9 ms·

A Tax Expert Takes Tim Cook's EU Letter Apart Point by Point

180 points by markdown 10y ago

CamperBob2 10y ago
As usual for headlines that contain phrases like "takes apart," "utterly debunks," or "totally destroys," the tax expert's response does absolutely none of the above. Not a single factual assertion in Cook's letter is contradicted. There should be an axiom comparable to Betteridge's Law for this sort of headline.
- dagss 10y ago
  What about the assertion regarding how much of the profits are taxed in the US?
  - asuffield 10y ago
    Here's an (old) discussion of some of the major points in understanding that question: http://www.forbes.com/sites/timworstall/2012/11/01/so-how-much-tax-did-apple-pay/#50d0ec365fa9 http://www.forbes.com/sites/timworstall/2012/11/01/so-how-mu... I haven't seen an explanation of where that 0.005% number comes from, but I would be unsurprised to find similar forms of confusion in it.
    - jsnell 10y ago
      The EC's press release is pretty clear on where the number comes from, and I do not see any such forms of confusion there: http://europa.eu/rapid/press-release_IP-16-2923_en.htm http://europa.eu/rapid/press-release_IP-16-2923_en.htm
      - asuffield 10y ago
        Ah, I see. So what they're saying in this case is that 0.005% is the fraction of Apple's global non-US profits that was paid as tax in Ireland. That's not the same thing as saying it was "a 0.005% tax rate". The issue is over what fraction of the non-US profits are taxable in Ireland, not over the tax rate.
        jsnell 10y ago
        Whoa, I don't think they're saying that. "Apple Sales International" is not all non-US profits. It's a company buying Apple products from contract manufacturers in other regions and selling them in Europe. It would not be recording any revenue from sales in other regions. The profits would then be the difference between the cost they bought those products for (+ things like the very substantial payments to Apple US for R&D), vs what they sold those products for.
- gambiting 10y ago
  Yeah, like the bit where he says that apple does not pay the "fair share". There is no such thing. Either you pay what is required by law or you don't. Especially if what they said about being the largest taxpayer in Ireland is true. I feel about it this way - if you rented an apartment for $1000/month, and you had a room mate that paid $900 a month, why does it matter that it's only 0.00001% of his income, while the remaining $100 is 20% of yours? Could anyone say that that other room mate is somehow not paying his fair share of the rent, since it's such a minuscule percentage of his earnings?
  - Oletros 10y ago
    > Either you pay what is required by law or you don't. And according to the EC, they don't
    - asuffield 10y ago
      That's not precisely accurate. The EC's ruling is that the Irish government changed the law in an unlawful way. There has not yet been an explicit ruling on Apple's conduct, as far as I know - that's likely to take more time (years...) to happen.
      - Oletros 10y ago
        > That's not precisely accurate. The EC's ruling is that the Irish government changed the law in an unlawful way. The ruling is that the Irish Government applied wrongly the actual law, no law has been changed > There has not yet been an explicit ruling on Apple's conduct, as far as I know - that's likely to take more time (years...) to happen. The investigation is not on Apple, but on the Irish Government. My comment about illegality was about the Irish Government practices, not about Apple.
  - blub 10y ago
    The law says they have to pay 12%. They pay 0.005% because the Irish goverment is giving them special treatment. No thanks, pay the 12% like everyone else or take your 6000 workplaces and shove them.
- blub 10y ago
  I think it's quite clear that Apple has a tax rate of 0.005% instead of the normal 12%. Can I also get such a discount? What about if I start a company, can I get it then? It's true that I don't hire thousands of employees, but I'm not rich to the tune of hundreds of billions either. It's all about proportions really. Let's all pay 0.005% tax and see everything turn to crap around us. But we'll be rich!
  - rimantas 10y ago
    Is it really clear?
    - Arnt 10y ago
      I didn't quite get it... 0.005% of what? Profit on sales in Ireland? Profit on sales in other parts of the world?
      - Arnt 10y ago
        Oh, I get it, the sum of those two. Are people complaining that when Apple sells a phone in Italy, Ireland taxes that at zero? Is that the complaint?
      - Wilya 10y ago
        Apple considers that all sales across Europe actually happen in Ireland, so taxes on profit on sales in the whole EU are paid in Ireland. That part is perfectly legal within the EU. The issue is that the normal tax rate in Ireland is around 12%, and Apple uses accounting tricks and tax exceptions to lower their effective tax rate there to 0.005%. That is the part that the the European Commission ruled illegal.
        pjc50 10y ago
        Effectively they argue that, in EU countries and India and Africa, the profit happens in Ireland. This is done through transfer pricing. In Ireland, they argue that the profits happen at a "head office" which was not based in any country and did not have any employees or own premises. (The ruling: http://ec.europa.eu/competition/state_aid/cases/253200/253200_1582634_87_2.pdf http://ec.europa.eu/competition/state_aid/cases/253200/25320... linked from http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_38373 http://ec.europa.eu/competition/elojade/isef/case_details.cf...) - search for "AOI"
- happy_tentacles 10y ago
  Agreed - the title is bombastic fluff, however, some interesting points are made. Though the strongest one just paraphrases of the opening paragraph of the EC press release (http://europa.eu/rapid/press-release_IP-16-2923_en.htm http://europa.eu/rapid/press-release_IP-16-2923_en.htm). -- The biggest problem I have with Tim Cook's position is the sovereignty argument. I would stay away from it for now, and let the interested parties pick it up. Tim Cook: "This would strike a devastating blow to the sovereignty of EU member states over their own tax matters, and to the principle of certainty of law in Europe".
jmulvi 10y ago
It seems hard to defend Apple's position. The pushed their tax avoidance strategies as hard as they could in Ireland until they were paying 0.005 percent in 2015. It would be wonderful if tech companies took this moment to push for clear and transparent international taxation laws. Some of the tax avoidance measures currently practiced can seem particularly unfair from a layperson's perspective.
