Apple-EU tax bill open thread…

apple-7So the European Commission has ruled that Apple must pay Ireland €13bn in unpaid taxes, which Dublin will appeal and likely will have broader consequences for Irish-EU relations.

I’d be keen for your thoughts. I only have two or three, so far.

The fracas between the EU and Ireland over Apple’s tax bill—what we here locally might term a ballyhoo—has a little to do with taxes and computers, and a very great deal to do with the EU Competition Commissioner, Margrethe Vestager.

Vestager, Denmark’s former Deputy PM, is under political pressure from several national capitals to come up with antitrust victories.

Likely Juncker is examining the ruling closely, given Luxembourg’s slightly flexible approach to tax law.

Agus níl thought eile agam.

  • terence patrick hewett

    It is not only Apple: the EU attacks companies like Intel, Google, Microsoft, Amazon, Chrysler, Apple, Sony et al by using antitrust charges to further the interests of its own technology companies. The EU is like Volkswagen writ large: when they can’t hack it – they crook.

    In 2008 and 2010 the EU squashed RoI like a bug: I have the feeling that the third time will be very unlucky for the commission.

  • OneNI

    The EU have essentially created a big bargaining chip for themselves. In a few years time when all the legal wrangling is done the EU will demand harmonisation in return for wiping out this inconvenient bill for Apple. Dublin wont have the UK to protect it by then either

  • Katyusha

    The EU is small-time when it comes to protectionism compared to the US, though. I wonder how hefty a fine GM might have drawn if they’d been found guilty of the same misdemeanor as Volkswagen, given that VW struck a settlement with the federal government to pay $14.7 billion for deceiving the emissions test program, whereas GM was only fined $900 million for continuing to sell vehicles known to have a critical safety issue.

    Rather makes a mockery of all the platitudes to “Free Trade”. Both sides of the Atlantic are not averse to using the law to hobble their competitors. All’s fair in love and war, I guess.

  • NMS

    The brilliant (and simple) analysis by M Vestager, the former Danish Minister for Tax, deserves praise from all. She has focused in on profit attribution – the proportion of the profit allocated to different branches or offices of the same business, in proportion to their input into the making of those profits.

    In examining the records and discussions between more recently the Revenue Commrs. Large Cases Division, ICT Unit and previously other sections of the Irish Revenue, she found that they agreed to allocate, to a part of the business which had no material form, office or staff, some 99.95% of the profits, leaving just a tiny proportion to be assessed to Irish tax.

    All she has done, is to point out that this is what I think is called a tautology, “a self-reinforcing pretence of significant truth”. Or in the land of Children’s fables, “The Emperor has no Clothes”. The profit belonged where these two companies had their only actual physical presence, Cork.

    She has further gone on to point out that there may be a need to reallocate some of the profit which has now moved from the ether to Cork’s Northside to other places. Interestingly Apple agree with her, having agreed a very substantial settlement with the Italian tax authorities in December 2015.

    She has also (politely) pointed out to the US authorities that the contribution made to R&D costs by the Irish company is a matter open to review by them. If they feel it is not enough, i.e. Apple Inc have “sold” certain IP rights or undercharged for research work done, then they may review and adjust the charge upwards, increasing the US profit and accordingly decreasing the assessable amount in Ireland.

    In the end, there will not be €13,000M left or anything like it. The Italian adjustment and likely adjustments from many others (Australia I gather are ready to demand a very large share) will leave very little in the hands of the Irish Exchequer.

    The scale & cynicism of Apple avoidance is breathtaking, even to this very world weary former taxman. I have seen dubious deals but this does beat Banagher. I feel sorry for my former colleagues who “negotiated” this arrangement, but this is what happens when a large MNC threatens to close down a plant. They were left in the invidious position of doing a deal, I have no doubt they cringed while signing it off.

  • terence patrick hewett

    Sure: Ian King gives a good summary of this:

    The Wider Impact of Taking a Bite from Apple

    http://news.sky.com/story/the-wider-impact-of-taking-a-bite-from-apple-10558113

  • terence patrick hewett

    Only to be exceeded in cynicism by the tax avoidance of government.

  • NMS

    Governments pursuing a “one club” policy are in deep trouble. The Irish dependence on taxation as a key part of economic policy smacks more of desperation rather than cynicism. MNCs take full advantage.

  • terence patrick hewett

    As a general principle: tax avoidance is legal and everyone does it: Government does it: professional footballers do it: Members of Parliament do it: companies do it: any sole trader who has a limited or umbrella company does it.

    Tax evasion is illegal. Tax evasion is criminal. Members of Parliament have gone to prison for it.

    Buying duty free cigarettes and booze is tax avoidance. Paying
    into your pension is tax avoidance. Members of Parliament who crook their expenses are tax evaders.

