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Apple will start paying $21B in back taxes to Ireland (businessinsider.com)
140 points by jklp 9 months ago | hide | past | web | favorite | 72 comments

It's weird that the EU has a monetary union, but so much difference in corporate income tax rates.

Great that IE is 12%, but this "competition" is BS in the sense that they needed the higher-tax countries to bail them out just a few years ago:


It's a leak in the EU system, and it needs to be plugged.

Just imagine what a unified income tax rate in the EU would do. (Post-Brexit, although if I were a gambling man, I'd wager that the Brexit will never materialize; A Brexit would sort of be like throwing out your existing post-ww2 source code instead of refactoring. Recipe for disaster).

THEN countries would really need to compete on quality of life and infrastructure to attract (US) corporations to establish show. Amsterdam is happy to welcome all the post-Brexit (see comment above) banks and EU-related orgs, as is Frankfurt.

Bear in mind that countries like France have even lower rates in practice due to various loopholes for their largest corporations - https://www.irishexaminer.com/business/france-has-lower-effe... - effective tax rate of 8.2% as of 2013.

The leak in the system is consolidated tax base, not different tax rates. That is, booking revenue (especially digital revenue) from sales across the whole of the EU in a single EU country for tax purposes promotes a race to the bottom. The right answer is to tax in proportion to the economic activity per country - https://en.wikipedia.org/wiki/Common_Consolidated_Corporate_... .

Unified corporate and income tax rates aren't a smart idea. There's no good reason to force one government to be less efficient than another.

Finally, the bailout (and to be clear: loans, not free money, and loans that were paid off early because they had higher interest rate than was available on the market) of Ireland was an indirect support for banks in other countries that had capital surplus for some years, Germany especially. The ECB forced Ireland to prevent bondholders from taking any losses - https://www.irishtimes.com/news/politics/ecb-refusal-on-bond...

> Bear in mind that countries like France have even lower rates in practice due to various loopholes for their largest corporations

Ireland also has lower rates in practice due to allowances for their largest corporations: Apple's allowance afforded them an effective rate of <1%, hence the $21 billion.

Ireland is not the only loophole: Luxembourg, Belgium and the Netherlands made "special" deals with large corporations, too. https://www.ft.com/content/7ce5bf96-a83d-11e7-ab55-27219df83...

Can confirm; working in the Netherlands right now for a large organization which basically got granted 10M tax deduction for innovation which boils down to implementing React in our frontends, doing microservices in Kubernetes, and building CI/CD pipelines in Jenkins....

As a small company you can apply for this same innovation thing and get 17K tax deduction, and you have to put 500 hours into it. It's rediculous.

It's called "WBSO (Wet Bevordering Speur- en Ontwikkelingswerk)". Hoi Jan.

Yeah, I'm sure others too. Interested to see if these are pursued in court as well, or even other corporations with deals in Ireland (Apple are in no way the only one).

When the Apple ruling first came out there was talk of it being the first of others, but with how much resistance the Irish government have put up, it's hard to see them coming to fruition at this stage.

While that is true for Apple, if you'd read the article you'd notice that the effective corporate tax rate in Ireland (11.9%), as found by the study, is still higher than France's (8.2%), and far closer to the advertised rate of 12.5%.

Irish effective corporate tax is 11.8%.

The deal with Apple was considered a sweetheart deal and is illegal (under EU law but not Irish) and not available to other companies.

OP is right correct approach is a consolidated tax rate/base across EMU.

You are correct in saying this is a leak in the EU system. You could say it relates to the fact that what you have is a centralised money system but with a federated reserve.

The EU banking system as a whole was very weak. Optimistically configured you might say. When the economy plunged it sent ripples right across the European banking sector which essentially were contained in Ireland, which as a small economy could take the hit without affecting the rest of the continent.

If you think about it, there's no way the sums that were lost in the banking crisis could ever have been vested in a small country like Ireland. There were creative financial strategies going on everywhere and Ireland was only a single node in all of this.

When you look closer at the whole thing, a lot of the money lost was due to political decisions in the midst of the crisis, rather than purely financial mismanagement in the years before.

Here's a few. Ireland being forced to take on payment of "subordinate" bond holders [0]. The bank guarantee [1]. The failure to nationalise (in time) what was effectively a financial time bomb [2]

Ireland was a patsy for the failures of the European system. As a weak link in the chain Ireland naturally took the fall, and many were outraged for a time, but now in light of Brexit everyone's quite happy to be such a significant debtor.

