they lose in any case.
> 1) The EU is essentially attacking a law made in 2003 in 2016. To do this retroactively for 13 years is far too long (imo).
I'm seeing a lot of comments saying EU's action is "retroactive" or "retrospective" - it is not. The EU law was always there, and Apple and Ireland were both in contravention for all the 13 years. Apple was in compliance with Irish laws, while contravening EU law.
If the IRS audits you and finds that you underpaying taxes for 13 years - you are going to pay all the taxes "retrospectively"! There isn't a 5-year statute of limitations on illegal EU subsidies (or IRS tax evasion).
This depends on the country. For example, Belgium has a statute of limitations of 3 years on taxes, unless you're committing fraud, then it can be extended to 7. There would be no way to recover those taxes within the current Belgian framework without introducing new laws (retroactively). But retroactively introducing a tax law is generally prohibited by the constitution..
You're wrong, Sangnoir. The IRS has a 3 year statute of limitations on most audits (beginning from date of filing return or date filing was due), 6 years if essentially the numbers on the tax return are way off, and unlimited if there is tax fraud. There was no fraud here.
mea culpa on IRS statute of limitations - I am not a tax lawyer/accountant - let alone an international tax accountant. In addition, the Apple/Ireland/EU issue is not directly a "tax" issue, but an illegal subsidy issue by way of taxes - and even that has a 10 year 'statute' from the time of enquiry by the EU. Since the EU made the enquiries in 2013, the period covered became 2003-2015. Whilst there was no fraud in this case, EU law was broken.
The rest of my point remains though - this is not a new law, but a decades-old one.
"The Commission can order recovery of illegal state aid for a ten-year period preceding the Commission's first request for information in 2013"
The rules against state aid were always there in the various EU constitutional documents. Ten years is a long time, but it takes a long time to investigate complex issues and you don't want a system where it becomes worthwhile to stall the investigation and run out the clock.
The real message is that companies should refrain from trying to do "deals" with individual member states; doing so is extremely divisive. One of the arguments going around at the time of Brexit (I have no idea whether it's true though!) was claims of EU grants being used to move car part production out of the UK to Eastern Europe.
Edit: in fact, if you go through to http://ec.europa.eu/competition/state_aid/cases/253200/25320... and read the description, it appears to date all the way back to 1991, where Apple sat down with the Irish revenue and simply decided how much tax they were going to pay. That's how transfer pricing works.
> If the EU wins the case, the money flows back to Ireland, in essence rewarding the country who was out of line to begin with.
Not entirely - any monies returned can legally only be used to pay back Ireland's national debt. The UK, Germany, and France are the biggest holders of Ireland's debt, so effectively the money is going back to them, albeit with Ireland benefiting by reducing its debt marginally.
EU is telling Ireland to levy the general corporate tax in Ireland on Apple. Ireland has had that obligation all those years.
EU legislation on state aid has always been this way. It's a usual thing to force a company (Apple) to pay back government subsidies (incl tax subsidies) to a member state (Ireland), which says it doesn't want the money.
Member states granting illegal subsidies almost always say they believe the subsidies were legal or that no subsidies were granted.
1) No it's not. If it's a break of contract with the EUs playbook of economic fairness amongst its members and therefor can be prosecuted forever.
2) Doesn't matter who gets the money. It's forcing corporations to not use Ireland as a tax haven anymore (there are others like Luxembourg, etc., but it's a step in the right direction)
If it's a break of contract with the EUs playbook of economic fairness amongst its members and therefor can be prosecuted forever.
This creates a system where even information from the national government charging taxes in its own jurisdiction can't be relied upon, and where literally billions of euros of tax can be retrospectively demanded indefinitely. That is a toxic environment for anyone running a business, even someone trying to do so honestly. If the EU wants to wade in after this much time and claim this much damage has been going on, it's going to strain credibility and the EU is going to deserve all the contempt that businesses will hold it in as a direct result.
I write this, BTW, as someone who runs small businesses in the UK that very much are at a disadvantage compared to the arrangements available to large multinationals. I'm all in favour of having a tax system that is transparently fair, where the same rules apply to everyone. But I'm not in favour of officially saying one thing, letting businesses carry on accordingly for a very long time, and then retrospectively changing the rules.
I think it's also worth mentioning that the EU's track record on tax issues and dealing with the large multinationals and their complex arrangements is awful. Just look at the hash they made of the VAT changes last year, which were supposedly going to have a beneficial effect by reducing multinational tax avoidance, but in fact did almost exactly the opposite, causing far more damage to smaller businesses than larger ones.
Apple's tax arrangements may be ethically questionable, and the system that permits those arrangements has plenty of room for improvement. However, if you think this specific move isn't a politically motivated cash grab by an EU that is in trouble and has several key elections coming up, I heard there are some Nigerian princes who have some great investment opportunities to offer you.
> I think it's also worth mentioning that the EU's track record on tax issues and dealing with the large multinationals and their complex arrangements is awful. Just look at the hash they made of the VAT changes last year, which were supposedly going to have a beneficial effect by reducing multinational tax avoidance, but in fact did almost exactly the opposite, causing far more damage to smaller businesses than larger ones.
This is I think one of the few genuine substantial complaints against EU membership: the EU is very bad at dealing with small businesses, because they don't have time and money to get involved in the legislative process. Brussels is too far away.
Indeed. In the cast of the VAT mess, they literally didn't even realise that many thousands of very small ("micro") businesses existed. They effectively managed to legislate a lot of those businesses out of existence, because the compliance costs were more than the "extra Christmas present money" level of revenue the microbusinesses were generating. When the relevant officials finally noticed, literally a few days before the new rules came into effect, the initial response was basically "We've been working on this for years, why are people only objecting now?", as if someone selling knitting pattern PDFs from their kitchen table was going to know about EU-level discussions on international tax laws and contribute early. It was like a case study in being totally out of touch and introducing wildly disproportionate administrative burdens, and the officials involved didn't even realise they were the punchline.
This isn't to do with a contract or treaty as much as how it's interpreted and how that interpretation has changed recently. What's changed in the past 18 months is how the EU Commission interprets the arms' length principle as it relates to international tax law, now using it's own guidelines instead of the international norm/consensus, i.e.: OECD Transfer Pricing Guidelines. 'Retroactive' is definitely the right word to use.
