6 ms·

What’s interesting is that it’s common for governments to give tax incentives to companies that will result in driving more economic value for their region. Eg

What’s interesting is that it’s common for governments to give tax incentives to companies that will result in driving more economic value for their region. Eg Ireland might give a tax incentive if a large Fortune 500 company hires X people in Ireland. Question: does this ruling prohibit that common practice?

afiori 2y ago
No, it just requires for the rule to exist and be used coherently.
dtech 2y ago
Yes, that is exactly the kind of thing that Ireland did and is not allowed in the EU rules. You are allowed to make rules, but you can't offer deals.
jemmyw 2y ago
Kind of. It's already prohibited, depending on what you mean. It would be legal to say all companies can have a tax break if they hire X people in Ireland. It's not legal to give the tax break to one company and deny it to another.
- noirbot 2y ago
  It does feel a little weird then that Apple is being fined here then? It seems like Ireland did the thing that's against the rules by offering the deal, not Apple? Obviously they worked on it together, but it feels odd that Ireland has now essentially gotten all the benefits of offering this illegal deal by having Apple do business there and now also gets all the back taxes that Apple probably wouldn't have paid to Ireland if they hadn't gotten the deal. That seems like a bit of a perverse incentive for countries to offer deals they may know will get overturned later because they'll get the money eventually.
  - tiffanyh 2y ago
    That's exactly why I asked. If the government approached Apple, to offer them a special (specific to Apple) tax deal in exchange for X ... why is Apple now being held accountable for Ireland doings.
    - ko27 2y ago
      Because in this area, EU has rule of law, not Ireland.
      - com 2y ago
        I don’t think that rule of law means what you think it does.
      - projektfu 2y ago
        More helpfully, you probably mean EU law supersedes Irish law in this area.
    - pyrale 2y ago
      Because accepting a corruption bargain is as illegal as offering it.
      - tiffanyh 2y ago
        "Corruption" is a strong word here. Tax Abatements are a long, well understood practice that's been leveraged by city/state/federal governments for decades to incentivize desired outcomes. Look at Electric Vehicles (EV's) Both California and Federal government were giving tax incentives for individuals who purchase an EV. This tax abatement was used to incentivize the adoption of EV's. Is that "corruption? Absolutely not.
        Sakos 2y ago
        ... Isn't it?
        pyrale 2y ago
  - dmurray 2y ago
    > it feels odd that Ireland has now essentially gotten all the benefits of offering this illegal deal by having Apple do business there and now also gets all the back taxes that Apple probably wouldn't have paid to Ireland if they hadn't gotten the deal. Yes, there's a widespread view in Ireland that this was the best possible outcome: be seen to fight tooth and nail to prevent collecting the taxes, but get them anyway. > That seems like a bit of a perverse incentive for countries to offer deals they may know will get overturned later because they'll get the money eventually. I'm not so sure of this, though. The companies aren't fools and have better paid lawyers than the countries, so they won't enter these deals unless they rate their chances of getting away with it.
    - noirbot 2y ago
      Sure, I'm not saying this is going to be a likely fraud, but there's much more subtly illegal ways to offer stuff that may be worth the risk for a company and then the government then lobbies via backchannels for the EU to find it illegal.
    - buildbot 2y ago
      An interest free loan for years for 13 billion isn’t too bad!
      - hervature 2y ago
        I haven't read this specific case but normally "back taxes" refers to the taxes, interest, and fees that are owed.
        awad 2y ago
        I would guess that Apple's ability to get a return on its cash are likely to exceed the total of taxes, interest, and fees.
  - BlackFly 2y ago
    Sure, Ireland did wrong by insinuating to Apple that they could have special treatment when in fact EU law prohibits it, but Apple failed to pay the prevailing tax rates which can be demanded long after the fact. Ireland has sovereign immunity from tort in this case. They could legislate to waive their immunity for tax assurances which would create an interesting constitutional issue in the EU.
    - toyg 2y ago
      EU law supercedes national law. Ireland can legislate as much as they want, but if they ignore ECJ judgements stating that their laws are incompatible with EU legislation, they will be fined.
      - BlackFly 2y ago
        Yes, potentially, but my understanding by following this case and others is that the EU has no legislation on taxes other than non-discrimination. So there is no EU law to supercede Irish law.
  - ko27 2y ago
    It's simple, EU law says Apple had to pay taxes at that time. Apple's ignorance of EU law is not an excuse, this doesn't work for individuals, why should it work for big multinational companies? Ireland doesn't have the power alone to overturn these kinds of laws, unless, of course, they decide to leave EU. Apple's decision to put their trust completely in Ireland officials and sidestep the EU is their own mistake. Reminds me of when Trump tried to arrange a trade deal with Germany without EU, which was impossible.
    - dmitrygr 2y ago
      > Apple's ignorance of EU law is not an excuse > Ireland doesn't have the power alone to overturn these kinds of laws How was apple to know what ireland could and could not do? Why should they have to? Irish government said to apple that the rules are as such. The precedent this sets is that companies should not trust governments' words, instead each company should somehow interpret the laws themselves, each (surely) in their own way. Are we sure we want to set this precedent?
      - noitpmeder 2y ago
        Presumably these laws are published publicly, and apple has more an enough resources to hire enough lawyers to ensure they are in compliance. Ignorance of the law is not an excuse.