[0] http://www.thejournal.ie/troika-warned-a-bomb-will-go-off-in...

[1] https://www.irishtimes.com/business/financial-services/night...

[2] https://www.irishtimes.com/news/government-to-nationalise-an...

Not any less crazy than being in a monetary union where you do not control your own currency or inflation and where the body who does (ECB) is technically outside of the political system and out of reach of both the national and EU electorates.

Essentially because of the above what you call crazy is the only option for those countries to survive.

When you can’t make yourself cheaper than Germany because of the Euro the only way of making yourself appear cheaper is through tax breaks.

Why is that odder than the Bank of England, which sets interest rates and is also technically outside of the political system.

Because the Bank of England controls the pound and everyone one who works for it are answerable to the electorate in one way or another.

On the other hand a Eurozone member cannot set it's own interest rates, inflation, can't restructure it's own debt, doesn't control it's exchange rates etc. It takes away nearly all the financial tools a country has.

Do you know why you need to bail out Ireland? because it doesn't have access to these tools, It can't restructure it's own debt and it can't control it's own currency and exchange rates to settle it and any changes to the Euro which might be a net positive to Ireland would be global and could often result in a net negative to other Eurozone members like Germany.

Lets take exchange rates for or example.

They have the same exchange rate which means that if Ireland and Germany want to export potatoes they both get paid at the same rate in their local currency.

This is a huge deal because it prevents one country from being more competitive than another as it would lose too much on the exchange rates.

This essentially takes away an important tool that countries have which is being competitive on export by reducing their prices but maintaining a good local revenue through favorable exchange rates.

And while it might appear "fair" it's not because fixed exchange rates favor larger economies like Germany which can be competitive more competitive due to simply their sheer production capacity.

Next you have imports again the exchange rate is fixed, also the import taxes are fixed so importing goods into Ireland would cost as much as to Germany excluding other marginal costs which again is a problem because Germany is a larger market, it's closer to the Netherlands which is the major port into the EU, it's on the mainland which give it easier access to the med as well as a land route to Russia, Turkey and beyond.

Now lets look at another example debt restructuring.

Lets look at both "internal" and "external" debt, in this regard internal means in your own local currency and external means in a foreign currency.

Internal debt you can repay by well simply "printing more money", sure you can't go wild with that but this is something all countries do all the time they play with interest rates and many other levers and reduce their debt at the expense of higher short term inflation.

External debt again if you control the exchange rates and control the supply of your own currency you have much better tools for debt restructuring.

And these are just the most crude and basic examples there are benefits to the Eurozone but you do take away most of not all of the tools countries have of managing their own financial and monetary policy. You also cannot make adjustments that you could make otherwise because you now have to set a unified policy across all member countries.

> Because the Bank of England controls the pound and everyone one who works for it are answerable to the electorate in one way or another.

The head of the Bank of England is appointed by the UK government. The head of the ECB is appointed by the Council of ministers - ministerial representatives of member states. How is is this different, conceptually, in terms of answerability to the electorate?

The ECB sets interest rates independently, the BoE does the same.

Most of your arguments appear to be about the difficulties inherent in having a single monetary system across disparate economies, and I agree with you - but there is nothing inherently anti-democrat in the way that the ECB manages its affairs.

>they needed the higher-tax countries to bail them out just a few years ago:

You have that the wrong way around.

The Irish taxpayers, unwillingly, covered the massive gambling losses of private individuals and companies(including a group of businesses called "banks") who were playing in the (German-lead US-style) light-touch bank de-regulation "bank-casinos" of Europe. The "casinos" in Ireland had a disproportionate share of that action at approx 40% of the EU total.

The total cost to the Irish tax-payer was approx 65 billion euro I've heard.

We bailed them out using money we _borrowed_ from them and have paid back in full (recently i think?) with interest.

Thats like borrowing money from your loan shark to cover his poker losses.

I usually don't engage in this sort of trivial nationalism. But I just have to inject that your retelling of this story omits the fact that Irish banks were obviously first in line to go belly-up.

It is true that those banks had various lenders in Germany/France/wherever, and that the consequences of an all-out collapse of the Irish economy would have had negative effects in those countries as well.

But presenting it as some sort of altruistic sacrifice to allow them to rescue Ireland from a potato-based future is just adding moral bankruptcy to the other.

a few points


Nothing about this is trivial.

This is not nationalism. There should be no pride in our creation or solution to our portion of this moronic mess.