>> Doesn't matter who gets the money
Perhaps, but it matters who loses it. The US Treasury see it as their money, since the untaxed cash hoard being referred to is on the Apple Inc. balance sheet. The implications for the EU could be far reaching.
I'll stick my head above the parapet and say that I partially support Apple in this. They negotiated particularly sweet deal with the Irish government and got it. The EU has now said tha the deal is incompatible with EU law. I don't particularly blame Apple for the attempt, if anything I rather think it is the Irish Government who were a bit naughty.
I'm conflicted on whether Apple should pay back the sum - it would seem fairer to me to simply agree that 'This Stops Now'.
It would indeed be much more reasonable to say, "this stops now" + giving Apple, say, 12 months to restructure their affairs.
Second, if that poorly Irish designed piece of tax law wouldn't have existed, they might have structured things differently. Even if Apple is to pay the €13bn, you can assume they will sue the Irish state for the exact same amount in damages.
If the EU wants to harmonise tax law, they should focus on that. But I'd be curious to see if it will ever happen, given member states don't want that. The state aid mechanic is the only thing they have to perhaps combat avoidance a bit. But if you only have a hammer... Well, just look at Vestager - that's exactly what happens. I wonder, has she challenged Danish tax mechanics?
Cases like that often appear when EU country does something that's consider a subsidy. A criteria is selective enforcement/favoritising of one company. If Ireland said: come to Ireland and pay 0.005% corporate tax, that would be fine by EU competition law.
Last year the big Danish energy company DONG (recently privatized and entered the stock market) was investigated but found not in violation. Here's an exciting article about it:
Don't get me wrong, I think it's good to use the state aid mechanic as a way to combat unfair competition. But I think retroactively applying it for 15 years is wrong, and displays incompetence. These breaks have existed for years, and it's not like the EU didn't know about them. Most countries don't even have national laws that allow recovering of taxes after 5-7 years.
I recently read in the newspapers she's also investigating Belgian harbours, because for some reason, they're exempt from paying corporate tax. HOWEVER, if she'd rule against it, she would be unable to force the Belgian government to recoup that money, because that tax break existed even from before the EU was founded..
I can only say that tax cases that go just to the lowest court instance in Denmark can take years to complete. Here's the most recent tax related cases I could find: http://www.skat.dk/SKAT.aspx?oId=2232974&vId=0
This person said they were not taxable for 2008 and 2009. The tax authorities disagree. A complex case with the person moving abroad is described. The amount of money that would be taxable is less than $200,000. In 2014, a tax court ruled one thing. Now in 2016 the first city court looked at the case. And that's just for one person, with relatively simple finances.
I can imagine considering Apple and the even more complex EU law could take huge amounts of time to process. The article said 3+ years was used on just investigating the case. Maybe if they had an extra 500 lawyers and accountants they could do it quicker. Or better legal powers to investigate this sort of tax stuff between the countries. But from what I've heard, I imagine the cross-border investigations are sending letters to the local authorities and waiting months before you get any concrete information. These guys are nothing like the federal law enforcement of US.
Take the tobacco lawsuits in US -- wasn't it known for 40+ years that tobacco was extremely harmful? Should the companies be allowed to continue given they haven't been sued by the government or stopped in some way for that amount of time?
You're absolutely right. But the EU has not been given direct power to set tax law. I'm not against more unification of the whole EU tax system, but currently, within the current framework, they are overstepping their bounds. I'm looking forward to the trial, and I'm curious what the ECJ will decide in this case.
Also, regardless of the company, don't you deserve a fair trial if the law is applied correctly? For if we disregard this, we might as well disregard other situations, which creates a dangerous precedent. Legislators shouldn't be putting the burden on companies, because they badly designed some law (or it had unintended consequences).
I've personally almost gone to court on a tax case, where the tax authority was pulling ridiculous arguments out of thin air with no merit whatsoever. The guy handling my case was extremely unreasonable, and it took intervention from some high up civil servant (who was more "up to date" on specifics of that law) to make him change his mind. It helped that I had one of the best local tax law firms represent me. These are often test cases to see what judges will allow, and to see if the precedent will stick. No point going to court if you don't have a good case and setting a bad precedent, since I said I would have no problem publishing the judgements for the entire tax community to see if I won. A full tax case can easily take 10-15 years.
Which is utterly absurd by any reasonable standard. Governments claiming the money may be faceless machines grinding away, but on the other side it's either a private individual or a business dealing with it.
If it's a private individual, or a small business where the lives of those running it are very directly connected to the business's performance, then any tax investigation forces them to live with a sword hanging over them throughout. That is going to cause considerable distress and potentially to undermine any long term financial planning they want to do, among other harm. Expecting someone to put up with that situation for a few months is bad enough. Expecting someone to put up with it for a decade or more is wildly disproportionate, even in the case of a significant underpayment if it was due to an honest misunderstanding rather than clear and deliberate tax evasion.
Even if we're talking about a large business whose staff might not suffer personally as a result of the case, it's still going to waste staggering amounts of time and resources to participate in an investigation over such a long time. It's going to damage long term financial planning, it's going to be unpleasant for the staff, particularly anyone potentially responsible for any mistakes, and it's going to cost the shareholders a small fortune, and again all of that remains true even if the final conclusion is that no-one did anything wrong or little real harm was done.
I just don't see any justification for these endless legal proceedings or going back far into history. IMHO there should be a statute of limitations of a few years in place after which what's past is past, there should be a strict limit on how long any investigation can last before either formal legal proceedings are held or the matter is dropped permanently, and ideally both of those time limits should be in some way proportionate to the scale of the alleged shortfall.
I would feel more sympathetic if they weren't sitting on 200B not doing anything. Waiting for the US to allow them to bring it back into the US for very little in taxes.
Look, if I negotiate with the state of Texas that I will not pay taxes in the state of New York for doing business there and then get fined by the state of New York for not paying my due taxes there, you will say I was stupid and it suits me right.
