Apple and Irish government collared over tax deal
Discussion
Dr Jekyll said:
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.
As for the non resident branch only being liable for tax on its profits from Irish operations, this makes no sense. How could the non resident "head office" have Irish income? its non resident. I am no expert on Irish tax law so just asking not saying you are wrong.
As I said in my summary above the Commission report does not specify how income from Irish operations where allocated. My guess is those would have been allocated to the Irish operating company but as I say report does not say.
Mrr T said:
Not sure I understand your post. Both Apple companies where Irish resident with non resident branches.
As for the non resident branch only being liable for tax on its profits from Irish operations, this makes no sense. How could the non resident "head office" have Irish income? its non resident. I am no expert on Irish tax law so just asking not saying you are wrong.
By selling stuff in Ireland, profit from that is taxable in Ireland profit from foreign branches isn't.As for the non resident branch only being liable for tax on its profits from Irish operations, this makes no sense. How could the non resident "head office" have Irish income? its non resident. I am no expert on Irish tax law so just asking not saying you are wrong.
Irish Revenue said:
Profits of non-resident companies that are not generated by their Irish branches – such as profits from technology, design and marketing that are generated outside Ireland – cannot be charged with Irish tax under Irish tax law.
Dr Jekyll said:
If Paddy's PCs is an Irish resident company then the regulations are quite legitimately different.
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.
Re your first point, a State Aid case has been brought against companies like BASF operating in Belgium, because the rules don't apply equally to domestic companies. 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.
I suspect the use of "branch" is colloquial, and it's actually an Irish resident company, which is a subsidiary of the "head office" Irish/Bermudan company. To circumvent certain US tax rules, the bottom company is elected to be a branch. Even if it is a real branch of a non resident company, it made all the profit. The ruling allowed the profit to be allocated to the non resident company, therefore reducing profits subject to tax in Ireland.
JPJPJP said:
I'm interested to see the basis of any appeal. It surely rests on the "there was no special deal" claim doesn't it?
From what I saw on the TV news it's likely to be on the basis it's not unlawful and against EU rules.A specific comment from Apple was along the lines of 'It is fundamentally against our ethos to break any laws'.
Not fundamentally their ethos to pay their fair share of tax though I guess.
PurpleMoonlight said:
JPJPJP said:
I'm interested to see the basis of any appeal. It surely rests on the "there was no special deal" claim doesn't it?
From what I saw on the TV news it's likely to be on the basis it's not unlawful and against EU rules.A specific comment from Apple was along the lines of 'It is fundamentally against our ethos to break any laws'.
Not fundamentally their ethos to pay their fair share of tax though I guess.
Presumably it exists somewhere. Who decided on the definition of 'fair share of tax' and this particular sum relating to Apple? What exactly is Apple's fair share of tax - a rounded sum would suffice.
It could then be compared with filed tax reports to see what the difference is compared to the sum lawfully demanded and due to be paid, which was/is paid afaics.
The suspicion has to be that demanding any additional tax beyond the lawfully required amount would be unfair. Voluntary additional payments are a different matter, not being the subject of a demand.
turbobloke said:
While 'paying their fair share of tax' and similar phrases have appeared in this and other tax avoidance threads over time, the definition seems elusive.
Very difficult topic. Ostensibly though, whichever way we view this case, or the broader issue of 'fair taxes' in the absolute cold light of day, neither you, me or anyone else can honestly say the Irish branch of Apple undertook or created all the business it paid the taxes for under this arrangement - the revenue was generated outside of this regime.Sparkyhd said:
FFS
Can I call it a Sales Tax then? Will this pass the pedantic filter?
Anyhow I'll give up on this thread because it's like dealing with the Humphrey from the civil service where we end up discussing minutiae rather than the concept.
Call it what you like.Can I call it a Sales Tax then? Will this pass the pedantic filter?
Anyhow I'll give up on this thread because it's like dealing with the Humphrey from the civil service where we end up discussing minutiae rather than the concept.
