back to article Eight-billion-dollar Irish tax bill looms over Apple

An upcoming European Commission ruling on tax laws could result in Apple having to pay as much as $8bn (€7.33bn, £5.6bn) in back taxes. This according to Matt Larsen, an analyst at Bloomberg Intelligence who expects the Cupertino maker of iStuffs will be found to have incorrectly reported its financial figures in Ireland and, …

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  1. Anonymous Coward
    Anonymous Coward

    Big deal!

    They'll just raise the price of each one of their products by a couple of % to compensate.

    Pass the burden on to the consumer, a.k.a. The little man always loses.

    1. Ledswinger Silver badge

      Re: Big deal!

      The little man always loses

      Given the price premium and excess margins on Apple products when adequately functional alternatives exist, the little man has chosen to lose. This has already been christened "the Apple tax", but now that will be particularly apposite.

      Weep into your soya lattes, bearded hipsters!

    2. DougS Silver badge

      Actually there will be ZERO cost for Apple to pass on

      Foreign taxes paid are taken as a tax credit against US taxes. The reason Apple and other US companies keep money overseas is because it allows delaying the payment of US taxes. They are still due, just in the future when they bring the money into the US. They all hope that will be done at lower rates than today's 39%, but in the meantime they wait. They even get the benefit of whatever interest they can earn on the money, since they won't owe interest on the US taxes as they are not payable until the money is brought into the US.

      If Apple has to cough up an extra $8 billion in Irish taxes, that means its future US tax liability drops by an identical $8 billion. So no need to raise anyone's prices, or do anything except pay the $8 billion out of the giant pile it was already holding overseas (or more likely just divert the next $8 billion it would have added to that pile)

      1. elDog Silver badge

        Re: Actually there will be ZERO cost for Apple to pass on

        Very interesting. How about penalties, not taxes, that might be collected?

        In a very perfect world, the penalties would be so large that any mega-corp would think twice, thrice about defrauding the tax collectors.

        (Said by someone who may have missed a payment or two....)

        1. bazza Silver badge

          Re: Actually, what about the loans?

          Apple borrowed a ton of cash in the US to pay their shareholders a dividend. Their foreign cash holding was used as collateral. Now that collateral might have to shrink by 8 billion those loans might have to be reconsidered.

          Not that it will matter to Apple. But it might to other US companies that have used the same trick and have cut things closer. They might get a sudden and unwelcome bill...

          1. I. Aproveofitspendingonspecificprojects
            Paris Hilton

            Re: Actually, what about the loans?

            It should not be viewed as tax and that is probably how someone suitably high enough in Ireland will be paid to see it. Viewing it a sort of Dan Geld to stop the Tea party declaring war on them and then possibly the rest of Europe (most likely for having too many Muslims.)

            The idea of having the Tea Party faction at war with you is not as funny as it seems, although the idea of being attacked by the likes of Bush, Palin and Trump sounds hilarious. The evil schemers behind that shit hole are the Koch Brothers and Dirty Rupert Murdoch. Even if they do manage to provide their own calamity, it won't cost them anything but the USA and look at what Bush managed to destroy in Iraq etcetera.

            1. TAJW

              Re: Actually, what about the loans?

              Not surprisingly, another left wing lunatic outrageously works a flame post toward conservatives into a subject that it is impossible to blame them for. None of the people you hate so much could possibly have any influence over the EU courts or what Ireland taxes Apple or Starbucks. Two of your favorite cows are getting gored and you just have to try, don't you? Sorry, nobody buys your paranoid tirades any more, especially when you invoke the dreaded 'it's Bush's fault' manta. The lefties have become a complete joke.

        2. John Sager

          Penalties?

          Have Apple actually done wrong here? They were offered a deal by the Belgian govt, which the EU have now said is illegal state aid. So if anything it's the Belgian govt which is in the wrong. Apple can easily say they accepted the offer in good faith. No doubt the devil is in the details though.

          1. Tom 7 Silver badge

            Re: Penalties?

            I would imagine Apples lawyers earn a lot more than the Belgian governments and any Belgian government lawyer that saw the illegality of this was outsourced to Apple asap. And Apple would have had a very very big influence on the way the offer was made.

            As they say ignorance is no excuse.

          2. fruitoftheloon
            Happy

            @John Sager: Re: Penalties?

            John,

            I am with you on that matey, (when) my nascent business actually makes a profit (bit of luck circa 2017/2018) I won't pay a penny more in tax than I am rightfully required to do under law.

            If there are R&D or 'regional development grants' or somesuch available I fully intend to make use of them!

            Of course, anyone running their own (or their shareholders business) may elect to pay more tax than is due, were I an Apple shareholder and it became known that Apple WERE NOT minimising the tax due, I would be a grumpy bunny...

