Apple and Irish government collared over tax deal
Discussion
Dr Jekyll said:
But the EU does allow individual countries to set their own corporation tax rates, surely there isn't a level playing field irrespective of Apple's tax position.
As long as there is no common fiscal policy (which would make sense given there is a common currency but is practically impossible given the f
ked up state the monetary union is in) countries will have that freedom and I'd say that despite that freedom the field is broadly even.Even within a member country such as Ireland as each company should pay the same tax rate unless there are e.g. different tax bands based on the amount of income. That also means that single companies should not be treated better or worse only because the government thinks they are more or less valuable to the economy.
Even between the member countries as they can compete based on a multitude of factors: e.g. tax rate in Ireland may be lower so corporate HQs are established there. Infrastructure and availability of skilled engineers may be better in another country, say the UK, despite a higher tax rate, so the new factory is built there instead. It's competition between the member states based on a multitude of factors.
twinturboz said:
So that's the best that Tim Cook's highly paid tax department can come up with?Reality check: https://www.fastcompany.com/3063340/a-tax-expert-r...
I'd give him one point though regarding the political aspect of it... The US f
ks Volkswagen (not defending anything here) so the EU Commission fks Apple.DamnKraut said:
Even within a member country such as Ireland as each company should pay the same tax rate unless there are e.g. different tax bands based on the amount of income.
In general there's no reason for a country to operate that way given it wants to attract investment from large successful / entrepreneurial / innovative companies. Tax breaks and incentives are a reasonable response to the reality of global competition, far better than the EU approach of subsidising bankrupt / near-bankrupt industries such as solar and wind which result in a country missing out on 2 to 4 real jobs for every fake green blob job created at great taxpayer expense. Then the unsustainable subsidies inevitably get clawed back and the rest is history.DamnKraut said:
So that's the best that Tim Cook's highly paid tax department can come up with?
Reality check: https://www.fastcompany.com/3063340/a-tax-expert-r...
I'd give him one point though regarding the political aspect of it... The US fks Volkswagen (not defending anything here) so the EU Commission fks Apple.
I think the political aspect is a bit of a red herring, VW screwed themselves with the dodgy emissions, the EU action against Apple is unrelated as far as I can see.Reality check: https://www.fastcompany.com/3063340/a-tax-expert-r...
I'd give him one point though regarding the political aspect of it... The US f
ks Volkswagen (not defending anything here) so the EU Commission fks Apple.turbobloke said:
near-bankrupt industries such as solar and wind which result in a country missing out on 2 to 4 real jobs for every fake green blob job created at great taxpayer expense. Then the unsustainable subsidies inevitably get clawed back and the rest is history.
Ah you mean just like the Oil industry as Fossil fuel subsidies reached $90 billion in the OECD and over $500 billion globally in 2011 https://www.odi.org/subsidies-change-the-gameI do find the attitude of many of the leave team on this thread amusing. Most hate the EU so much they seem to blame everything on EU. There hatred is so strong they even seem to deliberately miss read the facts of this case.
There was a summary of the position a couple of pages ago but it contained some errors.
So let me explain the facts.
It is normal for company/tax law across the world to allow a company to set up branches in other countries.
A branch of a foreign company normally has to file account in the host country and may or may not be taxable in the host country depending what it does.
Ireland tax law taxed an Irish company operating in Ireland at the standard tax rate and had a lower tax rate for branches.
Irish tax law has one funny quirk in that you can have a branch which is not resident anywhere and is still entitled to the lower tax rate.
The structure supports the well known Double Irish scheme by which many US companies avoid US tax on foreign earning.
To get back to Apple. It operated out of Ireland using 2 companies. The structure of the 2 companies was the same.
Both companies had an Irish operating entity which employed all the staff and paid fees to Apple US and paid the higher rate of Irish Tax. They both also had "headquarters" branch which had no tax residency and very few costs other than the occasional directors meeting.
Both Irish companies sold products around the world with local branches or companies providing just support and a distribution network. This meant the local branch would charge Apple Ireland on a cost plus basis. This meant Apple paid little tax in most of the countries it operated in.
None of the above is illegal or against any EU law. The Commission report is clear on this.
The issue with the structure is you need to allocate the income received from around the world to either the Irish resident operating company or the international branch.
So do you allocate the income mainly to the Irish operating company which has all the infrastructure, the people, to sell the goods (and the higher tax rate) or the headquarters branch which has nothing (but the lower tax rate).
Now in most tax jurisdictions that would be a no brainer.
However, The Irish tax authorities allowed Apple to allocate most of the income to the headquarters branch.
Its this allocation that the Commission decided was state aid.
The Commission does not mention if revenue generated in Ireland by Apple was allocated to the operating company or the headquarters branch. I expect the former to stop other Irish companies using the structure.
I know very little about the rules on state aid so cannot comment on the Commission ruling.
However, the allocation looks dodgy and I expect Apple will be having some interesting discussions with tax authorities around the world.
There was a summary of the position a couple of pages ago but it contained some errors.