It's not quite the same. The tax isn't owed to the EU, it is owed to Ireland. As far as I'm aware this sort of deal is not only legal, but common in the U.S. The rules broken here are the ones against excessive "state aid". These are defined as selective advantages given to companies. The treaties forbid these as anti-competitive. This mainly applies to subsidies to individual companies, but also covers sweetheart tax deals like these that aren't open to all companies. They're welcome to set low corporate tax rates, but not to approve convoluted structures like these. Stuff like Tesla's deal with Nevada would be illegal in the EU.
More like the federal government telling you ten years later that you and Texas shouldn't have made that concession to you and asking you to retroactively pay back taxes for the last ten years.
That is exactly what the IRS does. Do you think businesses want to keep 7 years of transactions? No, they do not. And if they fail an audit it increases to 10 years.
As everybody, when you didn't pay your due taxes, you're asked to pay for what's due.
And basically every law applies to past actions...
I don't get why Apple would have a special treatment.
Apple deal with Irish government was illegal regarding access to EU free market.
If Apple is not happy with that, they can open a business in every EU country, pay local taxes in each of those and keep their deal with Ireland only for the Irish narket.
I don't even get how anybody could defend Apple on this. You're get caught trying to cheat, you pay what's due, that's as simple as that. The fact that the Irish governemt took part in this illegal deal is another problem that should also be pursued by EU.
People link their liking of Apple with what is right and wrong. They do not realise the extent of tax evasion, and they do not realise that it is they themselves and every working person who is subsidising tax evading corporations by paying higher taxes.
For me personally, at this time it would _not_ stop me from buying from Apple. This is not a contradiction, the reality is that Apple isn't the only offender.
I wouldn't stop just for the tax evasion, but Tim's open letter has been a direct insult to my intelligence. If he thinks I'm stupid I'm happy to prove him wrong by not buying his products ever again.
This is coming from someone that has avoided flying Ryanair his entire life, no matter how convenient or cheap it could've been.
Subsidizing means support financially or pay part of the cost of producing (something) to reduce prices for the buyer. Why is whatever you believe the appropriate tax rate should be the baseline for which you determine subsidies? Apple is paying taxes, not the other way around. Perhaps you believe they should be paying more taxes but that's not exactly subsidizing as the appropriate tax rate is not written in stone or decreed from the heavens.
Perhaps you believe that the government needs $X to function and by Apple paying less, we have to pay more. But this isn't true either as I'm sure your tax bill won't go down if Apple loses this case. Perhaps spending will increase in some program or some new commission gets created from the funds but this will not come free, as any money transferred from Apple to the discretion of Irish politicians will come from Apple shareholders.
It absolutely is, I don't understand how someone gets so brainwashed to not understand such a simple concept. A nation has a finite set of costs, those costs are paid by taxes. If I pay less, someone else needs to pick up my slack.
I don't know how the European system works, but in the US taxes don't depend on proposed spending. The politicians don't get together and say we want to spend $X so let's see how much we get and then we'll adjust. I don't remember getting a tax rebate when the state pulled in billions from bank fees or some repatriation agreement.
In fact, spending and revenue have diverged increasingly since the financial crisis. Around 50% of federal funds are either transfer payments to the elderly (Medicare or ss) and military.
In the US, they overspend every single year. That is now debit, will Apple be paying a share of this debit at some point? Does Apple pay the interest on this debt? Of course not. Those costs are distributed to all the taxpayers. The cost of governance is X% of the economy. If Apple only pays X% - Y%, then the rest of the taxpayers must make up the difference in this year or down the road. If down the road, the costs are even greater than the savings Apple has received as interest must be paid to service the debit. Thus such a situation is wholly economically inefficient for everyone but Apple no matter how you slice it.
Also understand, these taxes are not for nothing. Without highways Apple can not ship it's product, without a legal system anyone can produce Apple's designs and undercut them.
We can decide what government services make sense to provide but everyone needs to pay their share or the system will fail. Rather violently, if history is any guide.
Yeah, I'm a defender of Apple because I don't think they should be asked to pay for taxes in the past. Instead, I would like to see all the evasion loopholes closed so Apple, and every other large company out there, can't do it for the future.
As a business owner, I actually was in a situation where my local tax authority said one thing, then came back to me 2 years later, said they were wrong, and now I had to pay 2 years worth of taxes because of their mistake. It's BS and it can ruin your company totally. If a tax authority tells you how much you owe, it should be binding - so in this way, if Ireland charged Apple too little, they should be at fault here. If EC now rules that Ireland undercharged them and haven't collected 14BN in taxes, then Ireland should be to blame.
If you jumped through all the hoops Apple did to try to evade paying taxes, you should know you're playing Russian roulette. Apple knew going into it that they were intentionally evading taxes - hell they hired several special tax accountants just to manage the cf required to make all this work. They were just assuming (hoping?)they had enough grease to keep the loophole open - they were wrong.
I believe they even called the liability out in their s1 filings, but I can't currently check.
Unfair, yes, but that is how tax law works in the US. Of course, he could challenge it in court and hope the judge sides with the original interpretation of the law. Also, there is limit to how many years back they can go in such a case.
I sympathise, and I would agree that if you take official advice from your tax authority on some point, that should set an upper bound on your tax obligations.
It doesn't help that bad or just plain wrong advice is given all the time by the tax authorities, at least in my country. I no longer even bother asking them about most things, because the last few times I called with a relatively straightforward business question, they still managed to give me completely wrong answers (always in their favour, naturally). The reason I know that is because when I was surprised by those answers and then took independent advice, the independent advisors used the tax authority's own official documentation to show me why what they told me was incorrect...
I have many times been in the situation of having paid to much tax (not my fault) and have received relatively large cheques automatically from the government as a result. This year they calculated that i have underpaid taxes (not my fault) for a year. The government have been automatically deducting a small amount over the year from me via the tax system.
So i have been happy to receive cheques from the government years later for over paying, and actually nonchalant about the deductions.
But what is important is that the rules to apply equally to everyone, and they should also apply to businesses large businesses and small businesses, and mega businesses.
It boggles my mind that so many people immediately and forcefully side with the EU in what seems to me a pretty complicated and arcane question of tax law. I'm honestly not sure which side is correct in this, but jumping violently to the defence of either side seems unwarranted.