        dmitrygr 2y ago
        five accountants will produce six results from the same input based on the same laws, all of which the IRS will accept. Laws are not code. They are not unambiguous and noncontradictory. And forget apple! This means that any company in existence now needs a lawyer who understands the Treaty of Lisbon! Just in case some EU country tells them to do X, they now need to know if said country can actually say so! I think you underestimate the damage of "we cannot trust the actual government to tell us what we can and cannot do"
        2y ago
  - marcosdumay 2y ago
    If the government "offers" you a deal that you don't deserve, and you take it, that's a crime. It's pretty much everywhere. The government isn't a person that can make decisions autonomously.
  - pyrale 2y ago
    > It seems like Ireland did the thing that's against the rules by offering the deal, not Apple? Well, Apple accepted the illegal deal, didn't they? > That seems like a bit of a perverse incentive for countries to offer deals they may know will get overturned later because they'll get the money eventually. There's also a perverse incentive for companies to defer paying taxes for 20 years. Apple isn't getting fined, they're just paying what they owe 20 years late. edit: apparently the years were 1991 to 1997, so that's about 30 years actually.
  - ensignavenger 2y ago
    I read through the first part of the ruling to get a better idea of what happened. Apparently, Apple wrote to the Irish tax authorities, and said "this is how we plan to calculate our taxes" and the Irish tax authority said "okay, no problem, that works for us" and the EU commission investigated some years later, and said "wait, was that method of calculating taxes available to all Irish companies? We don't think so, so now Ireland has to collect taxes from all the way back many years." Ireland said "no bro, we're all good, they don't owe us anything", and Apple said "wait, we just did what we were told to do, and we already paid taxes on that income in the US instead of the EU, you can't retroactively change the rules" and the EU top court just said "Sorry, those tax rules go against EU law, and yes we can"
    - nine_k 2y ago
      > you can't retroactively change rules ... yes we can Hence, fewer US companies will have significant production in the EU in general, and possibly Ireland in particular. Let's hope it will help native European industries flourish %)
      - hnbad 2y ago
        They didn't retroactively change the rules. They retroactively found a contract invalid. I'd file this under "play stupid games, win stupid prizes" as it sounds like Apple tried to talk Ireland into giving it special treatment that wasn't actually legally possible under EU law and the EU found out and told them they can't actually do that after Ireland agreed. If I get a tax agency worker to sign me a piece of paper that says I don't ever have to pay any taxes, I can insist that they said so all I want but I'll still owe the back taxes when someone finds out because that person had no authority to say I don't. Also capital flight doesn't actually work like that no matter how often people parrot it. Ireland is the European HQ for US tech companies because they need a European HQ to access the extremely lucrative market and Ireland is willing to go to great lengths (clearly including "agreeing to conditions they can't legally agree to) to attract them to go there in particular. If Ireland becomes less attractive that means they will be more likely to go elsewhere but their European HQ will still be in the EU/EEA because that's what it's for. This wasn't a case of Ireland competing for Europe where Ireland losing is a loss to all of the EU, it was Ireland competing against other EU countries.
NoboruWataya 2y ago
There is a general prohibition on EU member states granting state aid to companies, but there are exceptions to this where the aid is justified in order to promote economically underdeveloped regions. There are a lot of rules and court cases about when state aid will fall on one side or the other of that line. See eg https://competition-policy.ec.europa.eu/state-aid/legislation/modernisation/regional-aid_en https://competition-policy.ec.europa.eu/state-aid/legislatio...
- n_plus_1_acc 2y ago
  You Seen knowledeble on this topic. What do you think of the numerous Deutsche Bank and Lufthansa aids?
  - realityking 2y ago
    I don’t think Deutsche Bank has ever received direct state aid, they’re quite proud of that fact. Though they have benefitted indirectly when institutions that owed Deutsche Bank money received state aid. Lufthansa did receive state aid during the pandemic. This is currently under investigation as the EU’s approval was annulled by an EU court: https://ec.europa.eu/commission/presscorner/detail/en/ip_24_3662 https://ec.europa.eu/commission/presscorner/detail/en/ip_24_...
    - hnbad 2y ago
      To be clear: Germany also heavily subsidized a lot of other large companies, especially in the automotive industry during the pandemic but the politicians involved were mostly smart enough to hide this behind grants with tailor-made requirements that only incidentally happened to perfectly match those companies and few else.
      - realityking 2y ago
        At least VW and BMW have certainly received state aid in the past, mostly around opening new factories, but I can’t find anything where they got specific aid during Covid. Of course they were able to use support that’s open to all companies, e.g. Kurzarbeit, but that’s not considered state aid in the EU context.
pyrale 2y ago
> Eg Ireland might give a tax incentive if a large Fortune 500 company hires X people in Ireland. If Ireland is willing to give the same tax incentive to any company hiring X people in Ireland, it's fine. If Ireland only grants the rebate to Fortune 500 companies in a bid to lure specific US investment, it's the state creating a competitive distortion i.e. state aid.
- margana 2y ago
  Unless the threshold is set high enough that only a few corporations could even possibly do it. Especially if they limited it further per industry.
chrisdhoover 2y ago
Ireland was a poor country. They recognized low taxes would attract business. It worked. They then became a “tiger”