blub 10y ago
Disappointed in Apple and Tim Cook, this is the typical amoral behavior one can by now expect from corporations and their CEOs. It's always about the money. What can we as EU citizens do to encourage these corps to behave? I'm thinking an e-mail to Tim Cook wouldn't have much effect.
- gambiting 10y ago
  Advocate for unification of tax laws across EU - then corporations lose incentive to register in countries which offer them the largest tax discounts.
  - happy_tentacles 10y ago
    Tax unification - would in fact start with Fiscal Harmonisation.. That is to say - tax rates can be different, but the underlying calculations how to calculate income and expenses would be harmonised across the Member States of EU. We are generations away from Tax Unification, if it ever happens... Fiscal Harmonisation - more like it, though save some global seismic event - still a generation into the future.
    - danmaz74 10y ago
      Fiscal Harmonisation -> would be a good starting point.
      - blowski 10y ago
        I believe this is the political calculation the EU is making. Further EU integration is unpopular right now, but not as unpopular as large corporate tax dodgers. This is partly about showing how only a big powerful EU can stand up to companies like Apple, whereas small countries like Ireland have to beg for tax.
      - pjc50 10y ago
        The Eurozone crisis and the treatment of Greece tells me that we're a very long way away from that happening.
dagaci 10y ago
We often accuse authorities of going after the small, while leaving the big offenders free. The average individual working person has no negotiation when it comes to what taxes they pay. The average business has to be very careful, fully aware that they are at an extra competitive disadvantage compared to the international mega-corporations who are effectively given huge financial subsidies by entire nation states. It’s not personal. Tim Cook knows that what's happening is right, but nevertheless he is required to defend the tax advantage, same as the Ireland, as with the US where mega-business and corporations have a strangle-hold on government and law. Every individual should support the EU. If the EU is defeated here it will be a loss to the small man and small business. If defeated it will enshrine by default the creeping imbalance of power that corporations have over the individual nation and people.
- blub 10y ago
  It boggles my mind that there are people supporting Apple in this. There are so many of us that like to cheerfully screw themselves over to protect rich corporations. As an Apple customer I am not sure what to do in the future, if I should continue to support them by buying their products. I hope they lose in any case.
  - dagaci 10y ago
    People link their liking of Apple with what is right and wrong. They do not realise the extent of tax evasion, and they do not realise that it is they themselves and every working person who is subsidising tax evading corporations by paying higher taxes. For me personally, at this time it would _not_ stop me from buying from Apple. This is not a contradiction, the reality is that Apple isn't the only offender.
    - napworth 10y ago
      Yeah, I'm a defender of Apple because I don't think they should be asked to pay for taxes in the past. Instead, I would like to see all the evasion loopholes closed so Apple, and every other large company out there, can't do it for the future.
jeremysmyth 10y ago
The article is trying to address a legal situation but uses terms like "that doesn’t mean they’re paying anything resembling their fair share" and "everyone is correctly saying Apple did wrong". The moral/ethical viewpoint is being addressed here, not the legal one. If the law is out of step with the moral viewpoint (as it so often is), then folks on the moral side apply pressure to change the law. The law is supreme in our part of the world, and arguments that ignore it are simply beside the point. An appeal is exactly the right way to test the law, so we'll see at the end of this process if the EU is actually challenging Ireland's tax law and its legality in the context of the EU, or if there was, in fact, some illegal activity on the part of Apple and the Irish government (as is suggested by the extant ruling).
- dghf 10y ago
  > The article is trying to address a legal situation No, it's addressing a letter, which makes moral and ethical (as well as legal) arguments: e.g., one of the reasons why the EU's judgement is unfair is that Apple already pays lots of tax. The article is responding in kind.
jsmthrowaway 10y ago
I'm most interested that multiple commenters in this thread are so egregiously conflating legality and morality, particularly when discussing a corporation in a capitalist system. I'm as liberal as it gets and I probably wouldn't link corporate taxes under capitalism and morality, for a few distinct reasons.
- blub 10y ago
  Laws are finely-tuned reflections of morals - they are mostly about fairness and enabling society to function in an orderly way. How did laws evolve? Why do we punish theft anyway? What Apple (and Google, Microsoft, probably others) is doing is certainly immoral. It's likely also illegal.
  - jsmthrowaway 10y ago
    No. The entire point of law is to completely eliminate fairness, morals, and other squishies as deciding factors involved in a judgment. We punish theft because it is against a clearly defined set of laws, and because at some point lawmakers determined that we should. We notably do not punish many immoral things, and punish many moral things; introducing morality is dangerous and undermines the whole thing. To use your theft example, think about a Robin Hood type situation; should we overlook sidestepping of the law when it fits with our morals and squishies? No. The law is the law. That edge cuts both ways. In some ways it supports your argument. In others it does not. Introducing morality makes your argument totally different (and, in this case, irrelevant until the United States and Ireland adopt socialism). I'm a bloody liberal and I'm saying that; we can't expect capitalist entities to operate in anything other than their own self interest or we actually don't want capitalism. Can't have it both ways. How do you define fair for a corporate person? I'm very intentionally avoiding commenting upon the specific situation aside from saying it's weird to come at this morally when discussing a paper entity with clearly defined goals within a particular system of government.
    - pjc50 10y ago