Once you've seen the diagrams explaining how this specific bit of tax evasion works it becomes hard to attribute it to an oversight or misinterpretation of arcane tax laws on Apple's side. These complicated structures take a lot of know-how and effort to set up correctly, and exist only for the purpose of minimizing the taxation on their services. Apple reportedly paid a negligible 0,005% in taxes in 2014, where 12,5% is normal (in Ireland).
So when people agree with the EU findings on this subject, it isn't just out of spite or dislike of Apple. Some feel strongly about tax evasion, as it enriches those who practice it to the detriment of ordinary citizens (taxes pay for public works and institutions). Some may find that huge corporations benefit unfairly from these convoluted tax evasion schemes compared to ordinary citizens, and small and medium sized corporations, and they seem to get away with it too (unfair competition).
Apple knew they could get caught, that risk has been assessed when they implement this scheme and found to be low enough to warrant it at the time. If anyone else gets caught not paying their dues in taxes, you can bet the local revenue service will be knocking on your door for the amount owed. Corporations are no different.
Also this isn't just about Apple. The EU has been going after a bunch of mega-corps the past year, including Starbucks. Apple is just one of the bigger fish amongst the big fish.
I certainly would not attribute it to oversight or misinterpretation of arcane laws. Obviously they knew what they were doing.
And, I'll leave aside moral considerations because they are not strictly relevant to the point of whether the EU's ruling is correct.
My point was that I don't see that either side of the legal argument is blindingly compelling. Certainly not without hearing a lot more argument and research from both sides.
It comes down to a disagreement over whether Apple's use of a particular loophole in Irish law constitutes Ireland giving Apple a special deal that is unavailable to other companies.
Apple/Ireland argue that the loophole existed in law and was available to anybody.
EU argues that even though the loophole may technically have existed in Irish law, it still constitutes a special deal with Apple because (I think) it takes a lot of money to hire the tax experts necessary to exploit it.
What is the knockdown blow that makes either one of these either totally compelling or totally uncompelling?
I don't see why people are so certain on either side of this.
I live in Ireland. I work at a multinational - pretty much everyone I know does. And I know that on one hand, most MNCs aren't paying their "fair share" - most of them are here for the same reason. On the other hand, I know our jobs probably wouldn't be here otherwise.
MNCs paid 80% of all corporate tax in Ireland, in 2015. The top 10 payers paid 40% of all CT between them. It's really one of those "quantity vs quality" things, and Ireland has opted for quantity. A rather than extracting a lot from MNCs, we extract from a lot of them instead. And it does balance out - CT forms about the same % of govt revenue as the european average. We're not actually losing out this way - but we are gaining jobs and investment. And for a country where "getting a job" used to mean the ferry to the UK, that's huge.
And MNCs hoarding cash here does have other benefits. eg, Apple are building a datacenter not far at all from me, because it's cheaper to build it here, than repatriating the funds to the US to do so there. We create more jobs, more investment, more value by being friendly.
I also have to be a bit realistic - the moneys funneled through Ireland without being taxed, wouldn't have come this way at the full rate. That is - "our fair share" is a bit revisionist; if we taxed them 12.5%, we would have received 12.5% of nothing. They would have sent it somewhere even cheaper instead (eg, Intel are building out in Israel because they were able to offer 5% instead).
Of course I can see the other side, that corporations need to play fair. And that what we're doing is costing someone somewhere else instead. But I do see the day-to-day duality - that people here, in Ireland, will bounce between complaining that Apple don't pay enough, and being excited that they're building a few hundred more jobs 4 miles down the road, within the same conversation.
(and to be clear, it's not just Apple - the primary concern at the moment is that while Apple may concede and pay what the EU demands, the next investor, employer to move here, might have second thoughts.)
> It boggles my mind that there are people supporting Apple in this. There are so many of us that like to cheerfully screw themselves over to protect rich corporations.
Are you staying there isn't a principled stand to take here?
Or that there is reason to object on principle but one shouldn't because it's not self-serving?
1. Regardless of Apple, states should make good + compliant laws. Ireland clearly messed up here.
2. If Ireland would've done a good job, Apple wouldn't be having this problem today. Which probably means Apple will recover the tax payable from Ireland, through damages.
3. There's plenty of tax optimising any business owner can do.
Of course, but a lot of it has to do with scale as well. There's a lot of non tax stuff that Apple can do, that smaller companies can't either, e.g. negotiating procurement deals on certain electronics forcing the supplier to work on razor-thin margins.
As I am part of the 50+% of Americans with investments in the stock market, I would prefer the money stay with the shareholders rather than transferred to European politicians. It's okay if you disagree and think that politicians would make better use of the funds than an individual, but it shouldn't really be inconceivable why someone else would disagree
> I would prefer the money stay with the shareholders
I thought it couldn't be repatriated anywy, because the US charges a level of tax that isn't 0.005?
> rather than transferred to European politicians
Yeah, each MEP will get a personal dividend from it O_o
> if you disagree and think that politicians would
> make better use of the funds than an individual
This reduces to the absurd very quickly. Yes I think Apple should pay tax. They set up in a 12.5% corporate tax jurisdiction, and I think they should have to pay that, rather than the less than 1% that they did.
In general, U.S. reduces its tax by $1 on foreign income for every $1 of foreign taxes paid on it. So if Apple decides to repatriate the money after paying foreign taxes on it, the U.S. is in effect paying for the increased money going to the EU. (Or presumably would; perhaps the U.S. could argue this additional payment is not a creditable foreign tax.)
If Apple was similarly accused of wrongdoing by the IRS, and told to backpay taxes that they were supposed to have paid, would you still feel similarly?
I'm trying to figure out if you're taking Apple's side because of the Shareholders vs Government angle, or the America vs Europe angle.
Yes, I would. I am not particularly happy with what US politicians do with windfalls. It's not a US vs Euro issue for me. I'm talking about individual vs collective body.
Just as an example, NYC recently sued BNP and used the money partly to buy iPads and iPhones for the police force. Even if a wrong is done, the primary victims are rarely the main beneficiaries and the funds just increase the ever growing administrative state and encourages future shake-downs
> The city has already pledged some of the money toward equipping police officers with 41,000 iPads and iPhones, part of a joint, $160-million initiative with Mr. Vance’s office.
