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Ireland to appeal Apple Ruling

by Frank Schnittger Tue Aug 30th, 2016 at 08:25:39 PM EST

The European Commission has made a ruling charging Ireland with giving illegal state aid to Apple and ordering Ireland to collect €13 Billion in back taxes due - a figure that represents c. 6% of Ireland's total national debt. Apple has a market valuation of $571bn, a cash pile of $230bn, and an expected $53 billion in free cash flow this year, making the ruling material but hardly terminal from a corporate point of view. Apple shares are down less than 1% on the day.

Irish Finance Minister Michael Noonan is recommending that the Irish government appeal the finding to the European Court. Yes, you read that right.  The Irish Finance Minister doesn't want the money. Apparently collecting the money would damage Ireland's ability to attract multi-nationals like Apple to Ireland in the first place.  Noonan is also concerned that the ruling might be seen to imply wrong-doing by Irish tax officials and that it represents an encroachment by the Commission of Ireland's sovereign right to determine its own tax policies.


A White House spokesman has confirmed that Apple has been in contact over the ruling and that the US is concerned that the ruling might result in taxes that might otherwise be due to the US being collected by Ireland instead. The US Treasury said the ruling threatened the "business climate" between the US and Europe while Number 10 and the Treasury said Britain was "open for business" after being asked whether it was comfortable with the tech-giant coming to Britain.

The Commission, for it's part, is framing the ruling as part of its remit to prevent state aid favouring some companies over others. The Irish Government is adamant that Apple got no special treatment not available to any company under Irish and international tax laws. Noonan claims that the lack of corporate tax being collected is due to loop-holes in international tax laws and that the Irish Government is supportive of attempts by the OECD and others to increase corporate taxation more generally.

Based in Cork since 1980, Apple employs about 6,000 people in Ireland and recently announced a major expansion. Despite claiming to be the biggest corporate taxpayer in Ireland and the USA it nevertheless paid almost no tax on the vast majority of its international sales - with the proceeds transmitted to what the Commission claims is a largely fictitious HQ.

A detailed description of Apple's corporate structure, profitability and taxes paid is available here.  Suffice to say here that this is a major embarrassment for the Irish Government and shines a light precisely where it does not wish it to be shone. The already very shaky Irish Government could even fall over this issue if the independents keeping it in office fail to support an appeal of the Commission's ruling.

While the Government is undoubtedly sincere in its opposition to Commission encroachment on sovereign tax policies and concerned about the risks to future FDI, I suspect it wouldn't be too upset if it eventually lost the appeal and had to collect the money. However it believes that in order to continue to attract FDI it has to be able to demonstrate that it is robustly looking after the interests of major foreign employers and so it has to be able to say "the Commission made us do it!".

Recent changes in the corporate tax law in Ireland have abolished the "double Irish and Dutch sandwich" tax dodge and the ability to set up non-resident companies in Ireland which can effectively pay tax nowhere. Corporate tax revenues have increased by €2 Billion in the past year (from about 5 to €7 Billion) but what is at issue here is that Apple's profits on overseas sales weren't even subject to the low headline 12.5% rate applied to profits on sales in Ireland.

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by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Aug 30th, 2016 at 11:39:15 PM EST
Although never officially confirmed, it appears increasingly likely that when Noonan changed Irish tax law to make it impossible to register a non-tax resident company here, Apple change the registration of its HQ from non-resident to Irish resident thereby increasing Irish GDP by nearly 20% in one fell swoop in 2015 and incurring a 12.5% corporate tax charge on previously untaxed profits.  Irish corporate tax receipts increased by over €2 Billion last year and the revenue commissioners seem to think this increase is not a once off.  The Commission claim therefore refers to historic profits only and could be paid off by Apple on a once off basis without much of a blip in its cash pile and market valuation.

The question then arises as to why the Government is so keen to appeal the ruling as it does not impact on future corporate taxation, and hence on future FDI decisions by global corporates. Could it be that the Government is merely going through the motions of showing sympathy and support for the FDI sector and that it will shortly be persuaded, reluctantly of course, to accept the money?

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Aug 31st, 2016 at 03:20:57 PM EST
[ Parent ]
If the ruling stands, and Ireland retroactively gets tax income, does it get retroactive GDP also?

