Just for context this piece wasn't written by me but was contained in an Accountants News Letter that I receive. This should spell out the situation more clearly than some other knee jerk pieces that have been doing the rounds...... No doubt you will have all heard the news that Ireland Inc is refusing the €13 billion in back taxes from Apple. If you add on the interest the amount climbs to €19 billion. This is a massive sum of money that Ireland could certainly do with. The purpose of the article is to give a brief explanation of the case and that you’ll leave the moral hazard discussion to the politicians to keep them busy during their prolonged holidays. 2 questions came to mind when I first heard the news: 1. How did Apple get away without paying the tax in the years that the EU claimed it arose? 2. Why is the Irish government refusing to accept €19 billion euros? The first question is rather difficult to explain whilst the second one is surprisingly fairly straight forward. How did Apple get away with paying very little tax? The corporation tax rate in Ireland is 12.5%. Apple ended up paying in the region of .05% for the period under review. It did this by setting up an Irish resident company along with 2 other entities who were considered stateless companies. This means that these companies were not resident in Ireland or any other country. Billions of euros from EU sales were put through these stateless companies. The Irish government then agreed with Apple that only a portion of these sales related to Ireland and therefore only that portion of sales would be taxable in Ireland. As these companies were non-resident in Ireland they could only be taxed on their Irish source income. The rest of their income (which was the vast majority) remained untaxed. While the use of stateless companies is now prohibited in Ireland it was allowed for the years under review. The EU are instead saying to Ireland that the amount of sales that were taxed in Ireland were too low and that the Irish government at the time were complicit in calculating this rate. It is also suggesting that Ireland gave Apple favourable treatment and didn’t offer the same deal to other companies. It appears to me that if Ireland appeal this decision there is every chance it will be overturned. Apple used the Irish tax legislation to the letter of the law and so no rules were broken. From my reading of it the Irish government didn’t do anything untoward either. If the EU win this case then it is clear that they can now intervene in our tax law and this could have serious consequences. Why is Ireland refusing the €19 billion? If we end up receiving these funds we are then saying that the EU can control our tax laws, even more than they are doing so already. Foreign multi-nationals may reconsider coming to Ireland as there will be instability in our tax rate and legislation. They may end up going to the UK, where they may pay more tax but at least they will have certainty and will not have to deal with EU interference. This could be disastrous for foreign direct investment in Ireland and I believe the government are right to fight it. However coughing up 19 billion in order to prove our stability is a big price to pay. Ireland will appeal this decision and the case will most likely drag on for years. This can only have negative implications for Ireland, whether we win or lose on appeal. On the plus side if we do lose on appeal we will have an extra €19 billion in our coffers, so it’s not all bad. As the writer says Apple used the then tax legislation to the letter of the law thus broke no rules as effectively tax was charged on income generated in Ireland at the correct rate.
Where exactly do ethics, tax law and accountancy intersect? Venn diagram please. The article very ably shows that it's a tax evasion scam by Apple with the complicity of the Irish government, to the detriment of all the countries where Apple has made a profit. The EU position is pretty irrelevant to the basics, even if the letter of the law has been followed I am glad the commission has highlighted this rip off.
Stan, it's not tax evasion if it is within the law...........at the time the agreement was made it was agreed that the Irish state would apply Corporation Tax to the element of the income generated in Ireland and that is what it has done and that is why the US of A wants its cut as well as will most other EU Countries on the income that was generated in those countries....... Off course it is probably unethical but from reading that article the Government applied the tax laws of the day correctly concerning non resident companies......
The intent and effect is to evade or avoid paying tax (semantics), whether it's legal or not. Otherwise why would they do it? Laws can be ethically wrong, the Irish government is effectively depriving other countries of income generated within their territories. I think the impact may be for increased pressure for tax harmonisation within the EU, which is a prerequisite for the Euro to work as a proper currency but harmonisation of fiscal policy is also the end of national politics. The Irish may come to regret this extreme example of corporate favouritism.
If Ireland has so much money it doesn't want 19 billion maybe they could give him an interest free loan
Or perhaps they could use it to pay back the bailout loans they got from other countries from 2010. That's £3.2bn directly from the UK taxpayer, and another estimated £14bn through the taxpayer funded bailouts of RBS and Lloyds - 25% of which went directly into the Irish economy. Tell you what, let's cut out the middle men, Apple can just send me some cash and some trendy kit directly then I'll shut up.
