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Apple Agrees to Deal with Ireland Over $15B Unpaid Tax Issue (wsj.com)
171 points by antr on Dec 4, 2017 | hide | past | favorite | 184 comments



I always find it interesting the big companies get the opportunity to make a deal. As a small business you would just go to jail probably. Certainly nobody would negotiate with you.


"If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem."

The book "The Cheating of America" goes in to great detail about how this works (for individuals, not corporations) and it is pretty much guaranteed to make your blood boil. It goes through case studies on a number of specific people - how much they owed, what they did, what the government did, and how it all ended up - but the tl;dr is that it's fairly common for very rich people to end up negotiating a settlement for ~20-40% of their tax bill, 2-5 years after it was due. The quote I remember from it was something like "For those who have tax lawyers on retainer, the number at the bottom of a return is less like a final offer than an opening bid."

0: https://www.amazon.com/Cheating-America-Avoidance-Evasion-Bi...


Wow, that does make my blood boil. Is there any indication as to whether that assessment is still accurate, given that the book is from 2001? I could see this not being the case, given the digitization of money flow and how much easier it might be for the government to get your money, but then again I could see it still being the case.


And the sad fact is that the gov't can't hardline the tax code because the world is so connected that a rich person could move away.

The World needs to have one unified tax code!


The IRS negotiates all the time, as noted below. Moreover, in this case, Apple paid what Ireland asked. The EU came along and said Apple’s tax deal violated EU law. People don’t go to jail for doing what the IRS told them (or indeed, for having a reasonable but ultimately mistaken view of the law). The law has estoppel provisions that protect parties who rely on the IRS’s representations with respect to their taxes. (E.g. where they say a certain thing is okay then hangs their mind.) Plus, the IRS is a litigant like anyone else. If they think they might not win on their legal interpretation in tax court, they’ll settle to mitigate the risk.


Earlier this year I was trying to reach the IRS, and couldn't get through via phone after N attempts with no email options. I called my congressperson, complained, and got it resolved through an aide in my congressperson's office with a couple easy phone calls and email. It was super nice. I highly recommend.

When asking for help:

- be specific about the problem

- say you've made a good faith effort to resolve the matter on your own (keeping a log of calls made recommended)

- complain about being a person trying to give money to the IRS, and you shouldn't be having this problem

- be nice when talking to the congressperson's aide who tries to help you

- don't feel like your burdening the congressperson's aide by working with them directly, as resolving your complaint/issue is exactly the reason they exist, and you're helping them feel good about serving, because that's exactly what their doing

- when the matter is resolved, thank them directly

- for future matters regarding "call your congressperson to say X" campaigns, you now have a direct line to the congressperson's office (don't abuse it)


"don't feel like your burdening the congressperson's aide by working with them directly, as resolving your complaint/issue is exactly the reason they exist"

surely it's why their job exists, not them selves? :D that would be a weird answer to have to your existential questions, like the butter passing robot in Rick and Morty


> People don’t go to jail for doing what the IRS told them

The problem with this analogy is that the systems have one fundamentally important difference.

In the US, the IRS are federal enforcers. This means both regulation and enforcement are federal. In the EU, only regulation is, while enforcement is state level. This is much more comparable to the situation with patent regulation in East Texas.

Ireland is East Texas.


Actually in the EU corporation tax is meant to be state level too. After the Irish rejected the Lisbon treaty in a referendum, they were given explicit assurances by the EU that the EU would never interfere with their corporation tax policies, which are domestically popular there. Then they made the Irish vote again, and they got it passed that time.

However, that assurance turned out to be worthless, as here they are, telling the Irish how to tax corporations.

The EU has a history of making written assurances and then violating them later. After Lisbon gave the EU courts control over human rights law, the UK and a couple of other countries negotiated written opt outs. That opt out is written in the treaties, clear as can be. But later on the ECJ decided that the opt out shouldn't have been granted and voided it. Now the UK has to obey the ECJ in an area of law the EU explicitly agreed to leave alone.


> they were given explicit assurances by the EU that the EU would never interfere with their corporation tax policies

They were given assurance that the EU would not interfere with their low corporation tax rate

> that assurance turned out to be worthless, as here they are, telling the Irish how to tax corporations

Their interference here is not to do with Ireland's application of its tax laws or rates, but rather to do with favourable treatment of one company over others. Ireland's tax rate is 12.5% - charging Apple 0.005% instead of the already low 12.5% gives Apple a market advantage over any competitors paying 12.5%.

The specific violation is in Article 107 here[1], which is more concerned with competition law than tax law. And was not excepted in Lisbon.

[1] https://www.ecb.europa.eu/ecb/legal/pdf/c_32620121026en.pdf


No, it just isn't right. The EU's figure of 0.05% isn't even properly calculated. But even if it was, Ireland can set whatever tax rates it likes by area or by individual company. By treaty the EU just doesn't have jurisdiction over it at all.

Now, I know the article in question here. 107 is a classic example of badly drafted law, like most EU law is, but even so let's read it shall we?

http://www.lisbon-treaty.org/wcm/the-lisbon-treaty/treaty-on...

"Save as otherwise provided in the Treaties, 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 internal market"

Key word: AID. Key word: THROUGH STATE RESOURCES.

Ireland is not giving Apple "aid" under any dictionary definition of the term. Taxation at any level is not "aid" because "aid" means giving someone something, not taking it away. Tax would never be described in this way by anyone who didn't have a political agenda. Also note: through state resources (i.e. state budget). Obviously irrelevant in the case where the budget is getting larger as a consequence of this "aid".

That said, note the huge get-out clauses too:

aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest

... is explicitly allowed. This paragraph is essentially meaningless: Ireland could claim that - if they accept for a moment the idea that tax and aid are the same thing - it is to facilitate the development of the tech industry in Ireland, and that such "aid" does not affect trading conditions because Apple products are available all over Europe. But then the Commission can claim that anything that disadvantages higher tax countries is "contrary to the common interests" and around we go again.