I'm not being pedantic, calling it a tax on income is missing the concept behind VAT. The reason I highlighted that it's called Value Added Tax is because it's a tax on value added, which is not the same as sales. This is reflected in the way VAT is operated, it isn't a Tax on sales, it's much closer to a tax on profit.
If you want to look at the concept then you have to look at how the value added is created, in some cases it's a tax on the labour that goes into a new product, in others its a tax on the application of unique knowledge, for lots of businesses it's a tax on both.
Fundamentally it's a tax on the work that a company does, not the value of its sales.
turbobloke said:
While 'paying their fair share of tax' and similar phrases have appeared in this and other tax avoidance threads over time, the definition seems elusive.
Presumably it exists somewhere. Who decided on the definition of 'fair share of tax' and this particular sum relating to Apple? What exactly is Apple's fair share of tax - a rounded sum would suffice.
£11BN apparently. I assume this is the tax due at Irelands corporate rate on profits moved to the entity in cyberspace and not domiciled anywhere for tax assessment.Presumably it exists somewhere. Who decided on the definition of 'fair share of tax' and this particular sum relating to Apple? What exactly is Apple's fair share of tax - a rounded sum would suffice.
I'm a relatively simple guy. To me, 'fair share' would be to pay your tax in the country where the trading profits are created and not involve complicated inter country pricing, licencing, etc etc.
Digga said:
turbobloke said:
While 'paying their fair share of tax' and similar phrases have appeared in this and other tax avoidance threads over time, the definition seems elusive.
Very difficult topic. Ostensibly though, whichever way we view this case, or the broader issue of 'fair taxes' in the absolute cold light of day, neither you, me or anyone else can honestly say the Irish branch of Apple undertook or created all the business it paid the taxes for under this arrangement - the revenue was generated outside of this regime.Apple has operated almost tax-free in Ireland since 1980, welcomed at the time by a government keen to bring jobs to what was then one of Europe's poorest countries. It appears to have been a choice of 'almost no tax of one particular flavour', or 'no tax of any flavour and no jobs'.
That choice cannot have been difficult. Now, 36 years later, the dead hand of the EU and waffly fairness arguments are stirring the water. Talk about late to the party with questionable motives.
Agree WRT the EU playing this rather badly.
The Economist was pretty critical of it yesterday: http://www.economist.com/news/leaders/21706267-eur...
The Economist was pretty critical of it yesterday: http://www.economist.com/news/leaders/21706267-eur...
Leithen said:
As I understand it, sitting behind all this is Apple's inability to return these revenues to the US without double taxation occurring. Nice problem to have, but important to Apple nonetheless.
IMHO, this is part of the reason why the post GFC recovery has been so moribund in the USA. The Democrats are going to need to wake up and realise that their present tax-and-spend trajectory has many negative consequences. Of course this may lead them to normalise tax burden and diminish the advantage of Ireland and other havens.Also sitting behind this is Apple's success story and its mountain of >$200bn in cash, from which tax-happy-clappy third rate spendaholic politicos can hardly remove their greedy eyes. Any facility to waste more of other people's money is hard for them to resist today even where they managed to resist yesterday (figuratively speaking).
Eligible companies arriving with Apple in 1980 were given tax holidays until 1990 and have enjoyed a low tax environment of one type or another since then. Yet we don't hear about these companies, their identity, their track record, cash stash, and so on. The soaring success of Apple has made it a singular target for greedy political opportunism sanctified under a fairness flag of convenience which is also guaranteed to tweak the egalitarian gland in many onlookers - a very convenient element of thisproblem success story.
