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Commission says Ireland granted undue tax benefits of up to €13B to Apple

• Oletros 10y ago
  And here the press release from the European Commission http://europa.eu/rapid/press-release_IP-16-2923_en.htm http://europa.eu/rapid/press-release_IP-16-2923_en.htm
  • estel 10y ago
    Jeez, an effective tax rate on profits in Ireland of 0.005% is pretty inexcusable.
    • eru 10y ago
      Why? 0% tax on profits would seem fair and reasonable. (There's lots of stuff that's not taxed. Eg not a lot of people complain about not taxing capital gains of home owner/occupiers.)
      • Scirra_Tom 10y ago
        And how is 0% tax on profits fair and reasonable exactly?
        • fulldecent 10y ago
          Because all AAPL shareholders pay taxes on their pro-rata share of the company in the form of capital gains tax and dividends tax. Also, because this is a valid and consenting agreement between Apple and Ireland, two consenting adults.
        • eru 10y ago
          If you tax something, you get less of it. Either because you actually really get less of it, or because you encourage clever accounting. (Just look up Hollywood accounting..) People making profit isn't something we need to discourage. How about taxing CO2 emissions and eg alcohol consumption instead? (Something we can live with less off.) And the old classic: put most of the tax burden on unimproved land value. Land's supply is fixed, so there's no economic impact at all.
          • piva00 10y ago
            Actually people making ONLY profit is something we should discourage, people investing back their profits and sharing the pie with others is what should be encouraged.
          • 7952 10y ago
            Or just tax the product through VAT for consumer facing companies.
          • Oletros 10y ago
            Alcohol is already heavily taxed > People making profit isn't something we need to discourage. Who is discouraging it?
            • eru 10y ago
              Taxes on profit discourage it.
          • meira 10y ago
            People working is something we don't need discouraging, not people making profit of them. I hope apple has to pay it and must important, don't have another place to run.
      • marcospri 10y ago
        Because the Pub next door pays a higher effective tax
        • eru 10y ago
          They sell alcohol after all. But fair point. And because the bigger players who can hire expensive accountants can always mask their profits, we shouldn't tax profits. It's too malleable. Hey, even VAT is a better tax.
          • notahacker 10y ago
            The bigger players then avoid even more tax without the expensive accountants, with the burden falling upon everybody else, not least private companies whose owners are based locally and rely on taxable dividends for a living.
            • eru 10y ago
              How are they going to evade VAT or a land value tax?
              • notahacker 10y ago
                Well, they could own virtually no land in Ireland and buy very few physical assets in Ireland (hang on, that's actually already the case for Apple; shame about anyone brave enough to be actually making stuff in Ireland though) Put another way, why should Irish businesses and consumers pay increased VAT and a new land tax so that Apple's profits can be tax free?
          • k-mcgrady 10y ago
            If you raised VAT even more they would just pass on the cost and make a fuss that it's the governments fault everything is suddenly more expensive. Politically it wouldn't work. If there was a way to globally set the price of a good at one level (iPhone = $400) and then each country could add tax after that so it's clear the company isn't passing the price on to the consumer in various countries with higher sales tax/VAT it might work well.
      • tonicoto 10y ago
        0% tax on profits would be fair for whom? Definitely not the citizen.
        • tonyedgecombe 10y ago
          It would be fine if you moved the tax to dividends and capital gains.
      • estel 10y ago
        Because other companies pay about 20%. If you want to completely reform our taxation system, sure, whatever. But that doesn't impact Apple's liability under the current one.
        • phillc73 10y ago
          Ireland's official corporate tax rate is only 12.5% on trading profits[1] anyway, which is one of the lower rates in the EU, not 20%. [1] https://en.wikipedia.org/wiki/Tax_rates_in_Europe https://en.wikipedia.org/wiki/Tax_rates_in_Europe
        • eru 10y ago
          Fair point!
• justinv 10y ago
  $14.5bn to be recovered.
  • tener 10y ago
    Plus interest or not?
    • semigroupoid 10y ago
      "Ireland must now recover the unpaid taxes in Ireland from Apple for the years 2003 to 2014 of up to €13 billion, plus interest." (from the official press release)
  • totocino 10y ago
    How much is that at a macro level? Is it relevant at all?
  • tonicoto 10y ago
    How much is that at a macro level? Is it relevant at all?
    • jpalomaki 10y ago
      According to this document [1] the revenue form "Taxes on personal income, profits and gains" in 2014 was €15B. [1] http://www.oecd.org/ctp/consumption/revenue-statistics-and-consumption-tax-trends-2014-ireland.pdf http://www.oecd.org/ctp/consumption/revenue-statistics-and-c...
  • mohdmasd 10y ago
    Or they'll settle this so Apple pays $200 millions max in the end.
    • blackoil 10y ago
      Nope, Ireland had kind of already settled this, which EU had declared invalid.