afiori 2y ago

No, it just requires for the rule to exist and be used coherently.

dtech 2y ago

Yes, that is exactly the kind of thing that Ireland did and is not allowed in the EU rules. You are allowed to make rules, but you can't offer deals.

jemmyw 2y ago

Kind of. It's already prohibited, depending on what you mean. It would be legal to say all companies can have a tax break if they hire X people in Ireland. It's not legal to give the tax break to one company and deny it to another.

noirbot 2y ago
It does feel a little weird then that Apple is being fined here then? It seems like Ireland did the thing that's against the rules by offering the deal, not Apple? Obviously they worked on it together, but it feels odd that Ireland has now essentially gotten all the benefits of offering this illegal deal by having Apple do business there and now also gets all the back taxes that Apple probably wouldn't have paid to Ireland if they hadn't gotten the deal. That seems like a bit of a perverse incentive for countries to offer deals they may know will get overturned later because they'll get the money eventually.
- tiffanyh 2y ago
  That's exactly why I asked. If the government approached Apple, to offer them a special (specific to Apple) tax deal in exchange for X ... why is Apple now being held accountable for Ireland doings.
  - ko27 2y ago
    Because in this area, EU has rule of law, not Ireland.
    - com 2y ago
      I don’t think that rule of law means what you think it does.
    - projektfu 2y ago
      More helpfully, you probably mean EU law supersedes Irish law in this area.
  - pyrale 2y ago
    Because accepting a corruption bargain is as illegal as offering it.
    - tiffanyh 2y ago
      "Corruption" is a strong word here. Tax Abatements are a long, well understood practice that's been leveraged by city/state/federal governments for decades to incentivize desired outcomes. Look at Electric Vehicles (EV's) Both California and Federal government were giving tax incentives for individuals who purchase an EV. This tax abatement was used to incentivize the adoption of EV's. Is that "corruption? Absolutely not.
      - Sakos 2y ago
        ... Isn't it?
      - pyrale 2y ago
- dmurray 2y ago
  > it feels odd that Ireland has now essentially gotten all the benefits of offering this illegal deal by having Apple do business there and now also gets all the back taxes that Apple probably wouldn't have paid to Ireland if they hadn't gotten the deal. Yes, there's a widespread view in Ireland that this was the best possible outcome: be seen to fight tooth and nail to prevent collecting the taxes, but get them anyway. > That seems like a bit of a perverse incentive for countries to offer deals they may know will get overturned later because they'll get the money eventually. I'm not so sure of this, though. The companies aren't fools and have better paid lawyers than the countries, so they won't enter these deals unless they rate their chances of getting away with it.
  - noirbot 2y ago
    Sure, I'm not saying this is going to be a likely fraud, but there's much more subtly illegal ways to offer stuff that may be worth the risk for a company and then the government then lobbies via backchannels for the EU to find it illegal.
  - buildbot 2y ago
    An interest free loan for years for 13 billion isn’t too bad!
    - hervature 2y ago
      I haven't read this specific case but normally "back taxes" refers to the taxes, interest, and fees that are owed.
      - awad 2y ago
        I would guess that Apple's ability to get a return on its cash are likely to exceed the total of taxes, interest, and fees.
- BlackFly 2y ago
  Sure, Ireland did wrong by insinuating to Apple that they could have special treatment when in fact EU law prohibits it, but Apple failed to pay the prevailing tax rates which can be demanded long after the fact. Ireland has sovereign immunity from tort in this case. They could legislate to waive their immunity for tax assurances which would create an interesting constitutional issue in the EU.
  - toyg 2y ago
    EU law supercedes national law. Ireland can legislate as much as they want, but if they ignore ECJ judgements stating that their laws are incompatible with EU legislation, they will be fined.
    - BlackFly 2y ago
      Yes, potentially, but my understanding by following this case and others is that the EU has no legislation on taxes other than non-discrimination. So there is no EU law to supercede Irish law.
- ko27 2y ago