The obvious was ommitted because it was obvious. The banks are only "Irish" in a nominal sense. The people or state as a whole didn't own them. Don't forget they are international commerical businesses and can and should be shut down when they fail like any other business.

Obviously they are a critical piece of modern infrastructure and there was already plans in place for their failure such as "deposit protection insurance" schemes etc. The big question is if those plans were/are robust enough in modern countries. We _all_ need to be able to confidentaly able to "cull" bad components of our modern infrastructure without fear of causing wider problems.

Nothing about it was altruistic. Fear and panic very obviously gripped the politicians involved on all sides.

As an interesting related historic aside, we survived reasonably well without our banks for 6 months previously when we were a much weaker economy. https://en.wikipedia.org/wiki/Irish_bank_strikes_%281966%E2%...

Quite a lot of that was down to AIB, Sean FitzPatrick and Sean Quinn; at the height of the property boom there was all sorts of extraordinary conduct going on. Much of it on property loans within Ireland to other Irish companies.

> It's weird that the EU has a monetary union, but so much difference in corporate income tax rates.

That's because it's a monetary union, not a fiscal union.

> Great that IE is 12%, but this "competition" is BS in the sense that they needed the higher-tax countries to bail them out just a few years ago:

That's based on a severe misconception. The Irish headline rate is 12.5%, but the effective rate doesn't differ much from that. Meanwhile, you have countries like France with a much higher headline rate, but an effective rate much lower than the Irish one.

So no. Ireland was not bailed out by higher tax countries. Moreover, our corporate tax rate had nothing to the financial crises, whose roots in Ireland can ultimately be traced back to the ECB keeping interest rates artificially low to help with German reunification.

Moreover, Ireland was the fastest-recovering nation financial crisis, driven undoubtedly in part by its preferential corporate tax rates

Ireland's economy is highly linked to how well the broader global economy is doing. When major US corporations look to expand during good times, Ireland often directly benefits. Ireland's domestic economy is comparatively tiny, but plenty of large industries like tech, pharma and some random ones like global aircraft leasing[1] have a large base in Ireland to support their European and sometimes global operations.

[1] https://www.irishtimes.com/business/transport-and-tourism/ai...

Again, there's nothing particularly 'preferential' about Ireland's tax rates. Other countries, such as the aforementioned France, had much more preferential effective ones. The difference is that our rate is more transparent because the effective rate isn't all that different from the headline rate.

So no, it wasn't.

Monetary union without a fiscal union. It is a slightly odd position, but most countries aren't ready for the sovereignty transfer implied by centralising fiscal policy. The politics of paying for Greek pensions just doesn't work.

10 years ago, the bond spreads of sovereign bonds would have reflected this accurately, where Greece would have a higher YTM than Germany.

The idea of the euro is convenient, but since the crisis of 2007-2009 + various (Greek) scares, it's devolved into a "cake and eat it" situation.

A country cannot devaluate its currency (Sweden still has this freedom if it so wanted).

I'm not sure what the solution is, but to start, I would homogenize corporate tax rates, and discourage tax-shopping inside the EU.

Those politics will likely never work.

I think eventually this will lead to the breakup of the Euro... Fixed exchange rates generally don't work long-term without fiscal transfers to balance things out (like the US's federal budget does for the states). I don't think the EU can keep this up for that much longer - at some point they'll either have to consolidate fiscally or break up the monetary union.

> Great that IE is 12%, but this "competition" is BS in the sense that they needed the higher-tax countries to bail them out just a few years ago

The two are not related, things just don't work that way. The size of the Irish government's assumed liabilities and the bailout was relative to the size of capital inflows into Ireland primarily from the continent, it was quite large relative to the size of the Irish economy whether counting or foreign corporations or not. It's not a good idea to just put those two things next to each other and just sort of imply that they are related.

Ireland's tax rate has nothing to do with the bail out. It's intellectually dishonest to link the two.

Agreed, this is something we at http://volteuropa.org are working towards!

Unified tax rates would greatly reduce the burden of setting up and running a business in the EU.

It's amazing how little that site actually says. It's just populist talk with a smiley face.

Unified tax rates in the eurozone will just make smaller poorer countries uncompetitive funnelling all the money to manufacturing powerhouses with high purchasing power like Germany.

Yeah, obviously some people are against a tax union, for example Luxembourg profitted from being a tax haven, and guess what the former PM (and before that Fin Min) of that country is doing now: https://en.m.wikipedia.org/wiki/Jean-Claude_Juncker

What did the Panama Papers really unearth? Has there been _any_ effect?

