Apple and Irish government collared over tax deal
Discussion
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.
Actually that's exactly how things work. The difficulty is while in may be clear where the income is generated in a large multi national company the costs can be spread over many other jurisdictions. How income is allocated and how the costs are recharged across the many juristictions is subject to broad international agreement.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.
Basically if the the cost in a jurisdiction is just support services for a product sold by a group company or branch in another jurisdiction then no profit will be allocated to that jurisdiction and it will normally just change the selling entity costs for support on a cost plus basis.
This is how Apple operates across the EU and in a number of other jurisdictions with the Apple Irish companies as the seller..
As soon as the entity in a jurisdiction becomes involved in the sales process it may be entitled to a share of the sales income.
All of this is is fairly simple although the allocations are some times complex to do. There is broad international agreement around this so as to avoid income being taxed in 2 jurisdictions.
What's odd about the Irish situation is this concept of a branch with no jurisdiction.
I think the question is. If an Irish company set up a branch is a jurisdiction with no taxation of profits and then allocated all its income to the off shore entity so the on shore entity just made a lose what would the Irish revenue say?
don4l said:
Agreed.
We cannot have "Ever closer Union" if countries are allowed to control their own tax affairs.
You do realise that all multinationals benefit greatly from borderless trade but there has to be some common grounds to base it on!We cannot have "Ever closer Union" if countries are allowed to control their own tax affairs.
Apple were selling all sorts with only one trading address with next day delivery across the whole of the eu.
Alpinestars said:
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.turbobloke said:
Alpinestars said:
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.The way the Double Irish works is using by using a company resident in somewhere like Bermuda/Cayman etc, and holding the cash there until it needs to be repatriated to the US/there are tax incentives to repatriate. I believe Apple has a big stockpile of cash outside the US.
jamoor said:
with next day delivery across the whole of the eu.
I bet if you look hard enough you'll find that Apple Ireland paid their local license holders (or whatever they call them) for the provision of that delivery service. It's a perfectly reasonable arrangement given the local entity doesn't own any of the IP or even the products being sold and has no means of making sales that aren't wholly reliant on another legal entity, Apple in Ireland.
turbobloke said:
Alpinestars said:
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.
Dr Jekyll said:
But how do you work out where the profit is created without inter country pricing?
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.
It's worse though. Without considering any "licensing", you still have this;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.
Apple is based in Country A, where R&D takes place and there are a proportion of sales.
Products are built in Country B, where there is a growing proportion of sales.
Sales for a large part of the world, lets call them Countries C to S are remitted to Country T where there are very limited sales.
High levels of Corporation tax act as a disincentive to Apple returning revenues to Country A, where their main stock market listing happens to be.
Apple also has a stock market listing in Country F.
To pay dividends and buy back stock, Apple finds it more cost-effective to borrow money within Country A than repatriate revenues from outside Country A.
Globalisation isn't simple....
Digga said:
turbobloke said:
Alpinestars said:
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.
At a stretch possibly so but I can't see Apple knowingly telling fibs to a Senate panel.
turbobloke said:
At a stretch possibly so but I can't see Apple knowingly telling fibs to a Senate panel.
paulrockliffe said:
I bet if you look hard enough you'll find that Apple Ireland paid their local license holders (or whatever they call them) for the provision of that delivery service.
It's a perfectly reasonable arrangement given the local entity doesn't own any of the IP or even the products being sold and has no means of making sales that aren't wholly reliant on another legal entity, Apple in Ireland.
What's a local license holder? Or do you mean distributor?It's a perfectly reasonable arrangement given the local entity doesn't own any of the IP or even the products being sold and has no means of making sales that aren't wholly reliant on another legal entity, Apple in Ireland.
The Republic of Ireland's cabinet has agreed to appeal against the European Commission's ruling that Ireland granted undue tax benefits of up to €13bn (£11bn) to Apple.
The decision was taken after a half-hour meeting of the cabinet.
The Irish government previously said it "disagrees profoundly" with the ruling.
Apple chief executive Tim Cook said he was "very confident" the ruling would be overturned on appeal.
He called the European Commission's decision "maddening" and "political".
The decision was taken after a half-hour meeting of the cabinet.
The Irish government previously said it "disagrees profoundly" with the ruling.
Apple chief executive Tim Cook said he was "very confident" the ruling would be overturned on appeal.
He called the European Commission's decision "maddening" and "political".
jamoor said:
What's a local license holder? Or do you mean distributor?
Whatever the local entity is. They present themselves as Apple because they use the branding (and the entity is owned by Apple and I assume they have Apple in the name) but they're effectively acting just as an exclusive distributor, with another entity retaining ownership of IP, the product, development cost and the risk that goes with producing new products.It's really a question of where the value is created, the way I see it is that the value is created in the US and then it's monetisation is facilitated by various entities around the world.
