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http://www.bbc.com/news/business-37226101

Apple's.... creative tax dodge in Ireland, where they used subsidiaries to smuggle their profits to declare them in the Emerald Isle, where they had a pretty sweet tax deal in violation of EU regulations has been found in violation to the tune of 13 billion euros.

For those that wonder, that would cover Ireland's ENTIRE healthcare budget for the year. The average corporation in lovely old Eire has to pay about 12%. Apple was paying 1%.

The US is screaming that Apple is being told they have to pay thier taxes. Citizen Apple is a person too, after all. Except regular people who use tax dodges to only pay 10% of what they owe usually have the IRS come around and take everything they own. Only major corporations have the right to ignore laws and other forms of governance.


Except apparently in Europe.

I think there's actually a fair point that there was a deal made in good faith between Apple and Irish government. It was a stupidly exploitative deal made by Ireland to basically let itself operate as a tax shelter, but it was a deal all the same.

It's obvious that the deal, and all similar tax shelter arrangements, need to be shut down. However the back taxes don't sit right with me. It would make it very hard to do business when a government, or a multinational governing body, can decide that old tax deals are bad and that revenue earned under that old deal should now be taxed at a higher rate.

The complants of the US government are, well, business as usual.

Here's a market commentary service piece I saw today on this subject. I present it for merely informational purposes only and is in no way an endorsement to buy or sell any stock, security and/or commodity of any type. Please seek the advice of an investment professional before engaging in any investment or trading activity.

-- The European Commission ruled that Apple owes more than $14 billion in back taxes

-- Theoretical impact extends to many EU members, which are tax havens for other conglomerates

-- Apple, Ireland and the U.S. Treasury Department are aligned against EC: powerful tripod of influence

-- An elongated appeal process may be likely

Earlier this morning, the European Commission hit Apple (AAPL:Nasdaq) with a record- breaking tax penalty of up to €13 billion (more than $14 billion), encompassing what the Brussels agency says was roughly a quarter century of illegal state support from Ireland. In short, the EC concluded that Ireland had granted two unjust tax rulings to Apple that "substantially and artificially lowered the tax paid by Apple in Ireland since 1991."

Both Apple and Ireland have already confirmed that they will appeal the ruling. Ireland’s finance minister Michael Noonan went as far as to say an appeal "is necessary to defend the integrity of our tax system, to provide tax certainty to business, and to challenge the encroachment of the EU state aid rules." We expect Apple to have the full support of the U.S. Treasury (recall Secretary Jack Lew’s public disapproval the EC's actions), Ireland, and other U.S. companies seeking to abolish any precedent set by this decision.

Although Apple would bear the financial burden of the back-taxes, the tangential target of the punishment here is Ireland, which could potentially lose its relative attractiveness as a place of international business investment. The decision ultimately opens up a "Pandora’s Box" and sets the stage for a long, bruising political battle between the EU and U.S. multinationals over the increasingly broad reach of Brussels into national tax policy that is likely to impact business across other EU member states.

As a result, we expect controversy to linger for some time as the sides trade blows and investors get over the initial shock of the ruling. Apple has already fired back, accusing the EC of attempting to "upend the international tax system" with rules that "will have a profound and harmful effect on investment and job creation in Europe."

The company is expected to announce the new version of the iPhone, along with other updated products, at an event next week, and it is unclear whether the detrimental news today will linger long enough to overshadow the event.

All in all, although the penalty against Apple is admittedly large relative to any other decision of this kind (previous record was €1.3 billion in state aid recouped from Nürburgring racetrack in Germany), the tech giant is more than equipped to cope. Recall that Apple sits on an enormous international cash balance of some $215 billion. Regardless, the back-taxes, which Ireland is responsible for officially calculating (the EC’s figure is an estimate), will sit in escrow as the EC faces appeals from all sides of the spectrum

 BigWaaagh wrote:
I present it for merely informational purposes only and is in no way an endorsement to buy or sell any stock, security and/or commodity of any type. Please seek the advice of an investment professional before engaging in any investment or trading activity.

Have you become Bloomberg now?

 sebster wrote:

 BigWaaagh wrote:
I present it for merely informational purposes only and is in no way an endorsement to buy or sell any stock, security and/or commodity of any type. Please seek the advice of an investment professional before engaging in any investment or trading activity.

Have you become Bloomberg now?

Reflex.

 BigWaaagh wrote:
Reflex.

I'm just angry I won't get to sue you if my short on Apple doesn't work

 sebster wrote:
However the back taxes don't sit right with me. It would make it very hard to do business when a government, or a multinational governing body, can decide that old tax deals are bad and that revenue earned under that old deal should now be taxed at a higher rate.

Its the only realistic punishment that could be levied against Apple and it serves as a warning for other such companies that special little tax loopholes are not a good idea in the EU.

I feel like this sets a stupid presedent, and let's the EU apply its laws ex post facto. It was a legitament deal between Apple and the Irish Government. End it from this point on for sure but what was done was done legally (if not morally) right.