• rdslw 10y ago
  Good. Read how Tim Cook publicly considers Nobel economist Joeseph Stiglitz as a one who do not know what he (Stiglitz) is talking about. Eye opening. Excerpts from: http://www.washingtonpost.com/sf/business/wp/2016/08/13/2016/08/13/tim-cook-the-interview-running-apple-is-sort-of-a-lonely-job/ http://www.washingtonpost.com/sf/business/wp/2016/08/13/2016... Q: What do you say in response to Nobel economist Joseph Stiglitz’s comments on Bloomberg [television], where he called Apple’s profit reporting in Ireland a “fraud”? Tim Cooks answer: I didn’t hear it. But if anybody said that, they don’t know what they’re talking about. [...] Apple evaded taxes and consider it right :(
  • georgespencer 10y ago
    > Read how Tim Cook publicly considers Nobel economist Joeseph Stiglitz as a one who do not know what he (Stiglitz) is talking about. Eye opening. TC's answer was about repatriating money, not about tax reporting in Ireland. I'm not sure why he chose to answer that question, but the reporter let him get away with answering a totally different question.
  • Angostura 10y ago
    Who committed the "fraud"? Apple, the Irish government, or both?
    • Shivetya 10y ago
      The fraud is that there are many who feel no company should be able to shop around for a better tax deal and no country should be allowed to give them. This isn't about fairness but instead so that other countries don't have to correct their spending issues and can inflict the same pain on their contemporaries. Even in the US there are politicians who want to have all states implement similar taxation rules or penalize those who move one state to live in another. The absurdity of taxation rules never ceases to amaze me, let alone the punitive actions of politicians who go after people and groups who don't adhere to their rules. Worse, the EU tends to think of beneficial tax polices to people and corporations as subsidies where in the US the government calls it a tax expenditure. People need to wake up. Taxation view points are closely paralleled to privacy issues. Politicians and many left leaning groups think that all money belongs to government as do most rights. The same goes for privacy rules, in that many think you should have protection only from other individuals and private groups by government does not have to grant the same and in fact can decide how much you should keep.
• chrisacky 10y ago
  Can someone clarify where this money will eventually end up (assuming it's paid)? The article says that it will be paid back to Ireland, yet it looks like Ireland was somewhat complicit in allowing this fraud to continue for so long? ' Is this just how it works, money goes to Ireland, and then recovered by Europe?
  • pluma 10y ago
    AIUI the money is owed to Ireland but Ireland originally refused it, EC is now saying "no, really, you have to take it". Might be followed up by Ireland getting into trouble if they unfairly benefited from the deal? That said, I think Ireland owes the ECB money too, so they'll probably use that money to repay their debt? EDIT: Corrected EU->ECB as pointed out below.
    • iameoin 10y ago
      If they have to take it (after the expected appeals by both Apple and Ireland) they will not be able to use it in the national budget. It will be used to draw down on the national debt, so ya could very well end up going back to the EC or more accurately the EC.
    • giovannibajo1 10y ago
      If you're referring to the public debt, that's towards the ECB (private bank) not the EU (public institution).
  • bapbap 10y ago
    The money paid will go to Ireland. Ireland allowed Apple to structure its tax affairs in a way that reduced their tax bill which is a great incentive to maintain a presence there. The EU has now determined this was an illegal tax benefit provided by Ireland, so Ireland must now collect the tax as if it had done so at the time. There is no penalty but interest must be paid. This is not your normal run of the mill tax avoidance case (or a fraud as you've mentioned) although it appears to look the same. This was Apple benefiting from decisions taken by Ireland that Ireland should not have made.
• alphadevx 10y ago
  All of that will go back to Ireland's national debt repayments under EU rules from what I understand, which includes large repayments due to the EU for the recent loans provided to Ireland for propping up banks, so really EU is collecting this money by proxy of Ireland. Interesting play.
  • raverbashing 10y ago
    Debt, not depth ;)
    • alphadevx 10y ago
      Thanks, fixed ;-)
  • k-mcgrady 10y ago
    So this works out at about 20% of the EU/IMF bailout amount or 6% of total Irish national debt.
  • pjc50 10y ago
    I thought Ireland had exited the EFSF http://www.efsf.europa.eu/about/operations/ireland/index.htm http://www.efsf.europa.eu/about/operations/ireland/index.htm so the Irish national debt is now just generic open-market bonds rather than particular debts?
• Shivetya 10y ago
  Okay, the EC is wrong in that lower tax burdens are a form of state aid. Higher corporate taxes also tend to cause all sorts of new ways to lower tax burdens which can mean even less tax revenue, let alone simply up and moving to a more tax friendly environment. The EU needs to worry about Africa soon scarfing up companies looking for a way out. Then last of all, they are fooling themselves if they don't think EU based companies aren't receiving similar deals. This seems concentrated only on US based companies for the time being. Finally consider this, countries which lowered their corporate rates found increases in wages and taxes. This includes Canada and Japan
  • Someone 10y ago
    "This seems concentrated only on US based companies for the time being." AFAIK, Fiat isn't US based (http://www.wsj.com/articles/eu-rules-that-starbucks-fiat-benefited-from-illegal-tax-deals-1445419279); http://www.wsj.com/articles/eu-rules-that-starbucks-fiat-ben... neither are FC Barcelona, Real Madrid, and several other Spanish football clubs (http://europa.eu/rapid/press-release_IP-16-2401_en.htm http://europa.eu/rapid/press-release_IP-16-2401_en.htm), or Amsterdam, Antwerp, and other ports (http://europa.eu/rapid/press-release_IP-16-124_en.htm http://europa.eu/rapid/press-release_IP-16-124_en.htm) Significantly lower amounts, yes, but certainly not "only on US based companies" Taking it broader than tax rulings, many other examples exist. Meanwhile, I read that both Ireland and Apple are going to appeal this ruling, so one can see this as a shot very close to the bow that doesn't make the ones shot at surrender. I hope the result will be that the ruling that the deal is illegal will stand, with a smaller payback. Reasons? I think it is immoral that large companies can negotiate such deals, and applaud the EU for standing up against their pressure when smaller countries do not have the spine to do so, but do not think all blame lies with Apple.