I get the argument about taxing where the sales are made, it's easy and it makes a lot of sense. But then that doesn't take into account where the value is created. It's a philosophical argument whether the value is created by the company or the market, but let's just work on the basis that the company creates the value.
I'm sure Apple take the piss left right and centre when they can, but it's never black and white.
paulrockliffe said:
<snip>
It's really a question of where the value is created, the way I see it is that the value is created in the US and then it's monetisation is facilitated by various entities around the world.
<snip>
I'm sure Apple take the piss left right and centre when they can, but it's never black and white.
Those two sentences sum it up for me. I know where I think they should be paying taxes, and how.It's really a question of where the value is created, the way I see it is that the value is created in the US and then it's monetisation is facilitated by various entities around the world.
<snip>
I'm sure Apple take the piss left right and centre when they can, but it's never black and white.
Serious question that might sound bonkers.
What is to stop Apple and a handful of other international organisations buying a physical island and setting it up with a tax & political regime that they are happy to play with?
Funnel all monies there and pay whatever they think is the right amount and just have a US subsidiary to deal with the US market
What is to stop Apple and a handful of other international organisations buying a physical island and setting it up with a tax & political regime that they are happy to play with?
Funnel all monies there and pay whatever they think is the right amount and just have a US subsidiary to deal with the US market
turbobloke said:
...In May 2013 Apple told a Senate panel that it doesn't hold money on a Caribbean island....
So Bermuda then. In any event this image of cash being 'held offshore' is 40 years out of date; for a start apple 'only' has about 15bn in cash, the rest is invested in longer term securites; almost certainly government bonds. Secondly if Apple really did have $200bn held in a Bank on Bermuda that money isn't held in Bermuda, it's washed, along with the rest of the banks non-bermudan denominated balances to their correspondent banks in NY, London etc... Lastly this is arrangement is a disaster for the US but the rest of the world should be happy; without this wealth 'stuck' outside the US, European FDI, buyouts and other investments by these firms would be a lot lower.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.
Indeed.Perhaps they should go to the Mr Juncker the President of the EU commission for advice. After all he has a great deal of previous in doing dirty deals for Luxembourg.
http://www.bbc.co.uk/news/blogs-eu-30187778
If this doesn't get sorted or if Ireland do have to pay this money while apple leaves the country resulting in nearly 6000 jobs gone will Ireland want to have its own referendum to leave the eu. Im sure if apple do up sticks and leaves the country there are going to be a s
t load of angry people blaming the eu on this.
t load of angry people blaming the eu on this.A personal take posted on the Adam Smith Institute by Cillian Fleming.
Five Things To Know About The EU's Apple Tax Ruling
Five Things To Know About The EU's Apple Tax Ruling
JPJPJP said:
Serious question that might sound bonkers.
What is to stop Apple and a handful of other international organisations buying a physical island and setting it up with a tax & political regime that they are happy to play with?
Funnel all monies there and pay whatever they think is the right amount and just have a US subsidiary to deal with the US market
Various reasons. What is to stop Apple and a handful of other international organisations buying a physical island and setting it up with a tax & political regime that they are happy to play with?
Funnel all monies there and pay whatever they think is the right amount and just have a US subsidiary to deal with the US market
Whilst this is not simple, let's take a "simple" example.
Cox's inc has a subsidiary in a tax haven, Gran smiths, which in turn has one in Ireland, Gala co.
Cox inc sells/transfers IP on a cost sharing basis to Gran smiths. Gran Smiths licences the IP for a fee of €90 to Gala. Gala makes all sales in Europe and makes a profit before IP charges of €100.
On the face of it;
US no profit, no tax
Gran Smiths, profit of 90, nil tax as it doesn't tax profits.
Coral, profit of 10, tax say 1.25
The problems.
1. Cox inc will probably tax the €90 profit in Gran Smiths under its Sub Part F rules (CFC rules). Tax is at c35%, so very penal. The double Irish prevents this charge, until the cash is repatriated to the US because of the way sub part F interacts with that structure.
2. IP payments out of Gala, ie on the €90, will be subject to withholding tax of 20%, ie more than the Irish rate!
3. In any case, under new BEPS rules, it's unlikely that a tax deduction would be available in Ireland on payments to a tax haven, where there is no proper substance (broadly the machinery, including people etc to manage and develop the IP for which Gala is paying an IP charge). All the "machinery" is in the US.
The overall effect at best is that €90 of the profit is taxed at 20%, €10 at 12.5%. Worst case, is, well, a lot worse.
Leithen said:
A personal take posted on the Adam Smith Institute by Cillian Fleming.
Five Things To Know About The EU's Apple Tax Ruling
A very interesting read , and from my perceptions, bang on the nail. Just confirmation that it's a grubby money grab by the EU dictators. Five Things To Know About The EU's Apple Tax Ruling
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