And if any of these means Ireland should not have been forced to cut down to live up the rules of the fiscal compact will the Commission apologise for its role in the Troika?

by fjallstrom on Wed Aug 31st, 2016 at 07:45:31 PM EST
[ Parent ]
The Commission will require all Irish citizens to genuflect in it's direction three times a day in grateful remembrance of the Commission's vigilance and role in directing such largesse in Ireland's direction. The increase in GDP is already being used to calculate an increase in Ireland's net contribution to the EU budget. At this stage Ireland's GDP "growth" is probably the only thing standing between the EZ and a technical recession...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Aug 31st, 2016 at 08:34:10 PM EST
[ Parent ]
Why should the Commission apologise? It was Ireland that understated its GDP by 16% to 20% and reduced its tax revenue by over €1bn a year...

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2016 at 02:29:29 PM EST
[ Parent ]
Most of the coverage I have seen of this is just misdirecting noise - unsurprisingly. The issue is VERY simple. Ireland certainly has the ability to determine its own tax structure. But Ireland is also a member of the EU and that has specific treaty requirements, one of which is that individual countries cannot make tax arrangements with specific companies that are not available to all its competitors. There is also the issue of the impact of Ireland's actions with a specific company on the tax revenues of other EU countires. The EU Commissioner Margrethe Vestager was very clear on this. See press release

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Aug 30th, 2016 at 11:48:01 PM EST
Yes, and the Irish Government's case is that Apple's tax arrangements are compliant with Irish tax law AND are available to any other company that wishes to make such arrangements. While the Commission only investigated Apple, I think we will find that similar arrangements are in place for quite a few other foreign multinationals who will be watching the outcome of this case with more than a little interest and concern. Not all have a cash pile comparable to Apple's!

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Aug 30th, 2016 at 11:55:44 PM EST
[ Parent ]
The press release makes it seem simple alright.  In spite of all the Commission's inapposite table-pounding, it comes down to this: Is this arrangement generally available to companies in Ireland, or is it a special for Apple?  If the latter, the Commission is right; if the former, the Commission is simply wrong.
by rifek on Wed Aug 31st, 2016 at 02:02:11 AM EST
[ Parent ]
If you read the press release or watch Margrethe Vestager's response on the PBS NewsHour of Tuesday, May 30 you will see that there is another serious problem: the fact that Apple has a paper headquarters in Ireland with no staff, just a mailbox, and it routes all of its profits out of Europe, via Holland, through this paper headquarters, thereby paying almost no tax on anything is sells in Europe. This raises the question of the legitimacy of this arrangement and of the impact on the other countries in Europe when Apple only pays a fraction of a percent tax on all of its European sales. It seems that is also an actionable item. I must admit that I would not be sad to see the 'double Dutch' with an Irish desert be invalidated for all. This will also affect Amazon and others who use this tax-accounting scam.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Aug 31st, 2016 at 04:10:26 AM EST
[ Parent ]
I have no doubt that the vast majority of people of all political persuasions would like to see such tax scams eliminated and even in Ireland there is a recognition that the days of attracting FDI through such mechanisms are numbered.  Noonan himself abolished the "Double Irish and Dutch Sandwich" and the ability to set up non-tax resident Companies in Ireland.

However the issue here is whether such arrangements are illegal under international tax laws and treaties, and the sad reality is that it seems they are not.  Such tax avoidance measured are widely practised throughout the world, and not only in acknowledged tax shelter jurisdictions like the Cayman, Virgin, and Jersey Islands.  Luxembourg, Holland, and increasingly, the UK are particularly active in this area with the UK pioneering new dodges like the "patent box".

The even narrower issue here which is likely to be determined by the ECJ is whether the Commission has any competence in this area. If Ireland can prove that the Apple's arrangements are in no way peculiar to it and are widely applied by other companies, then I doubt the  Commission can sustain its position that the arrangements amounted to a special deal for Apple. The question of whether "a largely fictitious" HQ can be used to channel those profits away from tax exposure is a much more fundamental issue of Company law also widely applied throughout the world.