            Regards,

            Jay

          3. jonathanb Silver badge

            Re: Penalties?

            Apple uses a different scheme, in Ireland rather than Belgium.

            Apple Operations International is registered and tax resident in Ireland. It pays money to Apple Investments International which is registered in Ireland, but controlled from Texas. It isn't tax resident in Ireland because no activity takes place there, and it isn't tax resident in Texas/USA because it is registered in Ireland, so pays no tax anywhere in the world. This is known as the "Double Irish" loophole.

          4. SquidEmperor

            Re: Penalties?

            That's the great thing about being the taxman, you can change the rules after the game and act as if these were always the rules and retrospectively apply penalties. Neat trick. My wife might be a taxman now I think about it.

            1. ToddR

              Re: Penalties?

              Nice on architeuthis

          5. Naselus Silver badge

            Re: Penalties?

            "Have Apple actually done wrong here?"

            Annoyingly enough, no, they haven't. And I say that as one who hates Apple and would dearly love to see them screw up.

            It's basically the Irish government being prosecuted for cheating at the rules of the game. The punishment they are likely to face is being forced to charge Apple a bunch of back-taxes and charge them an extra few % ever after - in other words, Ireland has been naughty and so must now collect more money. Apple have done nothing wrong here aside from accepting an offer from a government which, in hindsight, turns out to be against EU rules, and so they have to pay extra - but in tax, not in penalties or fines, because they aren't guilty of any wrongdoing.

            So yeah, not really a thread where Apple-bashing makes sense.

        3. macjules Silver badge

          Re: Actually there will be ZERO cost for Apple to pass on

          I shouldn't think that Eire would want to impose penalties as well. It is known as not putting your hand under the goose that lays the golden eggs, just in case you get a handful of goose excrement instead.

        4. Anonymous Coward
          Anonymous Coward

          Re: Actually there will be ZERO cost for Apple to pass on

          Here they're not acting illegally; the Belgium Government passed laws that Apple (and others) rely upon, and those laws have been declared invalid by the EU Commission.

          Companies effectively have to obey the laws as passed, if those laws are subsequently invalidated how can you blame the companies, they didn't pass those laws. Should you obey the laws as the currently exist, or break them if you think they are wrong ? You may well chose to break them but you are liable for prosecution as a result.

          Virtually all this fuss about taxes anyway misses the point. With very rare exceptions the companies are obeying the law as it is written, and that's exactly how it should be. Companies don't pay tax anyway, the cost is borne in varying proportions by the customers, staff, owners and to a limited extent, the wider stakeholders. Tax a company more ? The actual tax is paid in some combinations by people.

        5. Tim Worstal

          Re: Actually there will be ZERO cost for Apple to pass on

          There will be no penalties. Because it's a "state aid" case. Meaning that whoever has done something wrong it's the government, not the company.

      2. Naughtyhorse

        Re: Actually there will be ZERO cost for Apple to pass on

        39%

        lol

        1. DougS Silver badge

          Re: Actually there will be ZERO cost for Apple to pass on

          Penalties can only be charged when there is wrongdoing. These deals are not being done in a back alley with companies handing a suitcase full of cash to the head of a country's tax department with a handshake agreement "we'll look the other way when you pay less taxes" like some third world company with rampant bribery.

          It is the EU that is forcing the issue here, not the individual countries. Ireland has loved this arrangement as it meant many US companies domiciled there for tax purposes and paying taxes in Ireland instead of another country. Ireland is not going to levy penalties on Apple for following an agreement Apple had with Ireland's government, and if they did Apple would easily win in court when they produced the paperwork showing the agreement they had reached. If that agreement is eventually decided to be invalid, Apple is not liable, any more than I can be put in jail for doing something that was legal at the time I did it and only made illegal later when a new law was passed.

          If there were a penalty (though like I said I don't see how that would be possible) then Apple couldn't take a tax credit against US taxes for it. You can only take the credit against taxes paid, not fines/penalties or interest. However, even though it wouldn't be a tax credit it would still effectively be deductible. Whatever a company was fined overseas they'd pay with overseas money. That would mean less money to bring into the US in the long run, so less US tax liability.

          1. imaginarynumber

            Re: Actually there will be ZERO cost for Apple to pass on

            "These deals are not being done in a back alley with companies handing a suitcase full of cash to the head of a country's tax department with a handshake agreement "we'll look the other way when you pay less taxes" like some third world company with rampant bribery."

            Suitcase full of cash? All of the iTunes purchases made in the EU carried Irish VAT (23%). At the same time MS and Google customers paid the VAT applicable in their own country.

            S'funny how a firm is allowed to have a number of subsidiaries that pay absolutely no taxes and the authority that allows the set up gets billions in VAT that they would not have ordinarily received...

