back to article Apple hands €14.3bn in back taxes to reluctant Ireland

Apple has paid the Irish government €14.3bn in back taxes after the European Commission ruled that arrangements between the pair had broken the state aid rules. Competition commissioner Margrethe Vestager ordered the Cupertino firm to pay up the €13.1bn plus interest two years ago after an investigation ruled the emerald isle …

  1. anothercynic Silver badge

    @Arthur The Cat is right though... the point of the EU argument was that the effective tax rate Apple paid was much lower than what the standard tax rate is. Also the amount of 'revenue' and 'income' that is channelled through Ireland was substantial, but it also included dosh from outside the EU. Since it is likely that there is a taxation agreement (if you pay tax in the US, you don't pay the tax again in the EU and vice versa) between the US and the EU, Apple can effectively repatriate a lot of its profits to the US, pay the once-off reduced tax, and doesn't have to deal with the EU. Which is why this is a once-off back-tax payment deal...

    The problem with the EU's 'digital revenue tax' scenario is that if they can, the US can retaliate with the same on any EU-based company providing services to US citizens etc. It opens a whole can of worms that you really don't want to have opened. Tax laws from the sixties, seventies and eighties being dragged into the digital age are a big problem, especially in a multi-taxed-but-single-economic-bloc environment like the EU.

  2. I ain't Spartacus Gold badge

    Re: Rules are not equal

    Santa from Exeter,

    The US corporation tax scheme doesn't quite work like that. At least where the US have a dual-tax agreement - in which case you can set local taxes paid off against your US ones - and only pay the difference. Which is broadly what you can do for income tax - it's just terrible when you're in a country without one.

    So US corp taxes may be deferred on foreign profits held off-shore. Until those profits are repatriated. Which is why Apple were borrowing money in order to pay dividends and leaving so much cash invested abroad.

    Then as soon as the Irish payment was forced, they agreed to repatriate a load off cash to the USA and pay tax on it. Knowing this would be offset against the EU bill - and thus make it a political issue in the ongoing campaign to get US corp taxes reduced.

    One of the reasons all this money was sloshing round in Europe was that stupid deferrment rule. If you had to pay the tax anyway, there would be no incentive to do this. But because you can, you stick the money in bonds and hope for a lucky day when you can persuade a US government to give you a one-off tax holiday. Then bring it all back, rinse and repeat.

    The correct answer is to stop deferrment, but for the US to lower corporation tax and/or dividend tax - both being high at around 35%. An effective tax rate on dividends of 70%-ish encourages companies to hold inefficient huge piles of cash, rather than spend it or give it back to shareholders to spend. Deferrment made a bad situation worse. Oh and without dividends, companies are incentivised to reward shareholders by boosting stock values, leading to all sorts of horrible short-termism - where regular dividend payments (hopefully) encourage more long-term thinking.

  3. Anonymous Coward
    Anonymous Coward

    "An effective tax rate on dividends of 70%-is"

    That's not different from paying VAT or any sale tax, and even property taxes, with an income which was already taxed, is even worse because it's the same entity.

    Companies can still invest their profits, to create more value and jobs, and that's usually less taxed. Too much incentives to dividends may lead to shareholders forcing the company to actually invest less and pay workers less. Remember also paying dividends usually decrease the shares value.

  4. I ain't Spartacus Gold badge

    Re: "An effective tax rate on dividends of 70%-is"

    VAT isn't levied on food, housing, children's clothing, and on energy only at only 5%. I don't know US sales tax rules, but then rates are lower.

    Also, if you're going to make that argument, people paid their dividends also have to pay VAT/sales tax.

    Companies are exempt from corporation tax on what they re-invest. And that's right and proper.

    My complaint is about inefficiency. Apple have over well $100 billion in cash! They've nothing useful to use this for, and are only holding it to avoid tax. They're not an investment company, and don't invest it all that well. If it was paid to the shareholders, they'd either spend it or invest it - both of which would grow the economy. This inefficient use of capital reduces global economic growth.

    And yes, taking money out of the company reduces the share price. But that's fine, because that money has gone to the shareholders, so they've lost nothing.

  5. DougS Silver badge

    Foreign taxes paid are a credit against US taxes

    When Apple pays $15 billion to Ireland, they can take that as a credit against the US taxes they owe (or at least that was the law, I don't know if the corporate tax rate reduction congress passed removed this credit as the price for no longer taxing overseas profit but somehow I doubt it)

    Not sure if paying them to an escrow account while appeals continue counts as having "paid" them, but assuming so then Apple will pay $15 billion less in US taxes for 2018 than they otherwise would have.

  6. anothercynic Silver badge

    Re: Rules are not equal

    @Spartacus, yes... deferred taxes are an evil all of their own!

  7. Doctor Syntax Silver badge

    Re: Rules are not equal

    "The correct answer is to stop deferrment, but for the US to lower corporation tax and/or dividend tax"

    The other alternative would be for multinationals to move their corporate HQ out of the US entirely with just a US subsidiary for sales there. A subsidiary which would, of course, make vary little profit. There might not be enough incentive in that alone but if the US govt. were to insist US corporations were to put in back doors in encryption then it might provide the extra incentive.