So let me explain the facts.
It is normal for company/tax law across the world to allow a company to set up branches in other countries.
A branch of a foreign company normally has to file account in the host country and may or may not be taxable in the host country depending what it does.
Ireland tax law taxed an Irish company operating in Ireland at the standard tax rate and had a lower tax rate for branches.
Irish tax law has one funny quirk in that you can have a branch which is not resident anywhere and is still entitled to the lower tax rate.
The structure supports the well known Double Irish scheme by which many US companies avoid US tax on foreign earning.
To get back to Apple. It operated out of Ireland using 2 companies. The structure of the 2 companies was the same.
Both companies had an Irish operating entity which employed all the staff and paid fees to Apple US and paid the higher rate of Irish Tax. They both also had "headquarters" branch which had no tax residency and very few costs other than the occasional directors meeting.
Both Irish companies sold products around the world with local branches or companies providing just support and a distribution network. This meant the local branch would charge Apple Ireland on a cost plus basis. This meant Apple paid little tax in most of the countries it operated in.
None of the above is illegal or against any EU law. The Commission report is clear on this.
The issue with the structure is you need to allocate the income received from around the world to either the Irish resident operating company or the international branch.
So do you allocate the income mainly to the Irish operating company which has all the infrastructure, the people, to sell the goods (and the higher tax rate) or the headquarters branch which has nothing (but the lower tax rate).
Now in most tax jurisdictions that would be a no brainer.
However, The Irish tax authorities allowed Apple to allocate most of the income to the headquarters branch.
Its this allocation that the Commission decided was state aid.
The Commission does not mention if revenue generated in Ireland by Apple was allocated to the operating company or the headquarters branch. I expect the former to stop other Irish companies using the structure.
I know very little about the rules on state aid so cannot comment on the Commission ruling.
However, the allocation looks dodgy and I expect Apple will be having some interesting discussions with tax authorities around the world.
Wouldn't it be simpler to tax income where it's earned.
Starbucks don't pay much UK corporation tax but Costa do and they're both doing the same thing, selling coffee.
Why not charge 10℅ extra VAT on UK coffee sales and let companies offset that 10℅ against corporation tax. Costa could therefore keep selling at the same price whereas Starbucks would be uncompetitive or have to absorb the cost.
Starbucks don't pay much UK corporation tax but Costa do and they're both doing the same thing, selling coffee.
Why not charge 10℅ extra VAT on UK coffee sales and let companies offset that 10℅ against corporation tax. Costa could therefore keep selling at the same price whereas Starbucks would be uncompetitive or have to absorb the cost.
Sparkyhd said:
Wouldn't it be simpler to tax income where it's earned.
Starbucks don't pay much UK corporation tax but Costa do and they're both doing the same thing, selling coffee.
Why not charge 10? extra VAT on UK coffee sales and let companies offset that 10? against corporation tax. Costa could therefore keep selling at the same price whereas Starbucks would be uncompetitive or have to absorb the cost.
Any company making a small profit would be uncompetitive and presumably go out of business.Starbucks don't pay much UK corporation tax but Costa do and they're both doing the same thing, selling coffee.
Why not charge 10? extra VAT on UK coffee sales and let companies offset that 10? against corporation tax. Costa could therefore keep selling at the same price whereas Starbucks would be uncompetitive or have to absorb the cost.
I think you'll find VAT is a tax on income which is a sales tax if you prefer another name.
Anyhow 10℅ was an arbitrary ℅. There will be a ℅ which is a fair amount taking account of the normal margin for an industry which means American corporates can all bugger off and try Mexico instead.
Anyhow 10℅ was an arbitrary ℅. There will be a ℅ which is a fair amount taking account of the normal margin for an industry which means American corporates can all bugger off and try Mexico instead.
How many companies has Ireland been giving favourable rates to? I heard at least Citigroup was benefiting, so could this case trigger the opening of the floodgates for a raft of companies in the spotlight. It's a good windfall for Ireland - in the short term anyway.
I'm not sure if this will compromise the appeal of the Emerald Isle to foreign multinationals or not..
I'm not sure if this will compromise the appeal of the Emerald Isle to foreign multinationals or not..
Sparkyhd said:
I think you'll find VAT is a tax on income which is a sales tax if you prefer another name.
Anyhow 10? was an arbitrary ?. There will be a ? which is a fair amount taking account of the normal margin for an industry which means American corporates can all bugger off and try Mexico instead.
VAT is a tax on the value added, the clue is in the name. It's not a tax on income.Anyhow 10? was an arbitrary ?. There will be a ? which is a fair amount taking account of the normal margin for an industry which means American corporates can all bugger off and try Mexico instead.
DamnKraut said:
Agree that I sounded like the EU Commission's press secretary there 
There is no such thing as the "EU's tax receipts". Taxation is within the authority of EU member states. The EU gets enough money thrown at them so as to not need the money that Apple should have paid in taxes in Ireland. What the EU cannot allow though is member states not sticking to the level playing field of the common market by giving single companies preferred treatment based on their importance to the country's economy.
