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back to article Ireland revisits tax laws to cook Apple

The Republic of Ireland has decided to take another look at its status of “tax haven of choice” for the tech sector. The nation has flagged its intentions in a Department of Finance "policy statement" (PDF) that Finance minister Michael Noonan says "... for the first time ... sets out Ireland’s International Tax Charter – a set …

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The USA should do with companies what it does with people

The USA should do with companies what it does with people.

And that is assess their taxes based on world-wide income and then deduct the taxes paid in other countries (that the USA has taxation treaties with).

Apple, Google, Microsoft, Starbucks, they are all a burden on the country, they all require educated employees, roads, sewers, defending by the US military, courts, and so on.

And they require these things much more than regular taxpayers.

Why should Apple, Google, Microsoft, Starbucks be getting handouts from the hard working middle class?

Why should Apple, Google, Microsoft, Starbucks get the benefit of 'corporate foods stamps' by not paying taxes?

Why should Apple, Google, Microsoft, Starbucks be treated like tax exempt charities?

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Re: The USA should do with companies what it does with people

Don't just sit there complaining. If you want the same tax breaks as these companies you buy your own politicians just like they had to.

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Re: The USA should do with companies what it does with people

" ...the hard working middle class ..."

You should try being working class. That really is hard work.

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Re: The USA should do with companies what it does with people

Companies are taxed on worldwide income, just like people. The one difference is that if companies leave that money overseas they aren't taxed on it until they bring it into the US. They can't give it back to the shareholders (as either dividends or buybacks) without doing so, so this law is a double whammy on the US economy. Not only are companies given an incentive to invest overseas to use money they haven't pay US tax rates on, they are discouraged from bringing it back into the US and giving it to the owners of the companies.

Apple, Google, Microsoft and other companies with tens or hundreds of billions of cash on the books aren't doing anyone any good. Lots of cash on the books worries investors that the company might do something stupid with it (see Microsoft buying Skype, HP buying Autonomy, Google buying Motorola) Apple has never made a really big acquisition but having so much money on the books is a temptation to one day do something insane like buying Twitter for a giant premium or worse (don't laugh, I've seen articles suggesting they do exactly that)

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Re: The USA should do with companies what it does with people

Google could always cut out the middle man and buy Irelance

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Joke

Re: The USA should do with companies what it does with people

Beat me to it, though ' The Emerald Apples ' has a nicer ring than ' The Republic of Goggleland".

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Anonymous Coward

Re: The USA should do with companies what it does with people

This will help only if it goes all the way.

There is an interesting statute in the tax code on taxing transactions between related individuals. It is designed so you cannot offload half a mil to your spouse and deduct that. The problem is that this particular set of criteria is never applied to companies. If the tax office catches an individual to do this, they pretty much deep six you on the spot.

For some reason transactions between corporations are not subject to this. For example, when Google Ireland pays to Google Bermuda or Starbucks UK pays to Starbucks Holland _FAKE_ IPR rights (they are the same f*** company what f*** IPR licensing are we talking about here?) they are not treated as "related individual transaction" or "fake transaction for tax evasion purposes". That is the problem here, not what Ireland is pretending to try to tackle.

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Re: The USA should do with companies what it does with people

On the topic of buying Ireland, I've long thought that Bill Gates or Warren Buffet should make the Irish an offer — re-establish the monarchy by means of a few referenda [1], crown Bill as King of Ireland and Bill then takes care of the irish financial woes.

If nothing else, it would make a great movie.

[1] Down with referendums!

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Re: The USA should do with companies what it does with people

While I understand why you want "subsidiaries" treated this way, let me give you a counter example: I start up a small company, and land a big supply contract to, lets say, Apple. They pay me $200 M a year for an exclusive agreement to use my software in iOS or whatever. Lucky day for me? Well, no... by your "ideal" rules, my company would have no tax allowances whatsoever, because it would be treated as a subsidiary of Apple on the basis that all my business (right now) is with Apple. In effect, you would have me pay Apple's taxes for them, which is even more unfair than the current situation.