  8. I ain't Spartacus Gold badge

    Re: Foreign taxes paid are a credit against US taxes

    DougS,

    I don't know if Apple can count the Irish payment as tax against US corp tax - but highly suspect it. This is because the week Apple were forced to pay it, they announced they were repatriating something like $40bn of off-shore profits to the US. Which basically would cost them zero corporation tax, accounting for that huge payment to Ireland. Which I assume was a pretty cynical piece of political lobbying.

    I could be wrong, an it's an utter coincidence. But the fact that when they were forced by complaining shareholders to start paying dividends, they did it by selling bonds while holding $140 billion in cash, gives me pretty good grounds for that suspicion.

  9. DougS Silver badge

    Re: Foreign taxes paid are a credit against US taxes

    No, the reason they repatriated that nearly $40 billion is because Apple was smarter than other companies. They had been making entries in their books for deferred US taxes on their offshore money, and just happened to be doing so assuming a 15% rate (they got lucky on that part, since the actual rate ended up being 15.5%) When the law was passed that deferred tax entry was about $39 billion.

    They brought that money in to balance the accounting entry and eventually pay the tax (they have eight years to do it, not sure if they did it up front or will pay over time) as they would now actually owed the tax instead of deferring it forever. Had nothing to do with Ireland - it would have been stupid to bring that money back. Why should they bring money back to the US, pay tax on it, then send it back out of the US to pay Ireland? They used overseas money that had never been taxed in the US (and never will be taxed in the US, since the liability for those Irish/EU taxes was incurred prior to the US tax law being changed) and thus saved about $2.3 billion they would have otherwise paid had they brought the money home and then sent it back out again.

  10. Anonymous Coward
    Anonymous Coward

    Greeetings from Appleonia

    It is with great joyment I gave you geetings, I am prince cook of Appleonia, and I need to transfer

    14.3Bn from my bank but I need your help great people of Ireland. Send me bank details and I will transfer the money. You need to pay the transfer fee via western union....

    Obviously this is just money laundering on a rather large scale, whilst trying to hide it as a tax payment held in escrow...

  11. deive

    14300000000 / 4803748 = 2976.84

    Seems like almost 3k for every person in Ireland, unless I have got the wrong billion or missed a 0 somewhere...

  12. Semtex451 Silver badge
    Windows

    Can't be 4.8M in the Republic ....already, shurley not?

    Maybe on the entire island, no?

  13. ratfox Silver badge

    4.77M in the Republic, 6.58M on the entire island.

  14. Steve Davies 3 Silver badge

    All people on the Island

    of Ireland are according to the Irish Constitution citizens of the Republic. That's why people born in the North can decide to represent the Irish Republic.

    This is from memory so the situation might have changed.

  15. Lars Silver badge
    Happy

    "Can't be 4.8M in the Republic ..Maybe on the entire island, no?"

    No, but 5,011,102 (July 2017 est.) according to:

    https://www.cia.gov/library/publications/the-world-factbook/geos/ei.html

  16. I ain't Spartacus Gold badge
    Coat

    By the time the appeal is finished in a year or two, €3k per Irish citizen will almost be enough to buy each of them a new iPhone...

  17. Arthur the cat Silver badge

    By the time the appeal is finished in a year or two

    Ooh look, an optimist. More like a decade or two I suspect.

  18. Doctor Syntax Silver badge

    Re: All people on the Island

    "That's why people born in the North can decide to represent the Irish Republic."

    It's also why they can claim an Irish passport & retain EU citizenship which is very useful in these troubled times. My children have done just that.

  19. Anonymous Coward
    Anonymous Coward

    14.3 billion...at 350 million per week, that'd last you around 40 weeks. Just imagine what you could do with that sort of money.

  20. Aristotles slow and dimwitted horse Silver badge

    With that sort of cash...

    You could buy yourself a nice Ireland somewhere; or a government, as Apple seemed to have thought they had done.

  21. I ain't Spartacus Gold badge

    €14.3bn is around the UK's annual contribution to the EU. The £350m a week figure included our rebate, which we obviously don't actually pay (bringing it up to €18bn ish). Our net contribution is something around the €8bn mark.

    Isn't that also about half a Chunnel?

  22. Anonymous Coward
    Anonymous Coward

    Now there's an irony, forcing an Irishman to take money off you.

    As it's been an illegal tax break and broken EU rules surely the Irish gov should now be fined €14.3bn by the EU.

  23. outnumbered

    My employer recently set up a new software development centre in Ireland, with a direct negative impact on UK jobs, primarily because of the (now illegal) tax breaks that they get there.

  24. steviebuk Silver badge

    Stick it..

    ...into the NHS. It could do with a bit of change.

  25. PiltdownMan

    Apple have been quite clever here...

    I assume that by putting the money into escrow, they will no longer be accruing interest bills against them. So if the whole legal wrangle does take a decade or so, Apple will not have any more interest to pay.

  26. DougS Silver badge

    Re: Apple have been quite clever here...

    How was Apple clever? They were ordered to pay this money into escrow, they didn't have a choice. I guess it helps them, to the extent that the interest they were being charged was more than the money they'd make on it. If so, they should have insisted on paying into escrow the moment the case came up!

    And it may well cost Ireland millions per year to hold the money, depending on what form the escrow takes.

Page:

POST COMMENT House rules

Not a member of The Register? Create a new account here.

  • Enter your comment

  • Add an icon

Anonymous cowards cannot choose their icon

Biting the hand that feeds IT © 1998–2018