Ok, I understand where you're coming from, but I still don't understand why you would reflexively always side with corporations/shareholders vs the government. Clearly the government needs to raise some tax revenue, in order to fund programs like the US Military and Medicare. And given that the government needs to raise some amount of tax revenue, they will need to put in place tax laws, and there will always be some corporations that try to skirt those tax laws in order to maximize their own profits. In cases where the corporation has genuinely broken the laws, even if it's an "honest mistake", they will need to make amends.
If we applied your principle of universally siding with corporations/individuals paying less taxes than they are supposed to, then no one would pay taxes at all and the government would cease to exist.
If you think that the current tax rates are too high, then start/join a political lobby that seeks to reform the tax system. But given that we do have a current set of tax laws, it doesn't make any sense to universally support those who have been found to violate those laws.
> If Apple was similarly accused of wrongdoing by the IRS, and told to backpay taxes that they were supposed to have paid, would you still feel similarly?
But that's not what's happening, really. If as an individual the IRS wrote to you and said "look, all your tax returns in previous years were in compliance with the law, but we've now decided those laws were wrong and you owe us more money" you might understandably be a little annoyed.
There's a reason that in most (but not all) cases we don't allow new laws to be retroactively applied - because we recognize it to be unfair.
That's not what really happened here though - the court found that they were in contravention of existing law all along. It's not a change in law or retroactive application of new law.
The proper US analogy would be some sort of state level tax break that was later declared unconstitutional and the tax refund you got having to be repaid.
Thank you for invoking the newly evolved Godwin's law by suggesting that politicians are a class of people without merit.
It's okay if you disagree and think that you meant to directly invoke images of fascists but it shouldn't be inconceivable why someone would ignore your ill-conceived argument.
They're not without merit but I don't buy into this whole "government is simply the name we give to the things we choose to do together" romanticization. Government is run by politicians and much of the administrative state (in the US at lease) is delegated to unelected officials.
It won't be transferred to European politicians but to Irish people.
That's money that should never have been in shareholders hands in the begining because illegaly kept as it's unpayed due taxes. Invest your money in businesses that respect the law if you want to avoid this situation.
I agree. I am a small business owner in Europe and it pains me to see the big guys getting away scot free without paying taxes while we are scrutinised over every cent. Even the NS, the Dutch national railway (semi-public) is using Ireland to dodge taxes. I would love if big companies that have resources and more leverage in the legislative process to push for a more simplified and standardised tax code across Europe.
> The average individual working person has no negotiation when it comes to what taxes they pay.
I'm not sure this is true. It's not a coincidence that many small businesses often pay their employees under the table, ignore minimum wage and overtime laws, and often prefer cash payments. The IRS chooses to go after the individuals where there is the biggest spread between how much they can collect and how much it costs to go after that person. If a small business is reporting suspiciously low income, the cost of going after them won't be worth it.
> Every individual should support the EU. If the EU is defeated here it will be a loss to the small man and small business
"Apple" doesn't pay these fees. The shareholders do. You're taking away that money from investors (401k, pension funds, ordinary investors, hedge fund investors, Tim Cook) and giving it to Irish politicians. This may be a good or bad thing, but you cannot argue that this money is coming from some giant black pit called Apple.
Apple has a big pile of cash from not paying taxes and they don't know what to do with it anyway. That's why their stock didn't move much because large pile of cash(tax shelter cash) - 15B still equals large pile of cash doing nothing for investors.
The value of that cash is baked into the stock price. It's tied up for now but investors have some expectation that they will ultimately benefit from the cash. Right now I believe they are using that money as collateral for debt which is being used to pay dividends.
I can't spell out exactly how this will impact debt and equity valuations but to assume that a $14 billion tax hit will have no impact whatsoever is a bit naive.
For years Cook and others have been taking the stance that they are just following the laws and if people want them to pay more tax then they should get the law changed, and then Apple will happily comply. Now we see the hypocrisy: when faced with actual law saying they should pay tax do they actually happily agree to pay the tax? No, they turn around and say that they object to the law and argue the law is invalid. So what we have here is not a good corporate citizen just happily paying what taxes it is due. What we have is just like any corporation: an entity that will cynically seek to avoid and minimize its tax using any argument available and they have absolutely no interest in paying their "fair share" or contributing back to society under any tax system. So we have to just remember this next time they say "Well if you want more tax, change the law" because that is a completely insincere lie on their part.
I think there is a difference between saying 'we comply with the law' and being happy when someone retrospectively changes the law and then demands n years payments under the new rules.
Nothing is changed retrospectively, in the EU you cant give one company a tax break. Ireland knew this, but went ahead and did it anyway, Apple knew this too, and took a chance.
It appears that this is the crux of the disagreement. Does the loophole that Apple used constitute "giving one company a tax break"? There seem to be reasonable arguments on both sides.
Nobody changed the law retrospectively. The EU law always existed and Apple obviously knew about it.
If Apple asked for the state of Texas for a tax cut in the state of New York and then got fined for not paying their taxes you wouldn't call name it "retrospectively".
The article is trying to address a legal situation but uses terms like "that doesn’t mean they’re paying anything resembling their fair share" and "everyone is correctly saying Apple did wrong".
The moral/ethical viewpoint is being addressed here, not the legal one. If the law is out of step with the moral viewpoint (as it so often is), then folks on the moral side apply pressure to change the law. The law is supreme in our part of the world, and arguments that ignore it are simply beside the point.
An appeal is exactly the right way to test the law, so we'll see at the end of this process if the EU is actually challenging Ireland's tax law and its legality in the context of the EU, or if there was, in fact, some illegal activity on the part of Apple and the Irish government (as is suggested by the extant ruling).
> The article is trying to address a legal situation
No, it's addressing a letter, which makes moral and ethical (as well as legal) arguments: e.g., one of the reasons why the EU's judgement is unfair is that Apple already pays lots of tax.
Tax unification - would in fact start with Fiscal Harmonisation.. That is to say - tax rates can be different, but the underlying calculations how to calculate income and expenses would be harmonised across the Member States of EU.
We are generations away from Tax Unification, if it ever happens...