In law, my imagined company is no different to Apple Operations (Europe), or Google (Cayman), or any of those other IPR sub-licensors. These are not subsidiaries, they're independent companies, run "at arm's length" with exclusive contracts to licence IPR. That's how the scam works. They rely on favourable rates for IP licencing, which are offered because developing valuable Intellectual Property is the highest risk activity a business can engage in: IPR doesn't apply to the idea, it's for the realisation of the idea.

You might consider it to be "Fake", but Starbucks does have valuable IPR. Its branding, logo and store design are its IPR, and they are apparently enough to convince people to pay over the odds for burnt coffee. Thus, that IPR has monetary value, and can be sold or licenced. Try open an independent coffee-shop serving coffee that tastes as bad as Starbucks and you'll quickly see the value of its brand.

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Re: The USA should do with companies what it does with people

"[1] Down with referendums!"

Spoken like a true monarchist. I imagine Louis XVI would have expressed the same sentiment...

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Anonymous Coward

Re: The USA should do with companies what it does with people

You have no understanding of international tax, do you? Or indeed of the difference between a gift of capital (offloading half a mill to your spouse) and revenue transactions (IP royalties).

The basic principle of transfer pricing is that if two companies are connected then you disbelieve all agreements between the two of them. For tax purposes you use the agreement independent companies would have reached if acting at arm's length.

If IP is fake and has no real value, then no third party would pay for it so no payments are allowed for tax purposes.

Ireland is worse than most at applying these rules, yes, but they're the exception rather than the rule.

And as for "they are the same f*** company" - no, they're not. They may be owned by the same parent company, but they are not the same company. Mind you, even if they were then we'd be no further forward because it would clearly be a US company not an Irish one and it's even harder to establish the proper transfer price for an Irish branch of a US company than it is for an Irish subsidiary.

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Re: The USA should do with companies what it does with people

@Kristian Walsh - I think ACs idea would work if the ultimate owner of any company is either public or at least known to tax authorities. Your hypothetical company supplying Apple is registered at companies house (or wherever, depending on country), and you are listed as owner.

Apple Ireland, Apple UK etc will be registered in the respective companies with Apple inc listed as their owner (and that way, it doesn't matter if Apple call their Bermuda subsidiary "Bob's bits inc" because the company ownership is known).

All that is required is (a) institute rules so that ultimate beneficial owner is known to tax authorities (so ownership can't be hidden in multiple layers of companies) and (b) rule that any company registered in a country that does not cooperate with these rules will be automatically treated with same rules as a related company (holdout countries would quickly become pariahs in the same way that tax havens currently are).

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Re: The USA should do with companies what it does with people

Alas, I didn't mean it so.

The point was more grammatical than political and I was being a classical snob — we say bacteria and not bacteriums and so forth. I blame the current linguistic immigration process.

I actually quite like referenda. They add a lot of colour to political and social life and obliges one to show one's hand politically. Now, if only the Irish would copy the Swiss and have 3 or 4 referenda every season, then that would be fun. Democratic, too.

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Baby, bathwater and balls

Let's be very clear about this: subsidiaries are legally separate entities. The idea that you are proposing requires the dissolution of pretty much the entire foundation of multinational business.

If you think that is a reasonable price to pay to recover mere billions (yes, that's what I said) then let us be glad that you have no say in these matters.

Now, let's look forward to Ireland sacking-up and taking a more globally-responsible stance regarding its taxation, but to suggest that subsidiaries should no longer be considered legally separate entities invokes images of babies and bathwater.

Ireland and the UK once had the same tax policy that allowed locally-registered companies to be 'tax resident' wherever their effective management was. The UK sensibly updated their tax law to make sure companies registered in the UK paid their taxes in the UK. Ireland did likewise but left a now gaping loophole that exempts foreign-controlled companies (like google, Apple, MS, etc al) from such requirements.

So, an Irish-owned company registered in Ireland must be tax-resident in Ireland. BUT, a foreign-owned company registered in Ireland can be tax-resident wherever it damned well pleases.

