back to article When Irish eyes are filing: Ireland to appeal Europe's $15bn Apple tax claw-back

The Irish government formally decided to appeal the European Commission's $14.5 billion back-tax demand on Friday. "There are some very important principles at stake in this case," said the country's finance minister Michael Noonan. "A robust legal challenge before the courts is essential to defend Ireland's interests." "The …

  1. Destroy All Monsters Silver badge
    Paris Hilton

    Expect mobsters doing "protection money claw-back" operations soon...

    I'm sorry, but the "claw back" ALWAYS works in direction of the tax-payer, never the the tax-extractor even if Big State defenders and other riffraff would like this to be acceptable Newspeak.

    It's a "tax", right.

    A "tax" is never friendly, doesn't initially belong to the one extracting it and requires guns and badges to be shown in order that the extraction may proceed speedily.

    1. Alien8n

      Re: Expect mobsters doing "protection money claw-back" operations soon...

      You've never had Child Tax Credits have you?

  2. Pseu Donyme

    A no-brainer ?

    I wonder if Apple's lawyers and accountants knew full well that this could happen, but went ahead anyway: it seemed likely to work and the worst that could happen was that they'd have to pay the tax they owed in the first place.

    1. Anonymous Coward
      Anonymous Coward

      Re: A no-brainer ?

      If so then their PR department weren't involved ... "let's go for this tax dodge that almost certainly won't work so it won't save us any money and when people realize what we were tryimg to do the publicity will be toxic to our brand - I know it sounds madness to do this ... but let's think different!"

    2. Doctor Syntax Silver badge

      Re: A no-brainer ?

      "it seemed likely to work and the worst that could happen was that they'd have to pay the tax they owed in the first place."

      ...by which time they'd have moved on anyway.

    3. Yet Another Anonymous coward Silver badge

      Re: A no-brainer ?

      >worst that could happen was that they'd have to pay the tax they owed in the first place.

      Which they can immediately knock off their US tax bill - it isn't going to cost them a cent

      1. katrinab Silver badge

        Re: A no-brainer ?

        Not immediately, only when they repatriate the money and actually pay the US tax.

        1. Roland6 Silver badge

          Re: A no-brainer ?

          Not immediately, only when they repatriate the money and actually pay the US tax.

          No, they will raise a loan in the US to pay off the overseas debt. The loan will be set against any US tax that may be due.

          The question is who is going to benefit from the monies currently holed up in the Irish shell company. I suspect Apple will only repatriate it to the US if there is a tax amnesty - hence the reason for their lobbying the US government. The UK could benefit, particularly if it effectively moves out of the EU but retains many of the trading arrangements arising from being a member of the EU.

          1. Anonymous Coward
            Anonymous Coward

            Re: A no-brainer ?

            The problem is that there already WAS a tax holiday allowing companies to repatriate overseas cash at only 5.25%, back in 2004. Given that the standard corporate rate is 39.4%, it makes a LOT of sense to keep the cash overseas indefinitely, hoping for another tax holiday. The savings are simply too huge to ignore. If they do another tax holiday, all it will do is cause companies to bring back overseas cash that one time, and then start accumulating it again waiting for the next one - which will be seen as even more likely since it would have happened twice.

            If they introduced a permanent lower rate for bringing overseas cash into the US instead of another tax holiday, that would fix the problem, as most companies would assume there is little chance of another tax holiday after the new permanent rate went into effect.

          2. Anonymous Coward
            Anonymous Coward

            @Roland6

            Apple has only borrowed against about a quarter of the overseas cash pile. Carl Icahn was trying to get Apple to take on a lot more debt - effectively to borrow against the entire amount - but he was unsuccessful in swaying Apple's board.

            1. Roland6 Silver badge

              Re: @Roland6

              @DougS re: Icahn

              The shame about Icahn is that he has sufficient wealth to buy sufficient shares to gain board level access, otherwise I suspect many wouldn't give him the time of day.

              Icahn would have wanted Apple to borrow against the entire amount AND give a big load back to shareholders. Whereas, Apple, like any sensible business would want to retain the monies in the business. In fact given Apple's history, it is not surprising that Apple would want to horde significant amounts of money.

              So as you point out, Apple's reticence or prudence in incurring debt could be handy in this instance.

              1. Anonymous Coward
                Anonymous Coward

                Re: @Roland6

                I actually agree with Icahn though. Not the "borrow as much as the cash pile" but "return substantially all the cash pile to investors". Apple doesn't need $200 billion in cash. They don't need $20 billion in cash, given the rate at which they generate cash.

                If Apple repatriated all their overseas cash (for whatever reason) I'd expect them to declare a massive one time dividend/buyback to get rid of at least 80% of what's left after US taxes are paid on it. If they continued to sit on a 12 digit cash pile in the US, I'd be very worried as a shareholder about what their intentions were. Nothing good can come of a company holding that much cash.