Basically, EU law is garbage. The treaties are extremely imprecise and whatever they say is irrelevant because the Commission and courts will simply re-interpret it to suit whatever their current political objective is.


I think the EU ruled that Apple's deal violated Irish law, not EU law. The 0.005% effective tax rate should of been a fair bit closer to Ireland’s 12.5% corporate tax rate.


This is unlikely, given that not surprisingly the judicial arms of the EU typically deal in EU law, not the laws of individual member States. It's pretty rare for a supra-national body like the EU to enforce individual State level legislation, as opposed to treaty obligations or similar.

In this particular case it was a breach of EU state aid rules, Ireland's Government has been very much opposed to the decision, which is why comparisons to the IRS don't really work all that nicely. From a legal perspective it's really more a question of competition law than tax.


It was a violation of Irish competition law, which as a part of the EU is harmonised with EU law. Seemingly the Irish officials were unaware of certain nuances, or at least were blithely ignorant.


It was not a violation of competition law either. The EU's basis for forcing Ireland's hand here is a novel redefinition of "state aid". Previously this part of the EU treaties had been understood to be talking about subsidies. The language contains a reference to the usage of "state's own resources" which is EU speak for government money. The goal was to stop the common practice of governments bailing out national champion firms.

But the EU can be relied upon to expansively re-interpret its powers after they have been agreed. It happens frequently. They have since decided that in Ireland's case, low tax rates are the same thing as direct subsidies. Obviously Ireland is not giving money to Apple, it's the other way around, but now "not enough" money is considered by the EU to be illegal.

This interpretation of the treaties was never raised previously and not surprisingly Ireland was very upset about it, as they'd been given assurances the EU would not interfere with their low corp tax regime. That's why Ireland is fighting it on Apple's side. It's not just about Apple. It's about the EU taking control of a policy that the Irish government thought they controlled.


That's not the case. Sorry. It certainly isn't that the EU redefined anything. These rules are quite clear.

What is less clear is the nuances of "just how" Apple was given favourable treatment.

It's very much in the fine details of Ireland's agreement with Apple, but what it boils down to is that Ireland gave an evaluation of Apple's tax liabilities tailored to Apple.

Even without this, Apple's tax liabilities would have been highly favourable but it is this "technical" matter that puts Apple & Ireland over the line, and is the basis of the 13bn figure, which is only a fraction of what Apple actually manages to avoid paying with their creative tax practices.

The best plea that Ireland can make in this regard is ignorance, but now that rules have been clarified the adjustments must be made.

I felt that Apple's whole response to this was highly disingenuous and inflammatory.


You should really discuss that with a tax lawyer. If the rules are so clear then why was Ireland taken by surprise and why did they fight it? The relevant section of the treaties are quite clear and readable. They simply would not be interpreted by any normal person in this way.

It is a power grab by the EU in an area that the treaties explicitly state the EU does not control. End of story.

edit: Also see below where I discuss the article in question, which is anything but clear


Why? If a company has $200B it wants to deposit in your banks, what tax rate should it pay on the interest on that deposit? If Ireland said 12.5% (which is ridiculously high), Apple would have deposited it somewhere else, outside of the EU likely.

Accepting bank deposits is a good thing, it didn't create any costs for the government of Ireland. On the contrary, it likely funded lots of economic development. Which is exactly why Ireland did and should have offered a near zero tax rate.


> On the contrary, it likely funded lots of economic development

It funded "a little" development. Provided a bunch of jobs down in Cork and the promise of a few more once their (now reneged upon) datacentre came online in Athenry. Nontangibles include putting Ireland on the tech map.

But, whatever the appropriateness of the remuneration for Ireland, the taxation was being applied Europe wide for access to the broader European economy.

So this tax is not only due to Ireland but the European economy as a whole.

I'm sorry if these nuggets of truth get under some people's skins but that's how it is.


I'm not sure if you're actually ignorant of the argument, or if you just chose to pretend you'd never heard it. But, basically, it is:

The EU has rules to prevent a race to the bottom. In the long term, they are good for every single EU country, because they allow to actually tax companies, instead of lowering taxes to around 0.01 Euros annually otherwise. Yes, Ireland may have made the best offer this time around. But a year later, it would have been Croatia or Luxembourg.

The value of having a base within the EU is shown by Apple going to Ireland, instead of 0-tax jurisdictions like the Caymans. That value, which Apple uses to create its profit, needs to be financed by taxes.


The EU actually convinced Apple to move their savings to the Isle of Man. That's not a race to the bottom, that's throwing the baby out with the bath water. Taxing bank deposits like you tax an operating business is a ridiculously dumb policy.


They're taxing the interest gained not the deposits just like everyone else has to pay tax on their interest. Fair is fair.


There are many countries that don't tax the interest on bank deposits, just none in the EU anymore. And those countries are where the EU is driving companies to move their deposits to.


For now. We’re not going to continue to let these unethical companies to operate in the EU forever without contributing.

You probably think this sounds silly, but it’s what the majority of the voters here want and the EU though slow is moving with the people not the corporations.


It's not silly, just dumb. A foreign company that wants to deposit billions in your countries banks without any other services in return is an immense benefit to your country. Trying to tax them for it on top is short sighted and greedy.


A lot of the foreign-for-tax-purposes funds of US corps is held in US bank accounts in the name of the foreign subsidiary of the US parent. It's not doing any particular good for the economy that is the legal home of the subsidiary except to the extent that it is taxes there.


Not all of it. Even if Apple is only keeping 1% in Ireland, that's a few billion that Ireland banks wouldn't have had otherwise. What's the Keynsian multiplier on that?


The Irish Corporation Tax rate is 12.5%, but the interests from bank deposits are subject to the Deposit Interest Retention Tax with the current rate of 39%.