          2. John Brown (no body) Silver badge
            Thumb Down

            Re: Actually there will be ZERO cost for Apple to pass on

            "Apple is not liable, any more than I can be put in jail for doing something that was legal at the time I did it and only made illegal later when a new law was passed."

            You can be put in jail for doing something you thought was legal at the time, but which further investigation and court ruling now states was illegal at the time the act was committed

            Irish Govt. and Apple lawyers interpreted the law and in their opinion what they did was legal. The view of the investigators is that it was not legal at the time and it'll be up to the judicial system to make a ruling.

            1. Anonymous Coward
              Anonymous Coward

              Re: Actually there will be ZERO cost for Apple to pass on

              I don't think the European union has the power to arrest and imprison people or companies.

        2. DougS Silver badge

          @Naughtyhorse

          Is your "lol" because of how high 39% is, or because you think that Apple wouldn't pay 39%? If its the latter you need to learn the difference between marginal and average tax rates. Apple most assuredly pays 39% on the last dollar they make, and billions more before it. They don't pay 39% on every dollar because they have some deductions and credits against income that lower their average tax rate.

          This isn't like GE and other large banks (yes, GE is essentially a bank) where they can use financial engineering to pay a rate near zero. Companies that can't do that and have little in the way of credits pay very close to 39% for the average rate. If you don't believe me, look up Walmart's tax rate - it is 37-38% most years.

          1. ToddR

            Re: @Naughtyhorse

            GE is not essentially a bank. It's as much a bank as Intel (via Intel Capital), is.

      3. JLV Silver badge

        Re: Actually there will be ZERO cost for Apple to pass on

        Problem is the US has unusually high corp taxes but ample loopholes to avoid paying them. Lower, fully collected, non-avoidable rates would serve everyone better, except tax lawyers and accountants. And where would the world be without those 2 fine professions, I ask you? Not to mention putting all the (justifiably) outraged social justice crusaders outta work as well.

        Article missing crucial bit: 8B is Europe-wide tax liability or Ireland-only? Seeing as many game Ireland tax residency.

      4. Anonymous Coward
        Anonymous Coward

        Re: Actually there will be ZERO cost for Apple to pass on

        "If Apple has to cough up an extra $8 billion in Irish taxes, that means its future US tax liability drops by an identical $8 billion"

        Surely if Apple bought in that $8 Billion they would pay 39% of $8 Billion, now they might have to pay 100% of $8 Billion?

        1. DougS Silver badge

          @AC - 39% vs 100% of $8 billion

          You're missing the difference between a tax credit and a tax deduction, and how overseas taxation works.

          If Apple makes $1 in the US, they owe 39% on it. If they make $1 overseas they owe 39% on it in the US, but only when it is brought into the US, and they get to take a tax CREDIT for the amount paid overseas.

          So if they brought in $1 that had been taxed at 10% overseas, they'd owe 29% (39-10=29) on it. Since Apple has so much money overseas, if they brought it all home tomorrow they'd owe far more than $8 billion in US taxes on it. So it is irrelevant to Apple whether they pay that $8 billion to the government of Ireland or to the government of the United States.

        2. jonathanb Silver badge

          Re: Actually there will be ZERO cost for Apple to pass on

          If they make $100 in foreign profits, they can claim up to $39 in double taxation relief for foreign tax paid on those profits. If the case goes against them, they will have to pay $12.50 in tax on those profits. At the moment they have paid a lot less than that.

          1. DougS Silver badge

            Re: Actually there will be ZERO cost for Apple to pass on

            Yes, but in the end that money WILL be brought back into the US (unless Apple figures out how to do a reverse merger like all those pharma companies are doing) When it is repatriated they will pay the difference of 39% and whatever they have paid on it. It doesn't matter to them if they have paid 2%, 12.5% or 30% on that money, they will have to make up the difference to Uncle Sam. So any savings by getting out of the $8 billion tab to Ireland is a short term savings only. If they pay it they reduce their "deferred taxes" balance sheet item by $8 billion and it doesn't change their financial picture at all.

            1. John Brown (no body) Silver badge

              Re: Actually there will be ZERO cost for Apple to pass on

              "If they pay it they reduce their "deferred taxes" balance sheet item by $8 billion and it doesn't change their financial picture at all."

              Only to the extent that that $8b is working for them as investments or even just "savings account" interest. It's not as if it's all just stored in a warehouse (I was going to say stuffed under the mattress but I don't think anyone makes a mattress that big)

              Of course, if Apple are just storing it in a warehouse, that will cost them in terms of storage space and devaluation due to inflation so I'd be quite happy to store it in my bank account and only charge them half the current interest rate so we both win.