No one doubts that such corporate laws are in dire need of reform, but the question is by whom and where and how.  The Commission may be rightly frustrated by it's lack of powers in this area, but that doesn't give it the competence to take the initiative. I suspect it knows this and has decided to highlight the issue as much as possible to the embarrassment of all involved. The fact that it investigated only one high profile Company in a smaller member state greatly weakens its case that this is a matter of giving one company an unfair advantage over others.  More likely, all global corporates have an unfair advantage over smaller national businesses in most jurisdictions in the world.

But the Commission had to start somewhere, and targetting the World's largest and most profitable global company was a good place to start. Whether this leads to more determined and concerted actions by the EU and OECD and other relevant bodies to eliminate such loop holes through international tax treaties remains to be seen.  Brexit will reduce opposition to such reform within the EU, and it seems not un-coincidental that both France and Germany are now signalling their opposition to TTIP - a Treaty that would have increased the powers of global corporates still further.  

Ireland's problem is that such reforms will make it much more difficult to attract FDI precisely at the time when the UK is using Brexit, greater tax avoidance measures like the Patent Box and lower corporate tax rates to greatly increase its attractiveness to global corporates seeking to reduce their tax exposure. The threat to become a "rogue corporate tax nation" seems to be May's strongest card in her attempt to extract a better Brexit deal from the EU.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Aug 31st, 2016 at 08:13:14 AM EST
[ Parent ]
Of course it's a scam.  Every tax code on the planet is chock full of them, including Germany's and France's.  As for brass doorplate corporations taking advantage of local tax loopholes, if that's illegal, then Luxemburg and the UK (including Scotland) are toast.  Enforcement actions against such tax practices will turn the slow motion implosion that is the EU into a short fuse explosion.
by rifek on Thu Sep 1st, 2016 at 02:51:01 PM EST
[ Parent ]
Enforcement actions against such tax practices will turn the slow motion implosion that is the EU into a short fuse explosion.

I am doubtful that anything definitive would happen within six months and Stiglitz along with others have already estimated that a financial collapse in the EU is likely within six months. And EU Commissioner Margrethe Vestager was very clear that they were proceeding one company/one agreement at a time due to the nature of the laws involved.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Sep 1st, 2016 at 07:04:54 PM EST
[ Parent ]
I'm just saying that, if she proceeds with ANY investigation based on the opinion that using empty shells for tax avoidance purposes is a violation of EU treaties, she will create a stampede.
by rifek on Thu Sep 1st, 2016 at 11:29:24 PM EST
[ Parent ]
David McWilliams: EU is a thing of the past - our future is with an Atlantic Ireland - Independent.ie

The future is an Atlantic Ireland, an essential mercantile part of the global supply chain, home to the largest and most innovative companies in the world. This way lies prosperity.

The past is the EU Commission with its vindictive misunderstanding of the relationship between global commerce and an outdated notion of the nation state. This is history. We should not care a jot about what Eurocrats think of us.

The reputation that matters is the one inside the heads of the people who make the modern world economy spin, not the views of outdated bureaucrats who still see the world through the prism of countries and state aids. That is a typical 1970s view of the global economy that doesn't take into account global supply chains where no one location wins outright.

When you are faced with people who live in the past, the key thing is to move on.



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by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Aug 31st, 2016 at 08:29:11 AM EST
decades ago.

But, I am not sure it is true anymore, nor will it be true in any conceivable future.

And, I think he is right that this is a no-lose, though uncomfortable, situation for the Irish government.

by John Redmond (Ladybeaterz@NolesAD.com) on Wed Aug 31st, 2016 at 11:54:02 AM EST
[ Parent ]
David McWilliams: EU is a thing of the past - our future is with an Atlantic Ireland - Independent.ie

If we lose the appeal, Ireland gets a windfall of €13bn, or about €2,600 per person. This is enough to wipe out our budget deficit for years to come, spend on what we will, or use in another way, which I will explain a bit later.

If we lose, we will be seen by corporate America as its only friend in Europe. This is exactly where we want to be. It is not pretty, nor heroic, but it's realpolitik. When you have no capital base, you have to borrow someone else's. How do you do that? You make the place attractive for other people's money and you do that by taxing it modestly. It's time for Ireland to think strategically in a post-EU world. Now Official Ireland will be getting its knickers in a twist over the admonishing from the EU Commission, but that's because Official Ireland is captured and is pathetically insecure about our place in the world.