I'm not certain if you are just being obtuse, but the entire arrangement Apple (and other companies) have set up with Ireland, is to avoid taxation inside the EU entirely, that "money deposited" is counted as a loss for other subsidiaries inside the EU and paid as "licensing fees" to Apple Ireland.


Nope, that's not true. Apple pays billions in income taxes in Britain, France and Germany. This is about where they deposit their after tax earnings.


It kind of is true, perhaps not to the letter, but certainly in principle. As someone not familiar with the nuances of tax legislation as I'd bet a lot of us are, you can chase terminology all day, but ultimately it all boils down to Ireland given Apple discounted access to the European market at a knockdown rate. The specific point at issue, is not the discount though, it's the fact that this discount isn't available to others.


Nope, has nothing to do with market access. Ireland's tax discount was an incentive for Apple to base their IP there and deposit it's after tax earnings, i.e. foreign earnings after paying corporate income taxes to France, Germany, etc, etc.

Apple paid all the taxes it needed for "market access", this is just a question of what they do with the remaining profits after they paid those taxes. And where they base their IP, which obviously isn't going to be France or Germany.


Yes the reasoning being that they “pay those in the USA” or otherwise they would be paying them in Europe. Now whether or not they actually pay them in the US is another matter but, the manner in which it was determined which taxes should and should not be deferrable is what is at issue.


You mean employees pay income taxes, don't you?


Nope, Apple pays corporate income tax in every country where it has a presence.


There's no such thing as corporate income tax in the UK, not sure about Ireland.


Ireland is 12.5%


And since they conspired to reduce wages they cheat on income taxes paid by their employees too.


Since Apple has driven up wages in all of it's markets, you mean they conspired to increase taxes paid by it's employees and it's competitors employees.


> Apple paid what Ireland asked.

No. Apple lobbied (bribed) Irish officials to tell them they needn't pay more taxes. It's not like Apple had been passive here.


I think, speaking as an Irishman here, it's as likely the Irish officials lobbied Apple ...


Far, far more likely that Ireland lobbied Apple to encourage them to move jobs to Dublin, rather than choosing say, London.


The income tax revenue from Apple's employees in Cork (their Irish HQ) is a tiny tiny percentage of the corporate tax discount they negotiated.

You may be right that the Irish government lobbied them, but if they did, it was more for the appearance of creating jobs for political gains, rather than any actual benefit those jobs might bring to the economy.


That is not true at all, small businesses and even individuals get a chance to negotiate, I have done so myself. You clearly have no experience in this matter, and the IRS may actually deliberately perpetrate that myth.


Even on the principle?

I've negotiated successfully to reduce or scrap penalties for things like late return lodgement or late payment, but never had them budge a dime on the tax owed.


Generally things get fuzzy when analyzing multiple laws together, which leaves room for interpretation.

One simple hypothetical example: capital gains are taxed at 20%, unless investing is your profession, then it is taxed as income at 40%. Seems easy enough, right?

Random guy A works as a part time teacher, making $20k a year (taxed at 40%) but also makes $1m a year from investments (taxed at 20%).

It is a ridiculous example, but what is your profession? Are you a teacher, thus paying 20% on your investments? Or are you an investor, having to pay 40% on all of your gains?

You can be certain your friendly local tax authority wants to classify you as an investor. And you want to be classified as a teacher, thus paying the lower rate. But it could also be a loophole for a wealthy person to avoid taxation at 40%.

Unless they are certain they will get it right in court, there's a good chance you could make a deal and settle your dispute.


I think you mean "principal"? (Got very confused reading your comment since I thought you were objecting to the concept in principle.)


Ooops, you're right of course. My mistake.


I would probably depend on how you calculate what is owed.. You have one theory and the IRS has another etc...


The IRS makes mistakes also, e.g. your foreign tax credit gets lost. Their collections people are super understanding, it made a very stressful time much more bearable.


I will second having done this myself. There was a disagreement between how the tax credit for Obamacare/ACA was being taken by my mother versus I because I was transferring from being covered under her insurance to being covered under my own. The IRS said I owed more than I did because the tax credit couldn't be used twice, while my mother and I disagreed we bickered back and forth with the IRS for about a year but they gave up and let us count it.


Could you please elaborate?


I know that there are ads on the radio for law/accounting firms that will negotiate back taxes with the IRS for their customers. The theory being: If you haven't paid taxes in a decade, the IRS would rather have $1000 from you now than $0 from you ever.

Someone that I know personally worked with an accountant in the past, who was able to negotiate a similar deal. I haven't ever been involved in it myself, so I'm not familiar with the details.


Tell us more?


probably a distortion over legal actions being toyed with by deep pockets when smaller groups or individuals will get crushed


At least in the US, the IRS does negotiate with pretty much anyone who owes back taxes: https://www.irs.gov/payments/offer-in-compromise


James Brown negotiated his way into jail, I guess. The man who literally stopped riots couldn't negotiate with the IRS his way out of the slammer.


The IRS does not treat people who willfully break the tax code lightly. This is called tax evasion. They treat situations of evasion differently than they treat differences in tax law interpretation.

If you interpret the tax law differently from the IRS and there is an actual ambiguity (no sovereign citizen BS), if you do end up owing the tax you will still need to pay it, plus interest owed.

If they prove that you evaded taxes, you need to pay the taxes, interest, and heavy penalties. There is also potential for jail.

There are many lines that can be crossed and an accountant will help you navigate them. Tax avoidance is legal and encouraged. The IRS does not want you to pay taxes you do not owe. It may disagree with you at times, and there are avenues for resolving those disagreements. On the other hand, the IRS frowns down upon tax evasion and will hit hard.


Yes but pretty much none of the conditions or hardships that they are willing to compromise based on apply to Apple.


Do they actually negotiate the amount of tax to pay? I know they will negotiate on payment terms.


> Do they actually negotiate the amount of tax to pay? I know they will negotiate on payment terms.