• known 10y ago
  Tax Apple revenues, not profits;
• pulse7 10y ago
  Companies try to pay the taxes by the "legal minimum" principle: pay what is required, but not more. If you have 2 parking slots in the downtown next to each other and one of them is cheaper, you will park where is cheaper... Why pay more if not required? Question is: Did politicians, who created such laws, received bribes?
  • tobltobs 10y ago
    The double irish is more like parking your car on the bicycle lane.
    • osi 10y ago
      .. which means only the bicyclists will complain. everyone else thinks there's no problem :)
• satysin 10y ago
  I am not too sure how I feel about this. On the one hand I do think Apple (and many other companies) should pay more taxes. However on the other hand Ireland enticed many big companies to their country on the promise of lower tax. You can't blame Apple for taking advantage of such an offer. They followed the letter of the [Irish] law as far as I can tell (unless someone can correct me?). I think this could end up being terrible for Ireland in the longer term. Then again perhaps the EU knows that they can't really go anywhere else now so will just have to put up with the new rates or not do business? It is far from a cut and dry situation IMHO.
  • denis1 10y ago
    That is the entire point of this article though. Apple didn't follow Irish laws (where Irish law = EU laws + laws created by the Irish parliament). They followed a deal with the Irish government that was actually against the Irish law.
  • creshal 10y ago
    > However on the other hand Ireland enticed many big companies to their country on the promise of lower tax. You can't blame Apple for taking advantage of such an offer. They followed the letter of the [Irish] law as far as I can tell (unless someone can correct me?). There's two separate issues. One, Ireland is cutting taxes far below the EU average to attract all companies they can. That's a dick move, but welcome to politics, it's fully legal. Two, Apple has received further tax breaks on top of that, reducing their tax rate from a crippling, communist 1% to an effective 0.005%. The European Commission found only the second deal to be illegal, and Apple just has to repay the tax difference to the regular Irish levels. Ireland is still a tax haven, just slightly less unfairly advantageously to Apple.
    • patrickaljord 10y ago
      > Ireland is cutting taxes far below the EU average to attract all companies they can. That's a dick move Allowing people and their companies to keep more of their money while creating tons of jobs in a high unemployment country. What a dick move indeed. /s
• shaqbert 10y ago
  What Apple, Amazon, Google, Microsoft, and most other big US company do is the so called "double Irish"[1]. Essentially is a clever way of using two quirks of some EU countries loopholes in tax laws, from treating IP licensing fees (of course the brand and intellectual IP is owned by a British virgin island tax haven, where else could this stuff be created/invented), and the net result is that Apple et al end up paying single digit cents on the dollar in EU profits. And with another quirk - this time in US tax laws - the do not even have to pay taxed in the US on those earnings, as they have not repatriated the funds. How to pay dividends/fund buybacks, without repatriating those funds? Easy: Just issue debt (which your own subsidiary in the British Virgin islands making a killing on IP licensing might want to buy) or have your BVI IP trust fund buy those shares. Now why would other EU countries let Ireland and the Netherlands get away with these accepted loopholes is a mystery to me, especially since Ireland had to ask for a bailout lifeline, and was in no position to negotiate firmly. Why the US would allow their truffle pigs to not pay taxes on oversea earnings is clearly the result of expert lobbying. [1]: https://en.wikipedia.org/wiki/Double_Irish_arrangement https://en.wikipedia.org/wiki/Double_Irish_arrangement
  • tinkerrr 10y ago
    >And with another quirk - this time in US tax laws - the do not even have to pay taxed in the US on those earnings, as they have not repatriated the funds. This is not a 'quirk' as you think. No country in the world, other than the US, tax their corporations on already taxed profits in a different jurisdiction. This actually ends up hurting the US because corporations cannot repatriate already-taxed funds without being taxed again.
    • shaqbert 10y ago
      The US tax code is a huge mess, agreed. But you gotta pay your dues (aka taxes) somewhere, and here Apple et al goes essentially Scot free. That is not cool.
      • X86BSD 10y ago
        Every time this apple in Ireland tax issue comes up it makes my brain hurt, literally hurt to read all these replies who don't seem to look at this problem correctly. First, Apple did nothing illegal. There is no wrong doing here. They pay tax in every country they owe tax. Period. Second, perhaps it's not Apple that's the problem? Perhaps it's the tax that is the problem. If you have mega corps building entities outside its main jurisdiction to avoid the main jurisdictions tax burden, perhaps you need to revamp your insane tax code. Hmm?
• nxzero 10y ago
  Given the stakes, unclear to me why multinationals don't find a way to create there own country, that would be free of any non-member decent.
  • tonyedgecombe 10y ago
    Because other nations wouldn't recognise it.
    • nxzero 10y ago
      Unlikely, that they'd not recognize it; multinationals have to much leverage internationally and many have sway over the masses too. What reasons would make you believe that?
  • frederikvs 10y ago
    You need to read the mars trilogy by Kim Stanley Robinson. Part of the story is about "metanationals", multinationals that become so rich and powerful they can basically buy a country.
