Apple and Irish government collared over tax deal

[ATG]

fblm said:

ATG said:

It's ironic that you describe what has happened quite well, yet draw a daft conclusion based on a misunderstanding of what the single market is for. If there were no controls on tax competition and state aid, then a small EU member state ... like Ireland ... could corner the market in corp tax receipts. It would mean no other member state in the EU could levy corp tax at all. You'd end up with a few million Irish receiving all the corp tax being generated by the economic activity of 1/3 billion people.

You seem to be labouring under the assumption that tax competition is a bad thing. Who do you think pays corporate tax?

I guess you missed the bit where I said tax competition was a "very, very good thing" about an hour earlier.

[anonymous-user]

ATG said:

I guess you missed the bit where I said tax competition was a "very, very good thing" about an hour earlier.

Indeed I did. My appologies. Although if 'some' tax competition is very, very good, I'd argue more tax competition is very, very, very good. But thats perhaps one for another thread.

[ATG]

alfie2244 said:

Terminator X said:

alfie2244 said:

ATG said:

alfie2244 said:

Terminator X said:

Perhaps the UK should "entice" them over here once we leave the EU

TX.

We will be able to offer them any enticements / inducements / subsidies / bribes...in fact I'd do it now before serving Art 50 just to pee a few people off.

You've rather missed the point. The tax break only works for Apple because Ireland is in the EU.

I could be wrong but as I see it.... In this instance it hasn't worked precisely because Ireland is in the EU hence the 13Bn + % fine.

Whereas when we are OUT of the EU we can do any tax deals we want and with impunity.

ATG seems to have missed the point. Ireland/EU not good for them then come to the UK.

TX.

Unless perhaps he thinks EU won't allow Apple products to be sold EU wide (or put or levy on) if they relocate to the UK?

If country A thinks country B is subsidising its manufacturers it is completely normal for country A to threaten to impose tariffs. Ideally country A would be flexible enough to take advantage of the money that B was wasting, but in reality it is usually too inflexible to avoid short-term disruption and that disruption is politically unacceptable. For example, if China is "dumping" cheap steel on the international markets, ideally we should focus on buying as much cheap steel from them as we can so that we become the beneficiaries of the subsidies. But what we actually do is focus almost entirely on the (very genuine) plight of the poor bds in Port Talbot.

But the point about Apple is that it is washing its EU-wide revenues through an EU entity. That is entirely different from trying to wash its EU-wide revenue through a non-EU entity which is what it would be trying to do if it moved this entity to the UK.

For what it's worth, just as Ireland has made itself attractive to Apple compared to other EU nations, the UK did the exact same thing with a whole host of industries. In the past by investing in the UK you could get full, unhindered access to the entire EU market place while benefiting from the UK's flexible labour markets and relatively competitive corporate tax regime. We used to be the recipients of a hugely disproportionate amount of the direct foreign investment coming into the EU. And we got accused of running an unfair, uncivilised, exploitative labour market by the socialists on the other side of the channel. Boo hoo.

As I already said, there's absolutely nothing wrong with EU states competing with each other. It is extremely healthy. They can't hide their economies behind tariff regimes. They can't hide their economies behind constantly devaluing currencies. The single market is supposed to give you a level playing field on which to compete with your labour markets and tax regimes to drive productivity and growth. But as with most markets, tax competition is susceptible to market failures ... i.e. if competition is left entirely unfettered there is absolutely no guarantee it leads to a better aggregate outcome. Small countries can game the system. Hence why you need rules and enforcers to stop blatant piss-taking.

[anonymous-user]

fblm said:

Recovered to whom? It's not like Ireland have lost out on tax revenue, if it wern't for the tax deal and structure they would have got nothing. There must be some twitchy CEO's of european corps with a substantial presence in the US right now! Virtual pint says there's a chunky DOJ/Treasury/EPA investigation of a European corporate announced in the coming months...

recovered to Ireland

but! as set out in the press notice (and maybe in more detail in subsequent documents to be released), there is likely to be a bun fight

Other EU countries could be after the share that would have arisen if proits from sales made in their country had been taxed on that basis

And the US might want a bit too - now that $13bn has been labelled as "tax" many governments will be wondering if / how to get their hands on some of it

[Spiritual_Beggar]

The way I see it there are two points to all of this;

1. Has anything 'illegal' ben done here? Probably not. EU would state Ireland hasn't followed the rules, but it seems this is a contentious issue.