  3. toplard

    What if taxation is inherently unjust?

    Think about this with great care. Taxation is unjust, in and of itself. How so? Well there's no guarantee government will return a benefit in direct proportion to what that take by force. What's more, 95% of all taxation comes out of earned incomes, while unearned incomes are virtually untaxed. These unearnds are about the same amount as the earned so would form an ideal alternate tax base. Show me any politician ready to stand up and point this out. Meanwhile, Apple and the Irish government have risen significantly in terms of nobility.

    1. streaky

      Re: What if taxation is inherently unjust?

      It's not a question of taxation or if it's just or not. It's a question of it's not the tax rate offered to every other company that runs cash through Ireland. It's a competition question. Faster the Irish figure this one out the better for all concerned.

      It's not even a case of Ireland's actual tax rate being unfair to the rest of the EU despite other countries have to pick up the costs of Apple doing business in their countries (although it should be) it's that the Apple tax rates miss the mark on fundamental issues of competitiveness. It's not even a question of the fact that what is going on being massive tax evasion. It's just simply that Apple isn't paying even Ireland's tax rate and that isn't on offer to me if I start up a business there.

      1. Doctor Syntax Silver badge

        Re: What if taxation is inherently unjust?

        "It's not even a question of the fact that what is going on being massive tax evasion."

        Of course not. That wasn't even what the EU were looking at and would have been none of their business. It was a matter of state aid illegal under EU rules. What's odd about this is that the arrangement was in operation for a long time before any investigation started.

      2. martinusher Silver badge

        Re: What if taxation is inherently unjust?

        Taxation is how we fund society. Its only unjust when the burden falls disproportionately on one sector of society. Corporate tax evasion means that we all pay more tax to fund the shortfall.

        What's caught Ireland out is that they're a member of a Federation, the EU. As such they have to play by the EU's tax rules -- if multinationals want a presence in the EU then they can't find a little sub-state somewhere and bribe it to give it favorable tax treatment. They'll try, of course, but sooner or later there will be a reaction, in this case 19 billion of them.

        Post Brexit the UK could set up its own corporate tax regime. It used to have a few close-by offshore tax havens -- Isle of Man, Jersey and so on -- but the UK tax authorities eventually closed them down. If they manage a decent low tariff trading agreement with the EU expect all those multinationals with an Irish parentage to decamp to the UK.

        1. gnasher729 Silver badge

          Re: What if taxation is inherently unjust?

          "It used to have a few close-by offshore tax havens -- Isle of Man, Jersey and so on -- but the UK tax authorities eventually closed them down. "

          They haven't closed down Gibraltar. Well, maybe Spain will.

        2. Commswonk

          Re: What if taxation is inherently unjust?

          If they manage a decent low tariff trading agreement with the EU expect all those multinationals with an Irish parentage to decamp to the UK.

          I'm not sure that that would go down all that well. If the UK post - Brexit enabled some companies to have significant advantages by being UK based the EU might see that as being detrimental to its interests, and I suspect that they would be right. If what Ireland is doing now is wrong under EU law then while a non - EU UK doing it might be perfectly all right (because we would no longer be an EU country) the EU would probably see it as cocking one snook too many.

          If the UK wants a decent deal with the EU after it leaves, trying to offer (say) Apple an easy way to avoid paying tax on money earned in the EU would, I suspect, be counter - productive to wider UK interests. It would more or less force the EU to implement countermeasures in an attempt to achieve a greater degree of "balance".

          I suppose I had better admit to being a Brexit supporter (that should ensure a few downvotes) but I would roundly condemn any attempt to have policies that could be seen as "trying to screw the EU". The EU would simply respond in kind, and the UK would deserve it.

    2. Voland's right hand Silver badge

      Re: What if taxation is inherently unjust?

      The inefficiency of the government's use of tax revenue is _BENEFICIAL_ in the big picture.

      Taking money out of circulation into a Leprechaun jar at the levels practices by the companies the size of Apple creates significant deflationary pressure.

      This has to be compensated for by government doing quantitative easing which is orders of magnitude less efficient than direct spending by the government because now the government is not just spending, it is printing money and wasting it to buy various assets it does not really need. On top of that, it devalues our savings and destroys our future. Want to retire? Well, then out of all your wishes allowing Leprechauning is probably the last, because healthy inflation in the ~ 2% range without the need for the government to defibrillate the economy is essential for you to have something to retire with.

      So I'd rather have them spend our taxes _INEFFICIENTLY_ on what they are supposed to spent on - infrastructure, education, fundamental research and defense. Better than them not having any tax revenue at all and 10-15%+ worth of GDP annually being taken out of circulation into Leprechaun jars (this is the current estimate for Eu). If the inefficiency is the cost of preventing Leprechauning of profits for decades, well, so be it. It is a small cost to pay compared to the benefits of keeping the money _IN_ circulation.