  It's simple, EU law says Apple had to pay taxes at that time. Apple's ignorance of EU law is not an excuse, this doesn't work for individuals, why should it work for big multinational companies? Ireland doesn't have the power alone to overturn these kinds of laws, unless, of course, they decide to leave EU. Apple's decision to put their trust completely in Ireland officials and sidestep the EU is their own mistake. Reminds me of when Trump tried to arrange a trade deal with Germany without EU, which was impossible.
  - dmitrygr 2y ago
    > Apple's ignorance of EU law is not an excuse > Ireland doesn't have the power alone to overturn these kinds of laws How was apple to know what ireland could and could not do? Why should they have to? Irish government said to apple that the rules are as such. The precedent this sets is that companies should not trust governments' words, instead each company should somehow interpret the laws themselves, each (surely) in their own way. Are we sure we want to set this precedent?
    - noitpmeder 2y ago
      Presumably these laws are published publicly, and apple has more an enough resources to hire enough lawyers to ensure they are in compliance. Ignorance of the law is not an excuse.
      - dmitrygr 2y ago
        five accountants will produce six results from the same input based on the same laws, all of which the IRS will accept. Laws are not code. They are not unambiguous and noncontradictory. And forget apple! This means that any company in existence now needs a lawyer who understands the Treaty of Lisbon! Just in case some EU country tells them to do X, they now need to know if said country can actually say so! I think you underestimate the damage of "we cannot trust the actual government to tell us what we can and cannot do"
        2y ago
- marcosdumay 2y ago
  If the government "offers" you a deal that you don't deserve, and you take it, that's a crime. It's pretty much everywhere. The government isn't a person that can make decisions autonomously.
- pyrale 2y ago
  > It seems like Ireland did the thing that's against the rules by offering the deal, not Apple? Well, Apple accepted the illegal deal, didn't they? > That seems like a bit of a perverse incentive for countries to offer deals they may know will get overturned later because they'll get the money eventually. There's also a perverse incentive for companies to defer paying taxes for 20 years. Apple isn't getting fined, they're just paying what they owe 20 years late. edit: apparently the years were 1991 to 1997, so that's about 30 years actually.
- ensignavenger 2y ago
  I read through the first part of the ruling to get a better idea of what happened. Apparently, Apple wrote to the Irish tax authorities, and said "this is how we plan to calculate our taxes" and the Irish tax authority said "okay, no problem, that works for us" and the EU commission investigated some years later, and said "wait, was that method of calculating taxes available to all Irish companies? We don't think so, so now Ireland has to collect taxes from all the way back many years." Ireland said "no bro, we're all good, they don't owe us anything", and Apple said "wait, we just did what we were told to do, and we already paid taxes on that income in the US instead of the EU, you can't retroactively change the rules" and the EU top court just said "Sorry, those tax rules go against EU law, and yes we can"
  - nine_k 2y ago
    > you can't retroactively change rules ... yes we can Hence, fewer US companies will have significant production in the EU in general, and possibly Ireland in particular. Let's hope it will help native European industries flourish %)
    - hnbad 2y ago
      They didn't retroactively change the rules. They retroactively found a contract invalid. I'd file this under "play stupid games, win stupid prizes" as it sounds like Apple tried to talk Ireland into giving it special treatment that wasn't actually legally possible under EU law and the EU found out and told them they can't actually do that after Ireland agreed. If I get a tax agency worker to sign me a piece of paper that says I don't ever have to pay any taxes, I can insist that they said so all I want but I'll still owe the back taxes when someone finds out because that person had no authority to say I don't. Also capital flight doesn't actually work like that no matter how often people parrot it. Ireland is the European HQ for US tech companies because they need a European HQ to access the extremely lucrative market and Ireland is willing to go to great lengths (clearly including "agreeing to conditions they can't legally agree to) to attract them to go there in particular. If Ireland becomes less attractive that means they will be more likely to go elsewhere but their European HQ will still be in the EU/EEA because that's what it's for. This wasn't a case of Ireland competing for Europe where Ireland losing is a loss to all of the EU, it was Ireland competing against other EU countries.