Who are the UBOs of these Luxemburg entities? Happy activist investors? Or wealthy family funds who funnel the money to CH and the Caribbean?

A leaking bucket.

The rules around taxation in a global economy where mainly ideas/IP are shuffled around needs to evolve.

> Apple was hit by the European Commission with a $21 billion bill for back taxes in 2016.

> It’s starting to pay the funds

You know, I was fined for not paying my installments (not my taxes! just my installments) in 2017 and these guys didn't pay their back taxes for two bloody years and were not charged hefty penalties and interest for it. Really, blood boiling unfair.

There's a big difference, Apple was directly told by Irish government these taxes aren't required. Apple is paying extra taxes after it was ruled that Ireland was incorrect. Why should Apple be fined for what Ireland did wrong?

You are required to pay the installments on time all the time, nothing has changed in the last several years related to this.

The analog would be: IRS told you that you didn't have to pay the installment this year but next year instead. A court then said IRS was wrong, you have to pay back taxes. You wouldn't be fined because IRS was wrong this time.

Absolutely, I agree 100%

One year I made a mistake on my taxes and my refund was $1000 more than it should have been. Six months later not only was I fined for the mistake and forced to pay back the $1000, I had to pay interest on that $1000. (Canada)

This year when the government owed me $6000 in overpaid taxes, why didn't they pay me interest on my money they were holding...?

Because your taxes are your duty.

In the US, if you don't file for a year and are owed, after the filing period they do pay interest. But not for the initial filing year. In fact, if you over pay too much, they (the IRS) can penalize you for that as well.

Their is no penalty for overpaying your taxes unless you mean the implicit loss of the time value of the money overpaid.

Anyone who's been "penalized" for overpaying their taxes was actually underpaying their taxes prior to their overpayment. People don't realize that taxes are generally due over the course of the year (usually quarterly), not all at once on April 15/16/17. The April deadline is just the due date for the final payment of your prior year's tax liability. If you were underpaying during the year, you could be penalized for that even if you overpaid in April the following year.

This is why trying to game your withholding on your wages (i.e., minimal or underwithholding) is such a bad idea. Any gain (i.e., investing in stocks) is usually more than offset by the penalties and interest you pay if you end up being wrong about how much in taxes you owed. The stock market would have to have a very bullish year to see an upside, usually better than 10% growth--and the target just goes up as interest rates go up.

It must have been some quarterly business stuff that stuck in my head.

This is why so many people recommend having the least amount withheld from you paychecks. The logic is that it is better to owe on tax day, than to get back. If the money is in the gov't accounts, they get the benefit. If it is in your hands, you get the benefit. You just have to be disciplined enough to pay what you owe when it is due.

I think that's because the appeal is still pending. Did you file an appeal, and is it pending?

That's Australian dollars, it's €13B.

So that's why there is such a difference with the link about the escrow account [1]. Maybe the title should be edited on HN to reflect that, since the australian context is not obvious (not hidden, either, but I missed it at first)

[1] http://www.businessinsider.com/r-ireland-expects-apple-back-...

That's roughly $5000 per Irish citizen. A good day for those chaps! Presumably they will be paying interest on all this borrowed money, yes? As well as late fees for non-payment?

If only.

NOTE: Headline is misleading.

Actually what they are starting to do is put the money into escrow while the case moves slowly through the courts. Ireland is not yet receiving money for back taxes.

Ireland's position is still that the taxes are not owed and that the government made no improper deals.

It will take some years before the taxes are actually paid to Ireland or Apple gets the money back from escrow.

Finally! It's a shame that Ireland had to be forced to demand this money from Apple.

Ireland wasn't demanding the money. They were actually opposing this ruling

That's what Tepix is saying. Ireland had to be forced (by the EU) to demand it.

Well, Apple went to Ireland just to get a tax break, and its desire to stay depended on future tax breaks.

It's not surprising that Ireland would want to keep being able to give the tax break: very small taxes from Apple (and other companies) is better than no taxes from Apple at all.

> very small taxes from Apple (and other companies) is better than no taxes from Apple at all.

It's not just about the tax paid by Apple, but the tax paid by Apple employees. Income tax and VAT make up the majority of Ireland's tax receipts[0], and adding more jobs increases those.

