Tim Cook: A Message to the Apple Community in Europe

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Aaron David

A fourth generation Californian, befuddled.

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25 Responses

  1. Avatar Oscar Gordon says:

    If anyone can explain exactly how the commission is justifying the act, I’d love to have it explained.Report

    • Avatar Saul Degraw says:

      EU anti-trust and competition law. Apple seems to have been offered tax breaks that no other company was offered in exchange for placing jobs in Ireland. My guess is that EU competiton law would say you can’t make one off deals like this. Ireland could have offered the same tax rate to all businesses but not just one company.

      I don’t see this as a highly controversial proposition.Report

    • Avatar Damon says:

      “We want the money!” What “justification” does gov’t ever need to provide other than that?

      If Apple complied with the Irish law, they should tell the EU to go pound sand. If Ireland did something that they shouldn’t have vs the EU rules, that’s all on Ireland.Report

      • Avatar Mo says:

        How is it about the EU wanting the money if the EU won’t see a penny. All of the money will go directly to the Irish government. And the Irish government doesn’t want it because they want their special tax haven money. This is a lot more complex than ideologues claim and is much more about the structure of trade agreements and how governments deal with BEPS.

        Saying it’s all about the EU wanting Apple’s money in this case is essentially a giant flashing billboard that the person that is saying this does not know anything about the situation and is purely spouting ideology. However, it is part of a larger battle by governments against BEPS to maintain their tax base long term.Report

        • Avatar Damon says:

          The eu considers Ireland’s tax rates in violation of their policies and insists that Ireland tax Apple per their guidance. Can’t have states competing for tax advantages in dealing with corporations. That’s the issue. My top comment was just a snarky comment to Oscar on the “justification” needed for a gov’t to claim a need for the money.Report

          • Avatar Mo says:

            The EU does not have a problem with Ireland’s tax rate (which is 14%). It has an issue with Ireland’s special tax treatment of specific companies. Trade agreements (which is a major part of what the EU is) covers things like subsidies, which is what differential tax treatment is. The EU and WTO, in exchange for having certainty and freer trade, has rules around otherwise domestic issues like currency, subsidies and conditions. Even socialists like Mitt Romney want to have extranational bodies regulate sovereign concerns.

            Also, frankly, the issue is less about the money made in Ireland being taxed at these rates. It’s the profit being made in France, Germany, etc. that’s being marked as Irish profit being booked at these rates. However, in a non-EU world, they would not be able to do this because Apple would no longer be able to count the money as “Irish”. So they want the benefit of being in EU (booking revenue in other parts of the EU as Irish) without the consequences of being in the EU (following EU subsidy rules).Report

            • Avatar Damon says:

              And nothing you said has to do with Apple. Apple and Ireland made a deal. If the deal doesn’t “agree” with the EU’s policies, well, that’s the EU and Ireland’s issue to hash out, not Apples.Report

              • Avatar Mo says:

                Except Apple was a principal in the case, it’s doubtful Ireland just sprung it on them and Apple coincidentally structured their company in an odd set of Russian nesting dolls? “Doesn’t ‘agree'” is an odd way of saying illegal.Report

              • Avatar Michael Cain says:

                I wonder what Apple’s European accountants and lawyers told the decision makers about the legality of the arrangement. Surely someone somewhere along the line said, “You know, this seems to be exactly the kind of tax-avoidance shenanigans that some of the EU regulations are intended to prevent. Perhaps we should get an opinion from someone other than Ireland, which has a vested interest.”Report

              • Avatar Mo says:

                Once the Swiss and their banks knuckled under to the US and the EU on banking secrecy to evade taxes, the writing was on the wall for assorted tax shenanigans.Report

              • Avatar Damon says:

                Hell, even if Apple was….it’s a deal between Ireland and Apple. If Ireland is in some violation of EU regs re tax rates to corporations, that’s all on Ireland.Report

          • Avatar DensityDuck says:

            People want to come here illegally and work? “That’s wrong, everyone should have to follow the same laws!”

            People want to give tax breaks to big companies? “Well every state should just get to set their own policy, y’know.”Report

    • Avatar Mo says:

      The best way to think about it is akin to a WTO ruling about unfair tax subsidies. Ireland has a statutory rate of 15%, however, due to a combination of playing a shell company game and a deal with the local tax authorities, they pay between 0.005% and 4.9% on their European taxes. The EU, like the WTO, is looking at special tax benefits as equivalent to subsidies and, if outside the limits of trade agreements, are illegal. The claim is that this benefits Apple over competitors.Report

  2. Avatar Oscar Gordon says:

    Hrmmm, I think I phrased that wrong. I get why they are upset with Ireland, what I’m curious about is how they justify telling Apple it owes $14B in back taxes without making some kind of claim that Apple was in violation of the law?Report

  3. Avatar Dark Matter says:

    It is a matter of public record that Apple Inc. is the single largest taxpayer to the Department of the Treasury of the United States of America with an effective tax rate of approximately of 26% as of the Second Quarter of the Apple Fiscal Year 2016.[392]

    In 2015, Reuters reported that Apple had earnings abroad of $54.4 billion which were untaxed by the IRS of the United States. Under U.S. tax law governed by the IRC, corporations don’t pay income tax on overseas profits unless the profits are repatriated into the United States and as such Apple argues that to benefit its shareholders it will leave it overseas until a repatriation holiday or comprehensive tax reform takes place in the United States.[393][394]

    On August 30, 2016, after a three-year investigation by the EU’s competition commissioner that concluded that Apple received “illegal state aid” from Ireland, the EU ordered Apple to pay 13 billion euros ($14.5 billion), plus interest, in unpaid taxes.[13] Specifically, the commissioner found that Apple had benefitted from Irish Department of Revenue tax rulings that allowed it to split the profits recorded by Apple Sales International internally between its Irish branch and a stateless “head office” entity lacking employees or premises (permitted under Irish law until 2013).[395]
    https://en.wikipedia.org/wiki/Apple_Inc.#Tax_practices

    Also: https://en.wikipedia.org/wiki/Criticism_of_Apple_Inc.#Tax_practices

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    So basically the Commission is trying to say what the law should have been before 2013. I suspect we’re looking at a “spirit of the law” vs “letter of the law” sort of thing. Multinationals who have lots of intellectual property have HUGE amounts of choice in terms of where to pay taxes on their stuff. Given that country’s tax rates are more than high enough to justify these sorts of games, these games are played.Report

    • Avatar Mo says:

      @dark-matter That effective tax rate is based on deferred US taxes if they repatriate their foreign profits at existing tax rates. Judging by their past decade of behavior the chances of that happening are slim and none. They have a giant tax liability sitting on their balance sheet. The real tax rate they’ve paid on a cash basis is closer to 18%. The taxes they’ve paid on international profits were 4.5%.

      The money that was taxed at the 0.05% is money that they claimed were exempt from taxes because they were set aside to be repatriated and pay taxes. Apple’s statement about waiting until a tax holiday or comprehensive tax reform likely read to the EU as “never” and therefore meant that they could go after them for it.Report

      • Avatar Dark Matter says:

        @mo

        The money that was taxed at the 0.05% is money that they claimed were exempt from taxes because they were set aside to be repatriated and pay taxes. Apple’s statement about waiting until a tax holiday or comprehensive tax reform likely read to the EU as “never” and therefore meant that they could go after them for it.

        Apple is playing the long game, waiting 10 or 20 years for a tax holiday makes a lot of sense from their standpoint. That this is much longer than the election cycle makes it politically painful for politicians, but that seems self inflicted.Report