      As far as it not being unfair state aid, well when I file accounts of my limited company I do not get 0.0005% tax rate. So I could not care who, how and when offered this rate it walks like a form of illegal state aid, it quacks like a form of illegal state aid, it is a state aid.

      1. streaky

        Re: What if taxation is inherently unjust?

        So I could not care who, how and when offered this rate it walks like a form of illegal state aid, it quacks like a form of illegal state aid, it is a state aid.

        It walks and quacks like state sponsored tax evasion. Which might even be fine if the rest of Europe wasn't bailing out that state with emergency loans because the markets won't lend them cash at a rate they can afford because their economy is completely fucked. I don't get how nobody has tied this together yet.

        As I stated on twitter earlier, if they won't collect on the bill their bailout loans should be recalled.

        1. Doctor Syntax Silver badge

          Re: What if taxation is inherently unjust?

          "It walks and quacks like state sponsored tax evasion."

          That's an oxymoron.

          The state says what the tax is. Evasion is the taxpayer failing to pay that. If the state sets the tax at a low level which is then paid there's no evasion. The EU seems happy that the tax as set was paid. They're classifying the low tax rate as (illegal) state aid.

          1. streaky

            Re: What if taxation is inherently unjust?

            That's an oxymoron

            No, it isn't. One state is sponsoring tax evasion in other states. And as I said then the other states have to bail out that state because they're running enormous budget deficits because they're not charging these companies who are costing them money, by the way, the tax that even they say they charge corporations.

            It's a something-moron but it isn't an oxymoron. As I said nobody is even taking Ireland to task on this (they should be though) - just simply that it's anticompetitive for companies in their own state.

            Ireland had a rating of A+ from S&P and AAA from Moody's, with outlooks varying from Stable to Positive.

            Educate yourself

            I'm educated plenty, thanks. Is it really not established in the zeitgeist that the ratings agencies, especially Moody's/S&P, have no idea what they're doing?

            1. streaky

              Re: What if taxation is inherently unjust?

              Just to.. y'know..

              All this nonsense for a massive 5500 Apple employees in Ireland; and most of those probably aren't even Irish and many of them will be low-skilled jobs (I know a couple of people who work at Apple in Cork so I know what kind of work they're doing). I really don't see what the country gets out of the deal.

            2. Doctor Syntax Silver badge

              Re: What if taxation is inherently unjust?

              "As I said nobody is even taking Ireland to task on this (they should be though) - just simply that it's anticompetitive for companies in their own state."

              You've almost got it. They're not taking Ireland to task on tax evasion. You've nailed it in one word: anticompetitive. Anticompetitive for companies in another state is state aid and that's exactly what they're being taken to task over. I said "almost" because you still think they should be being taken to task for something different.

              "One state is sponsoring tax evasion in other states."

              In what way? Apple aren't being accused of evading taxes, not even in Ireland so how can anybody be "sponsoring" them to do so - whatever that might mean?

              "State aid" and "tax evasion" have specific meanings in law. You can't successfully accuse someone of one thing when the circumstances that define it don't fit that particular case. You should at least consider the possibility that the EU's lawyers understand the definitions better that you do.

          2. Naselus

            Re: What if taxation is inherently unjust?

            "The state says what the tax is. Evasion is the taxpayer failing to pay that."

            That doesn't make what he said an oxymoron. The state can say what the tax is, and then ignore or be complicit in the evasion.

            Of course, this has very little to do with tax evasion (at best avoidance, and even then the EU didn't give a toss about it); just noting that merely because the state says what the tax is doesn't mean it cannot sponsor evasion.

            1. streaky

              Re: What if taxation is inherently unjust?

              Strange place we got to in society where the definition of avoidance has been changed to not include the word "evade".

              My thing, fwiw, was to point out the fundamental falw in the EU model where one state can offer up absurd rates that hack away at the economies of other states and then those same other states having to pick up the bill when it all goes wrong.

              €22.5 billion from the European Financial Stabilisation Mechanism (EFSM),

              €22.5 billion from the European Financial Stability Facility (EFSF) and bilateral loans from the Euro non-member states United Kingdom, Denmark and Sweden

              €22.5 billion from the International Monetary Fund (IMF)

              Just throwing that out there.

        2. Snorlax Silver badge

          Re: What if taxation is inherently unjust?

          Which might even be fine if the rest of Europe wasn't bailing out that state with emergency loans because the markets won't lend them cash at a rate they can afford because their economy is completely fucked.

          You might want to read a newspaper every now and again sunshine.

          Last time I looked at the financial pages during the week, Ireland had a rating of A+ from S&P and AAA from Moodys, with outlooks varying from Stable to Positive.

          Educate yourself

    3. Anonymous Coward
      Anonymous Coward

      Re: What if taxation is inherently unjust?

      Think about this with great care.

