4 ms·

There are two things to keep in mind: * Tax laws are (not theoretically) changed retroactively, i.e. even if no taxes were due at the time of filling, that ma

There are two things to keep in mind: * Tax laws are (not theoretically) changed retroactively, i.e. even if no taxes were due at the time of filling, that may change. * Law interpretation and/or leading acts may change (again retroactively), i.e. taxable amount, various exemptions, etc.. Some countries may pat you on the back for finding loopholes in the law while other may simply order one to pay hopefully without calling that criminal offence. We have no idea how this will turn out

zigzigzag 10y ago
It is well understood that retroactive changes to the law are one of the worst things a legal system can do, which is why so many constitutions ban it and why other countries (like the UK) have a strong convention not to do it. The US Constitution bans them explicitly. Yes, of course countries routinely do bad things and ignore convention and constitutional principles, but that doesn't make it suddenly OK. The low rate of corporation tax in Ireland is not really a loophole, it is a specific strategy to attract employers to a country that might otherwise not have much to offer, and it has worked fantastically well for them. This policy has been in place for decades and it is (or was) popular - the Irish prefer the jobs to the corporation taxes. What is the EU is doing here is trying to ban tax competition between countries on the grounds that if you don't charge much tax, you're offering illegal "aid". Beyond a strange interpretation of the word "aid" this is really a very serious problem - if the EU successfully forces countries to pick a single corporation tax rate across the bloc under the doctrine of illegal "aid", despite having no mandate to set tax policies, then what comes next? What if the French start arguing that countries with laxer worker rights than France are providing illegal state aid to their corporations? Zero-rating corporation tax is a perfectly reasonable policy for a country to have, there are plenty of economic arguments for it, and even if other countries might feel the outcome is unfair, well, so what? Competition is about different people making different tradeoffs and seeing what happens: if the Irish prefer to prioritise employment over collecting corporation tax (one of the hardest taxes to collect anyway), why should they be prevented from doing so?
- Xixi 10y ago
  The corporation tax rate in Ireland is 12.5%, and the rate applied to Apple was (eventually) 0.005%: it's the delta between Irish own tax rate and the one applied to Apple that is deemed illegal according to this EU ruling. If Ireland want a 0% tax rate for all corporations, as far as I know they are allowed to do it. They just cannot afford it.
  - zigzigzag 10y ago
    That's the EU's interpretation of the figures, but that's assuming Ireland should have taxed all revenue across all of Europe. The Irish tax system doesn't work that way though and the Irish government is stating flat out that there were no special deals: the apparently "low" rate is because the EU isn't calculating taxable income the same way Ireland does.
    - deleted 10y ago
      [deleted]
- friendzis 10y ago
  I do not encourage retroactive law changes, but they do happen. Anyway, I think you miss the point (which was not communicated at all). Long term gains are very hard to pick over short term gains, especially if that would incur some short term loss. The free market [long term] goal of EU can be roughly expressed as a fight for competition over monopolies. It may look extremely lucrative to lower taxes for a corporation to pay significant lump of money (create jobs, capital movement, etc) even at low rate, than to let the corporation set its foot at another country. As it was stated in other comments, a multinational naturally attempts to increase profits by any means and incorporating at different location with significant tax discount is one of the ways. Although, globally (or EU wise) this is simply tax discount for a corporation that is already pretty much resembling a monopoly. Think about the EC decision in this light.
- phab 10y ago
  You have missed the point - this is about different companies within one state being charged different rates of corporation tax, not different states across the EU charging different rates of tax. > if the EU successfully forces countries to pick a single corporation tax rate across the bloc The EU is forcing no such thing. It is forcing countries within the bloc to not give any one company special treatment. The distinction is critical.

zigzigzag 10y ago

It is well understood that retroactive changes to the law are one of the worst things a legal system can do, which is why so many constitutions ban it and why other countries (like the UK) have a strong convention not to do it. The US Constitution bans them explicitly. Yes, of course countries routinely do bad things and ignore convention and constitutional principles, but that doesn't make it suddenly OK. The low rate of corporation tax in Ireland is not really a loophole, it is a specific strategy to attract employers to a country that might otherwise not have much to offer, and it has worked fantastically well for them. This policy has been in place for decades and it is (or was) popular - the Irish prefer the jobs to the corporation taxes. What is the EU is doing here is trying to ban tax competition between countries on the grounds that if you don't charge much tax, you're offering illegal "aid". Beyond a strange interpretation of the word "aid" this is really a very serious problem - if the EU successfully forces countries to pick a single corporation tax rate across the bloc under the doctrine of illegal "aid", despite having no mandate to set tax policies, then what comes next? What if the French start arguing that countries with laxer worker rights than France are providing illegal state aid to their corporations? Zero-rating corporation tax is a perfectly reasonable policy for a country to have, there are plenty of economic arguments for it, and even if other countries might feel the outcome is unfair, well, so what? Competition is about different people making different tradeoffs and seeing what happens: if the Irish prefer to prioritise employment over collecting corporation tax (one of the hardest taxes to collect anyway), why should they be prevented from doing so?

Xixi 10y ago
The corporation tax rate in Ireland is 12.5%, and the rate applied to Apple was (eventually) 0.005%: it's the delta between Irish own tax rate and the one applied to Apple that is deemed illegal according to this EU ruling. If Ireland want a 0% tax rate for all corporations, as far as I know they are allowed to do it. They just cannot afford it.
- zigzigzag 10y ago
  That's the EU's interpretation of the figures, but that's assuming Ireland should have taxed all revenue across all of Europe. The Irish tax system doesn't work that way though and the Irish government is stating flat out that there were no special deals: the apparently "low" rate is because the EU isn't calculating taxable income the same way Ireland does.
  - deleted 10y ago
    [deleted]
friendzis 10y ago
I do not encourage retroactive law changes, but they do happen. Anyway, I think you miss the point (which was not communicated at all). Long term gains are very hard to pick over short term gains, especially if that would incur some short term loss. The free market [long term] goal of EU can be roughly expressed as a fight for competition over monopolies. It may look extremely lucrative to lower taxes for a corporation to pay significant lump of money (create jobs, capital movement, etc) even at low rate, than to let the corporation set its foot at another country. As it was stated in other comments, a multinational naturally attempts to increase profits by any means and incorporating at different location with significant tax discount is one of the ways. Although, globally (or EU wise) this is simply tax discount for a corporation that is already pretty much resembling a monopoly. Think about the EC decision in this light.
phab 10y ago
You have missed the point - this is about different companies within one state being charged different rates of corporation tax, not different states across the EU charging different rates of tax. > if the EU successfully forces countries to pick a single corporation tax rate across the bloc The EU is forcing no such thing. It is forcing countries within the bloc to not give any one company special treatment. The distinction is critical.