Confused, did you click the link at all? It literally answers your question right there at the beginning:

> An offer in compromise allows you to settle your tax debt for less than the full amount you owe. [...] We generally approve an offer in compromise when the amount offered represents the most we can expect to collect within a reasonable period of time.


"We generally approve an offer in compromise when the amount offered represents the most we can expect to collect within a reasonable period of time."

I read this and should have phrased more carefully. I think this applies to people who really can't pay whereas Apple just doesn't want to pay.


Exactly, Apple has loads of money, there is no reason they can't pay.


They paid exactly as much as Ireland agreed to have them pay. Those $200B in bank deposits was a huge windfall for the country of Ireland, why would they want to tax it at all?


Doesn’t matter how much money they have. No corporation will pay more than they are legally required. Apple believes they paid the correct amount (as Ireland never complained).


I think Apple can hire enough lawyers and accountants to drag their feet for the "within a reasonable period of time" portion to come into play regardless of ability to pay.


Not based in the US, but due to general tax law complexities, tax authorities definitely negotiate over the specifics and interpretations of laws, as well as the amount payable (source: personal experience).

Having a good lawyer from an established firm with an excellent name helps a lot as well. If you're small fish, don't be surprised if civil tax servants try to bullshit you on the law. Be willing to fight (and prove them wrong), or be eaten.

On one particular case I'm aware of (friend of a friend), a seven figure tax sum was payable. They eventually settled everything for $25k because they weren't sure of their case.


This is totally false. Not only can you negotiate with them, but you can also set up very reasonable repayment plans based on your ability to pay. I was surprised how easy it was to do this and how willing they are to work with you to actually resolve everything. It does take a couple of hours to get an agent on the phone, though.


How does this affect your credit? And can you, like large companies, only pay a portion of the tax you owe?


Your credit is not affected. Large companies do not "only pay a portion of the tax they owe". They are following the law and taking tax exemptions. You can do the same. Disagreements arise in the details of tax law in how various exemptions combine with each other, especially if you itemize deductions. You can't usually just say "I want to pay less", you have to have some reason why you think you owe less.


My credit was unaffected. I objected to some of what they claimed I owed, and got them to throw out almost half. No interest and penalities.


But how do you get them to finally give up? If they say you owe X and you say no, I owe Y, then does one of you have to threaten to go to court before expecting a settlement?


That's totally false. The American IRS, at any rate, is extremely prone to negotiating, cutting deals, and agreeing to payment plans, over disputes large and small.


I don't think its that simple. If I've learned anything, criminal prosecution for financial crimes is pretty hard unless the crimes are pretty clear cut with convincing evidence. Most of the time, its much better to settle out of court, or negotiate an agreement, avoiding all the unpleasantness of an investigation (a win-win for both).


But this works only if you can afford a lot of lawyers. Without that you don't get to negotiate much from my experience.


There is a high correlation between being able to afford lots of lawyers and being accused of crimes that are tricky for the government to prove. The government doesn’t offer deals to white collar litigants because they’re afraid of the lawyers. They do so because prosecuting a guy accused of a white collar crime (which often comes down to doing something that would otherwise be legal, except with s particular state of mind) is much harder than prosecuting someone accused of having a kilo of meth stuffed under their seat when pulled over for running a light.


You don't need a lot of lawyers, but yeah I do see your point. Usually, if the nature of your crime is big enough to warrant the a federal/state prosecutors attention, you would most likely have the resources. If you're a 5 person company that accidentally committed a crime but they want to make an example out of you... yeah that can be tough.


Being able to afford an army of lawyers is central to Double Irish With A Dutch Sandwich. Smaller companies then have to compete on even terms with companies which have the resources this tax avoidance allows.


No, having business operations and assets that are international in scope is central to such strategies. You can’t shift profits around different jurisdictions if all your revenue and assets are in Oklahoma. It just happens to be correlated with being able to afford an army of lawyers.


Hardly. The international operations are often faked to facilitate the dodge e.g. IP licensing of branding from Cayman Island entities.


Indeed, particularly (though not in this case) when the behavior is criminal.

I would love to be able to rob a bank and then tell the court, "How about I give back half the money I stole from the bank, in exchange for no admission of guilt?"


It's the old adage: "If you owe the bank $1000, you have a problem, if you owe it $1 billion, the bank has a problem".


Why is this still the top voted comment? It's clearly been rebuked as false.


Well, the deal negotiated in the article is between Ireland and the EU, not Apple. Ireland had offered Apple a low tax rate to base there and the EU had argued it was illegally undercutting other EU countries.


It's pretty much, if we are persecuted, we will take our business somewhere else.


All this says is the money will be placed in an escrow account while Apple and Ireland both appeal the decision, which they both seem confident to prevail eventually.

They haven't conceded anything yet. The ball is still in play.

[edit] I'm not advocating for either Apple or Ireland, just making a factual comment. I think corporations should pay a fair tax.


I suspect the deal is "we'll help you evade the taxes you should be paying other countries if you give us a slice"


That's more or less what was already happening; which is why the EU told the Irish government they had to stop giving Apple a preferential tax rate unavailable to other companies. Ireland didn't want to collect this money.


The "deal" is that Ireland is holding the back taxes in escrow until the appeals are exhausted. And because it's such a large amount, Ireland had to hire managers/custodians for it. The terms are probably about what the money is going to be invested in.


This is what will happen. Its a miscarriage of international justice.


>BRUSSELS—Ireland will begin collecting €13 billion ($15.46 billion) in back taxes from Apple Inc. as soon as early next year after both sides agreed to the terms of an escrow fund for the money, Ireland’s finance chief said Monday.

That's a lot of money.


Not for Apple.


13bill is always a lot of money


It was really never their money to begin with?


What kind of nonsense is this? Of course the money was apple's to begin with, otherwise what was being taxed?


That was my point that it should have been paid as taxes in the past. Instead of robbing the host country and keeping it hostage.