      Please do.

      Taxation is unjust, in and of itself. How so? Well there's no guarantee government will return a benefit in direct proportion to what that take by force.

      In a democracy, you get to vote. You can also run for govt and hence have a hand in how taxes are spent. It's not a perfect system but you can make a difference.

      What's more, 95% of all taxation comes out of earned incomes,

      Citation needed and that comment doesn't really make sense. I would suggest that 100% of all taxes are paid out of earned income by definition. Earn: obtain (money) in return for labour or services.

      while unearned incomes are virtually untaxed. These unearnds are about the same amount as the earned so would form an ideal alternate tax base.

      What in earth is an unearned income here? I can only presume you mean stolen and I don't think most people steal half their income.

      Show me any politician ready to stand up and point this out.

      Political suicide.

      Meanwhile, Apple and the Irish government have risen significantly in terms of nobility.

      Debateable - can't be arsed.

    4. Steve Knox

      Re: What if taxation is inherently unjust?

      Cart before the horse.

      The vast majority of tax is not investment in government for future benefit. Most of it is payment for benefits already received from government. Your taxes pay for your education already received, the roads you travel which are already built, the infrastructure you depend on every day.

    5. Philip Lewis

      Re: What if taxation is inherently unjust?

      I have no earned income, but inherited a brick shithouse.

      I didn't ask to inherit it, but I did. It stands on a lovely bit of land which came with the shithouse on it. When I inherited it, it was valued by the state at $100 and the state took $15 in tax because. In order to pay this $15, I had to borrow some money, I used the shithouse as collateral. I pay interest to an evil bank on a regular basis, money which I am forced to borrow, adding to my principal debt. I also pay $2 a year to the tax department in land/building taxes based on the public valuation of my shithouse and the land on which it stands. There are also water rates, garbage collection services and so on paid semi-annualy. I must borrow this money each and every year. So far I have borrowed $47 additional dollars to pay taxes and services to the state for my ownership of the shithouse.

      I would like to sell my shithouse as a form of tax evasion - but no one wants to buy it at any price.

      Recently, the state revalued my shithouse, noting that brick buildings sold nearby seem to have risen substantially of late. My shithouse is now valued at $200. So it's now $4 a year in land/building taxes based on the state's new assessment. I shall have to borrow this extra money. An increase in land/building taxes is being discussed in council, this amount will rise shortly. I predict this will not be the last tax increase.

      I would like to give my shithouse away as a form of tax evasion - but no one wants to have it.

      A recent change in zoning of the land upon which my shithouse rests, made said land extremely valuable (it is now residential) according to the state, thus the taxes I owe will be raised to reflect this new zoning and valuation. The shithouse is on a small strange shaped block, and building regulations prohibit building a residence on this parcel of land, so no one will want to buy my shithouse for the land to build a residence. The new valuation is likely to be an order of magnitude above the current valuation, as the state needs to raise money to put in "services" for the coming residental area. As a wealthy landowner, apparently I must pay my fair share.

      I would like to demolish my shithouse as a form of tax evasion. I am unable to do this, it is illegal.

      It seems my shithouse was once owned by Thomas Crapper and it is rumored that his famous invention was first tested in my shithouse. Thus, the building is listed, and it may not be demolished or changed in any way. Further, I am thus required by law to maintain my shithouse so that it does not fall into disrepair. The "old buildings department" recently advised me that under threat of legal action, I had 14 days to comply with their directive that a new roof be placed on my shithouse. The previous roof (thatched) had disintegrated due to age and lack of regular thatchery. The thatcher has quoted me $3842 + materials for a new thatched roof, and this was the discounted price!

      I will need to borrow this money and now pay interest on it.

      However, it seems the bank is no longer willing to accept my shithouse as collateral for the loans that I keep taking out, while the state continues to invent new and creative ways to exert state authorised power over me with respect to all aspects of my shithouse, resulting in new taxes and charges I must pay, or be sent to prison. As I can no longer raise cash to service my bank debt, they are threatening foreclosure and advising the start of civil actions to recover their loans and interest due.

      Soon the bank could own my shithouse. But they do not want it, for the same reasons that I never wanted it as its primary purpose is a piece of capital from which the state can legally extract money directly from the owner. The bank will thus not foreclose. They will sue. I will need to seek Legal Aid from the state.

      I think I need a shit, while I evaluate my options. Luckily, I will be able to "save a penny", having my own convenience for just this eventuality.

    6. DavCrav

      Re: What if taxation is inherently unjust?

      "What if taxation is inherently unjust?

      Think about this with great care. Taxation is unjust, in and of itself. How so? Well there's no guarantee government will return a benefit in direct proportion to what that take by force. What's more, 95% of all taxation comes out of earned incomes, while unearned incomes are virtually untaxed. These unearnds are about the same amount as the earned so would form an ideal alternate tax base. Show me any politician ready to stand up and point this out. Meanwhile, Apple and the Irish government have risen significantly in terms of nobility."