  • jbmorgado 10y ago
    And then where they would see their products, if not by having to pay taxes in the countries where they would ship those products from their own tax free country? I don't think you get the issue here, a company in the USA can't just come to EU and sell their products without paying taxes... much less a company from a non existing wannabe country.
  • spriggan3 10y ago
    Don't worry, it will happen eventually, the Cyberpunk era is upon us.
  • atombath 10y ago
    If they did so, there would be tariffs from their client nations. Then they'd bribe the tariff countries... which is what they're doing now, anyways. So why go through all the trouble of owning a country?
• chvid 10y ago
  The US smacks Volkswagen - the EU smacks Apple.
• retube 10y ago
  Mess with our banks, and we'll mess with your tech firms!
• noir-york 10y ago
  Apple engage(ds) in aggressive tax planning - and they, along with FBK, Google, etc - deserve to be smacked down with a heavy bill. An effective tax rate of 0.005% - when your next door business neighbour is paying 20% - is morally wrong and damaging to society and the common good.
  • madeofpalk 10y ago
    Morals are irrelevant in this story. Tax law is a system of rules. There should be no second arbitrary standard people (and companies) should be expected to follow.
    • noir-york 10y ago
      How a country chooses to tax, and where and on who the tax burden falls, is a political matter, and thus has a moral dimension.
    • cryoshon 10y ago
      >Morals are irrelevant in this story. ah, the capitalist angle. unfortunately, the consequences of acting this way are poor for the rest of society.
      • madeofpalk 10y ago
        Change the laws to suit the morals most have.
        • andrepd 10y ago
          I wish I could, unfortunately I have no power or money, while multinationals have armies of lobbyists and bags of money a la Scrooge McDuck to help write the laws to suit them.
    • HelloMcFly 10y ago
      Ah yes, because laws are totally independent of morals. I'm clearly being facetious. Laws are the manifestation of morals, either collective or of highly influential individuals. But, to your point, laws are the non-arbitrary manifestation of those morals. Indeed there should be no unwritten standard as well. In this case, there wasn't: the Irish laws did not comply with EU law, and EU law take precedence in this matter. Apple should have known that was a possibility, and probably did know but hoped (and lobbied) for the best.
• omarforgotpwd 10y ago
  If both Apple and Ireland are opposed to this I see little chance Apple actually pays this. Ireland's government obviously setup this tax structure intentionally to bring capital into Ireland and will want to preserve this.
• DanielBMarkham 10y ago
  "...The findings are a result of the culmination of a three-year investigation by Competition Commissioner Margrethe Vestager into tax arrangements for Apple, dating back 25 years..." I have no love in my heart for Apple. At the same time, it's not like they don't have enough lawyers. So I have to assume that anything involving billions of dollars would be strenuously vetted. I might be wrong, but I'm starting from there. And if they were supposed to pay taxes, they were supposed to pay them. Purposefully evading taxes is wrong. Avoiding taxes is another matter. Complex tax codes to change society work because we assume that people will be actively avoiding them. So good for them. They're playing the carrot and stick game that governments like us all to play. If true, this means that they did the right thing that the best-informed legal minds could offer in order to legally avoid taxes. It worked for a while then suddenly the rules changed. And they changed not just for the future, but retroactively. What occurred to cause a rules change? It wasn't the law. It wasn't Apple's behavior. It became a story in the U.S. about how companies are getting away without paying their "fair share". The EC was the one that acted, and the only thing that makes sense to me is that the EC saw an opportunity and appointed a commission. Not arbitration, not a criminal or civil trial. A commission. Quite frankly, this looks like a stick-up. Apple's a big company and can take care of itself. I really hope that the same kind of thing doesn't happen to mid-sized and smaller companies trying to eek it out in the EU. It's not just bad for the companies involved: it's bad for the reputation of the union as a whole. You can't keep changing the rules up if you're trying to tweak regulatory issues to promote long-term growth. Nobody with any sense is going to trust you.
  • einarfd 10y ago
    I'm not convinced that even if Apple have the money and probably employ some of the best tax lawyers around. That they always go for the solution that is unambiguous above board and guaranteed to follow the law. This might be one of the times they went for something that looked good and they thought they could get away with, but that didn't pan out in the end.
    • DanielBMarkham 10y ago
      Beats me. We might have to wait 20-30 years for somebody's memoirs to be written to finally hear the rest of it. With this much at stake I seriously doubt there will be a simple narrative. What I am sure of is that anytime the company with the biggest market cap takes a hit like this? Ten thousand other companies are paying very close attention. Even if Apple took a gamble and lost, other folks have to ask themselves when it comes to regulatory issues in the EU, what kinds of gambles they are taking without even knowing it. Of course, I simplified the story to make my general point. In the version with more details, Ireland even had their own investigation and worked everything out with Apple. But the EC decided that wasn't good enough. It's really quite breathtaking. They had to pay 11 years of taxes. How many companies would be able to do that?