      This argument completely contradicts the way law is enforced in practice, with all its "reasonableness" tests and mitigating factors. I think you'll find very few lawyers regarding it as a mechanical system. What is the law of equity but a different word for "fairness"? (Especially in a "common law" jurisdiction!)
circlefavshape 10y ago
One bizarre thing about this whole affair is the reactions on social media. The EU has made a ruling based on the idea that markets must be free from government interference, and facebook is full of lefties arguing in favour of the ruling and right-wingers arguing against it
- markdown 10y ago
  It's almost as if people want to be free to break out of the artificial 'lefties' and 'right-wingers' boxes into which others thrust them.
pulse7 10y ago
Let the court decide how much taxes Apple must pay in Ireland/EU... Let them make complete investigation into the matter and see what was going on here... If the laws are equal for all, I would also like to pay 0.005 percent on my profits, not just Apple...
atanasb 10y ago
Let's summarise: 1. Apple, like every other big corporation, uses a complex corporate structure in order to reduce taxes legally. 2. Irish government issues preferential rates and also advises Apple on how to do it, directly breaking EU law. 3. Five years later - Apple has to pay for the Ireland's preferential tax rates. So let me get this straight - according to EU law if I get told today that Irish tax rate is 20% for example, 5 years down the line I can just expect someone to send me a letter stating that actually - I got preferential tax and I should repay another 20% on everything. Not to mention negative PR. Can someone explain why people are angry at Apple when clearly they were allowed to do it? It is interesting watching how emotionally invested people get in scorning corporations about legally reducing their taxes. Every small company owner I have talked to has tried a few ways of legally reducing taxes - I can't see why people hate on other people for doing the same thing.
- snovv_crash 10y ago
  If somebody says they don't mind if you pay them below minimum wage, it doesn't mean that it is legal. At some point in the future a lot of hurt might end up coming your way, and you could be forced to pay them the remainder, even if they say they don't want it because they might lose their job as a result. Similarly, just because Ireland told Apple that they could get low taxes, doesn't mean that they were legally entitled to do so.
  - atanasb 10y ago
    I don't mean to provoke people to get downvoted to hell - I mean to understand why people are hating on Apple. Your example is not applicable here since below minimum wages are illegal to begin with. > Similarly, just because Ireland told Apple that they could get low taxes, doesn't mean that they were legally entitled to do so. You are talking about the government here - not Apple. My point being - the Irish government was at fault when they broke EU law. Why should Apple be the one to compensate their error?
    - snovv_crash 10y ago
      Ireland agreed to the Treaty of Rome, in which they agreed to not provide state aid to corporations. The EU commission's ruling is that the effective tax rate of ~0% amounts to state aid via a tax break. In order to reverse the state aid, Apple needs to pay Ireland the money that it was illegally allowed to keep. That is why it is Apple's responsibility to pay back the money, because that is the only way to ensure that the incentive of this tax-favouritism is removed.
zmmmmm 10y ago
For years Cook and others have been taking the stance that they are just following the laws and if people want them to pay more tax then they should get the law changed, and then Apple will happily comply. Now we see the hypocrisy: when faced with actual law saying they should pay tax do they actually happily agree to pay the tax? No, they turn around and say that they object to the law and argue the law is invalid. So what we have here is not a good corporate citizen just happily paying what taxes it is due. What we have is just like any corporation: an entity that will cynically seek to avoid and minimize its tax using any argument available and they have absolutely no interest in paying their "fair share" or contributing back to society under any tax system. So we have to just remember this next time they say "Well if you want more tax, change the law" because that is a completely insincere lie on their part.
- Angostura 10y ago
  I think there is a difference between saying 'we comply with the law' and being happy when someone retrospectively changes the law and then demands n years payments under the new rules.
  - jbmorgado 10y ago
    Nobody changed the law retrospectively. The EU law always existed and Apple obviously knew about it. If Apple asked for the state of Texas for a tax cut in the state of New York and then got fined for not paying their taxes you wouldn't call name it "retrospectively".
  - walkingolof 10y ago
    Nothing is changed retrospectively, in the EU you cant give one company a tax break. Ireland knew this, but went ahead and did it anyway, Apple knew this too, and took a chance.
    - d_theorist 10y ago
      It appears that this is the crux of the disagreement. Does the loophole that Apple used constitute "giving one company a tax break"? There seem to be reasonable arguments on both sides.
beyondcompute 10y ago
I am glad about my decision to switch away from the Apple smartphone. Now I'm also thinking that I shouldn't wait for their laptops lineup update as well. There's our little way of fighting for justice and for society's interests against money-making paperclip maximizers. :)
- Havoc 10y ago
  >I am glad about my decision to switch away from the Apple smartphone. All the big corporates do this, not just Apple.
  - sveme 10y ago
    Serious question: How are asian companies set up when targeting the EU? Does Samsung follow the same approach as Apple and other US companies?
    - Havoc 10y ago
      South Korea gives big tax breaks to its chaebol (form of conglomerate). So effectively they don't need to funnel anything to Ireland/wherever because their home country works just fine.
deleted 10y ago
[deleted]
jbmorgado 10y ago
My only issue here is that Ireland get's to be the big beneficiary of this. Ireland was in the wrong trying to strip the other EU countries of their due taxes as much as Apple. This money should go to EU to apply a they see fit, instead Ireland profits from it exclusively.
- abraae 10y ago
  Yep. They've played a blinder.
- alphadevx 10y ago
  No this is incorrect, Ireland will not benefit as they will be required to use this tax revenue to pay back their national debt, largely owed to other EU member states...
uptown 10y ago