Fiscal Harmonisation - more like it, though save some global seismic event - still a generation into the future.
I believe this is the political calculation the EU is making. Further EU integration is unpopular right now, but not as unpopular as large corporate tax dodgers.
This is partly about showing how only a big powerful EU can stand up to companies like Apple, whereas small countries like Ireland have to beg for tax.
> then corporations lose incentive to register in countries which offer them the largest tax discounts.
then corporations lose incentive to register in Europe. You can't have unilateral tax rules when countries have different growth and capital requirments.
I'm clearly in minority here on HN, but living in EU and hearing about their legislation, I'm pretty sure that Apple with their overpriced products and cheap factories in China can still make more positive impact in the world with that money than any EU gov or European Union.
Of course these ponderings should be irrelevant. If law would be simpler without unnecessary millions of complications (and new ones added every day), then it's just boolean. They broke the law by not paying necessary taxes or they didn't. Not much to discuss.
The EU has had a massive positive effect on former soviet countries.
I live in a former Soviet Union country and I can confirm that. Since we've joined EU in 2004 things have improved really massively in pretty much every aspect. Sure, we are still way behind the old western countries, but comparing to other former Soviet Union states that did not join EU, the contrast is staggering.
Preventing war has been an explicit aim of European integration going back to the beginning. From the Schuman declaration (1950, founding document of the ECSC): "The solidarity in production thus established will make it plain that any war between France and Germany becomes not merely unthinkable, but materially impossible"[0]. This principle has been widely accepted in Europe for the last 65 years.
You may of course disagree that economic integration is the main reason for the lack of intraeuropean wars since then (especially compared to the previous few millennia), but dismissing it as a "myth" is at very least least a surprising claim that requires some actual argument to back it up, and "new" is just factually incorrect.
It seems hard to defend Apple's position. The pushed their tax avoidance strategies as hard as they could in Ireland until they were paying 0.005 percent in 2015. It would be wonderful if tech companies took this moment to push for clear and transparent international taxation laws. Some of the tax avoidance measures currently practiced can seem particularly unfair from a layperson's perspective.
> Cook: [...] Apple has long supported international tax reform with the objectives of simplicity and clarity.
> Gardner: That bit made me laugh out loud. When the Senate’s permanent subcommittee was describing the elaborate tax-avoidance techniques used by Apple, they had to use flowcharts to explain it. The incredible complexity and creativity in the Apple tax-avoidance scheme is almost admirable. But to say that they are interested in simplicity and clarity is laughable.
This is a failure of reading comprehension by Gardner, which could only be brought about by bias. Cook is not saying Apple's current arrangements are simple. He's saying that he would like to see reform so that using simple arrangements instead would not be detrimental to Apple.
As usual for headlines that contain phrases like "takes apart," "utterly debunks," or "totally destroys," the tax expert's response does absolutely none of the above. Not a single factual assertion in Cook's letter is contradicted.
There should be an axiom comparable to Betteridge's Law for this sort of headline.
Apple considers that all sales across Europe actually happen in Ireland, so taxes on profit on sales in the whole EU are paid in Ireland. That part is perfectly legal within the EU.
The issue is that the normal tax rate in Ireland is around 12%, and Apple uses accounting tricks and tax exceptions to lower their effective tax rate there to 0.005%. That is the part that the the European Commission ruled illegal.
Agreed - the title is bombastic fluff, however, some interesting points are made. Though the strongest one just paraphrases of the opening paragraph of the EC press release (http://europa.eu/rapid/press-release_IP-16-2923_en.htm).
--
The biggest problem I have with Tim Cook's position is the sovereignty argument. I would stay away from it for now, and let the interested parties pick it up.
Tim Cook: "This would strike a devastating blow to the sovereignty of EU member states over their own tax matters, and to the principle of certainty of law in Europe".
Ah, I see. So what they're saying in this case is that 0.005% is the fraction of Apple's global non-US profits that was paid as tax in Ireland.
That's not the same thing as saying it was "a 0.005% tax rate". The issue is over what fraction of the non-US profits are taxable in Ireland, not over the tax rate.
Whoa, I don't think they're saying that. "Apple Sales International" is not all non-US profits. It's a company buying Apple products from contract manufacturers in other regions and selling them in Europe. It would not be recording any revenue from sales in other regions.
The profits would then be the difference between the cost they bought those products for (+ things like the very substantial payments to Apple US for R&D), vs what they sold those products for.
Yeah, like the bit where he says that apple does not pay the "fair share". There is no such thing. Either you pay what is required by law or you don't. Especially if what they said about being the largest taxpayer in Ireland is true. I feel about it this way - if you rented an apartment for $1000/month, and you had a room mate that paid $900 a month, why does it matter that it's only 0.00001% of his income, while the remaining $100 is 20% of yours? Could anyone say that that other room mate is somehow not paying his fair share of the rent, since it's such a minuscule percentage of his earnings?
That's not precisely accurate. The EC's ruling is that the Irish government changed the law in an unlawful way. There has not yet been an explicit ruling on Apple's conduct, as far as I know - that's likely to take more time (years...) to happen.
1. Apple, like every other big corporation, uses a complex corporate structure in order to reduce taxes legally.
2. Irish government issues preferential rates and also advises Apple on how to do it, directly breaking EU law.
3. Five years later - Apple has to pay for the Ireland's preferential tax rates.
So let me get this straight - according to EU law if I get told today that Irish tax rate is 20% for example, 5 years down the line I can just expect someone to send me a letter stating that actually - I got preferential tax and I should repay another 20% on everything. Not to mention negative PR.
Can someone explain why people are angry at Apple when clearly they were allowed to do it?
It is interesting watching how emotionally invested people get in scorning corporations about legally reducing their taxes. Every small company owner I have talked to has tried a few ways of legally reducing taxes - I can't see why people hate on other people for doing the same thing.
If somebody says they don't mind if you pay them below minimum wage, it doesn't mean that it is legal. At some point in the future a lot of hurt might end up coming your way, and you could be forced to pay them the remainder, even if they say they don't want it because they might lose their job as a result.
Similarly, just because Ireland told Apple that they could get low taxes, doesn't mean that they were legally entitled to do so.
I don't mean to provoke people to get downvoted to hell - I mean to understand why people are hating on Apple.