Why do you think 25% of the Lloyd's and RBS bailout funds went into the Irish economy? Because like the Irish banks, they made serious errors in lending money to people here for mortages based on totally inflated property prices. For their errors (all banks collectively), 87bn in bailout loans were put onto the Irish people when we played no direct part in the bankng crisis. The £3.2bn lent to us directly by the UK government was to prevent our economy going down the swanny. If our economy went down the swanny, so would tens of thousands of UK jobs that depend on trading with us. That trade is worth £60bn per annum. More than China, India and Brazil put together. That's why your government lent us the money. It was in the interests of many UK business's that have invested in their business's in this country. Lastly, Ireland Is out of the bailout programme now as we have met ALL our financial obligations since 2010. Every single repayment that was due on our bailout loans plus the scandalous amounts of interest that we were charged by all the EU countries including the UK has been paid back to date. We are not Greece or Argentina. We pay our way.
Finglas, I'm still trying to understand the facts about the Apple/EU tax issue. Can you help from an Irish point of view? I don't believe Apple has done anything illegal in Ireland, only followed standard multinational corporate amoral self interest. What I don't understand is the role of the Irish tax authorities. The mechanism used by Apple was to run the money through "stateless" corporations, which the Irish tax authorities would turn a blind eye to and only focus on the profits running through Apple Ireland. Is that your understanding? If so, was this arrangement uniquely available to Apple or was it freely available and well known to any corporation operating in Ireland who chose to do this? That, for me, seems to be the heart of the matter. Ta, if you can.
Yesterday, Outraged by Apple’s Tax Dodge. Today, by Its Tax Bill. By ALAN RAPPEPORTAUG. 31, 2016 WASHINGTON — American lawmakers have for years been assailing companies for dodging taxes with overseas maneuvers. But now that the European Union has done something about it by trying to wrest billions of dollars from Apple, those officials have offered a response viewed by many as rife with hypocrisy: collective outrage. Tax avoidance has become a lightning rod as the presidential campaign has taken on a strong populist cast, and leading Republicans and Democrats in Congress have demanded that companies be forced to pay their fair share. Both Hillary Clinton and Donald J. Trump have vowed to crack down on deals that allow companies to relocate their headquarters overseas to lower their tax bills, and the Treasury Department has made limiting international loopholes a priority. Despite all that, Apple — a company long accused of being overly creative at avoiding taxes — now has the federal government standing up for it after the European Union’s executive commission ordered Ireland on Tuesday to collect $14.5 billion in taxes from the company. And for at least some American politicians, the anger stems from a simple calculation: The tax money that the European Union extracts from Apple should be going to the United States Treasury, not that they have figured out how to make that happen. “It’s remarkable to think that the administration has been flying over to Brussels on taxpayers’ dollars to lobby the European Union against collecting taxes owed in Europe when they’re not collecting the taxes owed here,” said Clark Gascoigne, deputy director of the Financial Accountability and Corporate Transparency Coalition. “It’s terribly ironic.” Most lawmakers and business groups do not see it that way. They defended Apple by arguing that the European Union was overstepping its authority and reinterpreting international tax law to unfairly penalize the company. Some called it a new brand of protectionism. The Treasury Department said the ruling was “deeply troubling.” The Business Roundtable, a lobbying organization for America’s largest companies, called the move a “reckless and dramatic overreach” and an “act of aggression” against a company and a sovereign government. In Congress, lawmakers in both parties have urged the Treasury Department to be tougher on European officials as they aggressively investigate what they call undue tax benefits given by member nations to leading American companies. Members of the Senate Finance Committee sent a letter in May to Jacob J. Lew, the Treasury secretary, urging him to consider retaliation that would include doubling taxes on companies and individuals in Europe. The European Commission “is using a theory to make tax law, is doing it in a way that is retroactive and that overrides national tax law authority, in our view,” Mr. Lew said Wednesday at a Brookings Institution event previewing this weekend’s meeting in China of the Group of 20 largest industrial economies. He pushed back against the idea that Treasury is condoning tax evasion, saying legislation that prevents companies from parking income overseas to avoid being taxed in the United States “will see action probably not in my tenure but early in the next administration.” The European Commission’s ruling has even managed to forge a rare moment of agreement between the House speaker, Paul D. Ryan, Republican of Wisconsin, and Senator Chuck Schumer, a New York Democrat who is likely to become the next leader of his party in the Senate. “This decision is awful,” Mr. Ryan said in a statement. “Slamming a company with a giant tax bill — years after the fact — sends exactly the wrong message to job creators on both sides of the Atlantic.” Mr. Schumer said in an interview that he and Mr. Ryan had been discussing possibilities for a corporate tax