• kagamine 10y ago
  Most of you should probably read the EU press release which is full of juicy details before commenting. http://europa.eu/rapid/press-release_IP-16-2923_en.htm http://europa.eu/rapid/press-release_IP-16-2923_en.htm
• noir-york 10y ago
  People here are commenting on Ireland (and other jurisdictions) engaging in tax arbitrage to attract companies and jobs. Competing on tax rates and negotiating tax deals were a huge MNC like Apple pays a ridiculous 0.005% is bad: morally wrong, cuts to public services, increases unjustifiable economic inequality and is just not fair on other much smaller firms who have to pay full whack on the tax. Apple, FBK, etc don't see it like that - they will engage in aggressive tax planning to minimise their tax, hoarding billions of dollars. And its not like they do anything productive with their cash pile; its not like it goes to higher pay checks for their Asian workers. Instead, its spent on share buybacks to prop up sagging share prices and keep Wall St happy. Here's a better approach: tax companies on their profits and remove or reduce income tax and capital gains tax. This aligns incentives to: 1. encourage and reward founders to start new business 2. the most valuable employees tend to be mobile ones - a core EU principle is free movement so compete for the best employees by lowering taxes and giving them great public services. Companies will follow. 3. tax company profits and everyone is on the same level playing field: provides an incentive for companies to reinvest their profits into growth (and indirectly jobs).
  • khuey 10y ago
    Companies are already taxed on their profits. The hard question is determining what is a profit and where it is located. And share buybacks are returning capital to the owners of the business, which is why they invested in it in the first place. The owners can then make their own choices about how to allocate capital productively.
    • noir-york 10y ago
      > Companies are already taxed on their profits In theory. We are having this debate because in practice some are taxed at 20% and others practically nil. I'm arguing for no negotiated tax arrangements, indeed I have been giving thought to a progressive tax regime for companies. That would be interesting to evaluate. > And share buybacks are returning capital to the owners of the business Which is why I am not sure buy backs should be taxed. Either a company invests its earnings, or else it returns them to shareholders who can decide to identify growth opportunities, as you suggest.
• jcrei 10y ago
  I only wish that countries would compete for people the same way they compete for businesses. If they were to provide the best services, quality of life, in exchange for the lowest income taxes. That way people would move there and companies would follow. Wishful thinking?
  • gpvos 10y ago
    While I am in favour of such a scheme in principle, it would mean that 95% of Africa and large parts of Asia would move to Europe, which would cause big problems.
  • andrepd 10y ago
    Thankfully decision makers don't (all) think like you. Equating countries to businesses ignores such a vast amount of the reality of the real world that it isn't even funny. It's always the Achiles' Heel of the One Simple Trick that laissez-faire capitalists continually propose: that the world is more messy and complicated than: make countries = businesses.
  • JumpCrisscross 10y ago
    They do. Why do you think New York City and London get to tax at the rates they do? Taxes (at least personal taxes) are a user fee. Every time an employee snuffs at an offer in Missouri or Bangladesh, they are implicitly signalling a preference for quality-of-life elements.
    • dsacco 10y ago
      You don't have an email in your profile, but I'd like to get in touch with you. Would you mind letting me know the best way to do so? My email is in my profile.
      • JumpCrisscross 10y ago
        Shot you an email
• philoye 10y ago
  Apple responds with an open letter: http://www.apple.com/ie/customer-letter/ http://www.apple.com/ie/customer-letter/
  • deleted 10y ago
    [deleted]
• astaunton 10y ago
  It seems a lot of people think this ruling has something to do with 1) the "double irish" which is doees not or 2) Irelands 12.5% corporate tax, which it doesnt either. The ruling, as far as the EU are concerned, is that Ireland gave Apple a deal more beneficial than anyone else. But the basis for this claim is how the tax was charged. Instead of charging Irish tax for all income for the company, they charged what was reported in Ireland. The issue that needs to be resolved is did they pay tax anywhere else on the remaining profits. The US said they did but the EU say they dont think so.
• allendoerfer 10y ago
  Even with these baby steps, I like to see that the EU is unifying its corporate tax code. Of course, we do not need to worry about Ireland, Great Britain already made sure their position as English entrance to the EU will stay strong regardless of tax-breaks. The Netherlands are naughty, too, due to a strange coincidence Ikea Germany has to pay fees of exactly its profits to Ikea Netherlands each year. I think the bigger countries should use their power to end this ruthlessly, since in the end also the smaller countries would benefit if the race to the bottom stops.
  • jakozaur 10y ago
    Just to be fair: 1. Netherlands profit tax rate is 20%-25%, where Germany: 30-33%. Companies, may take advantage of those difference, but it less obvious evasion than paying 0.005% rate in some tax heaven. 2. Ikea Netherlands has several offices and a lot of employees in Netherlands. They likely provide some services to Ikea Germany. 3. Licensing cost, may have profit component. E.g. I can sell you the franchise for restaurant which takes base cost + some % of your profits. There are far more obvious tax loopholes that should be closed first, before worrying about taxation shifting between developed countries which taxes on roughly same scale.
