Apple and Irish government collared over tax deal

Apple and Irish government collared over tax deal

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Eric Mc

121,779 posts

264 months

Thursday 8th September 2016
quotequote all
turbobloke said:
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.

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.
I think the Irish will win this one. They've won every other such attempt by Brussels so far.

Eric Mc

121,779 posts

264 months

Thursday 8th September 2016
quotequote all
Alpinestars said:
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?
Because that is what has been said by political correspondents in the Irish media - principally RTE television and radio which I've been listening to over the past week or so.

turbobloke

103,742 posts

259 months

Thursday 8th September 2016
quotequote all
Eric Mc said:
Because that is what has been said by political correspondents in the Irish media - principally RTE television and radio which I've been listening to over the past week or so.
In general, if nullius in verba applies somewhere more than anywhere elsewhere it's got to be MSM.

Eric Mc

121,779 posts

264 months

Thursday 8th September 2016
quotequote all
turbobloke said:
Eric Mc said:
Because that is what has been said by political correspondents in the Irish media - principally RTE television and radio which I've been listening to over the past week or so.
In general, if nullius in verba applies somewhere more than anywhere elsewhere it's got to be MSM.
What?

irocfan

40,153 posts

189 months

Thursday 8th September 2016
quotequote all
Eric Mc said:
turbobloke said:
Eric Mc said:
Because that is what has been said by political correspondents in the Irish media - principally RTE television and radio which I've been listening to over the past week or so.
In general, if nullius in verba applies somewhere more than anywhere elsewhere it's got to be MSM.
What?
I'd imagine don't believe everything you hear?

Eric Mc

121,779 posts

264 months

Thursday 8th September 2016
quotequote all
I translated it as "nothing in words" - which probably goes a long way to explaining a lot of what people say on PH.

However, it's a bit difficult to get through life if you disbelieve everything.

And I'd certainly put more credence on experienced Irish political commentators and economic correspondents than some "expert" on a motoring forum.

Alpinestars

13,954 posts

243 months

Thursday 8th September 2016
quotequote all
Eric Mc said:
Because that is what has been said by political correspondents in the Irish media - principally RTE television and radio which I've been listening to over the past week or so.
Which gets into the area of what the recourse is if Ireland doesn't collect the tax.

If the US taxes the income, tax would be due at 35% plus. If Ireland taxes, it's at 12.5%, but with a deferred tax of 22.5% plus. Assuming the deferred tax liability is a) going to arise, and b) soon ish, it would make sense for Apple to tax in the income in the US, which benefits the US enconomy as opposed to the Irish economy. An interesting dynamic.

Eric Mc

121,779 posts

264 months

Thursday 8th September 2016
quotequote all
The EU doesn't really care - as long as Apple are "punished". After Apple, who's next?

I wonder why Renault, Air France and Alitalia have not been penalised for the help they have received over the years from their respective governments.

Alpinestars

13,954 posts

243 months

Thursday 8th September 2016
quotequote all
Eric Mc said:
The EU doesn't really care - as long as Apple are "punished". After Apple, who's next?

I wonder why Renault, Air France and Alitalia have not been penalised for the help they have received over the years from their respective governments.
The EU has "punished" Fiat, and with the Belgian ruling, lots of other Euro companies.

turbobloke

103,742 posts

259 months

Thursday 8th September 2016
quotequote all
Eric Mc said:
The EU doesn't really care - as long as Apple are "punished". After Apple, who's next?
Quite.

Supranational self-harm allied to harming the club membership has rarely been so foolish.

Eric Mc

121,779 posts

264 months

Thursday 8th September 2016
quotequote all
Alpinestars said:
Eric Mc said:
The EU doesn't really care - as long as Apple are "punished". After Apple, who's next?

I wonder why Renault, Air France and Alitalia have not been penalised for the help they have received over the years from their respective governments.
The EU has "punished" Fiat, and with the Belgian ruling, lots of other Euro companies.
What punishment did they get?

Alpinestars

13,954 posts

243 months

Thursday 8th September 2016
quotequote all
Eric Mc said:
What punishment did they get?
Assessments in the same way Apple has.

Mrr T

12,152 posts

264 months

Thursday 8th September 2016
quotequote all
paulrockliffe said:
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?
The have but the rules quite rightly allow for the charging of intangibles between entities. A £600 sale of an iPhone in the UK doesn't create £600 of value for Apple in the UK, most of the value is created when some clever chaps in the US develop new ideas, new technology and new ways of making it cheaply enough that a market is created in the UK. By the time that's all charged for there's not a huge amount of value being created by the UK operations.