Having said that, big companies do need to start paying more tax. These days though, corporation taxes on profits are a bit old fashioned and easily sidestepped. Maybe they need to be applied differently, like on the amount of sales a company makes in the area. Something that's not as easy to avoid.

 Silent Puffin? wrote:

 sebster wrote:
However the back taxes don't sit right with me. It would make it very hard to do business when a government, or a multinational governing body, can decide that old tax deals are bad and that revenue earned under that old deal should now be taxed at a higher rate.

Its the only realistic punishment that could be levied against Apple and it serves as a warning for other such companies that special little tax loopholes are not a good idea in the EU.

Except that there are many businesses within the EU that have such exceptions thanks to the generosity of the EU member states they inhabit. The EU has effectively turned a blind eye in spite of knowing what is going on.

Still, it makes a big fish for the EU as they wage a PR campaign to begin reforms in the wake of Brexit and negativity through out member states.

 Future War Cultist wrote:
I feel like this sets a stupid presedent, and let's the EU apply its laws ex post facto. It was a legitament deal between Apple and the Irish Government. End it from this point on for sure but what was done was done legally (if not morally) right.

As I understand it, it was technically an illegal deal; offering different tax rates to different companies. Just because it was agreed with a country doesn't make it not illegal.

I also assume they aren't going to be forced to pay this back in a single hit, though I believe Apple has enough cash in the bank (offshore somewhere, anyway) to pay for it without flinching.

The standard rate of Irish corporate tax is 12.5%. The Commissions's investigation concluded that Apple had effectively paid 1% tax on its European profits in 2003 and about 0.005% in 2014.

There's certainly no way Apple should be able to get away with an effective corporation tax rate of 0.005%. I get that there is going to be VAT/sales tax on individual sales, and each employee will be paying income tax, but why should every other company have to pay 2500 times more tax than Apple?

Herzlos wrote:

 Future War Cultist wrote:
I feel like this sets a stupid presedent, and let's the EU apply its laws ex post facto. It was a legitament deal between Apple and the Irish Government. End it from this point on for sure but what was done was done legally (if not morally) right.

As I understand it, it was technically an illegal deal; offering different tax rates to different companies. Just because it was agreed with a country doesn't make it not illegal.

Exactly. Just like any government decision and law can be contested in a court. Ireland subjected to EU law and apparenty this qualifies as illegal state aid of the kind the EU has gone against in the past like shipbuilders, mines, airlines/airports, etc.

The standard rate of Irish corporate tax is 12.5%. The Commissions's investigation concluded that Apple had effectively paid 1% tax on its European profits in 2003 and about 0.005% in 2014.

There's certainly no way Apple should be able to get away with an effective corporation tax rate of 0.005%. I get that there is going to be VAT/sales tax on individual sales, and each employee will be paying income tax, but why should every other company have to pay 2500 times more tax than Apple?

Sure, but VAT is a tax on the final consumer. The business only collects it on the government behalf and gives it to them so even though Apple does collect VAT it doesn't effectively pay for any of it.

What if this becomes a Pyrrhic victory for the EU? They get the back taxes but the companies hit by it decide to upsticks and move elsewhere?

They'd still have to sell stuff in the EU though, so would have a taxable site.

jouso wrote:

Sure, but VAT is a tax on the final consumer. The business only collects it on the government behalf and gives it to them so even though Apple does collect VAT it doesn't effectively pay for any of it.

Sorry, I didn't mean to imply it was tax that came from Apple, just tax revenue generated indirectly from Apple (along with staff income tax).

 Future War Cultist wrote:
What if this becomes a Pyrrhic victory for the EU? They get the back taxes but the companies hit by it decide to upsticks and move elsewhere?

They may well do, close everything, leave the apple shops to a 3rd party licensee and outsource warranty, customer service, etc.

Except their product would take a serious hit in their biggest export market, so they won't. They'll fight it just on principle and try to get a sweeter deal but it's a lost battle for them.

Apple already has enough problems trying to sell goods in China, so they won't close off a second market.


It's kind of an odd balance, between the EU and the ability of sovereign nations under it to have their own deals......

 welshhoppo wrote:
Apple already has enough problems trying to sell goods in China, so they won't close off a second market.


It's kind of an odd balance, between the EU and the ability of sovereign nations under it to have their own deals......

Yup, a greedy multinational, an incompetent government and an overbearing zealous commission.

No matter who loses we all win

No real winners here - Ireland doesn't want to lose its attractiveness as a tax haven, and Apple doesn't want to pay 13-14.5 billion in back taxes.

All told, Apple has enough cash on hand to cover the back taxes. Warren Buffett is sitting on about a billion dollars worth of Apple stock, and I'm not planning on dumping my Apple holdings just yet.

Apple will probably pay them back by stimulating the economy by constructing $10 billion worth of hipster coffee places. It's like the cane toad problem in Queensland here sort of, but with those ugly glasses and people wearing socks with sandles for some reason.

