back to article Ireland to fight against billing Apple for back-taxes

The Republic of Ireland has signalled its intention to push back against the European Union (EU) over accusations that it's offering a tax haven to Apple. In August, the EU decided Apple had received €13 billion in “illegal state aid” in the form of the tax breaks. When the investigation ended, competition commissioner …

  1. wolfetone Silver badge

    Oh, Ireland don't need the €13 billion?

    Are they sure? Because I think the country is full of people who can't even rent a home let alone buy one with mass emigration still happening because there's no work in the country.

    There are some bloody idiots running countries these days.

    1. Anonymous Coward
      Anonymous Coward

      The thing is it's a lose lose for the Irish government. They either lose €13 billion and risk the ire of their people or lose the taxbreak status and risk the ire of their people. There are powerful forces in the EU determined to see the EU tax systems harmonised.

      1. Anonymous Coward
        Anonymous Coward

        "There are powerful forces in the EU determined to see the EU tax systems harmonised."

        Care to expand on that? I feel you may be being a little paranoid. This kind of judgement on state aid isn't really that new. It just looks to me like the EU making it clear that you can't use cosy tax deals to get around the rules.

        1. maffski

          ...Care to expand on that?

          "Care to expand on that?"

          Common Consolidated Corporate Tax Base (CCCTB)

          The plan is that businesses over a certain size would be subject to an EU wide calculation of 'taxable profit', this notional profit would then be split (by the EU) to member states which would then apply their own tax rates to it.

          It would severely limit the tax benefits of being based in Ireland.

        2. Anonymous Coward
          Anonymous Coward

          "There are powerful forces in the EU determined to see the EU tax systems harmonised."

          Care to expand on that? I feel you may be being a little paranoid. This kind of judgement on state aid isn't really that new. It just looks to me like the EU making it clear that you can't use cosy tax deals to get around the rules.

          Well covered in the FT,

          "Brussels proposes Europe-wide corporate tax system"

          https://www.ft.com/content/4bfe986c-9ac4-11e6-b8c6-568a43813464

          "Frustration with the sluggishness of the EU’s processes prompted France and Germany to announce in 2012 that they would seek a bilateral deal to harmonise key elements of their corporate tax systems,"

          I'd say France and Germany are powerful forces in the EU, wouldn't you ?

      2. Thomas Whipp

        isnt the core issue here that Apple had been offered a company specific tax scheme which was not the same as most Ireland based companies had applied to them? My understanding is that the rules are that tax should be consistent within a country

        1. Cynical Observer

          @Thomas Whipp

          My understanding is that the rules are that tax should be consistent within a country

          Nailed it!

          <Wobbly Screen effect>

          Back in the days

          Ireland used to have two rates of Corporate Tax - one for indigenous companies, one for inward investors. This was deemed unfair by Europe and the Government of the day was leaned on to have a harmonised rate for all companies. The expectation at that time was that the rate would harmonise upwards - moving closer to that of France who were one of the biggest critics of the time.

          Never underestimate the ability of any Irish politician to behave as what is termed a cute hoor.

          Rather than raising the inward rate, the government of the day lowered the indigenous rate - to howls of apoplexy from Europe of "That's not what we meant!" But the rate was harmonised.

          </Wobbly Screen Effect>

          The current Irish Government is in a lose-lose position. It either has to pass on 13billion euro or give up its sovereign right to set its own tax policy. Damned if they do and Damned if they don't.

          1. Doctor Syntax Silver badge

            "The expectation at that time was that the rate would harmonise upwards - moving closer to that of France who were one of the biggest critics of the time."

            The thinking that should form the expectation is to work out what the likely outcomes will be. If your local company contribution is small you aren't going to be better off if you double it and drive away the bigger international contribution. It's a trade-off every country can make if they choose. For a lot of countries the high rate, screw the locals is the one that succeeds because with a race to the bottom everyone eventually loses. But for a few, such as Ireland, a contrarian approach can succeed. So any such expectation was going to be based on poor thinking.

          2. Lars Silver badge
            Happy

            "or give up its sovereign right to set its own tax policy". No, the big bad wolf, the EU, does not take away the sovereign rights to set tax policies. But in case you have not realized it, each time some company is playing the game, all of you will write "it's the law that is at fault", and should be mended, until somebody, like the big bad wolf, suggest something could be done about it.

            In this case it's fairly obvious that the Irish government has to oppose the ruling first, even if they want the money, or not, later. Apart from that it was about an illegal state aid, again because the EU does not interfere in the tax policy in its member states, perhaps they should, perhaps it will be more possible without the UK.