Yes it's open to abuse, but it's a lot more complicated than simple tax it where the sale is made.
I know that and if Apple had allocated most of the income to the Irish operating branching which employed people and paid royalties to the US entity then it would have been fine. However, Apple allocated the income to the headquarters branch which had no costs. On that basis it seems Apple was giving the products to the headquarters branch so it's difficult to say the headquarter had any hand in the sale. On that basis it would seem all the income should be allocated to the local entity.

paulrockliffe

15,639 posts

226 months

Thursday 8th September 2016
quotequote all
Mrr T said:
paulrockliffe said:
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?
The have but the rules quite rightly allow for the charging of intangibles between entities. A £600 sale of an iPhone in the UK doesn't create £600 of value for Apple in the UK, most of the value is created when some clever chaps in the US develop new ideas, new technology and new ways of making it cheaply enough that a market is created in the UK. By the time that's all charged for there's not a huge amount of value being created by the UK operations.

Yes it's open to abuse, but it's a lot more complicated than simple tax it where the sale is made.
I know that and if Apple had allocated most of the income to the Irish operating branching which employed people and paid royalties to the US entity then it would have been fine. However, Apple allocated the income to the headquarters branch which had no costs. On that basis it seems Apple was giving the products to the headquarters branch so it's difficult to say the headquarter had any hand in the sale. On that basis it would seem all the income should be allocated to the local entity.
I don't know if that's the case as I'm not aware of the detail in this case, but for the situation you describe the issue is the transfer of the IP at no cost out of the US. It's taxes in the US that are avoided in that situation. It still doesn't create a situation where the local entity is creating value.

Murph7355

37,651 posts

255 months

Thursday 8th September 2016
quotequote all
paulrockliffe said:
I don't know if that's the case as I'm not aware of the detail in this case, but for the situation you describe the issue is the transfer of the IP at no cost out of the US. It's taxes in the US that are avoided in that situation. It still doesn't create a situation where the local entity is creating value.
Also...if that arrangement is available to all companies fitting the profile then whether it makes no sense to others is surely academic. The Irish government have decided it's how they want to run things, and what they will allow in terms of the treatment of structures like that. It's not "State Aid" toward one company and is therefore none of the EU's business.

Eric Mc

121,779 posts

264 months

Friday 9th September 2016
quotequote all
Alpinestars said:
Assessments in the same way Apple has.
Did they appeal?

Did they win?

Alpinestars

13,954 posts

243 months

Friday 9th September 2016
quotequote all
Eric Mc said:
Alpinestars said:
Assessments in the same way Apple has.
Did they appeal?

Did they win?
Both being appealed by Luxembourg and Belgium, and individual appeals by the beneficiaries of the Belgian Excess Profits ruling are expected from the likes of BASF.

The Lux/Fiat decision may be out next year.

I understand the Commission has won the vast majority of State Aid cases brought so far, but I'm not aware of any significant tax state aid cases being decided yet.


Eric Mc

121,779 posts

264 months

Friday 9th September 2016
quotequote all
I think outright State Aid cases - i.e. where government money is physically given to a company - will be much more straightforward and "winnable" by the EU Commission.

It gets a lot trickier for them when they make claims that certain individual businesses are being given preferential tax treatment or are being charged less for government provided services.

Alpinestars

13,954 posts

243 months

Friday 9th September 2016
quotequote all
Eric Mc said:
I think outright State Aid cases - i.e. where government money is physically given to a company - will be much more straightforward and "winnable" by the EU Commission.

It gets a lot trickier for them when they make claims that certain individual businesses are being given preferential tax treatment or are being charged less for government provided services.
I'd be surprised if most of the state aid criteria are not met;

- there's a ruling
- it uses state resources (tax is well established as being a state resource)
- it looks anti competitive.

The points I don't think we have enough detail on are whether it was selective (probably), and if it is state aid, the amounts to be paid.

The decision is a bit confusing in that it is predicated an arm's length/substance type argument, but accepts that some of the profits could/should have been taxed elsewhere, which would mean on an arm's length basis, less tax should have been assessed by the commission.

Mrr T

12,152 posts

264 months

Friday 9th September 2016
quotequote all
paulrockliffe said:
I don't know if that's the case as I'm not aware of the detail in this case, but for the situation you describe the issue is the transfer of the IP at no cost out of the US. It's taxes in the US that are avoided in that situation. It still doesn't create a situation where the local entity is creating value.
The facts of the case are easily found on the commission web site.