That is the heart of the matter. Close that loophole and a good 75% of the much-maligned tax avoidance of these companies is irradicated.

Now, whether that is ACTUALLY beneficial is rigorously (and also occasionally childishly) debated. Essentially, the argument goes that the US still gets a lot of tax revenue, but that revenue is from taxes on all the money that these companies are spending - whether it be from payroll tax or land tax or whatever.

I don't have enough information to judge one way or the other.

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Re: The USA should do with companies what it does with people

> Or indeed of the difference between a gift of capital (offloading half a mill to your spouse) and revenue transactions (IP royalties).

So instead of giving your spouse all your money when you become a cabinet minister, just pay them for the IP rights to their name ?

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Re: The USA should do with companies what it does with people

@James

The AC's proposal wouldn't even prevent Apple's current trick. Apple take advantage of a particular feature of Irish company law. The liability for tax in Ireland is with a company's headquarters: the ultimate owner of the company (very much what AC proposed). However, US tax law says that a company is liable for tax in the state where it is incorporated.

Apple use a subsidiary company that's incorporated in Ireland, but headquartered in the USA. Thus, it falls between two stools, and cannot be taxed anywhere. It's a "victim" of a phenomenon called double non-taxation.

Noonan's plan is to bring Ireland's tax code into accord with the OECD's recently adopted anti-BEPS (Base Erosion and Profit Shifting) measures, [ http://www.oecd.org/ctp/beps.htm ] which provide a way for governments to bring the tax system into line and avoid "double non-taxation" without cutting their own throats in the process. Without a cooperative arrangement if (for example) Ireland were to tighten its measures, another country like Luxembourg or the Netherlands could retain their looser regime and draw investment away, and the problem would only move location, not be solved.

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International Taxation Union, anyone?!

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Facepalm

If governments weren't so profligate with our money I would be slightly more sympathetic to all these calls for more aggressive taxation.

Since I view government as a necessary evil and tax the same, I'll just say that we could do with fewer taxes and smaller government.

All this crap about tax avoidance and big companies "not paying their whack" is just so much pointless distraction from the real issue of out-of-control government, particular the EU beaurocracy which is just a money black hole. The US "administration" is another spralling abomination and they're paying the price with their obscene national debt.

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Mentioning government waste generally doesn't go well around this part of the internet. Even so we should advocate responsibility on all fronts. Governments need to be smaller and stop wasting so much of our money. Companies also shouldn't be using loopholes to avoid paying taxes. Plenty of room for improvement all around. And while I am generally conservative, I do acknowledge it wouldn't hurt for the US government to reduce military spending. Anyways, have a like on me.

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"I'll just say that we could do with fewer taxes and smaller government"

I am in complete agreement with that statement. Nevertheless, companies make LOTS of profit in modern western democracies partly because the modern western democracy provides rule of law and modern infrastructure, which in turn lead to prosperous people who can spend lots of money on companies' iTat.

So just because taxes should be overall lower is not an excuse for them to have so many loopholes to exploit

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> So just because taxes should be overall lower is not an excuse for them to have so many loopholes to exploit

I kinda take issue with the general idea, which normally goes unquestioned, that just because a company makes a lot of money, they should pay a lot of tax.

There are at least two reasons that I can think of to justify it:

1) The company uses a lot of government provided resources, so they should be paying proportionately for them.

2) Big companies have a lot of money, so if they pay a lot of money, they are effectively subsidising others with less.

I'm not sure that I'm morally in tune with 2). 1) may be relevant here but a lot of the "soft" companies like Google don't use much in the way of resources that they aren't directly paying for anyway. They use a lot of power, but they pay for that, which presumably pays their share of the power grid infrastructure to support it.

The furore has a lot to do with perception. They're making a ton of money so I *think* they should pay a ton of taxes like we assume rich people should. However, I think we should be really clear *why* we think this. Is it jealousy, do we really think they are consuming a disproportionate amount of government resources that they are not covering in the taxes that they pay, or do we think they should pay more tax because we want to pay less?