            Most people are fairly fed up with all the gaming of the system. Perhaps both the UK and the US governments should have got it, a bit earlier. I am totally confident that there is more intelligence within the EU, although the problems are large.

            1. Slx

              Both the UK and US governments massively facilitate such gaming themselves. The City of London didn't grow so large due to the lovely weather and excellent housing in Greater London, I can assure you. It is a handy, English-speaking financial hub in Europe with light touch regulation and relatively low tax / no tax options and has operated like a money laundry.

              Same goes for Switzerland.

              There is no 'system' and the powers that be have all been lobbied extensively to ensure that nobody upsets the status quo. If the US and EU really wanted to close those loop holes that allow money to disappear into mysterious virtual lands that only exist on paper, they could have done so decades ago at the stroke of a pen. However, they didn't and probably won't really do anything serious about it in the future.

              The simple reality of it is that big corporations have all of us, from Ireland to the UK to the US, to even moralistic claiming to be high tax France, by the short and curlies . Nobody can be the first nation to innovate on tax as the inward investment (foreign or domestic) simply runs away or they cut jobs and damage your position.

              So, yeah we're all being gamed but until there's a properly global taxation system to prevent (which as yet simply does not exist), the game just goes on and on and on.

              1. anonymous boring coward Silver badge

                "So, yeah we're all being gamed but until there's a properly global taxation system"

                States get plenty of revenue from income tax, VAT, and personal gains taxes. Even movement of capital (gifts and death). Not to mention exceptional taxes on fuel and energy, alcohol and "luxury" items. And import duties. And stamp duty. And vehicle tax. And council tax. I probably forgot a few.

                We certainly don't want a "perfect" taxation system that strangles every single company in its cot.

                The more "perfect" taxation, the more opressed and stagnant the country will be.

    2. Anonymous Coward
      Anonymous Coward

      Irish Govt to cancel 13 bn. Why? Because Irish Elite look after US elite. Let the plebs eat 43k debt

      RTE: "Should Ireland borrow to run the country? Most countries do. But in Ireland there is a massive national debt of €200bn. For a country of with 4.6 million inhabitants that is equal to €43,500 a head. Ireland pays €6.3bn in interest annually, which although less than it used to be, it is still a huge sum. This year Ireland is going to continue to borrow. The general government deficit of €2.4bn for this year will add to the debt."

    3. Doctor Syntax Silver badge

      "the country is full of people who can't even rent a home let alone buy one with mass emigration still happening because there's no work in the country."

      And being less attractive to foreign corporations will create work?

      1. secret goldfish

        What the foreign corporations that don't really pay tax, don't really have real offices and don't really employ the number of people that might justify a 13b tax cut.........yeah lets not go upsetting those wonderful corporations......where do I sign up or do I just bend over?

    4. Slx

      Fairly simple really:

      1) It would involve an admission of wrong doing by the Irish Government or at best incompetence by the tax authorities. They are not going to do that.

      2) It would potentially unravel a whole load of very long term Irish policies that were used to attract FDI and could cause massive numbers of job losses.

      3) There's a significant possibility that the €13 billion would be uncollectible anyway as other states may seek to apply taxes and then Apple would not pay them in Ireland under double-taxation agreements.

      4) There's a distinct possibility the figure is grossly over estimated and Apple's liability could be significantly smaller anyway.

    5. Fungus Bob

      "There are some bloody idiots running countries these days."

      This is not a new thing.

    6. gnarlymarley

      Oh, Ireland don't need the €13 billion?

      The EU probably wants their cut. I would not be surprised if the EU is set to take at least half, if not more than the €13 billion.

  2. secret goldfish

    I'd love to see what the Irish government defence to the EU will be, as at it's core, the EU argument is pretty simple.....

    The sweet Apple/tax deals you enjoyed while not a member of EU were no longer valid the moment you agreed to join the EU and agreed to the rules of the EU.

    At the very least, the Irish government is guilty of attempting to have its cake and eat it too.

    1. Anonymous Coward
      Trollface

      Maybe they'll want to Irexit then?

      1. Danny 14

        Nope. They couldnt afford to k9ve back to the pund. They only reason they make money is due to these tax deals being useful to large EU trading corporations.

      2. PNGuinn
        Happy

        Irexit

        That would solve a lot of issues for both our countries. Seriously.

        Free trade deal for both countries - Irish food surplus keeps a good local market without barriers.

        Traditional open borders for Paddy to the UK - Good, English speaking labour for the UK.