Sure many companies won't incorporate in Ireland, but about half the United States' corporations call Delaware or Nevada their "home" despite operating elsewhere.
nateabele 10y ago
"[T]hey’re using an arcane legal structure that is simply not available to the many smaller businesses Apple competes with." Either it's illegal or it's not. If it's not, then shut the fuck up. The shame isn't that Apple is doing this. The shame is that more people can't.
codecamper 10y ago
I can't see how setting up an Irish company will allow me to skip paying the 30% app store tax. Maybe Ireland should up it's game & slap Apple with a 30% charge! If Apple wants to complain, they can hunt for an email address, not find it, and be forced to fill out a little form, from which they will never hear back.
- dilemma 10y ago
  Perfect.
- draw_down 10y ago
  ...what?
codecamper 10y ago
I can't see how setting up an Irish company will allow me to skip paying the 30% app store tax. Maybe Ireland should up it's game & slap Apple with a 30% charge! If Apple wants to complain, they can hunt for an email address, not find it, and be forced to fill out a little form, from which they will never hear back.
zacharytelschow 10y ago
"It’s clear as day—and this was one of the findings of the 2013 Senate subcommittee—that there was no sensible business reason to set up those subsidiaries except to avoid paying taxes." The avoidance of paying taxes, the lowering of costs, does not qualify as a "sensible business reason" to take an action?
- NetStrikeForce 10y ago
  No one's core business is "avoid taxes". Apple's business is to sell computers and entertainment. Opening an office for the sole purpose of avoiding taxes is not a core business, it's tax evasion, legal or not.
  - alphadevx 10y ago
    Apple's business is to make profit, same as anyone else. Revenue - Costs = Profit, still holds true.
    - pjc50 10y ago
      Tax is computed after the profit is made. What we're discussing is the question of where the profit was made and which country's tax system it falls under. If any.
      - alphadevx 10y ago
        Yes I am aware that profits are taxed and not revenue. Parent mentioned reduction of costs as a compelling reason of locating in Ireland, as well as low taxes. Corporations are legally obligated to maximize profit for share holders.
        pjc50 10y ago
        Well .. firstly, that's an over-reaching reading of Ford v. Dodge, and secondly, the specific company that's located in Ireland (Apple Sales International) doesn't actually have any costs if I've understood correctly - it's a shell with no premises and no employees. (In a corporate structure, which company do you think is legally obligated to maximise profit? The one at the top of the pyramid, or every individual registered company?)
njloof 10y ago
For Tim Cook not to write this letter would be a breach of his fiduciary duties to Apple. That said, this tax liability is a rounding error on Apple's balance sheet, and I hope they pay it.
ChartsNGraffs 10y ago
Seems like they found a place that cost less to operate, so they did. That's just good business and they'd be dumb for not doing so. If the EU wants to change things, I support that going forward, but retroactively sounds fishy.
jmmcd 10y ago
> Cook: [...] Apple has long supported international tax reform with the objectives of simplicity and clarity. > Gardner: That bit made me laugh out loud. When the Senate’s permanent subcommittee was describing the elaborate tax-avoidance techniques used by Apple, they had to use flowcharts to explain it. The incredible complexity and creativity in the Apple tax-avoidance scheme is almost admirable. But to say that they are interested in simplicity and clarity is laughable. This is a failure of reading comprehension by Gardner, which could only be brought about by bias. Cook is not saying Apple's current arrangements are simple. He's saying that he would like to see reform so that using simple arrangements instead would not be detrimental to Apple.
- pawadu 10y ago
  You comment makes zero sense. Apple themselves created an extremely complex chain of operations to avoid paying taxes, nobody forced them to do it.
  - pas 10y ago
    They basically have an obligation to their shareholders, so the market forced them to do it.
- draw_down 10y ago
  Yeah, the clear and simple tax arrangement they seek is "Apple pays as close to zero in taxes as absolutely possible".
bryanrasmussen 10y ago
IF Apple pays a fair share of their taxes right now, it has very little impact on their position in the industry or their profitability. I wonder how many of Apple's competitors could really say the same. Fairness across the board, if it could be enforced, might be of strategic benefit to Apple. Maybe they should analyze that before fighting against it.
throw2016 10y ago
There is a difference between legal and ethical and there is a dimension of Apple's reputation that draws from ethical behavior. Tim Cooks argument is I am successfull and am producing n number of jobs and without my success the state would lose taxes from these x economic activity so I should basically not pay taxes and be rewarded for my success with a tax cut. While this Somalia argument completely ignoring government services can be made, its not part of the current economic and political system and social contract in which Apple has grown, exists and benefits from in higly educated employees and a rich stable ecosystem and marketplace. We may not agree with laws but we hardly have a choice to comply because of difference of opinion. The fact that one may have resources to game the system does not make it right. No one is stopping Apple from having this discussion but this does not give them any special privileges to avoid paying their fair share or justifying the act post. The bigger problem is the intentionally placed loopholes in the global financial system to aid creativity in tax avoidance. This is not an accident, these loopholes have been lobbied for and inserted by vested interests and must be removed to retain credibility and trust in the global financial system. Or loopholes should be placed for everyone. As in individuals outsourcing their labour to a holding entity in a low tax zone, being paid in this low tax zone and importing funds as required by paying a small percentage than they would be otherwise liable. This race to the bottom will drive all individuals to these low-tax states as it is driving crafty companies and the average state then won't have any revenue to offer any services. This simply won't be be acceptable for individuals and won't be accepted by any country, so why is it acceptable for billion dollar entities.