Apple didn't rob anyone. They had $200B in cash they couldn't deposit in US banks, or they'd be subject to $80B+ in taxes. So Ireland offered to let them deposit those funds in Irish banks for a near zero tax rate, because it was a huge windfall for Ireland and cost them nothing.

If ireland hadn't offered, dozens of other countries would have. The EU is being scummy trying to undo a legit deal after the fact instead of ruling it can't continue in the future.


Except it is not a legit deal, because Ireland isn't offering it to all companies.


It's surprising that Ireland couldn't simply say everyone (including Apple) pays the headline rate for the first billion in deposits, and 0% for every billion thereafter. That's a level playing field. And the outcome is much the same.


Except that what you claim is also contrary to the current legal ruling.

If the legal ruling is upheld (and the ball is in your court explaining why shouldn't it be?) then Apple most certainly did – with the collusion of parts of the Irish govt – rob someone. Because it has been found that those €13bn are not theirs to keep. So whose money is it rightfully? The citizens of some state. This is money that should be going to healthcare and public infrastructure. So as things stand in a very real sense Apple did rob someone. They robbed you, they robbed me.

> If ireland hadn't offered, dozens of other countries would have.

Not really I'd say, lots of multinationals have the European operations headquartered in Dublin because the corporation tax is 12.5% There are also favourable intellectual property regulations. Given that, this money was flowing through Ireland anyway so it was probably easy to siphon it off there.

> The EU is being scummy trying to undo a legit deal after the fact instead of ruling it can't continue in the future.

Just because you disagree with the ruling there is no need for thrashing EU regulatory bodies. From my perspective they are trying to claw back some of the tax due to the citizens of the EU. My guess is that you are from the US and figure that some of these taxes should end up across the Atlantic, and I wouldn't blame you for feeling that but calling the EU scummy is not helping matters.


That money is rightly Apple shareholders money, not the US governments or Irelands.

Apple shareholders pay taxes on their Apple dividends at far higher rates than virtually anyone in the world. They pay nearly 10% of foreign earnings to foreign governments. They owe 9% of what's left to CA State corporate income tax. Then they owe 35% of what's left of that to US corporate income taxes. Then they owe state income tax on the remainder paid to them as dividends. Finally they owe another 20% of the final remainder as federal dividend tax.

There isn't a country in the world that owed more taxes than that. There isn't a reason in the world Apple shouldn't keep their IP and after tax earnings in the most attractive tax environment, and out of the U.S. to defer paying taxes till later. It's not "robbing" anyone to refuse to pay extra taxes when you already pay all of your legal ones.


That’s not at all what happened. The money is in US bank accounts, this is about recognizing profits and transfer pricing.


I think it was the EU who took Apple to court over unfair trade practices and special tax deal in Ireland. Not surprising that Ireland cut a deal with Apple. We'll see if the EU lets this go through.

https://www.theguardian.com/business/2016/aug/30/apple-pay-b...


The EU wasn't even a governing entity when this tax deal was created.

That isn't an easy point to defend.


> That isn't an easy point to defend.

Let me try: Ireland joined the EU in 1973. Apple was founded in 1976. This "deal" was reached in 1991, and amended & renewed in 2007. The taxes in question stem from profits in the years 2003 to 2014.


Ireland joined the EC in 1973, the EU did not exist until the Maastricht Treaty was signed in 1992.


The clause in question - unfair state aids - were already a part of the Rome Treaties, much earlier.


This case hasn't been decided yet. This is essentially nothing more than a provision.

Wouldn't be surprised if Apple eventually wins this.


Yeah, if you have 250 billion in cash (offshore alone), it's only 6 percent, a decent tax rate if you end up paying it.


Finally! I love Apple but taxes should be paid. There is a difference between legal and ethical and US companies should begin to understand that. So hopefully others will follow suit.


The difference between legal and ethical is irrelevant in this case. Both Apple and Ireland had an agreement regarding Apple's taxes which was deemed illegal by the EU.

Apple and Ireland can count themselves lucky not to be additionally fined, since the likelihood that Apple's or Ireland's lawyers were unaware of the existing EU state aid laws are very slim.


I used to think this -- but then I heard the argument that if Apple was to behave "ethically" and pay the taxes that technically the law requires that they dont, then the shareholders can sue the company for not acting in their best interest.

Even if the above isn't true (not a lawyer) we cannot rely on ethics alone, it will have to be enforced by law, otherwise nobody will do it


> if Apple was to behave "ethically" and pay the taxes that technically the law requires that they dont, then the shareholders can sue the company

Well yes, but you know there's a shade of gray between engaging in complex, aggressive tax planning schemes and handing out unsolicited donations to the IRS.

A company's board is perfectly within its mandate to say it pays tax for its profits where it is incorporated, when the profits are made (and not delaying foreign profits in a tax havens). Because this is the very normal thing that almost all normal corporations do. The board is just as well within its mandate to say they do it for PR reasons to demonstrate corporate social responsibility.

For example, Nokia during its heyday happily paid a fair share of its taxes in Finland, eventhough they definitely had access and capability for all the tax dodging schemes in the world.


You must admit the irony in that Nokia example...

If Nokia had instead gone to the lengths Apple does to cut taxes and invested that money back in the company they might still be thriving as an independent entity today...ultimately generating far more benefit for the Finnish economy over the long run than being a shrinking Microsoft division.


I admit to the irony, but sadly they could have never saved enough profits to turn around the company. They could have at best delayed the inevitable further down the road..


Not so sure really, they likely would have burned through it anyway, such was the scale of the management screwup there.


There's another way to twist that: cheating the people out of their government's revenue is a fine way to build up negative goodwill. That has a longer term cost.


This is very true.

There was a recent incident in France in which people protested outside an Apple store for them to "pay their taxes."

Apple wasn't explicitly breaking the law, however customers are entitled to vote with their wallets, and showing their vote will likely have some effect on the company.