        Proper Border Control for Ireland when they become the next dumping ground for the EU - Assuming Terrorist Mayhem can get her act together.

        Ireland out of an increasingly dodgy looking eruo - france, italy, spain, greece etc ...

        Have to find a more catchy acronym, though. Irexit?? C'mon, commentards - I'll start off with with Fecksit.

        1. Slx

          Re: Irexit

          "Traditional open borders for Paddy to the UK - Good, English speaking labour for the UK"

          I think that's pretty much defined why Ireland would be extremely unlikely to leave the EU and end up riding on the UK's coat tails again. It's not something most of the electorate here would be prepared to do and, perhaps unlike our British cousins (or should I use some kind of pejorative?) we are not as keen to shoot ourselves in both feet and isolate ourselves from a massive market.

        2. Anonymous Coward
          Anonymous Coward

          Re: Irexit

          "Have to find a more catchy acronym, though. Irexit?? C'mon, commentards - I'll start off with with Fecksit."

          What about Ixit - sounds a bit Australian though. And speaking of Australia what about replacing EU with ESU - English speaking union, get rid of the continentals (unless they agree to the common language - so goodbye France!)

    2. Anonymous Coward
      Anonymous Coward

      There's that little thing about Ireland joining the EU in 1973, ie, 3 years before Apple (the computer company) was created, so they couldn't really have had that special relationship...

      1. secret goldfish

        Yes they could have had a special relationship, one that was perfectly OK in/from 1973 and onwards.

        The date that is relevant is the date that the EU changed rules relating to consistent tax rates and state aid, from that moment onwards Ireland were in violation of their EU obligations which they agreed to in 1973 and broke at the date the penalty has been backdated to.

    3. ToddR

      @secret goldfish

      Ireland have been a member of the EU for longer than the UK, did Apple Inc exist then?

      1. secret goldfish

        I'm not sure what point you're making so please excuse me in advance if I've misunderstood you;

        The relevant date is the date when the EU revised the laws in question, from that moment onwards Ireland was in violation of agreements (following EU member rules) it agreed to when joining the EU in 1973 regardless of what deals (and from what dates it had the deals) with Apple.

    4. Slx

      The Irish arguments are pretty simple too:

      1) The EU has no jurisdiction on tax policy and is using competition law as an backdoor attempt to expand its powers.

      2) This is a competition law case and EU would need to prove that Ireland gave Apple a deal that was unavailable to other companies. If it were available to other companies, the EU has no case.

      1. secret goldfish

        Only those arguments are speculative in nature, making them more opinions than legality.

        If those are the Irish legal arguments then all I can add is.......good luck to them in court.

        I wouldn't want to be an Irish politician in court protesting 'backdoor attempts' by the EU when the same sort of 'backdoor' deals between Apple and the EU were what caused this whole mess in the first place.

  3. Anonymous Coward
    Anonymous Coward

    Politicos covering their backs...

    It's not only they are afraid companies won't find Ireland appealing - corporate tax AFAIK are only lower in Bulgaria, inside the EU - it's some politicos would need to explain why they give that advantage to Apple only (and maybe a few others), and not to local companies and other EU/non EU ones. If they accepted the ruling, they would have also admitted they acted with too much discretionary power - and you soon start to wonder if that power wasn't "oiled" somehow...

    1. Phil O'Sophical Silver badge

      Re: Politicos covering their backs...

      some politicos would need to explain why they give that advantage to Apple only

      Do they? Irish corporate tax levels surely apply to all companies that operate in Ireland. Is it not just the case that only Apple have the lawyers and accountants who figured out how to use that loophole in their international dealings?

      1. Anonymous Coward
        Anonymous Coward

        Re: Politicos covering their backs...

        Yes I think they do. The whole argument here is that Apple got a special deal. If Ireland can prove that's not the case then they will win. However, I don't fancy their chances as it seems pretty clear Apple was on a deal which wasn't available to everyone.

      2. I ain't Spartacus Gold badge

        Re: Politicos covering their backs...

        Apple were paying Irish corporation tax on their Irish profits. But were allowed to book a huge chunk of their global profits to an "Irish" company that didn't have a link to any state - and therefore didn't owe any tax. Weee! Nice wheeze. This was changed last year, and was one of the causes of a startling rise in Irish GNP - along with presumably other companies coming off the deal.

        Now Apple would still have paid that tax to the US - had they ever chosen to repatriate profits. Because the US charge tax on global income (though you can usually offset the corp tax you pay abroad against this). But that's why Apple were borrowing money in the US (and so paying interest on it) to pay their dividends, so as not to repatriate any money and pay US corporation tax.