180 points by markdown 10y ago

As usual for headlines that contain phrases like "takes apart," "utterly debunks," or "totally destroys," the tax expert's response does absolutely none of the above. Not a single factual assertion in Cook's letter is contradicted. There should be an axiom comparable to Betteridge's Law for this sort of headline.

dagss 10y ago
What about the assertion regarding how much of the profits are taxed in the US?
- asuffield 10y ago
  Here's an (old) discussion of some of the major points in understanding that question: http://www.forbes.com/sites/timworstall/2012/11/01/so-how-much-tax-did-apple-pay/#50d0ec365fa9 http://www.forbes.com/sites/timworstall/2012/11/01/so-how-mu... I haven't seen an explanation of where that 0.005% number comes from, but I would be unsurprised to find similar forms of confusion in it.
  - jsnell 10y ago
    The EC's press release is pretty clear on where the number comes from, and I do not see any such forms of confusion there: http://europa.eu/rapid/press-release_IP-16-2923_en.htm http://europa.eu/rapid/press-release_IP-16-2923_en.htm
    - asuffield 10y ago
      Ah, I see. So what they're saying in this case is that 0.005% is the fraction of Apple's global non-US profits that was paid as tax in Ireland. That's not the same thing as saying it was "a 0.005% tax rate". The issue is over what fraction of the non-US profits are taxable in Ireland, not over the tax rate.
      - jsnell 10y ago
        Whoa, I don't think they're saying that. "Apple Sales International" is not all non-US profits. It's a company buying Apple products from contract manufacturers in other regions and selling them in Europe. It would not be recording any revenue from sales in other regions. The profits would then be the difference between the cost they bought those products for (+ things like the very substantial payments to Apple US for R&D), vs what they sold those products for.
gambiting 10y ago
Yeah, like the bit where he says that apple does not pay the "fair share". There is no such thing. Either you pay what is required by law or you don't. Especially if what they said about being the largest taxpayer in Ireland is true. I feel about it this way - if you rented an apartment for $1000/month, and you had a room mate that paid $900 a month, why does it matter that it's only 0.00001% of his income, while the remaining $100 is 20% of yours? Could anyone say that that other room mate is somehow not paying his fair share of the rent, since it's such a minuscule percentage of his earnings?
- Oletros 10y ago
  > Either you pay what is required by law or you don't. And according to the EC, they don't
  - asuffield 10y ago
    That's not precisely accurate. The EC's ruling is that the Irish government changed the law in an unlawful way. There has not yet been an explicit ruling on Apple's conduct, as far as I know - that's likely to take more time (years...) to happen.
    - Oletros 10y ago
      > That's not precisely accurate. The EC's ruling is that the Irish government changed the law in an unlawful way. The ruling is that the Irish Government applied wrongly the actual law, no law has been changed > There has not yet been an explicit ruling on Apple's conduct, as far as I know - that's likely to take more time (years...) to happen. The investigation is not on Apple, but on the Irish Government. My comment about illegality was about the Irish Government practices, not about Apple.
- blub 10y ago
  The law says they have to pay 12%. They pay 0.005% because the Irish goverment is giving them special treatment. No thanks, pay the 12% like everyone else or take your 6000 workplaces and shove them.
blub 10y ago
I think it's quite clear that Apple has a tax rate of 0.005% instead of the normal 12%. Can I also get such a discount? What about if I start a company, can I get it then? It's true that I don't hire thousands of employees, but I'm not rich to the tune of hundreds of billions either. It's all about proportions really. Let's all pay 0.005% tax and see everything turn to crap around us. But we'll be rich!
- rimantas 10y ago
  Is it really clear?
  - Arnt 10y ago
    I didn't quite get it... 0.005% of what? Profit on sales in Ireland? Profit on sales in other parts of the world?
    - Arnt 10y ago
      Oh, I get it, the sum of those two. Are people complaining that when Apple sells a phone in Italy, Ireland taxes that at zero? Is that the complaint?
    - Wilya 10y ago
      Apple considers that all sales across Europe actually happen in Ireland, so taxes on profit on sales in the whole EU are paid in Ireland. That part is perfectly legal within the EU. The issue is that the normal tax rate in Ireland is around 12%, and Apple uses accounting tricks and tax exceptions to lower their effective tax rate there to 0.005%. That is the part that the the European Commission ruled illegal.
      - pjc50 10y ago
        Effectively they argue that, in EU countries and India and Africa, the profit happens in Ireland. This is done through transfer pricing. In Ireland, they argue that the profits happen at a "head office" which was not based in any country and did not have any employees or own premises. (The ruling: http://ec.europa.eu/competition/state_aid/cases/253200/253200_1582634_87_2.pdf http://ec.europa.eu/competition/state_aid/cases/253200/25320... linked from http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_38373 http://ec.europa.eu/competition/elojade/isef/case_details.cf...) - search for "AOI"
happy_tentacles 10y ago
Agreed - the title is bombastic fluff, however, some interesting points are made. Though the strongest one just paraphrases of the opening paragraph of the EC press release (http://europa.eu/rapid/press-release_IP-16-2923_en.htm http://europa.eu/rapid/press-release_IP-16-2923_en.htm). -- The biggest problem I have with Tim Cook's position is the sovereignty argument. I would stay away from it for now, and let the interested parties pick it up. Tim Cook: "This would strike a devastating blow to the sovereignty of EU member states over their own tax matters, and to the principle of certainty of law in Europe".