    • allendoerfer 10y ago
      > 1. Netherlands profit tax rate is 20%-25% Not for foundations [0]. This is not about some procentual differences, it is a big loophole in the Dutch tax code, Ikea benefits from. https://en.wikipedia.org/wiki/Stichting_INGKA_Foundation https://en.wikipedia.org/wiki/Stichting_INGKA_Foundation
• kharms 10y ago
  If you're American, don't celebrate. The US government came out against this ruling, suggesting that US corporations are disproportionately targeted by the EC tax rulings. >The commission has initiated investigations into tax rulings that Apple, Starbucks Corp., Amazon.com Inc. and Fiat Chrysler Automobiles NV. received in separate EU nations. U.S. Treasury Secretary Jacob J. Lew has written previously that the investigations appear “to be targeting U.S. companies disproportionately.” >“There is a possibility that any repayments ordered by the Commission will be considered foreign income taxes that are creditable against U.S. taxes owed by the companies in the United States,” the paper said. “If so, the companies’ U.S. tax liability would be reduced dollar for dollar by these recoveries when their offshore earnings are repatriated or treated as repatriated as part of possible U.S. tax reform.” http://www.bloomberg.com/news/articles/2016-08-24/u-s-treasury-steps-up-pressure-on-eu-over-apple-tax-dispute http://www.bloomberg.com/news/articles/2016-08-24/u-s-treasu...
  • abduhl 10y ago
    That's fine - sounds like an incentive for companies to bring money back to the US. The reduction in tax liability happens when the earnings are repatriated per this quote. If these companies are storing this cash overseas in a bid to avoid paying taxes on it with no intention of repatriation until a tax holiday then why should we care?
    • res0nat0r 10y ago
      I would very much care if I were Apple and going to be taxed a second time trying to bring my money back to the USA. If that silly rule was eliminated much of all of this would be moot.
      • jandrese 10y ago
        They only get taxed on the difference. It's not really a second tax, it's just bringing the tax rate back up to non tax haven levels.
• cs702 10y ago
  US corporate profits as a percent of GDP are near their all-time highs. Take a look at this historical plot: https://fred.stlouisfed.org/graph/fredgraph.png?g=6ThF https://fred.stlouisfed.org/graph/fredgraph.png?g=6ThF I wonder how much of that is due to tax avoidance, whether legal or "unexpectedly illegal" (as in Apple's case). If governments around the world follow the lead of the EC, I would expect a noticeable decline in corporate profitability over the next five to 10 years. Note: I just generated the plot above as a png at the St. Louis Fed's FRED website, and I don't know how long the image will remain available. To recreate it, plot the "Corporate Profits, Adjusted" series divided by the "Gross Domestic Product" series, using the same units for both series (e.g., nominal billions).
• fulldecent 10y ago
  Maybe Apple spent $10M or whatever in taxes in Ireland over the past 10 years. And of course corporate profits are imaginary so you can imagine them happening anywhere on the globe. If I owned a small country on an island, I would be more than happy to allow Apple to imagine its profits were on my island and I would only charge $5M for the privilege. And I would be grateful for the $5M. What would you do with your small island?
• singularity2001 10y ago
  One might wonder whether multinationals paying 0.005% tax contributes to the horrible proliferation of oligo/monopolies.
• c0g 10y ago
  Given Ireland broke the law, not Apple, shouldn't they get the punishment?
  • plandis 10y ago
    Why attack your own when you can go after the US?
  • lucideer 10y ago
    Apple broke the law. Ireland provided Apple with false assurances that they were tax compliant, but there was nothing stopping Apple being fully aware of applicable EU tax laws. Perhaps Ireland should be punished (though the government is already arguing there is reputational damage), but you really cannot reasonable argue that Apple is not culpable.
• 300bps 10y ago
  I don't think this was planned but it could become a great bait and switch scam for countries. 1. Negotiate special tax privileges for a company 2. Have them set up shop in your country 3. Allow them to pay little tax for several years 4. Have federal authority sue saying that the deal in #1 is illegal 5. Collect back taxes based on normal tax rate and not the special deal in #1
  • k-mcgrady 10y ago
    I don't see how that would work (at least in Europe). Companies know now that the EC is going to come after them eventually unless they have their head buried in the sand and didn't hear today's news.
  • chronid 10y ago
    They will not collect back 100% anyway, maybe maybe 1/3 of the total amount.
    • Oletros 10y ago
      Why they won't collect all the due taxes?
      • chronid 10y ago
        Heavy discounts are usually given for this kind of issues by fiscal authorities, unless there is proof (beyond doubt) there was unlawful intent to not pay those taxes.
        • Oletros 10y ago
          But this is not a case of a Tax authority asking a company taxes, it is the EC saying what it is the amount owed.
      • gambiting 10y ago
        Imagine you had an agreement with your local tax authority that they agree for you to pay X in taxes. Then few years later tell you that actually, they were wrong and you have to pay more - you would fight this for as long as possible, wouldn't you?
• estel 10y ago
  From the press release: > The amount of unpaid taxes to be recovered by the Irish authorities would also be reduced if the US authorities were to require Apple to pay larger amounts of money to their US parent company for this period to finance research and development efforts. I wonder how much of the 14B could be offset by this? I suppose there's a chance that it all might be.
• Luc 10y ago
  Every country in Europe has some sort of wacky tax exception for multinationals. Every state is locked in this race to the bottom with its neighbouring countries. It's great that there is a supra-national authority forcing the states to cooperate on getting multinationals to pay reasonable taxes, because it wouldn't happen otherwise.
  • cel1ne 10y ago
    I'm not sure about that. I think most multinationals follow the same double-irish structure [0] which is based on laws in Ireland, the Netherland and the Bermudas. According to Wikipedia (just listing the IT-companies): * Adobe Systems * Apple Inc. * Facebook * Google * IBM * Microsoft * Oracle Corp. * Yahoo! [0] https://en.wikipedia.org/wiki/Double_Irish_arrangement https://en.wikipedia.org/wiki/Double_Irish_arrangement
    • wsc981 10y ago
      Also bands like U2 make use of such structures to avoid taxes: http://www.economist.com/news/business-and-finance/21625444-irish-government-has-announced-plans-alter-one-its-more-controversial-tax-policies http://www.economist.com/news/business-and-finance/21625444-...