        Many other EU countries have been trying to persuade / force Ireland to up it's Corp tax level to more like everyone else's 20% (ish) for years - because they see it as unfair that Ireland poaches corporate HQs off them. But that's how the single market works. What's really annoyed other governments is that not only were Ireland "stealing" their corp tax take - but worse they were then giving it away for free. And that's what the ruling stops.

        I can't see Ireland winning on appeal, for two reasons. Firstly because they've already changed their tax system, which sort of admits they knew they were going to lose. Secondly the European Court is unlikely to overrule the Commission on something like this, because it's not a proper independent court - it tends to support the same political aims.

        Apple rubbed salt into the wound by announcing they were going to repatriate a bunch of money to the US under a week after the decision. That being just enough cash that the US corporation tax would be offset against the EU bill. If they do win on appeal, who wants to bet they'll suddenly find a reason not to repatriate that $40bn?

        1. Anonymous Coward
          Anonymous Coward

          Why was that "rubbing salt in the wound"?

          If Apple is going to have to pay the extra tax overseas, they might as well bring as much money back to the US as they can without paying additional US taxes on it. That is the ONLY reason they (and many other companies) are parking so much cash overseas, after all.

          1. I ain't Spartacus Gold badge

            Re: Why was that "rubbing salt in the wound"?

            DougS,

            Well no. Irish Corporation tax is still 12%, compared to the US 35% - so there's still a good reason to shelter the cash abroad. Even the UK's 20% rate is still a lot nicer than 35%.

            Also, they can't get out of paying this - it's a past liability - but it makes no difference to their deferred tax liability to the US, as it can be offset.

            This problem is entirely of the US government's own making. They allow deferral of corp tax payments on foreign profits, they demand payment on foreign earnings (to be fair with offset against tax paid abroad in most cases), and they have both high corporation tax and high dividend tax - so it costs something like 70% in tax on dividends. They've created a system of eye-wateringly high tax that can be trivially avoided indefinitely - what the hell did they expect.

            To make it worse Bush, and I think Clinton, both had foreign profits amnesties, where they could be repatriated at lower tax rates. So there was another incentive for large corporations to sit on the cash and wait. Now Trump's in - they may get a lower rate - assuming he can avoid falling out with the rest of the Republicans.

            1. Anonymous Coward
              Anonymous Coward

              Re: Why was that "rubbing salt in the wound"?

              No, you misunderstand. I wasn't suggesting they'd bring ALL their cash home, just enough cash that $13 billion (or whatever it is that Apple ends up paying in Irish taxes if the EU prevails) would exactly equal the US tax bill. Since foreign taxes paid are a credit against US taxes, Apple could bring approximately $40 billion home without paying a penny in US taxes, because of the $13 billion they'd be paying Ireland taken as a tax credit.

              If Apple is found to not owe Ireland any extra money then of course they wouldn't bring that $40 billion home, because if they did so then they'd owe $13 billion in US taxes on it. Apple's goal, as with almost all US multinationals, is to pay the least amount of taxes. They're all playing a waiting game, hoping for either a lower permanent rate or another tax holiday like the one Bush had (which IMHO was really stupid, as it just made the problem of stashing money overseas twice as bad)

              With Trump's election and republican control of congress, the chances of corporate tax reform that reduces rates overall or permanently reduces the rate for bringing money in from overseas has gone way up, so that money may come home sooner rather than later. It would have certain political advantages of course - all that money coming home would puff up US tax collections for a year or two, making the deficit artificially smaller for those years. I'm sure Trump and the Laffer Curve folks would claim that as a success, and find someone to blame for the years following when it didn't continue.

              1. I ain't Spartacus Gold badge

                Re: Why was that "rubbing salt in the wound"?

                DougS,

                Sorry, I misunderstood you then. I've actually covered that point in another post. Cook announced that Apple would repatriate about $40bn, four days after the Commission announcement. A cynic might suggest it was to get the US government onside, and slavering over the huge wodge of tax they'd be losing.

                He implied this was unrelated, but it's only six months since he said they had no plans to repatriate any cash.

  4. Anonymous Coward
    Anonymous Coward

    Pointless

    The EU tax statement applied to profit where no tax was paid. Trump is about to lower corp tax to a point where Apple et al will repatriate their profits, pay a nice low rate of tax and the Irish problem will go away.

    1. I ain't Spartacus Gold badge

      Re: Pointless

      Europe still gets its pound of flesh though, as this is a past liability.