jmulvi 10y ago

It seems hard to defend Apple's position. The pushed their tax avoidance strategies as hard as they could in Ireland until they were paying 0.005 percent in 2015. It would be wonderful if tech companies took this moment to push for clear and transparent international taxation laws. Some of the tax avoidance measures currently practiced can seem particularly unfair from a layperson's perspective.

blub 10y ago

Disappointed in Apple and Tim Cook, this is the typical amoral behavior one can by now expect from corporations and their CEOs. It's always about the money. What can we as EU citizens do to encourage these corps to behave? I'm thinking an e-mail to Tim Cook wouldn't have much effect.

gambiting 10y ago
Advocate for unification of tax laws across EU - then corporations lose incentive to register in countries which offer them the largest tax discounts.
- happy_tentacles 10y ago
  Tax unification - would in fact start with Fiscal Harmonisation.. That is to say - tax rates can be different, but the underlying calculations how to calculate income and expenses would be harmonised across the Member States of EU. We are generations away from Tax Unification, if it ever happens... Fiscal Harmonisation - more like it, though save some global seismic event - still a generation into the future.
  - danmaz74 10y ago
    Fiscal Harmonisation -> would be a good starting point.
    - blowski 10y ago
      I believe this is the political calculation the EU is making. Further EU integration is unpopular right now, but not as unpopular as large corporate tax dodgers. This is partly about showing how only a big powerful EU can stand up to companies like Apple, whereas small countries like Ireland have to beg for tax.
    - pjc50 10y ago
      The Eurozone crisis and the treatment of Greece tells me that we're a very long way away from that happening.

dagaci 10y ago

We often accuse authorities of going after the small, while leaving the big offenders free. The average individual working person has no negotiation when it comes to what taxes they pay. The average business has to be very careful, fully aware that they are at an extra competitive disadvantage compared to the international mega-corporations who are effectively given huge financial subsidies by entire nation states. It’s not personal. Tim Cook knows that what's happening is right, but nevertheless he is required to defend the tax advantage, same as the Ireland, as with the US where mega-business and corporations have a strangle-hold on government and law. Every individual should support the EU. If the EU is defeated here it will be a loss to the small man and small business. If defeated it will enshrine by default the creeping imbalance of power that corporations have over the individual nation and people.

blub 10y ago
It boggles my mind that there are people supporting Apple in this. There are so many of us that like to cheerfully screw themselves over to protect rich corporations. As an Apple customer I am not sure what to do in the future, if I should continue to support them by buying their products. I hope they lose in any case.
- dagaci 10y ago
  People link their liking of Apple with what is right and wrong. They do not realise the extent of tax evasion, and they do not realise that it is they themselves and every working person who is subsidising tax evading corporations by paying higher taxes. For me personally, at this time it would _not_ stop me from buying from Apple. This is not a contradiction, the reality is that Apple isn't the only offender.
  - napworth 10y ago
    Yeah, I'm a defender of Apple because I don't think they should be asked to pay for taxes in the past. Instead, I would like to see all the evasion loopholes closed so Apple, and every other large company out there, can't do it for the future.

jeremysmyth 10y ago

The article is trying to address a legal situation but uses terms like "that doesn’t mean they’re paying anything resembling their fair share" and "everyone is correctly saying Apple did wrong". The moral/ethical viewpoint is being addressed here, not the legal one. If the law is out of step with the moral viewpoint (as it so often is), then folks on the moral side apply pressure to change the law. The law is supreme in our part of the world, and arguments that ignore it are simply beside the point. An appeal is exactly the right way to test the law, so we'll see at the end of this process if the EU is actually challenging Ireland's tax law and its legality in the context of the EU, or if there was, in fact, some illegal activity on the part of Apple and the Irish government (as is suggested by the extant ruling).

dghf 10y ago
> The article is trying to address a legal situation No, it's addressing a letter, which makes moral and ethical (as well as legal) arguments: e.g., one of the reasons why the EU's judgement is unfair is that Apple already pays lots of tax. The article is responding in kind.

jsmthrowaway 10y ago

I'm most interested that multiple commenters in this thread are so egregiously conflating legality and morality, particularly when discussing a corporation in a capitalist system. I'm as liberal as it gets and I probably wouldn't link corporate taxes under capitalism and morality, for a few distinct reasons.

blub 10y ago
Laws are finely-tuned reflections of morals - they are mostly about fairness and enabling society to function in an orderly way. How did laws evolve? Why do we punish theft anyway? What Apple (and Google, Microsoft, probably others) is doing is certainly immoral. It's likely also illegal.
- jsmthrowaway 10y ago
  No. The entire point of law is to completely eliminate fairness, morals, and other squishies as deciding factors involved in a judgment. We punish theft because it is against a clearly defined set of laws, and because at some point lawmakers determined that we should. We notably do not punish many immoral things, and punish many moral things; introducing morality is dangerous and undermines the whole thing. To use your theft example, think about a Robin Hood type situation; should we overlook sidestepping of the law when it fits with our morals and squishies? No. The law is the law. That edge cuts both ways. In some ways it supports your argument. In others it does not. Introducing morality makes your argument totally different (and, in this case, irrelevant until the United States and Ireland adopt socialism). I'm a bloody liberal and I'm saying that; we can't expect capitalist entities to operate in anything other than their own self interest or we actually don't want capitalism. Can't have it both ways. How do you define fair for a corporate person? I'm very intentionally avoiding commenting upon the specific situation aside from saying it's weird to come at this morally when discussing a paper entity with clearly defined goals within a particular system of government.
  - pjc50 10y ago
    This argument completely contradicts the way law is enforced in practice, with all its "reasonableness" tests and mitigating factors. I think you'll find very few lawyers regarding it as a mechanical system. What is the law of equity but a different word for "fairness"? (Especially in a "common law" jurisdiction!)

