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back to article Ireland accused of giving Apple 'selective advantage'

The European Commission will investigate The Republic of Ireland's handling of Apple's tax affairs, after raising concerns that discretion available to the nation's tax authorities “... has been used in the case of Apple to grant a selective advantage to that company, reducing its tax burden below the level it should pay based …

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Anonymous Coward

Apple has long held the stance that they paid all taxes owed under law. If The Republic of Ireland has been found to favor Apple in their tax dealings, I don't believe that Apple will be able to stand behind their stance that they paid what required under law. If they were given favorable treatment, then they knew and while they weren't the ones bending the tax laws, they knew it was being done and chose The Republic of Ireland based upon them bending the tax laws.

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Actually, no matter what the Review finds, Apple has broken no laws. It has applied the Tax Laws as each country told Apple applied to it. What they have done may be immoral, but it is not illegal.

What the Review is checking is whether Ireland, by allowing this shenanigans, may have breached some EU rulings about Taxation across EU states.

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Which is more serious than what Apple/Google/MSFT/etc have done to the tax man.

If eu countries are allowed to compete on who allows the most favourable interpretation of tax law, others will compete with other laws.

Imagine if some penurious eu state offered a deal to pharma companies - open a HQ here and we will approve all your drugs in 24hours, or you could get cross-eu safety approval for a new car import by just having a dealership there that employed the president's nephew.

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While I agree with your comment, its a bit more than that.

Place your EU HQ here, hire one person to watch the shop. We'll give you the lowest tax rate in the EU so you can make billions.

Do this and you starve communities of their tax revenue that they need in order to provide infrastructure to their population.

If you looked at it that way... then the budget shortfalls in the state of California would be non-existent because of all of the tax revenue paid by the companies like Apple. In fact one year of repatriated funds to the US would probably clean up a lot of the debt issues in California. (Noting that state taxes are separate from federal taxes.) Of course having said that... politicians will find ways to waste money so its probably a wash. (But you get the point... ;-)

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one person to watch the shop

Ian Michael Gumby, to be fair, Apple has had their European HQ in Ireland since 1980, well before they were raking in billions. Reuters has a good backgrounder here.

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Eu = Articles of Confederation/dysfunction

The EU is dysfunctional and needs a serious revamp at some point. The problem is the current dysfunction is very much more popular than any reasonable substitute.

Example in the USA: New York pays way more in taxes than it receives in benefits directly paid by the federal government. New York's economy benefits more from earnings in other states. The financial, insurance and cultural business income New York receives from the other 49 states dwarfs the losses in tax dollars. No one in the Euro zone is willing to recognize the long term growth Northern Europe will receive from the South and East. In short, most people are too selfish to see their own rational self interest especially when the pain is current and the benefit is in the future.

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Re: Eu = Articles of Confederation/dysfunction

"Example in the USA: New York pays way more in taxes than it receives in benefits directly paid by the federal government."

This is a fallacy.

Or rather you're not making a clear point.

Are you talking about corporate taxes paid to the US? Corporate taxes paid to NY?

Personal taxes paid to US? Paid to NY? Paid to NYC (If you're talking about NYC?)

Are you talking about all of the NY corporations paying US taxes vs. the federal funds received by the state of NY?

Again, your point is meaningless drivel until you get more specific in your initial statement.

Sorry.

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Re: Eu = Articles of Confederation/dysfunction

He's talking about corporate and personal taxes paid to the federal government, measured against payments made by the federal government to the state and residents of New York (i.e. spending on roads, bridges, schools, welfare, salaries of federal employees who live in New York)

This is a well known statistic that isn't under dispute in the US. The same is true for California. It has been a point of political contention since the republicans (who mostly carry the "red states") believe the government taxes/spends too much and is too large, while the democrats (who mostly carry the "blue states") mostly don't agree with that assessment.

But as it turns out, the blue states pay more in to the government and the red states take more out, so the best interest of their primary constituents would be for the two parties to trade positions on the tax/spending issue :)

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Anonymous Coward

The EU needs to be fair. So they need to investigate EVERY COUNTRY IN EUROPE, because they ALL give tax breaks of one form or another to large companies to locate in specific areas.

The UK should be investigated for offering a tax break to the new star wars film where as the smaller independents have to pay full wack. Apple are just a target because they are large and cash rich, but any investigation needs to be fair and the ruling applied to all.

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Anonymous Coward

The EU needs to be fair. So they need to investigate EVERY COUNTRY IN EUROPE, because they ALL give tax breaks of one form or another to large companies to locate in specific areas.

Well, OK, but that's why there isn't one single EU economy, but lots of countries. That's no different to, say, the US where sales taxes differ per state, or Switzerland where company and personal tax is set per Canton. All of these examples then charge a sort of general tax on top.

That's what competition is about, so I have no idea how this one is going to be solved. The only thing that could be an issue is Apple having a DIFFERENT benefit than others, I think selective taxation is indeed not permissible.