      None of what you said makes taxation inherently unjust. At best, it would make our implementation unjust, not the concept itself, so it wouldn't be inherent.

    7. Doctor Syntax Silver badge

      Re: What if taxation is inherently unjust?

      "Think about this with great care. Taxation is unjust, in and of itself."

      We've thought about it and as you can see we disagree with you. Perhaps it's you who should do more thinking about it. Two questions to think about:

      1. What is it that you can do for yourself as an individual better than you could do as part of the larger community or, to turn it round, what are all the other things that you can't do better for yourself that are better done collectively?

      2. For those things that are better done collectively, how do you (as a member of the community) finance them?

    8. Anonymous Coward
      Anonymous Coward

      Re: What if taxation is inherently unjust?

      What if profit on capital investment is inherently unjust? Because money is an expedient tool and an arbitrary measure of value that varies wildly against real value to society? What if taxation is the mechanism we use to regulate this imperfect expedient to restore justice in a democracy?

      Think about this with great care.

  4. Anonymous Coward
    Anonymous Coward

    Banana Republic

    Which is also a Boomtown Rats song.......they're Irish too.

  5. Anonymous Coward
    Anonymous Coward

    Taxation is unjust, in and of itself

    Whilst correct, it is also essential to any standard of living deemed acceptable in any developed country.

    Meanwhile, Apple and the Irish government have risen significantly in terms of nobility.

    In your eyes maybe. All the European citizens who have seem Apple willfully dodge paying the prevailing rate of local taxes by what amounts to a barely legal fraud, aided and abetted by the Irish government may think that the arrangements that Apple set up were squalid, dishonest and ignoble.

    You may recall that Apple wanted access to (as one example of many across Europe, I daresay) the UK high court in one of its disputes with Samsung. So the funny thing is that in that case, Apple wanted access to the British justice system. Its just that they don't want to pay their share for the rule of law, provision of courts, access to justice and maintenance of IP rights in the UK. My humble opinion on the basis of that and other information is that Apple are socially irresponsible hypocrites, and richly deserve what's coming their way.

  6. werdsmith Silver badge

    The problem might be that whilst Apple were getting a free ride from the Irish government, the EU were pumping in billions of € bail out money into Ireland. That's gotta be annoying for the Brussells brigade. Maybe that unpaid tax should go back into that EU fund that is used to rescue the Irelands and Greeces when it's needed.

    1. katrinab Silver badge

      It will add about €100bn to Ireland's GDP over the relevant period, and 0.7% of that will go to the EU as part of their budget contribution.

    2. Anonymous Coward
      Anonymous Coward

      "Maybe that unpaid tax should go back into that EU fund that is used to rescue the Irelands (sic) ..."

      IIRC, the bail-out agreement stipulates that such a windfall go directly to paying off the bailout money.

      So, one could argue, that this is just a cunning money transfer exercise, forcing companies to fund the economic bailout of Eire.

  7. The Count
    Trollface

    Ahh, how cute

    Little Ireland didn't think the big bad EU wasn't going to be telling them what to do with their sovereignty when they signed up.

    Just adorable...

  8. J.Smith

    So the Irish Government are forcing austerity on the public, and refusing to take due taxes from Apple. Shows you who they're really working for.

    1. Doctor Syntax Silver badge

      "So the Irish Government are forcing austerity on the public, and refusing to take due taxes from Apple."

      The Irish government may have calculated that the Irish economy might benefit more from having Apple operating in the country and maying minimal direct taxes than not operating there at all and paying none.

      1. theOtherJT Silver badge

        The Irish government may have calculated that the Irish economy might benefit more from having Apple operating in the country and maying minimal direct taxes than not operating there at all and paying none.

        It might have, but I'm pretty sure it didn't. Ireland's corporation tax is already just about the lowest in Europe, Apple would have gone there anyway - all the other big multinationals seem to. The reason they're paying less is because they "negotiated" to. What such negotiations amounted to is of course entirely open to speculation...

      2. toughluck

        It's not just Apple. I would bet Ireland provides this tax break to other companies. If it were just Apple, Ireland would happily welcome the extra money. Once the dam breaks, however, EU is free to pursue all other companies operating there, and Ireland might not be able to take it if those companies move out.

        Nevertheless, it would have been epic if Samsung (or any other competitor of Apple) was not operating this way and could publicly argue they don't get this sort of tax breaks, thus putting Apple in a very uncomfortable position.

  9. Baldy50

    Love the Articles title.

    No comment!

  10. Herby

    One thing to remember...

    When a government gets its hands on any amount of moola (bucks, quid, euros), it has a certain amount of "overhead". This number is not insignificant. So for every chunk of change that goes INTO government coffers, only a fraction goes OUT to help us citizens.