You're joking right? The tax deals and some protests will not affect Apple's bottom line in the slightest.

Customers vote with their uncaring brains, which will pull out the wallets just as they did before.


Clearly some customers are not uncaring.

I'm not saying that one protest will have a massive impact on Apple's bottom line; just that:

1. protesting is a sign that the tax issue is an area customers care about, and those out protesting are likely a very small minority of those who feel that way.

2. the act of companies' feigned goodwill for a net profit could extend to any area customers care about, including legal vs ethical tax practices.


this is not exactly true, no[0]. The law's intent is to give shareholders a means of legal action if the leadership at a company destroys shareholder value for their own gain.

0: https://www.nytimes.com/roomfordebate/2015/04/16/what-are-co...


As one who isn't familiar with all this: "not exactly true" means very little. How does it behave in practice?


That's a great argument in theory, but that isn't the way those laws work. The thought experiment is trotted out frequently to justify any type of corporate race to the bottom.

It isn't anything more than a misleading misreading of corporate law.


This supposed legal responsibility to be cut-throat capitalists is somewhat mythical. You can't just give money away without justification. But management has extremely wide discretion in their decision-making. Almost all companies donate to non-profits, for example. Yes, you can argue that it is good for PR. But that argument also works for anything else that someone, somewhere, would consider "ethical behaviour".

Specifically for this case: there is no obligation to establish a super-complicated tax structure to lower your tax rate to 0.5%. Otherwise, 498 of the Fortune 500 would run afoul of it.

We probably can't rely on ethics, or, to use the term I prefer, "integrity" (doing the right thing even when nobody is looking). But that doesn't mean that we cannot fault companies for behaving unethically. If we expect people not to always exploit each others weaknesses in the pursuit of money, why not expect the same from companies? Corporations are people, after all.


> then the shareholders can sue the company for not acting in their best interest.

I hear this argument often with tax avoidance and I'm not buying it. Has this ever happened to any company out there?


> but then I heard the argument that if Apple was to behave "ethically" and pay the taxes that technically the law requires that they dont, then the shareholders can sue the company for not acting in their best interest.

I've never considered central banks printing money to acquire majority interests in public companies in order to compel them to pay their taxes while preventing shareholder actions against them for doing so until this comment.


If Apple wanted to prioritize benefits to its home country (America) by avoiding use of ex-U.S. tax minimization schemes, it need only ask its owners (shareholders) for permission to do that.

I think Apple has enough market power to put shareholder return and tax benefits to its nation of origin at similar priorities. It would be interesting to see what Apple's shareholders would say, if asked.


That’s not really true, if it ever was. These days, officers and directors are quite insulated from law suits like that. The decision to pay more than you have to has to reach a level of just lighting money on fire, not taking less conservative tax positions.

Activist shareholders are the bigger source of risk.


> then the shareholders can sue the company for not acting in their best interest.

Sure, this COULD happen, but it is so rare to happen that it is incredibly unlikely. And has there even been a case of shareholders suing for a company not evading taxes enough? I doubt it, since all companies DO NOT do this.


We cannot rely on corporate ethics, that much is obvious.

But we can still make damn sure we expect ethical behaviour, and lobby for change where we can, and make our displeasure known through our purchasing habits and more direct communication.


> then the shareholders can sue the company for not acting in their best interest.

Has it ever happened before where shareholders have sued because a company was paying "fair" taxes?


Also, the shareholders will just replace the board with one who would get the best returns for the investors.


> There is a difference between legal and ethical

I don't see this as an ethical issue on the part of Apple (or, for that matter, any other taxpayer). I don't think anyone does any soul-searching about their tax deductions, nor should they. The soul-searching happens when we decide what the taxes and deductions are in the first place.


The tax system needs to be fixed.


It's going to need a lot more fixing after the disaster that happened this past week in US Congress.


US corporations will finally be more competitive on their effective income tax rates, with such nations as: Britain, Ireland, Sweden, Norway, Finland, Canada, China, Switzerland, Czech, Taiwan, Egypt, Estonia, Iceland, Israel, Italy, South Korea, the Netherlands, Turkey, Portugal, Romania, Russia, Singapore, Spain, Vietnam, Thailand and so on.

All of those nations have significantly lower effective rates.


That's not accurate. Considering the enormous loopholes, corporations in the US actually pay something comparable to these other developed countries. The average company pays something between 12% [1] and 22% [2] -- much less than the ostensible tax rate. (See also [3,4].) Now we have nearly all the same loopholes and a lower base rate: a simple recipe for disaster.

[1] http://money.cnn.com/2013/07/01/news/economy/corporate-tax-r...

[2] https://www.nytimes.com/2017/03/09/business/economy/corporat...

[3] https://www.politico.com/interactives/2017/35-percent-corpor...

[4] https://itep.org/the-35-percent-corporate-tax-myth/


This is ignorant and misleading, the only reason effective rates are lower than 35% is because of tax deferral, specifically for foreign earnings. Taxes on those foreign earnings are still owed when repatriated, but it would be foolish to repatriate them when companies would have to pay over 40% in both state and federal taxes, and their shareholders an additional 20%+ on any dividends.

Most countries don't tax their companies foreign earnings at all, so the rates don't even compare.

The real corporate income tax rate should be zero. There is no reason to tax investment, it's hugely counterproductive. Raise the capital gains and dividend tax rates to personal income tax rates, and eliminate corporate income taxes, you've eliminated double taxation and restored progressively to our tax system.

There is zero reason an 80 year old retiree living on a fixed income should be paying over 60% in taxes on her Apple dividends.


A lower tax rate is a boon to small and mid sized US companies that make up the majority of the economy and don't have the financial scale or international presence needed to take advantage of those loopholes. These companies compete daily against foreign firms, and against US conglomerates. I don't see how your comment counters the parent's argument that this a good thing for international competitiveness.