Your example is not applicable here since below minimum wages are illegal to begin with.
> Similarly, just because Ireland told Apple that they could get low taxes, doesn't mean that they were legally entitled to do so.
You are talking about the government here - not Apple. My point being - the Irish government was at fault when they broke EU law. Why should Apple be the one to compensate their error?
Ireland agreed to the Treaty of Rome, in which they agreed to not provide state aid to corporations. The EU commission's ruling is that the effective tax rate of ~0% amounts to state aid via a tax break. In order to reverse the state aid, Apple needs to pay Ireland the money that it was illegally allowed to keep. That is why it is Apple's responsibility to pay back the money, because that is the only way to ensure that the incentive of this tax-favouritism is removed.
"Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market."[1]
Again, please provide evidence that a specific deal was done for this specific company, or even group of companies. I have looked and cannot find any such thing.
> I get told today that Irish tax rate is 20% for example, 5 years down the line I can just expect someone to send me a letter stating that actually - I got preferential tax and I should repay another 20% on everything.
Were all the other companies also paying 20% when you started, or were they paying 40% then?
Did your accountants and lawyers not notice the preferential treatment? Were they not aware of both Irish and EU laws?
As an individual tax payer, can I get similar treatment where the IRS confirms that my 1040 is correct? If I get bad advice from the IRS which causes me to fill out my 1040 incorrectly, am I not still liable for any owed taxes?
If I am liable, why should Apple not be liable? If I'm not liable, tell me how to get the IRS to review my taxes this way.
> if I get told today that Irish tax rate is 20% for example
You got that wrong. They knew that the Irish tax rate was 12.5% for all corporations, but the government at the time offered them a super-extra-deal that - just for them - would bring that to 1%. Apple's lawyers were surely aware that this kind of special deals are very debatable in view of EU antitrust law, but took the deal anyway - at their own risk.
It doesn't appear there was one. Apple used a loophole in Irish tax laws that meant Ireland wouldn't tax certain income. It sounds like Ireland apparently acknowledged in a ruling this was a correct reading of the tax laws, which binds Irish tax authorities to not challenge Apple on the issue.
The thing is, if my understanding of the facts is correct, it was a correct reading of the tax law, not some special one done for Apple. So this ruling was not a "deal."
Seems like they found a place that cost less to operate, so they did. That's just good business and they'd be dumb for not doing so. If the EU wants to change things, I support that going forward, but retroactively sounds fishy.
I can't see how setting up an Irish company will allow me to skip paying the 30% app store tax.
Maybe Ireland should up it's game & slap Apple with a 30% charge! If Apple wants to complain, they can hunt for an email address, not find it, and be forced to fill out a little form, from which they will never hear back.
My only issue here is that Ireland get's to be the big beneficiary of this.
Ireland was in the wrong trying to strip the other EU countries of their due taxes as much as Apple. This money should go to EU to apply a they see fit, instead Ireland profits from it exclusively.
No this is incorrect, Ireland will not benefit as they will be required to use this tax revenue to pay back their national debt, largely owed to other EU member states...
Sure many companies won't incorporate in Ireland, but about half the United States' corporations call Delaware or Nevada their "home" despite operating elsewhere.
There is a difference between legal and ethical and there is a dimension of Apple's reputation that draws from ethical behavior.
Tim Cooks argument is I am successfull and am producing n number of jobs and without my success the state would lose taxes from these x economic activity so I should basically not pay taxes and be rewarded for my success with a tax cut.
While this Somalia argument completely ignoring government services can be made, its not part of the current economic and political system and social contract in which Apple has grown, exists and benefits from in higly educated employees and a rich stable ecosystem and marketplace.
We may not agree with laws but we hardly have a choice to comply because of difference of opinion. The fact that one may have resources to game the system does not make it right. No one is stopping Apple from having this discussion but this does not give them any special privileges to avoid paying their fair share or justifying the act post.
The bigger problem is the intentionally placed loopholes in the global financial system to aid creativity in tax avoidance. This is not an accident, these loopholes have been lobbied for and inserted by vested interests and must be removed to retain credibility and trust in the global financial system.
Or loopholes should be placed for everyone. As in individuals outsourcing their labour to a holding entity in a low tax zone, being paid in this low tax zone and importing funds as required by paying a small percentage than they would be otherwise liable.
This race to the bottom will drive all individuals to these low-tax states as it is driving crafty companies and the average state then won't have any revenue to offer any services. This simply won't be be acceptable for individuals and won't be accepted by any country, so why is it acceptable for billion dollar entities.
I am glad about my decision to switch away from the Apple smartphone. Now I'm also thinking that I shouldn't wait for their laptops lineup update as well. There's our little way of fighting for justice and for society's interests against money-making paperclip maximizers. :)
South Korea gives big tax breaks to its chaebol (form of conglomerate). So effectively they don't need to funnel anything to Ireland/wherever because their home country works just fine.
One bizarre thing about this whole affair is the reactions on social media. The EU has made a ruling based on the idea that markets must be free from government interference, and facebook is full of lefties arguing in favour of the ruling and right-wingers arguing against it
"It’s clear as day—and this was one of the findings of the 2013 Senate subcommittee—that there was no sensible business reason to set up those subsidiaries except to avoid paying taxes."
The avoidance of paying taxes, the lowering of costs, does not qualify as a "sensible business reason" to take an action?
Tax is computed after the profit is made. What we're discussing is the question of where the profit was made and which country's tax system it falls under. If any.
Yes I am aware that profits are taxed and not revenue. Parent mentioned reduction of costs as a compelling reason of locating in Ireland, as well as low taxes. Corporations are legally obligated to maximize profit for share holders.
Well .. firstly, that's an over-reaching reading of Ford v. Dodge, and secondly, the specific company that's located in Ireland (Apple Sales International) doesn't actually have any costs if I've understood correctly - it's a shell with no premises and no employees.
(In a corporate structure, which company do you think is legally obligated to maximise profit? The one at the top of the pyramid, or every individual registered company?)
I'm most interested that multiple commenters in this thread are so egregiously conflating legality and morality, particularly when discussing a corporation in a capitalist system. I'm as liberal as it gets and I probably wouldn't link corporate taxes under capitalism and morality, for a few distinct reasons.
