Apple and Irish government collared over tax deal
Discussion
TonyToniTone said:
fido said:
Good news for Brexit - expect Apple to move some jobs to the UK and elsewhere, in retaliation.
How would that make any sense for Apple's European operations?Why would Apple need to reduce jobs in Ireland?
That part of the operation is the part that paid Irish Corporation Tax at 12.5%. If they reduced jobs in Ireland to (say) move them to the UK, then the profits generated from that operation would become taxable in the UK - at UK Corporation Tax rates - which are currently 20% (reducing to 19%).
Of course, the UK MAY reduce its CT rates even further - but I actually don't see that happening for a while yet, if ever.
There is no guarantee that the EU will win this case. They have tried the same trick on Ryanair a number of times - and lost every time on appeal.
Don't forget, this is NOT a tax case (the EU has now power over CT in any EU country). It's an "Illegal Government Subsidy" case.
That part of the operation is the part that paid Irish Corporation Tax at 12.5%. If they reduced jobs in Ireland to (say) move them to the UK, then the profits generated from that operation would become taxable in the UK - at UK Corporation Tax rates - which are currently 20% (reducing to 19%).
Of course, the UK MAY reduce its CT rates even further - but I actually don't see that happening for a while yet, if ever.
There is no guarantee that the EU will win this case. They have tried the same trick on Ryanair a number of times - and lost every time on appeal.
Don't forget, this is NOT a tax case (the EU has now power over CT in any EU country). It's an "Illegal Government Subsidy" case.
dazwalsh said:
This is bloody confusing, as far as I can work out Ireland has taxed apple it's standard 12.5% rate for sales WITHIN Ireland, and nothing is underhand or bent. No special agreement in place
The 13 billion bill, im assuming is a legal loophole within the Irish tax laws because they haven't taxed the operations outside of Ireland?
Have a read of the link above - they don't charge non-resident corporates tax on earnings outside of Ireland The 13 billion bill, im assuming is a legal loophole within the Irish tax laws because they haven't taxed the operations outside of Ireland?
Which is pretty standard practice in many countries - including some other EU countries.
The problem is not "residency" - it's where the operation's profits are generated. That is what ALL the large multi-nationals have been exploiting for decades.
The EU has decided to interpret certain tax rules, which are "legal" (ethical is a different mater, of course) , as creating the equivalent of an unfair government subsidy. They cannot argue ANYTHING from a tax point of view. That is outside their remit.
The problem is not "residency" - it's where the operation's profits are generated. That is what ALL the large multi-nationals have been exploiting for decades.
The EU has decided to interpret certain tax rules, which are "legal" (ethical is a different mater, of course) , as creating the equivalent of an unfair government subsidy. They cannot argue ANYTHING from a tax point of view. That is outside their remit.
Eric Mc said:
Which is pretty standard practice in many countries - including some other EU countries.
The problem is not "residency" - it's where the operation's profits are generated. That is what ALL the large multi-nationals have been exploiting for decades.
The EU has decided to interpret certain tax rules, which are "legal" (ethical is a different mater, of course) , as creating the equivalent of an unfair government subsidy. They cannot argue ANYTHING from a tax point of view. That is outside their remit.
I also have no idea whether this breaches competition law however I do think it will raise some serious questions for Apple in many of the countries it operates in. Apples operating model was that the Irish company sell the products and the local branches just provide support. This means none of the sales revenue is allocated to the local branch or subsidiary it just get a commission or support fee from the Irish company. Now this always sounds odd to people when Apple has shops in most countries. However, the fact is Apple sell to external sellers as well and retail margin are slim. So even if you wanted Apple locally to be buying at wholesale prices from Ireland and selling retail it likely the profit in the selling country would be little different to that of the current business model. The problem for Apple is that the facts no longer suit the model. Apple have already confirmed than the entity in Ireland selling the products was not the Irish resident entity which had all the costs but the Irish, stateless, headquarters entity. Further the operating entity was not even charging the stateless entity for its services.The problem is not "residency" - it's where the operation's profits are generated. That is what ALL the large multi-nationals have been exploiting for decades.
The EU has decided to interpret certain tax rules, which are "legal" (ethical is a different mater, of course) , as creating the equivalent of an unfair government subsidy. They cannot argue ANYTHING from a tax point of view. That is outside their remit.
So what ever happens this may leave Apple between a rock and a hard place. Either pay tax in Ireland at lower rates or find lots of countries looking to change local taxes on the total sales revenue based on say the percentage of costs locally and in the Irish headquarters company.
Eric Mc said:
turbobloke said:
Eric Mc said:
Why would Apple need to reduce jobs in Ireland?
That's not the same as wanting to. EU purposes.They can easily afford not to do anything of the sort while sitting on >200bn in cash, so don't need to, but may want to.
Mrr T said:
...
So what ever happens this may leave Apple between a rock and a hard place. Either pay tax in Ireland at lower rates or find lots of countries looking to change local taxes on the total sales revenue based on say the percentage of costs locally and in the Irish headquarters company.
You'd have thought other countries would already have moved against this sort of practice if they could/it made sense for them. No?So what ever happens this may leave Apple between a rock and a hard place. Either pay tax in Ireland at lower rates or find lots of countries looking to change local taxes on the total sales revenue based on say the percentage of costs locally and in the Irish headquarters company.
Eric Mc said:
Which is pretty standard practice in many countries - including some other EU countries.
The problem is not "residency" - it's where the operation's profits are generated. That is what ALL the large multi-nationals have been exploiting for decades.