The "good room" mentality permeates the political corridors of power, where they care about what the EU apparatchiks think of us. We are constantly trying to please them, when we should realise that they are coming after us. Remember, no EU functionaries ever created a single job in Ireland. They don't matter in reality.

The last sentence is classic Eurosceptic bull.  The EU "functionaries" who created the EU and single market are the reason the global multi-nationals come to Ireland in the first place.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Aug 31st, 2016 at 08:34:08 AM EST
Comment above meant for this one.
by John Redmond (Ladybeaterz@NolesAD.com) on Wed Aug 31st, 2016 at 11:54:31 AM EST
[ Parent ]
of a good rant:
David McWilliams: EU is a thing of the past - our future is with an Atlantic Ireland - Independent.ie

Ireland's future is being the location of choice for large companies' supply chains. We are half way between America and Europe and we should keep a foot in both camps. It's really that simple.

Small indigenous Irish business can then service these American companies, creating symbiotic relationships. That's the game plan. Historically, the precedent is the medieval Adriatic city-states of Venice or Dubrovnik or the free-trading Hanseatic cities of the Baltic.

Let's not forget, without multinational investment, Ireland would be Albania with brutal weather. The multinationals have completely transformed the capital base of the country, totally upgraded the type of careers that are available to people here and plugged Ireland into the global economy in a way that is impossible to quantify. In short, they - not the EU - are the key to Ireland's economic modernity. The future is the smartphone, the technology and the Silicon Valley way of looking at the world.

Ask any 20-year-old on the street what means more to him: the iPhone 7 or the EU Commission? I don't ask this facetiously but pose it because one image is the future and the other - with its pompous councils of ministers and briefing papers - is the past.



Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Aug 31st, 2016 at 08:37:11 AM EST
medieval Adriatic city-states of Venice

You need a powerful navy and the ability to capture foreign cities for that. Good luck, Ireland.

Ask any 20-year-old on the street what means more to him:

You'd get the same answer with the iPhone and the Taoiseach.

by gk (gk (gk quattro due due sette @gmail.com)) on Wed Aug 31st, 2016 at 08:53:56 AM EST
[ Parent ]
No, the key now is ideological capture, and David McWilliams is arguing that the future is a corporatised global world, not a national one or the EU based on nation states and a large bureaucracy.   (eh - let's forget about the democracy bit....)

And he has a point.  The last thing anyone can remember the European Parliament doing for them is the elimination of roaming charges, and that took many years.

The EU has a credibility and PR problem, it is no longer seen as delivering new tangible benefits to ordinary people.  That may be partly unfair, but that's a growing perception.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Aug 31st, 2016 at 09:01:09 AM EST
[ Parent ]
Makes sense. Couldn't he have said that himself instead of bringing in Venice, 20-year old taxi drivers and all the rest? Maybe you should write for the Independent instead?
by gk (gk (gk quattro due due sette @gmail.com)) on Wed Aug 31st, 2016 at 09:41:03 AM EST
[ Parent ]
David McWilliams: EU is a thing of the past - our future is with an Atlantic Ireland - Independent.ie

By taking shares in multinationals, Ireland could create a sovereign wealth fund linked to the performance of the best-governed companies in the world, which would provide for future generations. In 2012, US multinationals made $100bn profit in Ireland, on which they are supposed to pay 12.5pc tax, or $12.5bn. In fact, they paid $4bn.

Why not encourage multinationals to pay the difference between what they pay and what they ought to pay in shares? Shares are permanent wealth, whereas taxes are transitory income. This is also attractive because shares or share options are cheaper for the company than giving cash. They already give their employees share options, so why not their host country?

So why not say to Apple and other multinationals, if the EU is going to be vindictive and retrospective, why not pay Ireland the difference between what you have paid us in tax and what you ought to have paid us, in shares?