Apple's decision to relocate was a massive boost for Ireland and has been incredibly beneficial since, even with meddling from the EEC/EU dating from 1973. Back in the day, Ireland was struggling with high and worsening unemployment, double-digit inflation and a significant brain drain. If anyone is going to look at any sort of cost/benefit view in the current version of Apple's tax arrangements, they really ought to remember to include the vast benefits over a timescale of 36 years. It's only 'fair' to do so
Eligible companies arriving with Apple in 1980 were given tax holidays until 1990 and have enjoyed a low tax environment of one type or another since then. Yet we don't hear about these companies, their identity, their track record, cash stash, and so on. The soaring success of Apple has made it a singular target for greedy political opportunism sanctified under a fairness flag of convenience which is also guaranteed to tweak the egalitarian gland in many onlookers - a very convenient element of this
Apple's decision to relocate was a massive boost for Ireland and has been incredibly beneficial since, even with meddling from the EEC/EU dating from 1973. Back in the day, Ireland was struggling with high and worsening unemployment, double-digit inflation and a significant brain drain. If anyone is going to look at any sort of cost/benefit view in the current version of Apple's tax arrangements, they really ought to remember to include the vast benefits over a timescale of 36 years. It's only 'fair' to do so
PurpleMoonlight said:
£11BN apparently. I assume this is the tax due at Irelands corporate rate on profits moved to the entity in cyberspace and not domiciled anywhere for tax assessment.
I'm a relatively simple guy. To me, 'fair share' would be to pay your tax in the country where the trading profits are created and not involve complicated inter country pricing, licencing, etc etc.
But how do you work out where the profit is created without inter country pricing?I'm a relatively simple guy. To me, 'fair share' would be to pay your tax in the country where the trading profits are created and not involve complicated inter country pricing, licencing, etc etc.
A company sells stuff in country A using intellectual property licenced from it's arm in country B. If the country A part of the business doesn't pay for the licence country B's authorities complain that the country B profits are being transferred to country A and their tax is being dodged. If licence fees are paid from A to B then country A's authorities say profit is moved offshore and their tax is being dodged.
The obvious solution would be to agree with the tax people a realistic commercial rate for the licence or transfer pricing. But that is what Starbucks did and just look at the protests.
Ireland joined the EU and knew the rules on tax subsidies, but still struck a different deal with Apple and probably others. Ireland benefited from millions of euros of eu investment to build new motorways etc. This was because they signed up to the eu agreeing the rules of membership.Picking selective tax deals to suit yourself is not part of the deal with eu membership regardless of whatever reasons are now being trotted out.
speedyman said:
Ireland joined the EU and knew the rules on tax subsidies, but still struck a different deal with Apple and probably others. Ireland benefited from millions of euros of eu investment to build new motorways etc. This was because they signed up to the eu agreeing the rules of membership.Picking selective tax deals to suit yourself is not part of the deal with eu membership regardless of whatever reasons are now being trotted out.
Ireland responded to EEC and EU membership.It stopped offering tax holidays, also zero rating by introducing a 10% rate, for example. Apple and Dublin negotiated an arrangement which fell within European rules. Earlier on, Apple had secured an Internal Revenue Service advance pricing agreement.
speedyman said:
Ireland joined the EU and knew the rules on tax subsidies, but still struck a different deal with Apple and probably others. Ireland benefited from millions of euros of eu investment to build new motorways etc. This was because they signed up to the eu agreeing the rules of membership.Picking selective tax deals to suit yourself is not part of the deal with eu membership regardless of whatever reasons are now being trotted out.
Agreed.We cannot have "Ever closer Union" if countries are allowed to control their own tax affairs.
EU tax harmonisation lies ahead for the lucky ones with EU futures who are still enjoying buoyant economies and high employment in the EU and particularly the EZ. It's going to be difficult here in the UK, competing with the ultra-low levels of taxation due to be imposed on reluctant nations.
Leithen said:
As I understand it, sitting behind all this is Apple's inability to return these revenues to the US without double taxation occurring. Nice problem to have, but important to Apple nonetheless.
The money is held offshore to prevent it being taxed in the US ie, in the current structure it has not been taxed at all and sits in Cayman/Bermuda. Once it it repatriated, prima facie, it is taxable in the US. That's always been the case. I suspect that if the Irish tax sticks, Apple will get tax credits for the Irish tax paid, and in effect only pay US tax on the profits.Bizarelly, this means the US treasury could be financing the payment!
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