    Any financial officer of any company that does not maximise that company’s position under law, should quite rightly have his a*se stuck in the barrel of a cannon and fired into orbit.

  • Kevin Breslin

    Nope, but It will have the Dutch, the Luxemburgish, the Greeks and other vested interests when it comes to tax. Even the Germans and the French will not be immune from common competition laws around state aid.

    Why be tied eternally to one country simply because it speaks the same language? The UK isn’t nor has it ever been some solitary Swiss-like state on the fringes of Europe like most Brexiteers wish it to be.

    Let’s not think Northern Ireland can take advantage, because the UK is copying the EU’s Azores ruling ensuring that stops a precedence where the Scottish follow the Republic of Ireland in leaving the English-Scottish-Northern Irish-Welsh European Union.

  • terence patrick hewett

    Ireland, the island of: does not have to be the bitch of either the EU or the UK.

  • hgreen

    Well done the EU. It goes to show that even a 12.5% corporation tax is too much for some corporations as well as the idiocy of politicians here in N.I. attempting to use corporation tax cuts as a way to bring inward investment.

  • hgreen

    Comparing government created and approved schemes that reduce individual tax liability with loopholes created by the tax avoidance industry is b*llsh*t.
    I read the same tired arguments every time a discussion comes up on tax evasion and avoidance. Why people continue to peddle this argument mystifies me greatly as all it means is the rest of us have to pay more tax to make up the difference.

  • Jollyraj

    It’s a funny old world – and must seem ripe indeed to mainland Europeans that after all the countless millions of cash they have pumped into Ireland that the Dublin government might fight tooth and claw not to collect billions in tax which they are entrusted to gather and adminster on behalf of the Irish people.

  • terence patrick hewett

    Much of life is indeed a mystery H. But if government make the laws and people obey them to the letter of: that isn’t much of a mystery really.

  • hgreen

    You don’t seem to understand what a loophole is.

  • terence patrick hewett

    That is not how the law works H. It is either legal or it is not. Making moral judgements on the legality of bad law is fruitless.

  • Kevin Breslin

    Single/Common Market means one single set of common competition rules, it’s not a matter of the EU being a bitch, it’s a matter of Ireland being a bitch to the EU and common market and indeed arguably its own public services too experimenting in Laffer Curve economics at the lowest ebbs of the curve.

  • NMS

    The issue in the Apple case is different. The company was granted a specific ruling in the way it’s profits were treated. It was not a State created tax scheme or an artificial version, abusing rules. It was a MNC coming to the authorities, threatening to pull a region’s largest employer, if their tax bill was not reduced to virtually nil.

    In effect, looking for a massive subsidy to stay. The subsidy is of course paid by consumers throughout EMEA.

    Tax is just the conduit for the subsidy.

  • terence patrick hewett

    Sure.

  • Kevin Breslin

    Form part of Switzerland’s “Free Trade Deal” with the EU too.
    http://europa.eu/rapid/press-release_IP-07-176_en.htm?locale=en

  • Korhomme

    Agreed, evasion is illegal. But what is meant by evasion does differ across jurisdictions. Thus, what is illegal in the UK is (can be) legal in Switzerland.

  • hgreen

    And I was responding to a specific comment comparing types of tax avoidance not the Apple deal.

  • hgreen

    Courts have the power and regularly do interpret the law as it pertains to supposed “loopholes.” I never mentioned morals you did.

  • Kevin Breslin

    Erm What’s illegal under the Swiss-EU trade deal is illegal under the Swiss-EU trade deal.

    http://europa.eu/rapid/press-release_IP-07-176_en.htm?locale=en

    Who wants a trade deal?

  • Korhomme

    I’m not sure abut trade; I was thinking about individuals evading tax – that can be quite legal there.

  • Sprite

    anyone buyin’ or sellin’ a ticket?

  • terence patrick hewett

    You are implying that tax-avoidance is wrong: it is not. And that is a moral judgement. Do not complain if governments draught law that they are not happy with. Do not complain: change it. You are in effect compaining about goventmental incompetence.

  • hgreen

    You are making things up now. I never said that tax avoidance is wrong. Some tax avoidance is clearly the result of govt legislation and I’ve no problem with that. Other tax avoidance is the result of the tax avoidance industry looking for loopholes. That is wrong and when tested in court often found to be illegal. As I’ve said before for you to equate the two types of avoidance is complete bull.

  • NMS

    I appreciate that, the Apple arrangement raises some side issues. It is an interesting lesson in Realpolitik. Firstly, Apple demand a subsidy via the tax system & now the European Commission say you can’t do that. Yet those who worked on it will be vilified. However imagine what would have been said, had they carried out their threat.

    I remember dealing with the Group tax Manager of a US MNC, who threatened to pull more than a thousand jobs out of Ireland over about €100M of an R&D claim. The advice from one Revenue Commr. was “do your best”.