Not sure either global corporates or the Commission would buy that, but it's a good populist head-line grabber.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Aug 31st, 2016 at 08:45:10 AM EST
For an interesting argument that Ireland should not appeal the Commission ruling, see:
Appeal of Apple tax ruling is not in the public interest | Irish Examiner

It is important to remember that the reason the commission initiated the Apple case was because of a US Senate sub-committee inquiry into Apple Ireland which drew attention to the fact that Apple earned about 60% of its global profit in Ireland and paid virtually no tax on these profits because Apple had no tax residency in any jurisdiction -- an example of "double non-taxation".

There are several strands to the US case, some consist of mere assertion, others are based on interpretations of what has been agreed by the G20 and OECD as to the nature of international tax reform, some are based on interpretations of European law.

Others are purely self-interest, for example that one effect of commission decisions would be to increase corporate tax receipts in certain EU countries, giving rise to additional tax credits and hence a reduction in US corporate tax revenue.

The overall conclusion of the white paper is not, however, based on legal or economic arguments, or arguments about necessary tax reforms but rather a threat. The white paper states: "The US Treasury Department continues to consider potential responses should the commission continue its present course."



Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Aug 31st, 2016 at 10:24:21 AM EST
Joseph Stiglitz says Ireland should not appeal Apple ruling

Prof Stiglitz said: "the fact is that you were encouraging tax avoidance, you knew it.
"Let's not make any pretence about it, you got a few jobs at the cost of stealing revenues from countries around the world. That's the kind of activity that has to be stopped."

...
Prof Stiglitz said he found it mystifying that Ireland didn't "just pocket that €13billion and use it for the enormous hardship that the people of Ireland have had to face.
"The argument that you will lose lots of jobs is absolute nonsense. It's a new world, it's very clear that the rules of the game have changed, under those new rules Ireland will have to compete on the basis of going forward, what it can provide economically.



"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Wed Aug 31st, 2016 at 04:57:53 PM EST
[ Parent ]
I agree with this, for the reason given in my comment above.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Aug 31st, 2016 at 05:24:36 PM EST
[ Parent ]
Apple tax ruling not a sound basis for tax policy | Irish Examiner

THE European Commission's extraordinary ruling means it believes 60% of Apple's profits should be taxed in Ireland. Apple does have significant functions in Cork, but there is no way it contributes more than half of its profits.

Apple is hugely profitable because it designs a phone in California that is manufactured in China and branded all around the world that people want to buy. None of those activities are based in Cork.

If Apple was declaring 60% of its profits in a Caribbean island, there is no doubt the European Commission would be accusing it of using a tax haven. But yesterday the commission decided that Apple should be declaring 60% of its profit in a European island. It's as if it wants us to be tax haven.

---snip---

Of course, the US corporate tax regime is no shining light, and many of the current problems stem from the US tax code. If US companies were not provided with provisions that allow them to defer the payment of much of their US tax, then many of these issues would not arise in the first place.

---snip---

If this wasn't the most profitable company in the world it is likely that the arrangements in place would have attracted little attention. If this was a company that had large sales but low profit margins, then the profit attributed to the Irish branches would seem generous and the tax payments more than adequate.



Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Aug 31st, 2016 at 08:54:27 PM EST
I came across this yesterday, well worth a read in the current context. It looks like the US Treasury was expecting the Apple ruling and is going to come out swinging.

To me it seems that this is a very good fight that the EU Commission is picking. Especially in a week that saw the death knell of the TTIP.

The US Treasury just declared tax war on Europe » Uncounted

On this quiet August day, the US Treasury has fired the first shots of a tax war with Europe. And while it's wrapped up in a claim to defend international tax cooperation, it looks more like an attempt to prevent an effective measure against international tax-dodging - carried out, not least, by US companies. At the same time, the US continues as the leading hold-out against the automatic exchange of individuals' financial information; and to resist the growing tide of public registers of the beneficial ownership of companies. The stage is set for a prolonged battle.

By publishing a white paper titled `THE EUROPEAN COMMISSION'S RECENT STATE AID INVESTIGATIONS OF TRANSFER PRICING RULINGS' (h/t @RichardRubinDC), the US has signalled an end to a period of quiet tension. This long post considers why this matters; then sets out the main contents of the white paper; before concluding with an assessment of what is possible in the ensuing hostilities.