Ireland did not make 21B from additional VAT and income tax receipts thanks to Apple - I estimate more like 2B - but she probably made an amount commensurate with the amount of value added by Apple employees in Ireland. The excess comes from Apple's ability to declare a large part of its worldwide corporate income in Ireland, which somehow is not what is under scrutiny here.


I'm glad this is happening, hope they'll close this Double Irish Dutch Sandwich loophole for good.

I can't wait for the next crazy tax dodge scheme name.

It's finished -- phase out will complete in 2020.

I don’t. Not unless European countries plan to lower taxes. High tax rates are what causes these accountancy gymnastics. If the EU just charged a flat 10% tax — and actually enforced it, tax revenues would rise and these loopholes would be unneeded. Foreign companies would actually relocate to Europe by choice and not by necessity. Unemployment would also drop as a result. Business would boom.

According to certain theoretical frameworks... Empirically though there generally isn't any causal relationship demonstrated between corporate tax rates and wages, economic growth, or unemployment in most statistical data.

This is a really big debate in Australia at the moment, a lobby group made up of large corporates (the Business Council of Australia) is campaigning heavily for a tax cut given the recent Trump cuts. So there's been a lot of examination of this data and the best they have is intuitive arguments ("of course if there's more profits you'll have more investment and employment") but they admitted in a Senate enquiry just yesterday that they didn't actually have any demonstrable statistical evidence that tax cuts have caused employment growth, wage growth or increased investment in any developed economy.

This is a different problem though. Sure thing, EU should work on improving the imperfect system; for what it's worth I personally think the EU state is little too socialist and too safe, if you will.

But this isolated issue with this particular tax dodging scheme should be solved separately, as should "lowering tax rate", "reducing unemployment" et al.

Enforcing law is different job than making law.

When will countries finally understand that it's better to co-operate them too compete against another? Multinational companies are playing them against each other.

The thing is, if you're a small enough country that can tax - at a lower rate - revenues/profits generated in other bigger countries, then for you it's better to be able to compete. As long as the bigger countries allow that, that is.

You are right but it will never happen. It only takes one country to break ranks and the game is back on again.

Seems like this very article is about this practice ending?

I wouldn't be so pessimistic. This was happening in XVIII and XIX century Europe too, which was much more divided politically. Thanks to the industrial revolution, businesses went from town-size to country-size. In reaction, nations coagulated around larger cores. Similarly, when businesses played national region versus national region, workers' right movements were forced to scale up to respond.

In many ways, the emergence of the EU was forced by the rise of supranationally-sized industrial giants emerging from US and URSS. Now that it's clear that "supranational champions" really have no fundamental loyalty, there is a very high chance that supranational institutions will become more and more powerful. The challenge is to make those institutions answer to everyone rather than just to the elites.

A quote I noticed in fortune(1) today: "The great nations have always acted like gangsters, and the small nations like prostitutes."

Seems particularly apt in this context.

AAPL up 1.1%.

Seems the markets already believed Apple would lose this one.

how about you pay back taxes to the US

Sadly, the government has to accept it.

Damn EU! Destroying our country.

Yeah, so sorry for all the money your country has received from the EU...

This is exactly why a lot of people don't like the EU. Local politicians claim EU victories as their own, while blaming the EU for all unpopular laws. David Cameron was really good at that and look how that worked out...

The EU bailed Ireland out a couple of years ago. Perhaps you should realize that the "tax break" and their "double sandwich" wouldn't be possible WITHOUT the EU.

Like most Irish people, I am a huge fan of the EU, and of the many benefits we enjoy thanks to our fellow European citizens, via the EU.

Nevertheless I feel compelled to nitpick at the statement that the EU bailed Ireland out.

I believe the most important components of the so-called bailout instrumented by the IMF, ECB, and EU were that:

  A. Ireland was forced to turn about 65bn euro of private (banking) debt into public debt [for scale: our national debt was 36bn a couple of years before]

  B. The Irish government was allowed to run an _enormous_ budget deficit for many years
I don't know what would have been best for Ireland given the situation, but I'm not delighted about A and B. Even if the terms of the bailout were best for Ireland, all of money received went onto our national debt, which is now well over 200bn euro, and which we must pay back with interest.

Ireland is assisting Apple to avoid taxes that should rightly be paid in EU countries including presently the UK, while benefiting greatly from EU spending. What did you think was going to happen?

The EU is pulling our country out of the dark ages kicking and screaming.. in more ways than one.

This is an insane comment, are you even aware of what's happening?

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