The EU has decided to interpret certain tax rules, which are "legal" (ethical is a different mater, of course) , as creating the equivalent of an unfair government subsidy. They cannot argue ANYTHING from a tax point of view. That is outside their remit.
Which is where the case will fall down surely? The argument is that Apple was offered a deal; it wasn't as the revenue commissioners just clarified (allegedly as the EU haven't provided any evidence), that the apple approach (plus whomever decided to create essentially a shell in Ireland) was not committing tax avoidance. That's what makes the EU position probably egregious; they're not after Apple for its tax avoidance; they're after the entire model, and as the Adam Smith Inst link posted earlier makes clear, they're really after the offshored US profits of all multinationals. The problem is not "residency" - it's where the operation's profits are generated. That is what ALL the large multi-nationals have been exploiting for decades.
The EU has decided to interpret certain tax rules, which are "legal" (ethical is a different mater, of course) , as creating the equivalent of an unfair government subsidy. They cannot argue ANYTHING from a tax point of view. That is outside their remit.
As far as the UK is concerned it does open up an interesting prospect that is the EU continues in its attempts to pursue offshore profits, US firms may be enticed to the UK specifically to avoid the repercussions of the EU judgement (ie pony up all the billions in back tax we think you owe based on our assessment of where profit is generated). Case in point I think Starbucks finally handed over a derisory handful of millions earlier in the year in a much trumpeted HMRC deal. If the UK continues to take that approach while the EU starts laying down multi billion back tax judgements, I would imagine the UK will become attractive quite quickly.
You are still assuming that this is a tax case. It's not. It's an "unfair competition" case. In fact, the EU Commission has more or less ordered the Irish Revenue Commissioners to collect back tax of around £11 billion - but has not indicated how or whether it would be lawful for the Irish tax collectors to try to obtain this. The ironic thing is that, even if the Revenue Commissioners were able to collect this money, they would not be able to keep it nor would the Irish government be allowed to spend it.
Apple themselves have said that if any of this tax ever is collected, most of it would go to the US Internal Revenue Service (IRS), so the EU would see very little of it.
Apple themselves have said that if any of this tax ever is collected, most of it would go to the US Internal Revenue Service (IRS), so the EU would see very little of it.
Murph7355 said:
Mrr T said:
...
So what ever happens this may leave Apple between a rock and a hard place. Either pay tax in Ireland at lower rates or find lots of countries looking to change local taxes on the total sales revenue based on say the percentage of costs locally and in the Irish headquarters company.
You'd have thought other countries would already have moved against this sort of practice if they could/it made sense for them. No?So what ever happens this may leave Apple between a rock and a hard place. Either pay tax in Ireland at lower rates or find lots of countries looking to change local taxes on the total sales revenue based on say the percentage of costs locally and in the Irish headquarters company.
Yes it's open to abuse, but it's a lot more complicated than simple tax it where the sale is made.
How many times do I have to say that this is not a tax issue?
The EU can only rule when they see what looks like Government subsidies being paid to businesses. This is now outlawed under EU rules. What the EU has decided is that a company making use of legal tax regulations is the equivalent of receiving a government subsidy.
That is a very moot point and they have failed on various occasions when they have tried to challenge a company or government on this presumption.
The EU can only rule when they see what looks like Government subsidies being paid to businesses. This is now outlawed under EU rules. What the EU has decided is that a company making use of legal tax regulations is the equivalent of receiving a government subsidy.
That is a very moot point and they have failed on various occasions when they have tried to challenge a company or government on this presumption.
Eric Mc said:
How many times do I have to say that this is not a tax issue?
The EU can only rule when they see what looks like Government subsidies being paid to businesses. This is now outlawed under EU rules.
Another good reason for leaving the mother of all Munchausen by Proxy supranationals. Causing problems for those you are supposed to be looking after is endemic in the EU's zealotocracy. The EU can only rule when they see what looks like Government subsidies being paid to businesses. This is now outlawed under EU rules.
A nation state should be able to do what it wishes to promote the relocation of businesses it wants to encourage, and to help such companies already present to stay put. This is after all a key part of what running your own country's economy is about. The EU is welcome to as many subsidy farmers as it wants, Ireland and the UK will be quite happy to take the real businesses. Or at least the UK will, as we've had the sense to vote Out.
Eric Mc said:
You are still assuming that this is a tax case. It's not. It's an "unfair competition" case. In fact, the EU Commission has more or less ordered the Irish Revenue Commissioners to collect back tax of around £11 billion - but has not indicated how or whether it would be lawful for the Irish tax collectors to try to obtain this. The ironic thing is that, even if the Revenue Commissioners were able to collect this money, they would not be able to keep it nor would the Irish government be allowed to spend it.
Apple themselves have said that if any of this tax ever is collected, most of it would go to the US Internal Revenue Service (IRS), so the EU would see very little of it.
Apple may well say most of the tax would go to the IRS, but that's not true at this stage. As it stands Ireland needs to collect the tax. I understand the money has been put in ESCROW.
It's entirely possible that territories where Apple Ireland undertook sales have a claim out of this cash, and would need to make the relevant assessments which would reduce Apple Ireland's income and therefore profits.
The Commission has also stated that Apple Ireland's taxable profits could be reduced if it were to pay more "royalty" to Apple US (where it would be taxed at higher rates). It wouldn't make sense for Apple to do this.
Why don't you think Ireland can spend any tax it collects?
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