Not sure what your source is for that claim, but when you look at corporate tax revenue as a percentage of GDP the US is significantly below average:

https://espnfivethirtyeight-files-wordpress-com.cdn.ampproje...


Lowering the corporate tax rate to 20% goes along way to making the US tax system better for everyone.


How?


Corporate income taxes are a double layer of taxes on investment. Investment is good, and lower taxes means more investment.

Apple's shareholders are currently subject to 40%+ total tax rates on dividends paid from US profits, and 60%+ total tax rates on dividends paid from foreign profits. Lowering the portion that's corporate income tax rates makes these rates far more reasonable.


Investment gets to be taken out before tax in most places.

Investment by the company in R&D, growth and training becomes more attractive in a higher tax environment.


Investments that companies make aren't an expense per se. It's almost always "capitalized" as an asset and can't be expensed, only expenses can.

But we are talking about investment in businesses by investors/owners. Imagine a successful US (California) company called Shmapple approaches you about funding a joint venture. You invest $10M for half of the shares in a subsidiary that will build a factory for a new product they've designed, they sell the resulting goods and split all profits with you.

So you ask, what will my share of the profits be? The company gives you very reasonable financial forecasts showing the factory should generate $3M a year in profit on average, grossing you $1.5M a year on your $10 million dollar investment, or 15%.

But wait, you say. I don't care about gross profits, only net profits after taxes. So you calculate it. First they have to pay California corporate income taxes (8.84%), about $260,000. Then they have to pay 35% federal corporate income taxes on what's left, or $1,180 more, leaving $1.78M (59%) left or $900k to you. But that's just the corporate level, you still haven't paid your taxes yet.

When the company pays you your share of the profits, you now owe income tax in your state, and dividend tax to the federal government. Lets say you also live in California, in the top bracket you average around 11%, or another $100k. And 20% for federal dividend tax, or another $160k. So you will net a little less than $640k, or a 6.5% after tax return on your investment.

But wait, it gets worse. Shmapple tells you that their business model is highly international. About 60% of the profits will actually be earned overseas, so they will also be forced to pay income taxes in every country products are sold in. So that's another 10% off the top. So you redo the math again, and now you only get $600,000 a year, or a 6% after tax profit (and you've lost $900k, or 60%, of your profits to taxes!).

So you say, hell no, I'm not funding that factory! I can make nearly that much risk free in treasury bonds, taking the huge risk on a new business for only an extra 1-2% a year would be colossally dumb.

So Schmapple says to you, okay, we've got a way to lower everyones taxes. Turns out we can defer the taxes on our foreign earnings if we don't bring them back to the U.S. We'll find a friendly country with an extremely low tax rate and deposit the profits there. And we'll wait for the US government to wake up and realize how awful their corporate tax system is, and pay the taxes then at a lower tax rate. In the mean time we can borrow against the foreign bank deposits and pay you dividends from that.

So you say, yea, even with all that hard work, my effective tax rate is still going to be close to 50%. You are just deferring, not avoiding, taxes, and when we pay them the future US corporate rate is still going to be pretty high, 20% or more.

So you make a counter-offer. Let's build the factory and incorporate the joint venture in Shmireland, a fair country across the sea. Sure the Shmirish might not be quite as good as workers as Californians are (maybe, maybe not, but they ain't much worse), but look at the tax savings.

Building in Schmireland means paying a 12.5% corporate income tax rate. Schmireland also doesn't tax world-wide income, just the income earned in Schmireland. We'll account for our profits being the same 60% rest of world (at an average 10% income tax rates), and 40% in Schmireland where we make the products. So our average tax rate is 11% TOTAL!. Now the net corporate profits are nearly $2.7M, and your share is $1.35M. After your California income and Federal dividend taxes, you will have around $960,000 left, or nearly 10% after tax. Now you tell Schmapple, do it in Schmireland and we have a deal!

This is what's happening in real life. If the U.S. tries to close it's "loopholes", say by no longer letting companies defer earnings in their foreign subsidiaries, they'll just make it even more attractive to invest overseas. It's already insanely more attractive now, how much do you think Samsung pays in taxes compared to Apple? It's Samnsungs biggest advantage!


Well you certainly do make the US system sound bad, and heavily taxed.

In most cases though, as a non-US person it's the avoidance of taxes in the overseas countries that concerns me. It seems that many multinationals are finding creative ways to pay no tax in the UK. Starbucks, famously, but also amazon and others. Apple have this sweetheart deal in Ireland which amounts to a way to operate in the whole EU with no corporation tax owed. That's why both Apple and Ireland are in trouble here.

If you need to look at it in pro-business terms - it's skewed the playing market and left other companies less able to compete.


'the playing market'

Hah! I meant either the playing field or the market, of course :)


First of all, nothing has been settled. This is just escrow, both Apple and Ireland are appealing.

Second, what Apple did was both legal and ethical. It had $200B in cash that it had already paid taxes on to the countries where it was earned. Ireland offered them a near zero tax rate on the interest it would earn if they deposited it in Irish banks. That was a great deal for Ireland, and a good deal for Apple, and hurt no one.


> and hurt no one.

It hurt whatever country didn't participate in Ireland's race to the bottom, and would have been Apple's preferred base of operations when ignoring tax issues.


There is no race to the bottom on bank deposits, Apple already paid taxes on these earnings to every european country.


?

There isn't even a tax on bank deposits, in any country I know. So what, exactly, do you think this case is about?


Talking about taxes on interest, not deposits.


It hurts because it adds to the already big amount of inequality in this country (Ireland). Me, as a software engineer, I am pretty much accommodated economically but you should see the amount of junkies and homeless people in this town. It is shocking.


In what way do Apple's tax arrangements here lead to people choosing to inject themselves with heroin?


Do you really think that having Apple not invest billions of dollars in Ireland is going to help the homeless?