circlefavshape 10y ago

One bizarre thing about this whole affair is the reactions on social media. The EU has made a ruling based on the idea that markets must be free from government interference, and facebook is full of lefties arguing in favour of the ruling and right-wingers arguing against it

markdown 10y ago
It's almost as if people want to be free to break out of the artificial 'lefties' and 'right-wingers' boxes into which others thrust them.

pulse7 10y ago

Let the court decide how much taxes Apple must pay in Ireland/EU... Let them make complete investigation into the matter and see what was going on here... If the laws are equal for all, I would also like to pay 0.005 percent on my profits, not just Apple...

atanasb 10y ago

Let's summarise: 1. Apple, like every other big corporation, uses a complex corporate structure in order to reduce taxes legally. 2. Irish government issues preferential rates and also advises Apple on how to do it, directly breaking EU law. 3. Five years later - Apple has to pay for the Ireland's preferential tax rates. So let me get this straight - according to EU law if I get told today that Irish tax rate is 20% for example, 5 years down the line I can just expect someone to send me a letter stating that actually - I got preferential tax and I should repay another 20% on everything. Not to mention negative PR. Can someone explain why people are angry at Apple when clearly they were allowed to do it? It is interesting watching how emotionally invested people get in scorning corporations about legally reducing their taxes. Every small company owner I have talked to has tried a few ways of legally reducing taxes - I can't see why people hate on other people for doing the same thing.

snovv_crash 10y ago
If somebody says they don't mind if you pay them below minimum wage, it doesn't mean that it is legal. At some point in the future a lot of hurt might end up coming your way, and you could be forced to pay them the remainder, even if they say they don't want it because they might lose their job as a result. Similarly, just because Ireland told Apple that they could get low taxes, doesn't mean that they were legally entitled to do so.
- atanasb 10y ago
  I don't mean to provoke people to get downvoted to hell - I mean to understand why people are hating on Apple. Your example is not applicable here since below minimum wages are illegal to begin with. > Similarly, just because Ireland told Apple that they could get low taxes, doesn't mean that they were legally entitled to do so. You are talking about the government here - not Apple. My point being - the Irish government was at fault when they broke EU law. Why should Apple be the one to compensate their error?
  - snovv_crash 10y ago
    Ireland agreed to the Treaty of Rome, in which they agreed to not provide state aid to corporations. The EU commission's ruling is that the effective tax rate of ~0% amounts to state aid via a tax break. In order to reverse the state aid, Apple needs to pay Ireland the money that it was illegally allowed to keep. That is why it is Apple's responsibility to pay back the money, because that is the only way to ensure that the incentive of this tax-favouritism is removed.

zmmmmm 10y ago

For years Cook and others have been taking the stance that they are just following the laws and if people want them to pay more tax then they should get the law changed, and then Apple will happily comply. Now we see the hypocrisy: when faced with actual law saying they should pay tax do they actually happily agree to pay the tax? No, they turn around and say that they object to the law and argue the law is invalid. So what we have here is not a good corporate citizen just happily paying what taxes it is due. What we have is just like any corporation: an entity that will cynically seek to avoid and minimize its tax using any argument available and they have absolutely no interest in paying their "fair share" or contributing back to society under any tax system. So we have to just remember this next time they say "Well if you want more tax, change the law" because that is a completely insincere lie on their part.

Angostura 10y ago
I think there is a difference between saying 'we comply with the law' and being happy when someone retrospectively changes the law and then demands n years payments under the new rules.
- jbmorgado 10y ago
  Nobody changed the law retrospectively. The EU law always existed and Apple obviously knew about it. If Apple asked for the state of Texas for a tax cut in the state of New York and then got fined for not paying their taxes you wouldn't call name it "retrospectively".
- walkingolof 10y ago
  Nothing is changed retrospectively, in the EU you cant give one company a tax break. Ireland knew this, but went ahead and did it anyway, Apple knew this too, and took a chance.
  - d_theorist 10y ago
    It appears that this is the crux of the disagreement. Does the loophole that Apple used constitute "giving one company a tax break"? There seem to be reasonable arguments on both sides.

beyondcompute 10y ago

I am glad about my decision to switch away from the Apple smartphone. Now I'm also thinking that I shouldn't wait for their laptops lineup update as well. There's our little way of fighting for justice and for society's interests against money-making paperclip maximizers. :)

Havoc 10y ago
>I am glad about my decision to switch away from the Apple smartphone. All the big corporates do this, not just Apple.
- sveme 10y ago
  Serious question: How are asian companies set up when targeting the EU? Does Samsung follow the same approach as Apple and other US companies?
  - Havoc 10y ago
    South Korea gives big tax breaks to its chaebol (form of conglomerate). So effectively they don't need to funnel anything to Ireland/wherever because their home country works just fine.

deleted 10y ago

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jbmorgado 10y ago

My only issue here is that Ireland get's to be the big beneficiary of this. Ireland was in the wrong trying to strip the other EU countries of their due taxes as much as Apple. This money should go to EU to apply a they see fit, instead Ireland profits from it exclusively.