overhaul for next year. He said he was optimistic about the prospect of requiring corporate money to return to the United States at a lower tax rate, with some of the proceeds being used to fund a large investment in infrastructure. The action taken by the European Union, he said, should be an impetus to get moving on such legislation. “The European Union is going to grab this money, instead of the U.S.,” Mr. Schumer said. “It’s a big signpost here for us. Let’s get moving.” He added: “We’re trying to protect our U.S. tax base. That money sitting over there should be here in the U.S., not in Ireland and not in the E.U.” The bipartisan “consensus” that the corporate tax rate should be cut in exchange for loopholes closures emerged in President Obama’s first term, yet Congress has not formally drafted a bill, much less voted on one. Tax experts said that without a deep cut in the tax rate, companies like Apple would be better off paying back taxes in Europe than repatriating their overseas cash. “This is not taking 13 billion euros out of the U.S. Treasury’s pocket and U.S. taxpayers’ pocket and putting it into Europe,” said Jeffery M. Kadet, a tax lecturer at the University of Washington School of Law. “They wouldn’t be bringing this money back to the U.S. anyway.” Reuven S. Avi-Yonah, who directs the international taxation program at the University of Michigan Law School, said that the European Union had a strong case for collecting the taxes from Apple and that if the situation were reversed, Americans would be clamoring to collect taxes from a foreign company. “Just because it happens to be an American company, to say that the European Union should not take action, I think, is the height of hypocrisy,” Mr. Avi-Yonah said. While most lawmakers condemned the treatment of Apple, one prominent former senator said he was pleased to see Europe take action. Carl M. Levin, Democrat of Michigan, who was chairman of the Senate Permanent Subcommittee on Investigations when it examined Apple’s use of tax havens in 2013, said the European Commission should fill the vacuum left by lackadaisical tax enforcement in the United States. “The royalties Apple collects for its overseas sales of products designed and developed in the U.S. should be taxed in the U.S.,” Mr. Levin said. “But Apple has avoided the billions of dollars of taxes it owes the U.S. by transferring its intellectual property to itself in Ireland.” Blaming Apple and the Internal Revenue Service, he added, “When Apple used those tax avoidance schemes, it is understandable that Europe would try to go after them.” It remains to be seen if corporate tax reform will be a priority for the next administration, but the language used by both Mrs. Clinton and Mr. Trump on the campaign trail suggests that it is a strong possibility. Mrs. Clinton has released a formal proposal to prevent so-called corporate inversions and to reward companies that keep their operations in the United States. Mr. Trump, who has called for a boycott of Apple products, has threatened to punish companies that relocate to other countries by imposing taxes on products they sell in the United States. The news that a corporate giant might have evaded billions of dollars in taxes could become another populist rallying cry. “There’s a reason Donald Trump and Bernie Sanders did so well in the campaign this year,” Mr. Gascoigne, of the Financial Accountability and Corporate Transparency Coalition, said. “People are fed up with the kinds of back-room deals that are happening at the large multinational companies at the expense of the American people.”
Your understanding is correct TBD. From what I can make out, this tax policy is not only available to Apple but to many other multi-nationals that are based here. It seems to be widespread accepted practice here. As you say, that is the heart of the matter. Big corporations are using a little island desperate for direct foreign investment to pay as little tax as possible. From the Irish government's point of view, they haven't done anything illegal and they believe it is within their rights to set their own tax policy. There will be serious repercussions over here no matter what way this goes as there is talk already of the government possibly falling. The junior partner in the coalition (Independent Alliance - made up of left wing independents) are talking about pulling the plug as they disagree that the ruling should be appealed. Apparently, they want us to accept the ruling, collect the 13BN and spend it on much needed public services whilst the largest party in the parliament, Fine Gael want us to appeal the decision and not touch the money as they say it doesn't belong to us.
Thanks for that. Well, as far as the EU ruling goes, if it was genuinely available to anyone operating in Ireland, then it's none of the EUs business. I believe their take on it was that it wasn't available to anyone, and therefore "state sponsored aid" for one company rather than an even-handed tax policy which was the same for all. The EUs own statement on this (Google found it for me) isn't as specific on the facts as I would have liked, although the tone seems certain.
And that is the problem, country's may sett there own tax rules but it must be applied to all not a select few.
Bloody left winger Imagine wanting to spend money on much needed public services Better grab the money now before apple moves on to the next tax haven
Careful what you wish for Kiwi. Apple's next stop might be Kiwi Land. We won't be grabbing any money that doesn't belong to us, hopefully. The rest of the world can collect their own taxes from now on.
They are claiming they pay loads in tax so you never know, they might just go for it. You are in the Asian time zone so they might set up their Asia-Pacific HQ there?