    Then the government decides who to give handouts to is rarely in line with those that it extracts taxes from. It is the nature of the beast. This is why government is not the "solution", it is the "problem".

    But as was so eloquently said a bunch of years ago, "Nothing is certain but death (life is a terminal disease) and taxes".

    1. Schultz

      Government overhead

      The government overhead goes into paying the tax collector and the minister salary. Your voting indirectly controls that overhead.

      Somehow I fail to see how that is more despicable than the overhead in private companies. Especially when you think about toga parties and such.

    2. Naselus

      Re: One thing to remember...

      "Then the government decides who to give handouts to is rarely in line with those that it extracts taxes from. It is the nature of the beast. This is why government is not the "solution", it is the "problem"."

      Except that logic is idiotic.

      Consider a banker. He is taxed, in order that the state can run a banking regulator. The banker does not like the fact that his income is taxed in order to fund a man who spends his time preventing the banker from making even more money by doing illegal things.

      In this case, the government is not 'the problem'. It very much is 'the solution'. Funnily enough, more or less any quote from Ronald Reagan is also idiotic when subjected to about 20 seconds of genuine thought, which tells you quite a lot about Reagan, a fair amount about the United States, and a distressing amount about the world since 1980.

  11. JeffyPoooh
    Pint

    Exported untaxed profits under the guise of importing IP rights

    Problem: Apple writes a memo and assigns their IP to "Apple Ireland Shell Company". Then all the other Apple companies around the world calculate their gross profit, put it in an envelope and scrawl "IP Royalty Payment" on it with a crayon, and mail it to the "Apple Ireland Shell Company". Thus each of their net profit becomes zero. They've just exported their untaxed profits to Ireland, where the tax rate for Apple is somehow 0.00005%.

    Solution: All that the nations of the Earth need to do is slap an Import Duty on imported IP Rights.

    They could invoke that tonight (as they do when engaged in a 'trade war', when import duties can be slapped on overnight).

    That they're not doing it implies that they don't really want to do it.

    I wonder why?

    1. Philip Lewis

      Re: Exported untaxed profits under the guise of importing IP rights

      "They've just exported their untaxed profits to Ireland, where the tax rate for Apple is somehow 0.00005%."

      I am sometimes astonished by the subtle wit of the commentardery here at The Register. But it's all going too slowly and being missed.

      My arithmetic suggests the real value is 0.0000005% - your calculation may vary

    2. P. Lee

      Re: Exported untaxed profits under the guise of importing IP rights

      >Solution: All that the nations of the Earth need to do is slap an Import Duty on imported IP Rights.

      Or you can just see what profits the shell company has made, divide it by number (or estimated number) of units sold locally, and tax the local company based on that value. No duties or WTO required.

      For good measure, you can declare that you won't be offering a tax concession ever, so any shareholders holding out for that are out of luck. Maybe even have a stepped increase in the tax rate for repatriated funds based on how long the company has held onto the cash.

      If companies aren't playing nice, there's no reason the government should.

  12. Pascal Monett Silver badge

    "Ireland did not give favorable tax treatment to Apple"

    So Ireland gave normal treatment to Apple.

    Which means every single other company in Ireland should now pay .005% tax.

    I think the fallout on this is not going to be pretty. Looking forward to the report on the next parliament session.

  13. 080

    Apple Tax

    Why is Apple paying any tax in Ireland or potentially in the USA when the profits were made in the UK (the rest of Europe can sort its own share out)?

    Its goods are manufactured in China, shipped directly to the UK and sold here for real money, if any tax is due on the profit then it should be paid in the state where it is earned.

    1. John Brown (no body) Silver badge

      Re: Apple Tax

      "Its goods are manufactured in China, shipped directly to the UK and sold here for real money, if any tax is due on the profit then it should be paid in the state where it is earned."

      Apple (UK) as well all other Apple (xx) companies pay IP royalty license fees to Apple Ireland. Apple Ireland then claims that this is overseas earnings, thus not taxable in Ireland. But somehow the money still ends up in Ireland. Someone is paying money to Apple Ireland HQ for something, but somehow it's some kind of intangible money transfer for no apparent reason. A gift, maybe?

      1. Bob Rocket

        Re: Apple Tax

        Apple Ireland buy that IP from Apple US so Apple Ireland only make a small profit in Ireland.

        Apple Ireland sends a cheque to Apple US's holiday home in the Bahamas but it can only be cashed in the US, when it's cashed it gets taxed.

        1. John Brown (no body) Silver badge

          Re: Apple Tax

          "Apple Ireland buy that IP from Apple US so Apple Ireland only make a small profit in Ireland."

          Ah, that actually makes a sort of sense. So Apple Ireland is a sort of licensing broker who are only renting the IP from Apple US and then sub-licensing it out. Oh what a tangled web we weave.

