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an effective tax rate 12 % lower than anyone else, which is equivalent to a monetary subsidy of the same size. Both legally and practically.
The fact that the Irish government did this is, incidentally, completely insane. 6000 jobs (and that number is wildly inflated) is not worth 12.5 billion.
by Thomas on Fri Sep 2nd, 2016 at 06:00:58 PM EST
[ Parent ]
Apple set up a non-tax resident company in Ireland as its HQ for international sales.  At the time anyone could do it, and many did. It wasn't an arrangement in any way unique to Apple.

I don't agree with it, and am glad Noonan abolished that provision last year.  But that does not give Vestager the power to make that abolition retro-active for 20 odd years. She has no powers in relation to corporate taxation whatsoever.  

The €13 Billion tax bill relates to profits made on international sales, not its Irish operations.  Since becoming tax resident in Ireland last year, Apple is now paying Irish corporation tax on those profits.

There is a valid case for arguing that those profits should be taxed in the markets where the sales took place, but that is not the basis for her finding.  In fact she is arguing that Ireland should collect that tax, and if necessary, come to an arrangement with those countries where the sales took place.

None of this has any basis in any of the Treaties or is in any way within her sphere of competence.  It may make her and the Commission look good in Europe -  kicking around a weak government in a smaller member state. It is also the fastest way of promoting an Ire-exit movement in Ireland I can think of and embodies all the stereotypes of "unelected Brussels Bureaucrats" dictating policy to sovereign states so beloved of the Brexiteers.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Sep 2nd, 2016 at 06:23:27 PM EST
[ Parent ]
Well, Apple appears to be awfully confused about who it owes taxes to.
Since last year, profits on its European operations, based in Ireland, is now taxed in Ireland at the official 12% rate (have I got that right?). This is a clear recognition that they are creating profits in Europe which should be taxed in Europe.

The billions in profits which they have accrued on their European operations in previous years, hitherto untaxed, apparently is considered to generate a US tax liability (presumably because that money is owed to the US parent company, in the form of royalties or whatever).

So there seems to be an ambiguity about where these profits should be taxed.

The fact that Ireland previously let them get away with paying no tax on their European profits, and that the EU let Ireland get away with that, was a tacit subsidy accorded to Ireland when it was struggling to emerge from an Upper Neolithic economic status. But Ireland has one of the highest per capita incomes in the EU, and there is no longer any reason to continue the subsidy. Is there a danger that Apple will shift their operations out of Ireland? Where to? They need a base in the EU... Bulgaria perhaps? I think not.

None of this speaks to the legal position of course, and the Commission seems likely to lose; I don't think it matters much to them. I suspect them of doing this in order to mobilize public opinion in favour of severe constraints on transnational tax avoidance, and perhaps even standardising company tax rates.

In which case, I wish them all success, and indeed they have already achieved a great deal in that direction.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Sun Sep 4th, 2016 at 08:01:35 PM EST
[ Parent ]
Vestager won't loose, among other things, because Apple will almost certainly fold like a wet napkin once their lawyers get a good grip on the case. The problem is that if their tax setup in Ireland is legit, their use of the European transfer pricing mechanism is not. Because they would be transferring their profits out of the union into an office domiciled nowhere, which is most definitely illegal, at which point they get hit with back taxes not in Ireland at a low 12.5 %.. but in Germany. France. And everywhere else they sold their products, at those, far higher rates.

Hattip to:
http://www.thepropertypin.com/viewtopic.php?f=4&t=66347
I very strongly recommend reading it. Well written, very persuasive.
Pretty

by Thomas on Sun Sep 4th, 2016 at 09:39:51 PM EST
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