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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?


"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"


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.

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