 NuggzTheNinja wrote:
Ireland doesn't want to lose its attractiveness as a tax haven

It will still have low corporation tax, it just can't offer special snowflake deals anymore.

 Mr. Burning wrote:

Except that there are many businesses within the EU that have such exceptions thanks to the generosity of the EU member states they inhabit.

Not for much longer it would seem

 sebster wrote:
I think there's actually a fair point that there was a deal made in good faith between Apple and Irish government. It was a stupidly exploitative deal made by Ireland to basically let itself operate as a tax shelter, but it was a deal all the same.

It's obvious that the deal, and all similar tax shelter arrangements, need to be shut down. However the back taxes don't sit right with me. It would make it very hard to do business when a government, or a multinational governing body, can decide that old tax deals are bad and that revenue earned under that old deal should now be taxed at a higher rate.

The complants of the US government are, well, business as usual.

I agree with this. As bad as the deal was, it was all legal and above board at the time. The EU's actions come across as retrospective, which could have all sorts of horrible implications down the line.

 Do_I_Not_Like_That wrote:
I agree with this. As bad as the deal was, it was all legal and above board at the time. The EU's actions come across as retrospective, which could have all sorts of horrible implications down the line.

Yes, that's exactly what I was saying.

Since it was legal/above board at the time... couldn't Ireland simply refuse to collect this ex post facto tax on behalf of the EU?

 whembly wrote:
Since it was legal/above board at the time... couldn't Ireland simply refuse to collect this ex post facto tax on behalf of the EU?

Yes and No. EU rules get flaunted all the time, the French being past masters of this, but Ireland is Ireland, not France or Germany, so different rules apply

Ireland could try and drag it through the courts for years, or threaten to leave the EU.

Point is this, Whembly - the EU have enough problems on their plate right now, so this could get put on the back burner.

Plus, your country might not be happy to see one of its big companies being 'punished' like this. Congress might kick up a fuss.

 Do_I_Not_Like_That wrote:

 sebster wrote:
I think there's actually a fair point that there was a deal made in good faith between Apple and Irish government. It was a stupidly exploitative deal made by Ireland to basically let itself operate as a tax shelter, but it was a deal all the same.

It's obvious that the deal, and all similar tax shelter arrangements, need to be shut down. However the back taxes don't sit right with me. It would make it very hard to do business when a government, or a multinational governing body, can decide that old tax deals are bad and that revenue earned under that old deal should now be taxed at a higher rate.

The complants of the US government are, well, business as usual.

I agree with this. As bad as the deal was, it was all legal and above board at the time. The EU's actions come across as retrospective, which could have all sorts of horrible implications down the line.

It's not retrospective because Ireland should have known his deal with Apple was fishy. They signed into the rules when entering the EU, so it's as legal as the few dozen other times the commission has ruled illegal state aid (just about every country has had a few).

Governments break the rules all the time. It's just easier to catch them when they answer to a higher authority.

Wrt the French being above this.

http://www.wsj.com/articles/eu-orders-france-to-recover-state-aid-from-edf-1437559208

And Brussels against Brussels

http://www.politico.eu/article/commission-rules-belgian-tax-rules-are-illegal-state-aid/

Illegal state aid is also a concern of the World Trade Organisation.

 Future War Cultist wrote:

 Do_I_Not_Like_That wrote:
I agree with this. As bad as the deal was, it was all legal and above board at the time. The EU's actions come across as retrospective, which could have all sorts of horrible implications down the line.

Yes, that's exactly what I was saying.

Yeah.

I have seen reports and comments regarding the claiming of 'back taxes'...of which there are none.

This Is just the EU going into offensive PR mode. Apple will make a gesture - small potatoes compared to the billions wanted. And this will soon go away. Meanwhile alternative loopholes will be placed within tax codes continent wide.

Business as usual.

The core EU rules on state aid to industry were contained in the Treaty of Rome 1957 so the government of Eire and Apple Computer Corp cannot claim to be totally free of blame though it's fair to say that the rules have been changed and modified a number of times.

 Kilkrazy wrote:
The core EU rules on state aid to industry were contained in the Treaty of Rome 1957 so the government of Eire and Apple Computer Corp cannot claim to be totally free of blame though it's fair to say that the rules have been changed and modified a number of times.

The EU must shoulder some of the blame here as well. I'll bet my hat they knew of the deal and just kept schtum as it suited them at the time.

I suspect that the EU was happy for Apple to set up shop in Ireland when it was a relatively poverty-stricken backwater of the EU. Part of the purpose of the EU is to help uplift such areas by means of grants and intervention.

However Eire grew massively after joining the EU and I defy anyone to say it is still a poverty-stricken area when the IMF ranked Eire 5th in the world for GDP per capita in 2014.

 Kilkrazy wrote:
I suspect that the EU was happy for Apple to set up shop in Ireland when it was a relatively poverty-stricken backwater of the EU. Part of the purpose of the EU is to help uplift such areas by means of grants and intervention.

Apple's corporation tax rate was also dropped hugely in 2014.