It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Wed Aug 31st, 2016 at 10:44:39 PM EST
This story just keeps getting better. You know how Apple, along with every other US multinational that doesn't like paying 35% US company tax, has a colossal cash stash which it claims it will one day repatriate to the US (but only when they lower the tax rate!! i.e. never) :

Well, it turns out that...

Apple boss expects to repatriate billions to the US next year | Business | The Guardian

Apple boss Tim Cook expects the iPhone maker to repatriate huge offshore profits to America next year, paying billions of dollars in deferred taxes to the US Treasury.

In an interview with RTE radio, he gave a summary of the company's 2014 tax affairs, saying: "We paid $400m [in tax] to Ireland, we paid $400m to the US. And we provisioned several billion for the US for payment as soon as we repatriated.

"Right now I would forecast that we repatriate next year. So it is not true that we would pay just $400m, or even just $800m, the number is materially larger."

The revelation that Apple plans to repatriate some of its offshore profits and pay its huge US tax bills next year comes as a surprise given Cook's previous refusal to countenance such a move.

If he's sincere, this rather belated pre-emptive move would certainly take the wind out of the sails of US treasury and its incipient tax war of the EU... On the contrary, they should be thanking the EU for provoking a shift in their apparently insoluble struggle with the tax-deferment scam.

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

by eurogreen on Thu Sep 1st, 2016 at 09:45:05 PM EST
They're probably still hoping for a Trump victory which would lead to a big drop in Corporate tax rates. Interestingly they chose to pay 12.5% in Ireland post the elimination of their non-resident tax status in 2015 rather than head for the Cayman Islands or somewhere else with a 0% tax rate. Perhaps there is a recognition that such scams have a limited shelf life at this stage.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Sep 2nd, 2016 at 01:15:10 AM EST
[ Parent ]
Or might be that they think the EU would slap them with a tax on their EU turnover if they did.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Sep 2nd, 2016 at 06:00:43 AM EST
[ Parent ]
Does the EU have any power to tax companies directly? And would the EU not be guilty of selective enforcement if they applied a law to Apple alone?

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Sep 2nd, 2016 at 10:55:23 AM EST
[ Parent ]
I am pretty certain that the particular agency of the EU Commission which Margrethe Vestager heads does not have that power. Her agency's power is limited to enforcing specific aspects of tax and trade policies on specific companies and their deals with specific countries.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Sep 2nd, 2016 at 01:21:23 PM EST
[ Parent ]
Money laundering enforcement at the external border is a federal competence.

And the money laundering rules are fun, if you can make them stick.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Sep 2nd, 2016 at 05:46:48 PM EST
[ Parent ]
My impression is that Apples behaviour here is driven by two things:

* The Apple that did these deals originally was not the all conquering company of 2016, but the very vulnerable
 niche computer maker that had just been propped up by its greatest rival to help Microsoft fend off monopoly action. They needed to optimise to survive.

* Current Apple is constrained by fiduciary duty and shareholder lawsuits. I don't think paying taxes bothers them especially - they literally have more money than they know what to do with - but if they start paying more taxes than they have to they'll be sued to hell by shareholders, as a company and as individuals.

So if the tax loopholes are closed, they'll just pay the taxes. I thin the suggestion that they've been doing something other than complying with what they understood as the law offends Cook personally. I don't think paying taxes does.

by Colman (colman at eurotrib.com) on Fri Sep 2nd, 2016 at 07:26:37 AM EST
[ Parent ]
...Uhm. There is no way their lawyers didn't call this arrangement out when they made it. Given the age of the arrangement, maybe Cook never heard those objections, but.. it's kind of blatantly illegal.
by Thomas on Fri Sep 2nd, 2016 at 08:28:49 AM EST
[ Parent ]
against what law, where? (and I'm not referring to moral law!)

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Sep 2nd, 2016 at 10:53:35 AM EST
[ Parent ]
In Ireland. Well, specifically, Vestager is correct - it's obviously state aid, and thus illegal under those directives, but both at the time, and for the entire duration, it was entirely unambiguous that those directives had the force of law in Ireland. You can't pass the bar to practice corporate law in Europe without knowing this, so if they asked their legal council, they'd have been told it'd get overturned if anyone ever cared to go over the books.
Which begs the question why they even tried it on in the first place, and .. well, at this point, it's pure guess work, but equal parts pure arrogance, "hey, a major loan we don't have to put on the books" and "if we get away with it long enough, some of the extra money will be shielded by statutes of limitation".