2. Is it correct that a system should exist that effectively allows the richest company is the world to get away paying 0.005% Corp Tax, whilst SMEs get hounded to pay full whack? Definetely not.


As the saying goes: "Don't hate the player...hate the game".

The tax systems being as complex as they are creates the environment to allow these loopholes & exploits to be found. It needs to be simplified across the board.

[Adrian W]

Spiritual_Beggar said:

The way I see it there are two points to all of this;

1. Has anything 'illegal' ben done here? Probably not. EU would state Ireland hasn't followed the rules, but it seems this is a contentious issue.

2. Is it correct that a system should exist that effectively allows the richest company is the world to get away paying 0.005% Corp Tax, whilst SMEs get hounded to pay full whack? Definetely not.


As the saying goes: "Don't hate the player...hate the game".

The tax systems being as complex as they are creates the environment to allow these loopholes & exploits to be found. It needs to be simplified across the board.

Did you miss the bit where the deal the Irish government did with Apple was against EU rules? That's against EU law

[sidicks]

Spiritual_Beggar said:

The way I see it there are two points to all of this;

1. Has anything 'illegal' ben done here? Probably not. EU would state Ireland hasn't followed the rules, but it seems this is a contentious issue.

2. Is it correct that a system should exist that effectively allows the richest company is the world to get away paying 0.005% Corp Tax, whilst SMEs get hounded to pay full whack? Definetely not.


As the saying goes: "Don't hate the player...hate the game".

The tax systems being as complex as they are creates the environment to allow these loopholes & exploits to be found. It needs to be simplified across the board.

Don't forget the money is still subject to Corporation tax when it is repatriated to the US, so higher EU tax simply reduces the tax due in the US, assuming that a double taxation agreement exists?

That's my understanding, happy to be corrected.

[ATG]

"Set yourselves up here lads and you'll hardly pay a penny in tax!"

Some time later ...

"Ah, Jesus. Now understand it's not what we wanted at all, not for a second, but it seems you owe us 13 billion.."

Clever.

[Spiritual_Beggar]

Adrian W said:

Did you miss the bit where the deal the Irish government did with Apple was against EU rules? That's against EU law

No I get that bit....but Apple and Ireland seem to think they haven't done anything wrong...hence it being contentious.

I'm coming at this from a layman's point of view, so happy to stand corrected on a lot of this.

My overall feeling though is that rightly, or wrongly, you have one of (if not the) largest companies in the world, with reported £200 billion in cash sitting in its accounts.....and yet it's still finding ways to pay as little tax as possible, when it could easily pay the same tax as any normal company and not even make a dent in the balance sheet.

If this was a company who needed to keep the tax as low as possible just so it could survive, I'd probably be a bit more sympathetic to it all, but when it is so they can get an extra few hundred million on top of their billions I'm not quite as understanding.

Edited by Spiritual_Beggar on Tuesday 30th August 18:35

[alfie2244]

Who actually broke the EU rules.....Ireland or Apple?

As a layperson I would think only a member state can break EU Tax rules by allowing / encouraging / agreeing to a company paying lower taxes than the EU allows.

[MarshPhantom]

Europa1 said:

There is something very "only in the EU" about "National government found to have done illegal deal with multinational, so national government please get multinational to pay you €13bn for having done the deal".

It's the people's money, not the governments.

[Sway]

sidicks said:

Spiritual_Beggar said:

The way I see it there are two points to all of this;

1. Has anything 'illegal' ben done here? Probably not. EU would state Ireland hasn't followed the rules, but it seems this is a contentious issue.

2. Is it correct that a system should exist that effectively allows the richest company is the world to get away paying 0.005% Corp Tax, whilst SMEs get hounded to pay full whack? Definetely not.