NoboruWataya 2y ago

There is a general prohibition on EU member states granting state aid to companies, but there are exceptions to this where the aid is justified in order to promote economically underdeveloped regions. There are a lot of rules and court cases about when state aid will fall on one side or the other of that line. See eg https://competition-policy.ec.europa.eu/state-aid/legislation/modernisation/regional-aid_en https://competition-policy.ec.europa.eu/state-aid/legislatio...

n_plus_1_acc 2y ago
You Seen knowledeble on this topic. What do you think of the numerous Deutsche Bank and Lufthansa aids?
- realityking 2y ago
  I don’t think Deutsche Bank has ever received direct state aid, they’re quite proud of that fact. Though they have benefitted indirectly when institutions that owed Deutsche Bank money received state aid. Lufthansa did receive state aid during the pandemic. This is currently under investigation as the EU’s approval was annulled by an EU court: https://ec.europa.eu/commission/presscorner/detail/en/ip_24_3662 https://ec.europa.eu/commission/presscorner/detail/en/ip_24_...
  - hnbad 2y ago
    To be clear: Germany also heavily subsidized a lot of other large companies, especially in the automotive industry during the pandemic but the politicians involved were mostly smart enough to hide this behind grants with tailor-made requirements that only incidentally happened to perfectly match those companies and few else.
    - realityking 2y ago
      At least VW and BMW have certainly received state aid in the past, mostly around opening new factories, but I can’t find anything where they got specific aid during Covid. Of course they were able to use support that’s open to all companies, e.g. Kurzarbeit, but that’s not considered state aid in the EU context.

pyrale 2y ago

> Eg Ireland might give a tax incentive if a large Fortune 500 company hires X people in Ireland. If Ireland is willing to give the same tax incentive to any company hiring X people in Ireland, it's fine. If Ireland only grants the rebate to Fortune 500 companies in a bid to lure specific US investment, it's the state creating a competitive distortion i.e. state aid.

margana 2y ago
Unless the threshold is set high enough that only a few corporations could even possibly do it. Especially if they limited it further per industry.

chrisdhoover 2y ago

Ireland was a poor country. They recognized low taxes would attract business. It worked. They then became a “tiger”