              1. DougS Silver badge

                Re: Actually there will be ZERO cost for Apple to pass on

                Apple keeps their overseas cash in conservative dollar denominated investments, mostly US T-bills. They do this to avoid exchange rate fluctuations causing large changes in the value of their overseas holdings.

                So yes they earn interest on it, but it is pretty small. The interest is taxable income when brought back into the US (at 39%) and inflation erodes the value of the dollar one or two percent a year, so there's maybe a 1% gain in real terms per year after taxes and inflation. They would need to hold that money offshore another decade before the difference amounted to 10% of that $8 billion tax bill.

      5. TheVogon Silver badge

        Re: Actually there will be ZERO cost for Apple to pass on

        "are still due, just in the future when they bring the money into the US."

        Except when they aren't:

        http://www.ft.com/cms/s/0/839e662a-b3dd-11e2-ace9-00144feabdc0.html#axzz3xbDTaLlN

    3. TechGeezer

      ...And yet:

      As if that matters. Fanbois are dumb enough to pay the extra so it really won't matter.

    4. ToddR

      Re: Big deal!

      The little man doesn't have to buy!

  2. chivo243 Silver badge

    The cash

    What happens to the cash collected? How is is spent? Will the impact be seen by the citizens of Ireland?

    1. ratfox Silver badge
      Happy

      Re: The cash

      It's tax money. Ireland normally gets around €40bn each year, so that would be a cool +20%. Ask your politicians what they do with the money!

      1. Fruit and Nutcase Silver badge
        Alert

        Re: The cash

        @ratfox

        Ask your politicians what they do with the money!

        Are you sure that is a good idea?

        1. Ken 16 Silver badge
          Childcatcher

          Re: The cash

          Ask them anything you want, they won't give a straight answer.

      2. Rich 11 Silver badge

        Re: The cash

        Ask your politicians what they do with the money!

        In Ireland? Buy themselves bigger houses, usually.

      3. Shane McCarrick

        Re: The cash

        Well- the Irish exchequer actually managed to balance its budget last year (miraculously- and ironically- because we got a couple of billion extra in corporation tax that no-one had been expecting). The logical thing to do with an extra 8 billion- if we get it- would be to pay a lump off our national debt- Ireland's national debt is over twice as much per capita- as Greece's is- we're worse than even Italy- which is saying something. We owe over 210 billion- after our bailouts- paying a lump back on the capital- would save us on interest in future..........

    2. Loud Speaker Bronze badge

      Re: The cash

      Free Guinesses all round? With a population of 4.5 million, 8 billion will buy around 1,000 Guinesses each. And some of the population does not even drink! (I'll drink theirs).

    3. DaLo

      Re: The cash

      "Will the impact be seen by the citizens of Ireland?"

      Yes, probably as all the tech companies close down and move to out-of-the-EU tax havens and all the staff lose their jobs.

  3. graeme leggett Silver badge

    they may be able to take the hit monetarily

    But how will they spin getting caught at all.

    Point to the Irish government and say "big boys made me do it?"

  4. Chris G Silver badge

    Oi! Ireland!

    For only 1% commission I am willing to do some debt collecting.

    1. Simon Westerby 1

      Re: Oi! Ireland!

      I can undercut you -- I'll do it for 0.1%... and I'll take my hammer...

      1. Chika

        Re: Oi! Ireland!

        Don't forget to claim wear and tear on the hammer then!

    2. Fruit and Nutcase Silver badge
      Go

      Re: Oi! Ireland!

      Next time Tim Cook visits the Emerald Isle, put him in Mountjoy Prison with bail set at triple the level of the tax bill until the bill is paid in full, Litigation costs of the government to be paid by Apple.

      GO to jail

      1. Anonymous Coward
        Anonymous Coward

        Re: Oi! Ireland!

        I'll agree with you as long as they do the same to the boss of Google, MS, Adobe and a few dozen other US companies who use Eire for the same reason

        Then find a stinky prison in Luxemburg for the boss of Starbucks.

        etc

        etc

        etc

        But don't let your blind hatred of everything Apple get in your way. All these companies are a guilty as each other if one of them is guilty.

        1. Fruit and Nutcase Silver badge

          Re: Oi! Ireland!

          @AC

          I've no problem with the bosses of the big companies, whoever they may be of being personally held responsible.

          As for mooted level of 8 billion, which in the case of Apple and their cash reserves is not an issue for them, the only way the bosses will take notice is if they have something to lose - so, make it a criminal offence and also have some extra penalties such as being disbarred from being directors for say 10 years, or even life

          1. Naughtyhorse

            Re: make it a criminal offence

            It is, thats what did for capone.

            I'll leave you to draw your own parallels

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