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."
The World needs to have one unified tax code!
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)
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
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.
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 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, which is more concerned with competition law than tax law. And was not excepted in Lisbon.
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?
"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.
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.
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.
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.
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
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.
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.
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.
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.
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.
No. Apple lobbied (bribed) Irish officials to tell them they needn't pay more taxes. It's not like Apple had been passive here.
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.
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.
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.
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.
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.
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.
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.
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.
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?"
They haven't conceded anything yet. The ball is still in play.
 I'm not advocating for either Apple or Ireland, just making a factual comment. I think corporations should pay a fair tax.
That's a lot of money.
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.
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.
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 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.
Wouldn't be surprised if Apple eventually wins this.
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.
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
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.
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.
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.
Customers vote with their uncaring brains, which will pull out the wallets just as they did before.
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.
It isn't anything more than a misleading misreading of corporate law.
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.
I hear this argument often with tax avoidance and I'm not buying it. Has this ever happened to any company out there?
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.
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.
Activist shareholders are the bigger source of risk.
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.
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.
Has it ever happened before where shareholders have sued because a company was paying "fair" taxes?
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.
All of those nations have significantly lower effective rates.
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.
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 by the company in R&D, growth and training becomes more attractive in a higher tax environment.
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!
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.
Hah! I meant either the playing field or the market, of course :)
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.
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 isn't even a tax on bank deposits, in any country I know. So what, exactly, do you think this case is about?
(the hang together reference being most apt)
EDIT: searched for title and another link worked for me: http://www.cetusnews.com/tech/Apple-Agrees-Deal-With-Ireland...
Its time the global community makes tax havens illegal.
It's a corporate tax heaven. But incorporating is trivial.
This story explains the foundation of the 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.
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.
- 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: 
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.
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...
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.
And in the case of the Irish deal, it hugely benefited Ireland, much more than Apple.