          It does smack a little of the Starbucks "trick" of buying all their coffee at rather higher than expected rates through a Swiss holding company as well as paying rather significantly large amounts of cash for the rights to use the Starbucks name in the UK

  14. Bob Rocket

    Dyson

    According to the Graun, Dyson made a profit of £367m in 2015 (presumably gross)

    Dyson was No.1 interms of sales in Germany and Japan.

    Where did they pay tax on products manufactured in various countries and sold in others ?

    In the UK.

    When do they pay that tax ?

    When it is received back in the UK.

    As long as the avenues that Apple used could also be used by any other company with a similar structure then there is no competitive advantage/state subsidy.

    Just because no other companies currently use that particular methodology doesn't mean it is not open to them (others may use more advantageous solutions).

    This is the EU overextending its reach to try to apply retroactive tax rules on a member state as they realise that all that (currently untaxed) cash sitting in Apples offshore cache is about to be split between the IRS and the shareholders resident in the US.

    (probably in retaliation regarding the fines levied on Deutche Bank, large amounts of which was EU money)

    1. nsld
      Facepalm

      Re: Dyson

      And the rate paid on those profits will be the standard rate all other UK companies pay.

      That's the fundamental difference, it's a level playing field.

      Which is why the Irish, Luxembourg and a few others offer these dubious arrangements to draw in overseas companies.

      1. Bob Rocket

        Re: Dyson

        Apple paid the standard rate all other companies pay on their profits declared in Ireland.

        When a UK company sells an item to a wholly owned distributor in Japan, any profit on that deal is taxed in the UK.

        When that distributor sells that item to the end user in Japan, any profit on that deal is taxed in Japan.

        1. Order is placed in Japan from end user for item that sells in Japan for $1000

        2. Japanese distributor orders item from UK head office for direct delivery to end user in Japan and pays UK head office $900, it has costs of $50 (marketing/support etc.) so makes $50 profit.

        3. UK head office orders item to its design from China to be delivered direct to end user in Japan and pays manufacturer $100, it has costs of $300 (R&D etc.) so makes $500 profit

        4 Chinese manufacturer has costs of $90 so makes $10 profit

        Sell price is $1000, total costs are $440 total profit is $560

        If the tax on profit was 10% in each country the total tax due would be $56

        China would collect $1 of tax

        Japan would collect $5 of tax

        UK would collect $50 of tax

        $1 of tax on total profits of $560 is less than 0.2%

        $5 of tax on total profits of $560 is just under 0.9%

        $50 of tax on total profits of $560 is just under 9%

        1. toughluck

          Re: Dyson

          @Bob Rocket: But in that case, a total of 56 dollars in tax would be collected.

          If your figures were applied to the Apple/Ireland situation, China would collect $1 of tax, Japan would collect 0 tax and UK would collect $0.01 of tax because why not.

          What it works out to is:

          1. A customer in, e.g., Germany, purchases an Apple phone for €1000. Apple Germany orders that phone from Apple Ireland for €1000.

          2. Apple Germany makes 0 profit.

          3. Apple Ireland orders the phone from China for €50.

          4. Apple Ireland paid €10 lip service to Apple US for IP rights.

          5. Their profit would work out to €940, but for some reason, Irish government decided that €939 was non-taxable and only charged them for €1.

          It would be fair if Apple Germany originally ordered the phone for €61 and Apple Germany was taxed at €939 profit, but what happened is that the actual profit was not taxed anywhere. The effective tax rate of 0.[0-000000]5% was what Apple ended up paying. It's not the tax rate that Ireland chose to levy on them, it was probably 12.5% on profits made in Ireland, or spent on employee welfare/income tax, or whatever, but Ireland waived the requirement to tax profits made from international subsidiaries.

          1. Bob Rocket

            Re: Dyson

            When that whacking great profit (which is currently offshore somewhere) makes landfall it will be taxed.

            In the US that would be at around 45%.

            Apple are waiting to do a deal with the POTUS (whoever that may be) whereby they can onshore it in one go at a lower rate.

    2. Anonymous Coward
      Anonymous Coward

      Re: Dyson

      But there's the rub. The EU is arguing that Apple's tax avoidance system was not actually open to any other company because companies have to come up with a half-decent purchasing excuse in order for tax authorities to recognize it.

      The evil genius in the EU's argument is that in order to show that Apple _wasn't_ given unfair treatment, the Irish government merely has to show a court a bunch of similar examples of their generous recognition of shell companies...

  15. Anonymous Coward
    Anonymous Coward

    EU power grab?

    The Irish government have not given Apple any money therefore they argue they have not employed state aid. The EU Commission argue that NOT charging the same level of tax they apply to other businesses is an indirect state aid. The EU solution (yet to be made public) will be to "harmonise" tax rules across the EU with, of course, the "neutral" Commission in charge. Those remaining in the EU should be very wary of how this develops as it is an ideal example of how the Commission will go about grabbing and centralising power.