  • terence patrick hewett

    A sin is a sin: scale does not come into it.

  • Declan Doyle

    And the Fine Gael Fianna Fail government have already spent 650 million euro defending apple. Now they plan to waste millions more on an appeal. Corrupt to the roof.

  • Jollyraj

    What is the Sinn Fein position on Apple? Do they have one?

  • Jollyraj

    Apparently they don’t.

  • hgreen

    Didn’t mention scale. Are you responding to the right post?

  • Oggins

    In a pie with cream.

  • Katyusha

    Didn’t look very hard, did we? Why not let Pearse Doherty explain? It’s right on the front page of their website.
    http://www.sinnfein.ie.

    And there are statements here: http://www.sinnfein.ie/contents/41334
    here: http://www.sinnfein.ie/contents/41339
    and here: http://www.sinnfein.ie/contents/41341
    Happy reading!

  • Jarl Ulfreksfjordr

    It must take a quare sized brown envelope to stuff that amount of dosh into.

    I can imagine the conversation between Apple and the Irish Government:

    Apple ‘naturally we’d need our usual ‘itax’ rate.’

    IG ‘aye, tax, sure ‘dat’il be no problem, me bucko! We only use big numbers in our welcomes. Céad míle fáilte!

  • 05OCT68

    The ordinary 5/8 will find it hard to comprehend the Irish government’s position in challenging the EU ruling. A government that introduced property tax,water charges, insurance levy, universal social charge etc as a condition of an EU bail out. Who can they to trust the EU or the government. 13 billion euro was going to the wealthiest shareholders in the world instead of the Irish or other EU exchequers, I’d hate to be the minister trying to explain that.

  • 05OCT68

    You mean a country.

  • Reader

    Katyusha: Didn’t look very hard, did we? Why not let Pearse Doherty explain? It’s right on the front page of their website.
    And it seems like an incoherent position. If the government appeals the decision it is either because they think the sweetheart deal was legal or, more cynically, that the deal may have been a bit dodgy but was in the national interest.
    The SF position seems to be: just look at all that lovely money…gimme.

  • Mac an Aistrigh

    (a). Surely Irish authorities had legal advice on state aid situation.

    (b) Brexit implications?

    (c). Er … that’s it.

  • Declan Doyle

    Actually the conversation more likely went like this –

    Apple rep: We don’t want to pay any tax.

    Fianna Fail Rep: That can be arranged.

    Apple: is it that easy ?!!

    Fianna Fail Rep: Ya, here’s my off shore bank account details.

    Apple: Deal Done.

    Fianna Fail rep: i’ll definately make Taoseach when I tell the lads about this.

  • 05OCT68

    Will Apple be covering Ireland’s legal bill to fight the EU ruling?

  • Katyusha

    It seems pretty coherent to me. Each of the statements I linked had two main points.
    1) They intend to bring forward a motion in the Dail to prevent the government from appealing the decision.
    2) It is unjust for the government to impose and collect punishing taxes on ordinary people as part of EU-directed terms for their bailout, and yet not pursue Apple for the fair share of tax that they owe and mount a challenge to the EU to defend Apple’s tax arrangements.

    Pretty clear cut to me. SF seem to be pushing the injustice angle to this story –why do ordinary people have to pay their taxes, but Apple doesn’t, why is the government challenging the EU’s decision when Apple’s finances are threatened but not the finances of their own citizens – more than any windfall for the exchequer, so to say their position is “just look at all that lovely money” is almost a deliberate misrepresentation. By all accounts, that money won’t be SF’s to spend, anyway.

  • John Collins

    It is a funny old world alright- Ireland are actually paying back far more than their share of EU debt, and with interest

  • Surveyor

    No matter what the subject on Slugger is you can always count on someone to drag Sinn Féin’s name into it, even when they have nothing to do with it.

  • Declan Doyle

    No, the Fianna Gael Fianna Fail Government have already spent 650 million fighting this case, it seems at the moment they are happy to continue spending tax payers money fighting anything that challenges their corrupt senses. Recently in County Wicklow, The Fianna Fail Fine Gael Dominated council spent half a million in the high Court trying to get the Local SF TD and his wife with five kids evicted from their home. The high Court ruled against the council. We are living in desperate times.

  • Surveyor

    Slab Murphy was dragged through the courts in a highly publicised trial and slapped with an 18 month sentence for not paying almost £150,000 in taxes. Seems his only crime was not knowing the right people.

  • Jollyraj

    I would have thought it hardly all that surprising that on a site dedicated to a robust discussion of politics in NI that Sinn Fein, the ‘richest political party in Ireland’, might get a regular mention

    Above we have Declan, reliably calflike in his adoration of Sinn Fein, criticizing their rivals. Fair enough to ask him about SF’s position, I think.