Let's not forget that tax is not a punishment for success. It is a necessary evil to cover services that we all need. All too often, governments forget this. It pays for:

- fighting other peoples wars (hugely expensive)

- punishing those that are successful

- subsidising poor people (don't misunderstand me, I make no moral judgement here) ( massively expensive)

- subsidising an ever increasing bureaucracy that feeds into itself.

Personally, I think the world would be a much better place if governments would just stop and think before they spend our money.

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Flame

Ironic that the Merkins get upset about pumping Ireland full of tax dollars to fund it's health service and welfare policies, but have no problem pumping it full of money to buy guns and bombs.

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WTF?

What are you talking about?

Merkins get upset about pumping Ireland full of tax dollars to fund it's health service and welfare policies

The USA funds Ireland's health service?

Riiiiiight.

You've obviously never used the Irish health service - it makes the NHS look well-managed and well-funded.

Every time I pay €50-60 to see a GP for ten minutes I'm funding the health service, not the fuxxing Americans.

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Good on Ireland

Instead of instituting parliamentary commissions to excoriate company executives for following the laws instituted by that same parliament*, Ireland seems to be going the sensible way an changing the laws.

*like some other country that shall remain unnamed

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to commence in January 2015

plenty of time for "those" companies to find a loophole in the new system.

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Re: to commence in January 2015

There is no loophole to avoid. All those Bermudan companies operating in Ireland (MSFT, Google, Apple, etc) can continue to pay their corporate tax in Bermuda.

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Anonymous Coward

Ireland has shot itself in the foot - now instead of receiving some tax and employment those companies will move away to somewhere else.

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I wonder

if everyone paid their fair share what the actual tax rate would need to be.

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Germany are doing the leaning

It seems pretty obvious that Ireland will not "lose" out here. DE on behalf of the rest of the EU - they bank roll most of it so why not - have intimated that IR might want to re-evaluate their taxation regime.

I would imagine that should IR suddenly become unpopular as a tax haven which I personally believe is unlikely then DE, sorry "the rest of the EU" will support IR until it has transitioned out towards normality.

This is the first tentative step in a very long process which has the potential to level the playing field. Its handy that there is a rather buggered economy dependent on several others that can be made to change in this way. It's possible the other havens will start to fall in line gradually but each one will need careful handling.

This plan does rather depend on the EU supporting the recovering tax-aholic IRL though her withdrawal stages, however as her economy is rather small in the grand scheme of things that should not be a problem. For comparison from a straight Google, GDP 2012: IR = 210 billion USD, GB = 2400 billion USD, DE = 3400 billion USD.

Cheers

Jon

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Re: Germany are doing the leaning

It's "IE", unless you really are trying to claim that Germany is bankrolling Iran to reform its tax code.

In any case, Ireland's corporate tax system is as level a playing field as you'll see in Europe: everyone is taxed at 12.5%, from biggest to smallest. Compare that with France or Germany, with their numerous sweetheart deals - if Ireland were so generous, why haven't you seen the likes of EDF-Suez, Siemens or BASF* moving to Ireland for nice rates? The reason is simple: they're getting a better effective rate at home - but the small businesses are subsidising it.

Bluntly, the problem isn't Ireland's tax rate, it's the ability of multinationals to strip earnings out of their accounts by shunting profits through various jurisdictions. Ireland, Luxembourg and the Netherlands are used more often because they've got open economies with simple tax codes, they are stable nations under a rule of law, and they have tax treaties with many other countries.

* Germany's largest corporation, Volkswagen AG, of course couldn't move, as it is 30% owned by the government of the State of Lower Saxony. But then, access to finance at AAA government bond rates is something that would keep any company from looking for new headquarters...

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The question

Is the money better in the hands of people who have worked to build something and provide employment and services? Or is it better in the hands of govs to use for spying on its people, frivolous stupidity and schemes to fleece the population more?

Should the money be in the hands of those who work and try and make the effort? Or the parasites who use the funds to pay for a consultant to the consultant for organising a desk?

Should the money be with the ones who earn it? Or the ones who rob it and tell you its the right thing?

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