As the saying goes: "Don't hate the player...hate the game".

The tax systems being as complex as they are creates the environment to allow these loopholes & exploits to be found. It needs to be simplified across the board.

Don't forget the money is still subject to Corporation tax when it is repatriated to the US, so higher EU tax simply reduces the tax due in the US, assuming that a double taxation agreement exists?

That's my understanding, happy to be corrected.

Indeed. It seems the claim is made on two fronts:

Firstly, that Ireland agreed a massive proportion of 'added value' within Apple profits were derived in the US, therefore reducing the percentage of profits liable to pay Irish corp tax. The profits not liable would then be subject to US corp tax rates.

The principle of a calculated added value for corporate profits isn't novel, unique to Ireland, or particularly unusual as I understand it - so the only bone of contention is the content of the calculation itself.

Secondly, that this was compounded by all EU sales being reported in Ireland.

Tough titties there - the very principle (along with customs union) of the Single Market as opposed to a free trade union.

So it would seem it'll all come down to the approach taken to determine the relative proportions of added value. That should be a boatload of fun for the legal teams...

[speedyman]

CaptainSlow said:

Dr Jekyll said:

speedyman said:

13 billion to subsides 5500 jobs, that a lot of money per job, if my maths is right about 2.5 million for each job. wow

If it wasn't for the deal Apple wouldn't be there and neither would the jobs, and Ireland still wouldn't get the 13 billion.

A good example of the flaw in socialists' economic strategies.

No, its a good example of tax avoidance by a large corporation.

[don4l]

ATG said:

alfie2244 said:

Terminator X said:

Perhaps the UK should "entice" them over here once we leave the EU

TX.

We will be able to offer them any enticements / inducements / subsidies / bribes...in fact I'd do it now before serving Art 50 just to pee a few people off.

You've rather missed the point. The tax break only works for Apple because Ireland is in the EU.

Is that true?

If Ireland left the EU, how much import duty would be applied to EU sales under WTO rules?

[Stormfly1985]

What I don't think is fair (although I appreciate that no one wants to pay taxes) is that a company can create a division within itself that has no employees, produces nothing and has no domicile for tax purposes (which is what Apple has done) then pump all your income through that division so you pay next to no tax at all.

Surely a fair tax rule would be a corporation has to pay tax on the sale where the customer is based?

[Welshbeef]

Stormfly1985 said:

What I don't think is fair (although I appreciate that no one wants to pay taxes) is that a company can create a division within itself that has no employees, produces nothing and has no domicile for tax purposes (which is what Apple has done) then pump all your income through that division so you pay next to no tax at all.

Surely a fair tax rule would be a corporation has to pay tax on the sale where the customer is based?

Traditional companies are very simple

You build the widget within X country it's dead simple so you know how much to tax.


Modern companies it's much harder - let's say I come up with this amazing algorithm which does something amazing it's my idea I can build that anywhere and can live anywhere. How do you decide which country gets the benefit of that individuals great idea? Then after you decide and let's say the chap actually lives on board a boat travelling the world so no fixed abode. Then he sells his idea internally to different divisions around the world - how do you value that? Frankly without that idea there is nothing to sell so really you could say all the profit shouldn't be in the country it's sold in (excl transactional aspect of miniscule profit) whereas the value sits wherever the idea was or resides.


I can see taxing revenue becoming the solution - but tiny margin high volume companies could be bankrupt by tax whereas low volume mega profit would be LOL to the bank. It's tricky.

At he end of the day the consumer pays the tax so how about scrapping corporation tax entirely and then having a sales tax which the consumer pays. The more something is sold in a country the more tax they get. Tragic for the UK as were a tiny island with hardly any population yet sell vast sums overseas so we would have a gaping tax hole.

[Dr Jekyll]

Welshbeef said:

Traditional companies are very simple

You build the widget within X country it's dead simple so you know how much to tax.