  • Jollyraj

    Figures for that JC?

  • Surveyor

    And as it was mentioned but completely ignored by you their position can be found on their website or by entering Sinn Féin / Apple tax into a very popular search engine.

  • Declan Doyle

    More than that, after nine years of court proceedings, the only date the judges could pass sentence just happened to land on the very same day as the recent general election. So because of the moritorium on the media, they couldn’t comment on the election however there was nothing to stop the media connecting slab, Adams, ira, sinn fein etc on the hour, every hour from dawn to dusk.

  • Roger

    Ireland, the island, cannot make a decision on whose bitch it should be. It’s split in two.

  • Jollyraj

    Well, he wasn’t to my knowledge on trial for any other crimes – but the court certainly seems to have found him guilty of the crimes he was charged with. As to not knowing the right people, he seems to be quite pally with some of the top dogs in one of our biggest political parties – so I doubt if the problem was really his not knowing the ‘right’ sort of people.

  • Jollyraj

    Didn’t Adams himself connect himself to the accused?

  • Adam Martin

    They pumped cash into Ireland? My arse they did.The bottom line is that the Irish taxpayer is on the hook for private debt recklessly provided to a relatively small number of individuals by European banks.

  • Jollyraj

    Ireland didn’t receive huge amounts in funding from Europe?

  • Reader

    The government at least claims to be defending the rule of law and the national interest in the longer term. SF is clearly admitting that neither of these concepts matters to them at all. Heaps of cash in the short term – that’s the ticket…
    You referred to “fair share of tax” in your post. According to the government, Apple has already paid their “fair share of tax” and the EU commission has got its sums wrong. (though isn’t the EU case mostly about the impact of transfer pricing on tax rather than about tax rates themselves?) Presumably the legal case will determine the truth of the matter – we all want to know the truth of the matter, don’t we?

  • Reader

    It’s probably true what he said, except that there is no EU debt! If Ireland is paying back 100% of Irish debt and Greece is issuing haircuts all round on Greek debt, then Ireland is indeed paying more than a proportional amount – but so is everyone else.

  • Surveyor

    It appears that if you owe 150 grand in taxes the Irish government will pursue you with maniacal zeal in order to get it back. When you owe 12 billion though…..

  • murdockp

    irelands brexit moment.

    the day the country has to survive on its own merits.

  • Katyusha

    I make no judgment on the law and it’s not unreasonable to expect Apple’s tax arrangements were both legal and financially sound. Like you said, the appeal will determine the legal truth of the matter. However, while government might think that 0.005% is a fair and just tax rate for a multibillion-dollar-multinational, plenty of the electorate who had to struggle under the austerity program would disagree.

    While the tax policy might be in the national interest, publicly defending tax loopholes and only standing up to the EU when the interests of a multinational corporation are threatened is not a good look for the Government; at least not in the parts of society that SF draw their vote from. We’ll see how this washes out.

  • Reader

    The point of the appeal is to sort out the legal issue. It’s starting to look like you no longer object to the appeal itself?
    As for the national interest (including the interests of the people): Suddenly I am wondering who collects the VAT on Apple’s European sales. If – because of these head office and transfer pricing arrangements – Ireland collects the VAT, that is a far better deal for Ireland than collecting a bit of back tax on profits and possibly losing all future revenue.
    After all, VAT is at a higher rate than corporation tax, and sales are larger than profits.
    Or maybe Ireland just collects the iTunes and cloud VAT, but the gadget VAT is collected where the shops are? Anyone know?

  • Katyusha

    I never objected to the appeal, Reader. I’m not entirely against sweetheart tax deals or state-aid either. I merely outlined SF’s position on the matter when it was suggested they didn’t have one.

    I’m not a member of the party, and their views are not my own.

  • Adam Martin

    Around $40 billion since the early 1970’s.This figure is dwarfed by the estimated €220 billion taken out of Irish waters by European trawlers.

  • John Collins

    Thanks Reader. That about describes it. However I would point out that France refused to have its banks fully stress tested and Spain and Portugal are not being punished for not reaching their bail out targets, according to an article in the ‘Irish Times’ over the past few days.
    And yes the ‘EU Debt’ reference was a clumsy inaccurate comment.

  • John Collins

    Jr
    Sorry for delay, but here we go. Please take a few minutes to read article in full. I, like you, feel GB was mad to ‘brexit’. However, when I read this in full again I feel I am having a ‘St Paul moment’.
    irishexaminer.com/ireland/42-of-europes-banking-crisis-paid-by-ireland-219703.html
    Btw sorry for posting this in a reply on another thread.
    Please take special note also of how much Latvia, one of the poorest countries in Europe, is expected to pay.

  • John Collins

    Please take a ‘gander’ at the site I posted above. It makes for sobering reading and one wonders how long the EU can last if it continues to behave like this.