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Scandal

Something should be done about countries that abuse EU tax rules and "launder money" for non-EU companies. It cannot be right that we let foreign non-EU companies getting away with paying 2-7% tax on their EU earnings while we tax our own companies and citizens through the roof. How can an EU company compete in such a system!?

If the countries do not want to play ball the EU tax rules should be changed. We cannot afford this.

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Re: Scandal

> How can an EU company compete in such a system!?

By doing exactly the same, and in many cases much worse.

That's why the UK lets vodaphone pay no tax because it would be bad for their business.

Rolls-RoyCe and Boots, those well known Bahamanian companies, pay little tax here

The worst is probably the Dutch Antiles charity Ikea

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The actual issue

Apple, routed their global (excluding US) finances through Ireland (and a series of other states)- in such a manner that the finances were deemed to not be domiciled in any state. Aka- Irish taxes were not applied on the funds- nor were taxes from any other state- because they used every trick in the book to launder their funds- so they could legitimately say they weren't due to pay any tax on it.

They probably haven't broken any actual laws- but they certainly have ridden rough shod over the spirit of the laws, and the spirit of equity in the collection of taxes.

It is not fair that a large multinational, such as Apple, has manipulated tax law to give itself an effective tax rate of close to zero. It is not fair on tax payers in the countries where they do business- and it is not fair on the reputation of Ireland- who have had the misfortune to have been associated with this behemoth.

A fair and equitable solution- would be to enumerate Apple's global business as per the countries they are active in. Ringfence the funds (in their totality) and garnish an agreed sum (say 25% of their gross retained profit)- which would then be divvied out amongst the states in which they conduct business, on a pro-rata basis.

I don't see why I, as an Irish tax payer, pay an effective tax rate of approaching 60% on all earnings over 32k- when Apple are allowed get away with these shenanigans.

What they have done is immoral, and while most probably legal within a strict interpretation of the law, most certainly not in keeping with the spirit of the law- and most probably considered as criminal behaviour by most ordinary mortals, who are getting shafted by tax collectors..........

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Re: The actual issue

"Apple, routed their global (excluding US) finances through Ireland"

Does anyone know where Apples "war chest" actually is and is it "working" or just sitting in a bank somewhere (yes, I know, technically, even just sitting in a bank means it's working in some way)

I think the problem people have with companies like Apple is they are sucking money out of local economies and apparently just sitting on it rather than circulating the money around, especially back into the local economies.

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The smear is obviously working

There is absolutely no evidence that Ireland has offered Apple favourable tax rulings - both the Revenue Commissioners in Ireland and Apple insist that there are no special tax deals for Apple - the same rules apply to Apple as apply to any other company. But Brussels will take 12-18 months to investigate this, meanwhile leaving a cloud over the whole issue. The consistency and predictability of Ireland's tax code has been a factor in Ireland's FDI strategy, and a long drawn out investigation that will probably fail to find anything doesn't help.

Ireland's rules on "tax residency" for companies are based on where the company is managed from, rather than where it is incorporated - this means that some of Apple's subsiduaries aren't tax-resident anywhere, because even though they are owned and managed from Cupertino, the US doesn't consider them tax resident there because they are incorporated in Ireland. Ireland has recently changed it's laws so that any company that is incorporated in Ireland that isn't tax resident somewhere else will be considered tax resident in Ireland - presumably there was a LOT of lobbying to prevent the US government introducing a law that would have allowed to pick up these "state-less" companies, but in the long run, these US companies are going to come under more pressure to pay taxes to the IRS than to EU governments - indeed, if anything, the more they end up paying to EU Governments, the more unhappy the US will be about not getting its share!

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Re: The smear is obviously working

The odd thing about US company taxation is that it seems to be different to US citizens. While US citizens are taxed by the IRS on their worldwide earnings, US companies are seemingly only taxed by the IRS on their US earnings.

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US taxation

Roland6, US company taxation is different from US individual taxation. Both US companies and US individuals are taxed on worldwide income, but tax brackets, exemptions, and deductions differ.

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Re: US taxation

Irony Deficient, agree, just that it seems that a company can keep monies abroad - like Apple has done with respect to Ireland, and not incur US tax on that money (whilst it remains outside of the US), whilst (my understanding is) an individual would have to pay tax. Perhaps someone who pays US tax could enlighten us.

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Re: US taxation

Roland6, I file US individual tax returns and pay US individual income tax, and my (puny) company files US corporate tax returns and pays US corporate income tax when it has taxable income. In the specific case of Apple, it is their corporate structure that enables them to not incur US tax liability on a great deal of their money — see here for an overview. From the US perspective, the key to Apple’s low tax liability is that so much of their income is booked by their foreign subsidiaries, which don’t have US tax liabilities because they take advantage of the “disregarded entities checkbox” of Subpart F of the Internal Revenue code — see this Reuters article for a fuller explanation.

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