      • furilo 10y ago
        At least they are Irish...
• beilabs 10y ago
  6% of total Irish national debt... I wonder how much Irelands payroll taxes would have been were the corporations not to have set up shop in Ireland, they would have just gone somewhere with a decent tax arrangement. Unemployment in the 70's and 80's was brutal in Ireland, personally, I think the government at the time made the right choice, however, this "selective treatment" allowed Apple to pay tax rate of 1% on European Union profits in 2003 down to 0.005% in 2014, FFS.
  • legulere 10y ago
    > I wonder how much Irelands payroll taxes would have been were the corporations not to have set up shop in Ireland, they would have just gone somewhere with a decent tax arrangement. A better question is where the world would be if nation states wouldn't allow multinational companies to pay only negligible taxes by taking part in a race to the bottom. With tax deals like this one you're just ripping other countries off.
    • Radim 10y ago
      Even better question is, where the world would be if evolution wouldn't allow individual organisms to optimize their fitness by taking part in a race to the bottom? That constant pressure to do more with less... deadly. With "beneficial" (sic) mutations like this one you're just ripping other organisms off.
      • legulere 10y ago
        The race to the bottom doesn't optimize fitness though. It relies on being globally unsustainable and just works by parasitically draining all business from the rest of the world. Ireland isn't somehow magically fitter than other countries and thus able to offer 0.005% corporate tax. It's only relying on attracting an above-normal amount of companies by having low taxes and draining other countries of their tax benefits in the same turn. It wouldn't work if everybody was doing it. In fact countries would just turn to shit.
        • 10y ago
• andmarios 10y ago
  In 2014 Apple's effective tax rate was 0.005%. That is 5 cents for every $1000 in profits. Even a patent troll could do better than Ireland...
  • tinkerrr 10y ago
    Why this blatant falsification of facts? In 2014, Apple's earnings before interest and taxes was $53,483,000 and the income tax expense was $13,973,000. That's 26.12% effective tax rate. All data from Yahoo! Finance: https://finance.yahoo.com/quote/AAPL/financials?p=AAPL https://finance.yahoo.com/quote/AAPL/financials?p=AAPL. It's a similar tax rate in other years too.
    • andmarios 10y ago
      Did you read the article? The numbers I wrote are straight from the European Commission. As a European Union citizen I trust EC's findings more than yahoo. Also, do you really think that Apple made only 50 million in Europe in 2014? What is it? A startup?
    • cowls 10y ago
      This article is regarding Apple's EU profits, the Yahoo statement (I think?) is global profits. Also the income statement says: All numbers in thousands So you need to add 000 to the end of those numbers
      • jandrese 10y ago
        It seems silly to price in thousands when you're talking about billions. Either go all the way and show billions, or show dollars. Don't try to do some halfassed compromise.
    • CJefferson 10y ago
      Apple made $53 million in a year?
    • jdmichal 10y ago
      > At the centre of the Apple controversy are two of the company’s subsidiaries, Apple Operations Europe and Apple Sales International. Find me those numbers, not those of the US parent company Apple, and you have an argument.
• jdimov10 10y ago
  Time for Ireland to leave the EU too, I think.
  • _delirium 10y ago
    Ireland's entire strategy when it comes to attracting foreign businesses to domicile there depends on being both 1) in the EU, but 2) lower-tax than most of the rest of the EU (excluding a few micronations). They're selling a tax arbitrage within the EU common market, which doesn't work if they aren't in it! Ireland's domestic market in itself isn't large enough to really attract major international companies to set up European headquarters there.
    • MrBuddyCasino 10y ago
      This seems like the right way to look at it. If the EU wants to scare off multinationals and signal that this tax haven's days are numbered, why punish Ireland? Its unnecessary.
    • SmellyGeekBoy 10y ago
      > Ireland's entire strategy when it comes to attracting foreign businesses to domicile there depends on being both 1) in the EU, but 2) lower-tax than most of the rest of the EU... Spot on. I'd also add: 3) English-speaking 4) Close ties to the UK
• meira 10y ago
  So Ireland, the tech hub that would replace London, isn't going anymore?
  • notahacker 10y ago
    Suspect Dublin will do quite well in the fintech sector if Brexit means passporting agreements are difficult to arrange for London based startups...
• Marazan 10y ago
  Duplicate https://news.ycombinator.com/item?id=12385232 https://news.ycombinator.com/item?id=12385232
• dekhn 10y ago
  So, if I understand correctly, EC's argument hinges on the idea that Ireland gave "special favors" to Apple in terms of the tax deal. In particular, that Ireland offered things which nearly all other companies were not. If that is not the case (IE, if it can be proved apple received no special treatment), then the conclusions of the case, and the penalty, are false.
• tmaly 10y ago
  Ireland uses lower taxes to attract companies to create jobs. This has worked, but I wonder if the EU is going to cause another country to exit with this ruling? Seriously, what does Ireland gain if it loses a ton a jobs due to this?
  • tmaly 10y ago
    Why the down votes? Does a promise of lower taxes not attract jobs?