    1. P. Lee

      Re: EU power grab?

      The rules are consistent with creating a level competition playing field so its within its purview. However, the logical conclusion of the EU is a single centralised government, so it is consistent with that too.

      1. Anonymous Coward
        Anonymous Coward

        Re: EU power grab?

        >The rules are consistent with creating a level competition playing field so its within its purview. However, the logical conclusion of the EU is a single centralised government, so it is consistent with that too.

        Yes, it's consistent with a power grab.

    2. John Brown (no body) Silver badge

      Re: EU power grab?

      "The EU solution (yet to be made public) will be to "harmonise" tax rules across the EU with, of course, the "neutral" Commission in charge."

      That's neither here not there on this case. The EU finding is that Ireland has not taxed Apple at the same rates other companies in Ireland are taxed. Ireland already has an attractive 12.5% corporate tax rate, one of if not actually the lowest in the EU. The EU is NOT telling Ireland to up its corporate tax rates. It's telling Ireland to fscking about with what is and is not profit under EU regulations and tax properly at Irelands standard tax rate.

    3. ChubbyBehemoth
      Angel

      Re: EU power grab?

      Yup, further federalisation is more feasible without the pesky Brits that would stall any progress in the matter. Which would also solve the Euro problems that basically derive from the fact there is not a unified taxation. More power to the Brussels bureaucrats to fight the nationalist populist movements and geriatric fear tinkers that are stifling progress and humanism all over the continent. A unified Europe ruled by technocrats that base their rule on the declaration of the rights of man. With a parliament that actually can create legislation.

      Joy...

      Okay,.. not bloody likely, but one can dream ;-)

  16. This post has been deleted by its author

  17. Mr_Brie

    Thought experiment

    Imagine an (Apple, someone else) product that is sold for £120 in the shop.

    In the UK, VAT at 20% means that £20 is tax.

    Most retail / luxury products have about a 30% mark up which is the difference between what the shop buys it for and what they sell it for.

    In the UK profit is taxed at 15% -- after expenses. A high street shop is not cheap to rent and needs people to run it. Let's say that half of the markup can be spend on expenses (rent, electricity, staff, business rates) and half would be taxable.

    £30 = £15 profit, £15 expenses

    profit taxed at 15% = £2.25

    But wait! rent is taxed, electricity is taxed, staff is taxed, and business rate are pure tax...

    expenses taxed at ~20% = £3

    Now. An Apple product is:

    - a bag of electronic components

    - electronic design

    - software

    - put together in a factory by a worker

    - shipped to the store

    In pure materials, a £68 before retail product perhaps only contains £20.

    The rest of it is labour -- which is taxed at an average of 25%.

    £48 or labour taxed at 25% = £12

    So in this very rough estimate, out of a sale price of £120

    £20 + £2.25 + £3 + £12 = £37.25 flows back to the tax man.

    But wait!

    For someone to be able to spend £120, they have to earn it first.

    Taking the same 25% on labour, that means to be able to spend £120 you'd have to earn £160, and pay £40 in tax.

    Leaving a grand total of £77.25 in tax collected for a £120 purchase.

    1. Bob Rocket

      Re: Thought experiment

      'In pure materials'

      Those 'pure materials' are in fact mostly worthless rocks/waste, it is only with the application of labour (both physical and intellectual) that they gain value.

      All tax is derived from labour and in a modern society the 'tax rate' is probably > 95%

  18. kmac499

    Electoral Calculation

    The Irish Gov't may well consider a simple calcuation. The population of the Republic of Ireland is about 4.6million. Apples supposed back Tax is 14.5billion euro by my reckoning that's gettng on for 3,000 euros per head OK so Apple will never pay anything like that amount this side of the apocalypse, but it could be tricky for the TDs to argue that nothing is due at all..

    1. Bob Rocket

      Re: Electoral Calculation

      If Ireland collects this tax then it must be used to pay down the National Debt, large amounts of which is at low rates from the ECB.

      It would also increase GDP so their contribution to the EU coffers would rise.

      It would actually cost each voter money to collect this tax and put them out of work when Apple etc. leave.

      Unusually for a bunch of politicians, they seem to be doing the right thing for their electorate for once.

  19. Baldy50

    Wonder what the EU's got in store for this lot?

    The new robber barons: MARGARET HODGE on how Starbucks, Amazon and Goldman Sachs are ripping billions off British taxpayers... while OUR civil servants and tax chiefs are helping them

    1. Baldy50

      Re: Wonder what the EU's got in store for this lot?

      http://www.dailymail.co.uk/news/article-3782591/The-new-robber-barons-MARGARET-HODGE-Starbucks-Amazon-Goldman-Sachs-ripping-billions-British-taxpayers-civil-servants-tax-chiefs-helping-them.html

      Forgot the URL, what a plonker!!!!!

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