If Apple is forced to pay a big chunk of tax in the EU, why wouldn't they spin off their EU sales operations as a completely separate independent company? Apple US (or Apple Cayman Islands) could then sell iPhones to Apple EU and demand a wholesale price very close to the retail price. Apple EU would therefore make very little profit and pay very little EU tax.


That's called transfer pricing and is essentially illegal in almost every jurisdiction. There are of course plenty of loopholes and ways around it and large companies such as Apple spend a fortune with the big 4 accounting firms to take advantage of every such loophole.


Would transfer pricing still be an issue if Apple EU was a completely separate company?


Wait, wasn't it the EU who took Apple to court over a special tax deal for Apple in Ireland?

https://www.theguardian.com/business/2016/aug/30/apple-pay-b...


No. The European Commission ruled that Ireland gave preferential rates to Apple (and I believe this will go to the European Court of Justice, where the case will, I believe, be the EC v. Ireland; Apple aren't directly a party of the case).



Just to clear things up here: Ireland does not want the money, they much rather have this special deal with Apple, it's EU who is forcing Apple to pay and forcing Ireland to stop having special deals with companies.


so is this an opportunity for collective action. let's say some one owes 100 million in taxes, and can negotiate that down to 50 mil. does that mean i can get 1-2000 of "normal" folks and if we hang together we can get a 50 % rebate ?

(the hang together reference being most apt)


Paywalled, can someone share another link?

EDIT: searched for title and another link worked for me: http://www.cetusnews.com/tech/Apple-Agrees-Deal-With-Ireland...


Non-Paywall version: http://archive.is/N7JvW


how about not linking to a paywalled article?

https://www.independent.ie/business/technology/apple-agrees-...


So when are they going to pay taxes in the united states ?

Its time the global community makes tax havens illegal.


The United States is the largest tax haven in the world, so don't count on it.


Can you elaborate on this?


The article is from 2012 but still sums it up quite well:

http://www.nytimes.com/2012/07/01/business/how-delaware-thri...

It's a corporate tax heaven. But incorporating is trivial.


He is bs'ing you. Companies don't incorporate in United States they are incorporating tax havens across the world ( everywhere but the United States)


It's based on this fraudulent premise that makes its rounds as an empty soundbyte (when back in reality, the US has the second highest effective corporate income tax rate in the OECD). The setup is that Delaware is being used as an information cloak (while there's zero evidence the US is actually being used as a real tax-evasion haven of any sort).

This story explains the foundation of the soundbyte:

https://www.washingtonpost.com/news/wonk/wp/2016/04/05/how-t...


Oh, it's a fraudulent premise and an empty soundbyte?

It seems like you're quoting an article in the washington post, and similar articles from similarly reputable sources point it out (see http://www.nytimes.com/2012/07/01/business/how-delaware-thri... for example).

Just saying, it's a pretty convincing soundbyte that happens to cite its (verifiable) claims.


Yeah, it's an empty claim, which is why neither the NY Times nor the Washington Post provides any actual evidence that there's a tax haven occurring onshore in the US. The sole premise they float, is about information cloaking, and then they call it a tax haven arrangement without backing that up.

Where's the hundreds of billions or trillions of dollars in tax haven'd capital to support their claims? They don't provide so much as a shred of evidence such a thing exists. It doesn't exist, because the US isn't a tax haven. The IRS is extraordinarily aggressive about such things and has very far reaching powers to hammer entities that attempt to evade taxes in any manner inside the US.

The articles use hilariously absurd things like that states are competing over lowering the cost of establishing LLCs, as evidence. Oh golly gee, that verifies the US as the world's largest tax haven no doubt.

Like this amusing quote: "In some places [in the U.S.], it’s easier to incorporate a company than it is to get a library card"

Oh man, the Washington Post really nailed it there, world's largest tax haven status confirmed.

Just look at the language they use throughout, it's vapid, unsupported, vague, etc. They constantly hint, use suggestive language, proclaim, and never deliver anything real. Such as:

"Too often, however, shell companies are used as a vehicle for criminal activity"

Oh, too often, well that's really spot on. Then they proceed to not actually support the "too often" part in any manner. The NY Times and Washington Post articles are filled with that crap.


Well, from my point of view, I can either:

- Choose to think you are right, dear random HN commenter

- Choose to think the corpus of papers and articles saying the opposite of what you claim is in fact right (https://en.wikipedia.org/wiki/United_States_as_a_tax_haven#R... - I'm not quoting wikipedia, this is a link to sources)

Guess what? :)

EDIT: Please, by all means, do produce articles from reputable sources that support your claim that the US is not an enormous corporate tax heaven! I would be very interested to educate myself on the subject with differing opinions from experts such as investigative journalists or economists, bankers, or tax lawyers.

I just don't believe random HN commenters on face value :)

TL;DR: [citation needed]


I appreciate that my pointing out the extremely mediocre reporting by the NY Times and Washington Post on this matter has swayed you to such a degree.


Next year, thanks to the tax bill.


I was unable to read the article because of a paywall. Can we please make it a policy not to allow paywalled content?


Tax Apple revenues, not profits.


Reminder: both Apple AND Ireland agree that they don't actually owe any tax.

So it's not that Apple didn't pay tax to Ireland - it's that they were specifically contracted to pay a certain rate and the EU disagrees.

So the headline is incredibly misleading.


Apple is the largest taxpayer in the world.

I see a lot of misinformation in the comments section here.

This may help them. https://www.apple.com/newsroom/2017/11/the-facts-about-apple...


If you pay the most tax you have implicitly paid the required amount of tax is not a good argument.

You can could response to those comments so they can be discussed or just declare them fake news if that's how you feel.

Nothing in that link addresses the EU ruling or this deal.


Ok, Apple pays the most taxes of any company in the world, and it also pays all the taxes it's legally obligated to pay.

And in the case of the Irish deal, it hugely benefited Ireland, much more than Apple.


Especially considering that Apple is also the wealthiest company. So it should be expected that they should pay (or nearly pay) the highest taxes.




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