    • twblalock 10y ago
      I suspect you are getting downvoted because the prospect of Ireland leaving the EU over this is farcical.
• deleted 10y ago
  [deleted]
• nradov 10y ago
  We should cut corporate income taxes to 0%, and increase income taxes on investors and highly-paid employees to make the change revenue neutral. This will eliminate the incentive to waste resources on corporate tax avoidance and allow businesses to focus on creating customer value.
• deleted 10y ago
  [deleted]
• johnnyhillbilly 10y ago
  Here's how to fix this: 1. Foreign deductions are taxed based on the difference between the locale where the earnings are made and the locale the service/product is provided from. Where the sales division is located has no relevance to taxability, and deductions for sales costs are treated as any other internal service. 2. IP is enforced on the national level, and should not be eligible as a foreign deduction. Good-will also follows the local market. 3. Documentation should be provided that foreign costs are real, and that they are actually taxed. Tax agreements should be null and void if systematic abuse is uncovered. The problem right now is that no company can compete against these cheats. Personally, I think Ireland has scammed the rest of Europe for long enough by now. Likewise, I wouldn't be surprised if a large part of India's competitiveness in asses-in-seats outsourcing is created by artificial tax rule phenomena - and various constructs to exploit these.
• nepthar 10y ago
  "European Commission tells Apple to spend €13B arguing against them"
• throw2016 10y ago
  I don't see why commentators here are so divided, presuming they are not beneficiaries of this system. The government gets revenue from taxes to provide services. If everyone were to do what Ireland is doing then goverments either have to raise money by increasing other taxes or reducing services. Either way individuals and society lose. Nobody wins from this race to the bottom. The bigger question is the presence of these convenient loopholes in the global financial system that benefit the wealthy and privileged but leave everyone else facing clear cut laws that cannot be evaded without serious consequences. Questioning the legitimacy of taxes, or even society, and getting pedantic about laws in this context seems little more than a self serving tactic to avoid admitting this is obviously wrong. Especially when everyone else without exception is paying their fair share. Here is a better idea, pay your share and then start a debate about taxes and society if you want.
  • Armisael16 10y ago
    This feels an awful lot like a scam; Apple is explicitly told by the Irish government (the presumable authority on Irish taxes) that what they're doing is fine, then over a decade later the EU steps in and says "you can't do that. pay more taxes retroactively (to us)". This stinks of ex post facto lawmaking in order to get money from a corporation, and it seems there are a few of us who object to that. I'm all for changing the laws in the present, but I consider ex post facto laws a far worse solution than the disease.
• everydaypanos 10y ago
  I live in Europe and I can certainly see how this seems like a mess and how can a company obey the laws in one country and at the same time being illegal... I just want to point out something that is often neglected. EU Commission is basically a referee entity. It all starts with someone making a formal complaint about Apple or Google or Amazon and then they check into it. And in MOST cases the complainers are other US companies that feel that their complaints are being neglected in their own country(ex Yelp)
• gjolund 10y ago
  This is all over the news like something is actually going to come of this. What can Ireland/EU actually do? Apple is a bigger player in the world economy than Ireland.
• nodamage 10y ago
  The more I read about this the more likely I think this decision could be appealed and overturned. The initial implication is that Apple specially negotiated a lower tax rate for itself in Ireland. But if you read through the European Commission press release[1], it's not that a special rate was negotiated, but rather Apple Sales International (the Irish Subsidiary) only pays Irish income tax on the portion of its income that comes from within Ireland, which is correct according to Irish tax law. But there's nothing particularly special about this setup that applies only to Apple, and from what I can tell, any other corporation operating in Ireland could have also set up this arrangement and is subject to the same rules. It doesn't make sense to me that the EU can compel Ireland to collect more taxes from Apple, if according to Irish tax law, they've already paid what they owe for Irish sales, and they don't owe taxes for non-Irish sales. Now, there is a separate question, which is can/should every other EU country go after Apple's local subsidiaries for failing to pay sufficient income tax in their own countries (by transferring the profits over to Ireland)? The answer to that is probably yes. If Apple sells an iPhone in Italy for a profit, it should pay Italian taxes on those profits, and should not be able to avoid Italian taxes by booking the profit in Ireland. This is touched upon in the press release: > The amount of unpaid taxes to be recovered by the Irish authorities would be reduced if other countries were to require Apple to pay more taxes on the profits recorded by Apple Sales International and Apple Operations Europe for this period. This could be the case if they consider, in view of the information revealed through the Commission’s investigation, that Apple's commercial risks, sales and other activities should have been recorded in their jurisdictions. This is because the taxable profits of Apple Sales International in Ireland would be reduced if profits were recorded and taxed in other countries instead of being recorded in Ireland. It seems more logical to me to conclude that that Apple doesn't owe more taxes to Ireland, instead they owe more taxes to all the other countries in the world where they operate but have avoided taxes by transferring their profits into Ireland. [1] http://europa.eu/rapid/press-release_IP-16-2923_en.htm http://europa.eu/rapid/press-release_IP-16-2923_en.htm
• jernfrost 10y ago
  I don't get how the US government can so strongly advocate in favor of Apple in this case. I am a big Apple fan, but clearly the law was broken. This seems like a slam dunk case. And Apple isn't fined, they just have to pay normal low Irish taxes like everybody else.