abraae 10y ago
Yep. They've played a blinder.
alphadevx 10y ago
No this is incorrect, Ireland will not benefit as they will be required to use this tax revenue to pay back their national debt, largely owed to other EU member states...

uptown 10y ago

Sure many companies won't incorporate in Ireland, but about half the United States' corporations call Delaware or Nevada their "home" despite operating elsewhere.

nateabele 10y ago

"[T]hey’re using an arcane legal structure that is simply not available to the many smaller businesses Apple competes with." Either it's illegal or it's not. If it's not, then shut the fuck up. The shame isn't that Apple is doing this. The shame is that more people can't.

codecamper 10y ago

I can't see how setting up an Irish company will allow me to skip paying the 30% app store tax. Maybe Ireland should up it's game & slap Apple with a 30% charge! If Apple wants to complain, they can hunt for an email address, not find it, and be forced to fill out a little form, from which they will never hear back.

dilemma 10y ago
Perfect.
draw_down 10y ago
...what?

codecamper 10y ago

zacharytelschow 10y ago

"It’s clear as day—and this was one of the findings of the 2013 Senate subcommittee—that there was no sensible business reason to set up those subsidiaries except to avoid paying taxes." The avoidance of paying taxes, the lowering of costs, does not qualify as a "sensible business reason" to take an action?

NetStrikeForce 10y ago
No one's core business is "avoid taxes". Apple's business is to sell computers and entertainment. Opening an office for the sole purpose of avoiding taxes is not a core business, it's tax evasion, legal or not.
- alphadevx 10y ago
  Apple's business is to make profit, same as anyone else. Revenue - Costs = Profit, still holds true.
  - pjc50 10y ago
    Tax is computed after the profit is made. What we're discussing is the question of where the profit was made and which country's tax system it falls under. If any.
    - alphadevx 10y ago
      Yes I am aware that profits are taxed and not revenue. Parent mentioned reduction of costs as a compelling reason of locating in Ireland, as well as low taxes. Corporations are legally obligated to maximize profit for share holders.
      - pjc50 10y ago
        Well .. firstly, that's an over-reaching reading of Ford v. Dodge, and secondly, the specific company that's located in Ireland (Apple Sales International) doesn't actually have any costs if I've understood correctly - it's a shell with no premises and no employees. (In a corporate structure, which company do you think is legally obligated to maximise profit? The one at the top of the pyramid, or every individual registered company?)

njloof 10y ago

For Tim Cook not to write this letter would be a breach of his fiduciary duties to Apple. That said, this tax liability is a rounding error on Apple's balance sheet, and I hope they pay it.

ChartsNGraffs 10y ago

Seems like they found a place that cost less to operate, so they did. That's just good business and they'd be dumb for not doing so. If the EU wants to change things, I support that going forward, but retroactively sounds fishy.

jmmcd 10y ago

> Cook: [...] Apple has long supported international tax reform with the objectives of simplicity and clarity. > Gardner: That bit made me laugh out loud. When the Senate’s permanent subcommittee was describing the elaborate tax-avoidance techniques used by Apple, they had to use flowcharts to explain it. The incredible complexity and creativity in the Apple tax-avoidance scheme is almost admirable. But to say that they are interested in simplicity and clarity is laughable. This is a failure of reading comprehension by Gardner, which could only be brought about by bias. Cook is not saying Apple's current arrangements are simple. He's saying that he would like to see reform so that using simple arrangements instead would not be detrimental to Apple.

pawadu 10y ago
You comment makes zero sense. Apple themselves created an extremely complex chain of operations to avoid paying taxes, nobody forced them to do it.
- pas 10y ago
  They basically have an obligation to their shareholders, so the market forced them to do it.
draw_down 10y ago
Yeah, the clear and simple tax arrangement they seek is "Apple pays as close to zero in taxes as absolutely possible".

bryanrasmussen 10y ago

IF Apple pays a fair share of their taxes right now, it has very little impact on their position in the industry or their profitability. I wonder how many of Apple's competitors could really say the same. Fairness across the board, if it could be enforced, might be of strategic benefit to Apple. Maybe they should analyze that before fighting against it.

throw2016 10y ago

There is a difference between legal and ethical and there is a dimension of Apple's reputation that draws from ethical behavior. Tim Cooks argument is I am successfull and am producing n number of jobs and without my success the state would lose taxes from these x economic activity so I should basically not pay taxes and be rewarded for my success with a tax cut. While this Somalia argument completely ignoring government services can be made, its not part of the current economic and political system and social contract in which Apple has grown, exists and benefits from in higly educated employees and a rich stable ecosystem and marketplace. We may not agree with laws but we hardly have a choice to comply because of difference of opinion. The fact that one may have resources to game the system does not make it right. No one is stopping Apple from having this discussion but this does not give them any special privileges to avoid paying their fair share or justifying the act post. The bigger problem is the intentionally placed loopholes in the global financial system to aid creativity in tax avoidance. This is not an accident, these loopholes have been lobbied for and inserted by vested interests and must be removed to retain credibility and trust in the global financial system. Or loopholes should be placed for everyone. As in individuals outsourcing their labour to a holding entity in a low tax zone, being paid in this low tax zone and importing funds as required by paying a small percentage than they would be otherwise liable. This race to the bottom will drive all individuals to these low-tax states as it is driving crafty companies and the average state then won't have any revenue to offer any services. This simply won't be be acceptable for individuals and won't be accepted by any country, so why is it acceptable for billion dollar entities.