.. Getting the approval of the Irish for it doesn't change any of that, tough it probably does effectively shield them from punitive damages.

by Thomas on Fri Sep 2nd, 2016 at 01:40:39 PM EST
[ Parent ]
Well first of all Irish law is quite different from European law, and secondly you haven't cited the law which was broken.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Sep 2nd, 2016 at 03:57:29 PM EST
[ Parent ]
From the irish constitution:

"No provision of this Constitution invalidates laws enacted, acts done or measures adopted by the State which are necessitated by the obligations of membership of the European Union or of the Communities, or prevents laws enacted, acts done or measures adopted by the European Union or by the Communities or by institutions thereof, or by bodies competent under the Treaties establishing the Communities, from having the force of law in the State."

Article 107 of lisbon.

(ex Article 87 TEC)

  1. Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.

  2. The following shall be compatible with the internal market:

(a) aid having a social character, granted to individual consumers, provided that such aid is granted without discrimination related to the origin of the products concerned;

(b) aid to make good the damage caused by natural disasters or exceptional occurrences;

(c) aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division. Five years after the entry into force of the Treaty of Lisbon, the Council, acting on a proposal from the Commission, may adopt a decision repealing this point.

3. The following may be considered to be compatible with the internal market:

(a) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment, and of the regions referred to in Article 349, in view of their structural, economic and social situation;

(b) aid to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of a Member State;

(c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest;

(d) aid to promote culture and heritage conservation where such aid does not affect trading conditions and competition in the Union to an extent that is contrary to the common interest;

(e) such other categories of aid as may be specified by decision of the Council on a proposal from the Commission.

Lisbon post dates the deal apple made, but the relevant rules did not change substantially with the changeover of treaties.

by Thomas on Fri Sep 2nd, 2016 at 05:42:39 PM EST
[ Parent ]
And no, none of the exceptions apply.
by Thomas on Fri Sep 2nd, 2016 at 05:44:34 PM EST
[ Parent ]
So what, precisely, was the aid the Irish Government gave to Apple, not available to its competitors, and which enabled it to distort the market?

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Sep 2nd, 2016 at 05:55:13 PM EST
[ Parent ]
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
[ Parent ]
Irish government to appeal against Apple's €13bn tax bill
The Irish government has decided to appeal against the European commission's ruling that Apple was given a sweetheart tax deal and should hand Dublin €13bn (£11bn) in fiscal payments.

The cabinet decision still needs to be endorsed by parliament next Wednesday but a group of independents in the ruling coalition who were concerned about the appeal have already been won over.

"A motion will come before the Dáil [parliament] on Wednesday seeking an endorsement of that [cabinet] decision," a government spokesman said.



"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Fri Sep 2nd, 2016 at 06:01:54 PM EST
.. if it was universally available, no company would have paid any more than apple. They did. QED.
by Thomas on Fri Sep 2nd, 2016 at 06:18:38 PM EST
Joseph Stiglitz: `Cheating' Ireland, muddled Europe
"That 26 per cent growth rate sent a strong message about the magnitude of the corruption going on. It's tax corruption. People are not paying the taxes that they ought to be paying, and it's robbing developing countries, it's robbing the United States."


"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Fri Sep 2nd, 2016 at 06:44:03 PM EST
Recent changes in the corporate tax law in Ireland have abolished the "double Irish and Dutch sandwich" tax dodge and the ability to set up non-resident companies in Ireland which can effectively pay tax nowhere. Corporate tax revenues have increased by €2 Billion in the past year (from about 5 to €7 Billion) but what is at issue here is that Apple's profits on overseas sales weren't even subject to the low headline 12.5% rate applied to profits on sales in Ireland.
So, how much tax has Apple been paying since the loophole was closed?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2016 at 10:52:06 AM EST
The suggestion is that a good chuck of that 2B is Apple.
by Colman (colman at eurotrib.com) on Wed Sep 7th, 2016 at 12:29:00 PM EST
[ Parent ]


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