Modern companies it's much harder - let's say I come up with this amazing algorithm which does something amazing it's my idea I can build that anywhere and can live anywhere. How do you decide which country gets the benefit of that individuals great idea? Then after you decide and let's say the chap actually lives on board a boat travelling the world so no fixed abode. Then he sells his idea internally to different divisions around the world - how do you value that? Frankly without that idea there is nothing to sell so really you could say all the profit shouldn't be in the country it's sold in (excl transactional aspect of miniscule profit) whereas the value sits wherever the idea was or resides.


I can see taxing revenue becoming the solution - but tiny margin high volume companies could be bankrupt by tax whereas low volume mega profit would be LOL to the bank. It's tricky.

At he end of the day the consumer pays the tax so how about scrapping corporation tax entirely and then having a sales tax which the consumer pays. The more something is sold in a country the more tax they get. Tragic for the UK as were a tiny island with hardly any population yet sell vast sums overseas so we would have a gaping tax hole.

Or just scrap corporation tax full stop. The money will end up being paid to shareholders who pay income tax.

[Stormfly1985]

Welshbeef said:

Stormfly1985 said:

What I don't think is fair (although I appreciate that no one wants to pay taxes) is that a company can create a division within itself that has no employees, produces nothing and has no domicile for tax purposes (which is what Apple has done) then pump all your income through that division so you pay next to no tax at all.

Surely a fair tax rule would be a corporation has to pay tax on the sale where the customer is based?

Traditional companies are very simple

You build the widget within X country it's dead simple so you know how much to tax.


Modern companies it's much harder - let's say I come up with this amazing algorithm which does something amazing it's my idea I can build that anywhere and can live anywhere. How do you decide which country gets the benefit of that individuals great idea? Then after you decide and let's say the chap actually lives on board a boat travelling the world so no fixed abode. Then he sells his idea internally to different divisions around the world - how do you value that? Frankly without that idea there is nothing to sell so really you could say all the profit shouldn't be in the country it's sold in (excl transactional aspect of miniscule profit) whereas the value sits wherever the idea was or resides.


I can see taxing revenue becoming the solution - but tiny margin high volume companies could be bankrupt by tax whereas low volume mega profit would be LOL to the bank. It's tricky.

At he end of the day the consumer pays the tax so how about scrapping corporation tax entirely and then having a sales tax which the consumer pays. The more something is sold in a country the more tax they get. Tragic for the UK as were a tiny island with hardly any population yet sell vast sums overseas so we would have a gaping tax hole.

I see what you are saying but a transaction, whether a widget or an idea, someone has to buy it. So, wherever the person or business is registered is where the tax is paid. The loophole for Apple is that they created a "company" with no domicile!

I agree it all gets very complex with intellectual property rights but again, with Apple, they are just paying themselves, in effect. I don't have an issue with Apple channeling all their EU sales through Ireland, if they paid the set tax rate that everyone else has to. I DO have an issue with Apple creating pretend companies which aren't registered in any country so they can avoid tax.

As has been said, it's not like they are on the breadline here!

[Welshbeef]

Dr Jekyll said:

Or just scrap corporation tax full stop. The money will end up being paid to shareholders who pay income tax.

But they could be based in Outer Mongolia with 0% tax....

[ninja-lewis]

Mrr T said:

hidetheelephants said:

The EU engaging in a fingerwagging exercise over the Irish government's sweetheart tax deal with Apple; the disputed tax could amount to 19bn euros. Does this mean the EU will investigate the likes of Vodafone etc with regard to tax deals in the UK?

Edited by hidetheelephants on Tuesday 30th August 05:35

There is no dodgy deal with Vodaphone to investigate. It’s a myth and legend made up by self-serving left wing politicians and newspapers. Two minutes google will reveal all.

Indeed. There is a certain irony in that the whole reason for no tax being due in the Vodafone case was the European Commission determining that the UK's Controlled Foreign Company rules were incompatible with the EU's freedom of association principle.

JPJPJP said:

The appeal will be interesting

For instance, how many similar cases would need to be shown in order for Ireland to show that Apple's treatment was not selective?

Agreed. I haven't seen any real mention anywhere today of other companies that benefited from the arrangement.