Apple has been in Ireland since 1980, the tax deals are newer than that if I am correctly informed. So the deals were not the original reason Apple chose Ireland for their operations. Apple will stay in Ireland, Apple has already set up an escrow account for the expected payment they will need to make - which is pretty much them expecting to lose this. And rightly so.
The EU is not fking Ireland, do you think they would want Ireland to go the same way as the UK?
Apple on the other hand is not an innocent little virgin stumbling into a cross fire. They are the fking perpetrators here and Tim Cook can swear all he want that this is politically motivated.
The EU ansolutely wants to run the Irish tax model onto the rocks. These tax deals buy Ireland thousands of jobs and hundreds of millions in income tax but at the expense of billions in corporation tax throughout the rest of the EU. (If 13bn was due at Irelands regular tax rate one has to assume over double that would have been due in most other EU countries!There is no such thing as the "EU's tax receipts". Taxation is within the authority of EU member states. The EU gets enough money thrown at them so as to not need the money that Apple should have paid in taxes in Ireland. What the EU cannot allow though is member states not sticking to the level playing field of the common market by giving single companies preferred treatment based on their importance to the country's economy.
Apple has been in Ireland since 1980, the tax deals are newer than that if I am correctly informed. So the deals were not the original reason Apple chose Ireland for their operations. Apple will stay in Ireland, Apple has already set up an escrow account for the expected payment they will need to make - which is pretty much them expecting to lose this. And rightly so.
The EU is not f
king Ireland, do you think they would want Ireland to go the same way as the UK?Apple on the other hand is not an innocent little virgin stumbling into a cross fire. They are the f
king perpetrators here and Tim Cook can swear all he want that this is politically motivated.The EU despises tax competition.
fblm said:
The EU ansolutely wants to run the Irish tax model onto the rocks. These tax deals buy Ireland thousands of jobs and hundreds of millions in income tax but at the expense of billions in corporation tax throughout the rest of the EU. (If 13bn was due at Irelands regular tax rate one has to assume over double that would have been due in most other EU countries!
The EU despises tax competition.
Wouldn't say that the EU wants to run Ireland's tax system into the ground. There is nothing to be gained from pissing off the next member state and make them consider the UK route to independence/doom (so as to cover the full range of Brexit opinions here in the forum The EU despises tax competition.
)What the Commission needs to do is investigate potentially illegal state aid being given to companies which distorts competition between companies and between EU countries. Ireland has borderline dodgy tax laws and Apple made full use of that. That this draws the attention of the EU at one point or another is no surprise.
As for other countries being after tax income they may have missed out from Apple... Apple Germany is in Bavaria and the state government there already said they don't want any of that money for the sake of not pissing off the Americans.
Alpinestars said:
Jockman said:
I think that touches upon price elasticity. Ireland has a well-argued Corp tax rate of 6.25% which is half of its headline rate. At what point would Apple have been tempted elsewhere?
Perhaps Ireland has sold itself short?
Ireland had 2 benefits for US multinationals, outside of the low tax rate;Perhaps Ireland has sold itself short?
a) the ability to do deals - now being attacked under State Aid law, and
b) the concept of tax residence following central management and control even when a company is incorporated in Ireland. This gave rise to the double irish structure which allows profits to be stripped from Ireland to Cayman/Bermuda, where they are not taxed, unless remitted back to the US. The bifurcation of central management and control from residence is important for US tax in the whole structure.
The low tax rate attracts some investment, but in Apple's case, it's a bit of a red herring.
We should also bear in mind, Ireland has a skilled workforce and they speak (broadly) the same language as the US.
All these factors make it ideal for US organisations to route operations through Ireland.
In the UK you sometimes create enterprise zones to regenerate deprived areas which AIUI includes extended sweetheart tax agreements. Presumably this isn't state aid because it's open to all. I wonder if one could create such an enterprise zone, in theory open to all but requiring local investment which in practice means only one applicant? 
My consultancy fee is just 0.01% thanks
My consultancy fee is just 0.01% thanks
fblm said:
In the UK you sometimes create enterprise zones to regenerate deprived areas which AIUI includes extended sweetheart tax agreements. Presumably this isn't state aid because it's open to all. I wonder if one could create such an enterprise zone, in theory open to all but requiring local investment which in practice means only one applicant?
My consultancy fee is just 0.01% thanks
My consultancy fee is just 0.01% thanks
jamoor said:
Dr Jekyll said:
But the EU does allow individual countries to set their own corporation tax rates, surely there isn't a level playing field irrespective of Apple's tax position.
There in't because Paddys PC's cannot use the same terms Apple has.The point at issue is, if Paddy's PCs (like Apple) was not an Irish resident company, and did set up the same structure as Apple, would the same tax rules, IE not charged tax on rest of world profits, still apply? If different rules applied, then Apple got a special deal. If the same rules would apply there is no special deal so no state aid so no problem.
And Irish tax law clearly states that non resident companies are only liable for Irish tax on the proceeds of their Irish operations.
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