      Also Ireland have half the corporation tax of Germany or France, so for the EU single market, it still makes sense to book all the profits from Europe in Ireland. That is assuming Trump sets the rate at 10% for foreign profits but keeps the domestic one at 35%. If he sets everything at 10%, then they're better off operating entirely from the US.

  5. Tubz Silver badge

    So Apple now getting Eire to pay for it's EU legal challenges, somebody made exit threats ?

    1. I ain't Spartacus Gold badge

      The judgement is against the Irish government. The EU has no jurisdiction on Irish corporation tax, that's a local matter. But they do have jurisdiction on illegal state aid. Which is the case that Ireland lost.

      Some people have accused the Commission of cheating or mission creep. Of ruling on an area that's the sole competence of governments - but I don't think that's fair - because they've ruled on a specific deal, where Apple were allowed to create a company to hold profits that on paper had no geographical location, and so paid no corporation tax to anyone.

      1. N000dles

        I'd hope now there is similar investigation on how companies operating out of Luxembourg could have been offered sweetheart deals as well. Mr Junker seemed pretty good at signing companies up to these deals in his time running that tax haven.

  6. lglethal Silver badge
    Go

    Political theatre only

    I said it months ago this is all just political theatre. Ireland have to be seen to be fighting this, but they know they will lose and I doubt they will pull out all the stops to try and win. But if they don't appear to be fighting in Apples corner, then Apple might question using them for its EU base.

    So they'll talk the talk, throw a few punches and then go down in the fifth round. And blame it all on the EU. The EU makes such a great political scapegoat after all...

    1. I ain't Spartacus Gold badge

      Re: Political theatre only

      Well a €13 billion windfall isn't such a bad thing to be blamed for...

      But as you say, they may feel they've got to be seen to object. And also partly for domestic politics. If they admit they were in the wrong, they're admitting to their taxpayers (after years of huge austerity and a more than 10% drop in the size of the economy), that they could have had €15 billion of extra. And that's serious money in a country with a small population.

      1. Kristian Walsh Silver badge

        Re: Political theatre only

        Ireland won't see anything like 13 billion. If the appeal is lost, then the leaders of every other state that Apple did business in will line up outside the Irish Revenue offices with a bill in their hands.

        Heading the queue will be an orange man with stubby little fingers, because the big loser in Apple's non-shore tax status is the USA.

        So, Ireland would be lucky to see 500 million from the whole pot, and guess who'd foot the bill for administering those claims? Hint: rhymes with "Blyreland".

        It's only the megaphones and placards class of politicians that's playing this as "Ireland throws away thirteen billion to please its masters" - truth is, there's no upside to the country.

      2. Doctor Syntax Silver badge

        Re: Political theatre only

        "If they admit they were in the wrong, they're admitting to their taxpayers ... that they could have had €15 billion of extra"

        That doesn't follow. In the absence of the deal they probably wouldn't have had Apple there so they wouldn't have had the tax and they wouldn't have had Apple's contribution to their economy.

        What will actually happen, assuming they lose, is they get a big windfall now and then see Apple stop investing if there are more tax advantageous opportunities elsewhere so unless they use some of that windfall - carefully enough to avoid further accusations of state aid - they'll lose out in the long term.

  7. Anonymous Coward
    Anonymous Coward

    unlikely bluster now possible.

    didnt trump say he would force us companies to repatriat cash the are hiding round the world.

    Hopefully the same genius that found obama's orish roots will stumble on the ruins of the trump clan castle.

    1. Mystic Megabyte

      Re: unlikely bluster now possible.

      Yes and he also said that he would reduce the tax to 10%. I wonder if we will soon see a Putin powered Trump tower in Moscow, them being chums an'all.

  8. anonymous boring coward Silver badge

    Easy win

    Should be an easy win for Ireland!

    Just mention that a vote on "Ixit" is on the menu, if EU doesn't play ball.

  9. imaginarynumber

    I have always wondered if Apple used the iTunes VAT as a bargaining chip.

    For years, all iTunes purchases throughout europe carried the higher 23% Irish VAT.

    In the meantime the likes of MS and Google applied the VAT rate applicable in the country of purchase.

    1. Kristian Walsh Silver badge

      Since January 2015 VAT on digital downloads (and other telecommunications services) in the EU is charged at the rate applicable to the downloader, not the company selling the download.

      This change in the rules on Place of Supply doesn't affect the supply of physical goods; it's only for "digital" online stuff.

      (If you've been affected by the issues raised in this post, you can contact your local tax advisor who'll expensively explain it in great detail to you...)

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

Other stories you might like