No. The entire point of law is to completely eliminate fairness, morals, and other squishies as deciding factors involved in a judgment. We punish theft because it is against a clearly defined set of laws, and because at some point lawmakers determined that we should. We notably do not punish many immoral things, and punish many moral things; introducing morality is dangerous and undermines the whole thing.
To use your theft example, think about a Robin Hood type situation; should we overlook sidestepping of the law when it fits with our morals and squishies? No. The law is the law.
That edge cuts both ways. In some ways it supports your argument. In others it does not. Introducing morality makes your argument totally different (and, in this case, irrelevant until the United States and Ireland adopt socialism). I'm a bloody liberal and I'm saying that; we can't expect capitalist entities to operate in anything other than their own self interest or we actually don't want capitalism. Can't have it both ways. How do you define fair for a corporate person?
I'm very intentionally avoiding commenting upon the specific situation aside from saying it's weird to come at this morally when discussing a paper entity with clearly defined goals within a particular system of government.
This argument completely contradicts the way law is enforced in practice, with all its "reasonableness" tests and mitigating factors. I think you'll find very few lawyers regarding it as a mechanical system. What is the law of equity but a different word for "fairness"?
(I didn't downvote you, but...) I think you're ignoring the fact that laws and morals can't be completely decoupled.
Yes, morals should not play a role when --applying-- the law. But the reason the law exists is ultimately a moral one. When the punishment is flexible, the judge will normally apply moral arguments to support a more lenient or harsh sentence.
Why did we determine at one point that we should punish theft? Maybe we were wrong and should repeal those laws.
I think you will have a very hard time doing this and most counterarguments will be moral ones.
We got into this with taxes which are pretty much the opposite of rooted in morality. You successfully strawmanned theft and judges and sentences, I stupidly rose to that challenge with perhaps an over literal interpretation of law to make a point, HN encourages downvoting for disagreement, and here we are, having a conversation where you have to be sympathetic to me for being downvoted before you can make your point.
Ever ask yourself why?
Anyway, it's corporate tax law. The assumption that a corporation is being unfair by using every legal remedy available to it disagrees with how capitalism is supposed to work, or so they tell me, and I really don't care. I literally ran out of steam on making this point while typing this comment because it's 3:30am and matters approximately zero, so I have to ripcord on this. Sorry.
I said theft, because tax evasion is ultimately a form of theft. Theft from us, because we pay our taxes and the government uses that to build infrastructure which allows companies like Apple to function.
And then they take that and give us 0.005% of their profits in return. Thank you for the generosity? No.
This form of aggressive, "everyone for himself" capitalism works, for a definition of works equal to making certain people rich beyond their dreams. Why should the common man support that? For a phone?
Okay, but understand that your entire comment can be translated to "I don't actually want capitalism." Do you understand my point now?
You can't have fair corporate expectations and capitalism. They are mutually exclusive and every case of corporate leadership trading value for moral causes can likely be successfully fought on fiduciary grounds. Capitalism is not aggressive. It just is. The incentives are created in a certain way. This is like saying you'd rather play chess if there was a third color; there's nothing wrong with wanting to play that game instead, but let's not call it chess any more. Dig it?
I don't even disagree with you entirely (again: liberal! Look at me typing this conservative wet dream!), I'd just rather see you make the anticapitalist case as opposed to appealing to morals.
If you ran a corporation in the United States and volunteered to pay more taxes on moral grounds you'd very likely be in breach of fiduciary duty if someone pressed the issue. That's what I'm saying. We have built a certain house and we can debate whether it's a good house, but we also can't be surprised and morally outraged when the incentives of the system are followed to their extremes.
I don't think that the system must be in a certain way. We should not be too dogmatic about what capitalism is, but rather ask ourselves what is desirable for a healthy society and work toward achieveing that.
Fair corporate expectations and capitalism are not mutually exclusive. If the result will not be called "capitalism" is not so important for me.
I don't want to make an anti-capitalist case, because I am not opposed to it, but rather certain aspects and behaviors. I think you're arguing that those are intrinsic parts of capitalism.
"""Why do we punish theft anyway?"""
This usually boils down to: do not do onto others, what you wish not done to you.
In this case: what if Apple suddenly got a competitor who pays negative taxes ? (Since we can't go lower then 0% in this example) How would Apple feel ?
We punish it because it's damaging to individuals and the social fabric that binds them.
The money that Apple is sitting on could have been used for many positive things for the citizens of Ireland. Their government and Apple robbed them of that money for 6000 jobs, the taxes they produce and probably some administrative income.
Corporations are not above society. They exist thanks to individuals and infrastructure built with taxes.
I think the idea is to have a level playing field, where everyone pays x%. There could be rebates for some categories of companies, but not for ONE company which is rich anyway.
The money that Apple is sitting on could have been used for many positive things for the citizens of Ireland. Their government and Apple robbed them of that money for 6000 jobs, the taxes they produce and probably some administrative income.
Nonsense. The reason Apple and those other companies are in Ireland in the first place is because of those deals. That's why the EU is trying to shut it down - the EU is the cartel charging high prices (taxes), and Ireland is the member undercutting them.
I don't think there's anything wrong with what the EU is doing, assuming they have the authority under the treaties, but painting this as a government against its people is just wrong.
But Apple isn't paying the 12.5% Ireland tax rate; they paid 0.005% in the past year - thanks to an assumed deal between Apple and the government.
The issue here isn't Ireland being at 12.5% which they are free to use - it is the special treatment Apple and I assume other large corporations are getting which is being viewed as unfair
The average individual working person has no negotiation when it comes to what taxes they pay. The average business has to be very careful, fully aware that they are at an extra competitive disadvantage compared to the international mega-corporations who are effectively given huge financial subsidies by entire nation states.
It’s not personal. Tim Cook knows that what's happening is right, but nevertheless he is required to defend the tax advantage, same as the Ireland, as with the US where mega-business and corporations have a strangle-hold on government and law.
Every individual should support the EU. If the EU is defeated here it will be a loss to the small man and small business. If defeated it will enshrine by default the creeping imbalance of power that corporations have over the individual nation and people.