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[Funky Papa]

Given what we know, I'd say that chances of Apple getting raw dogged are looking fairly high. Starbucks (which risibly enough claims its UK business is not profitable for tax reasons) is also on the list.

http://www.reuters.com/article/2014/06/11/us-apple-tax-ireland-idUSKBN0EL1SR20140611

(Reuters) - The European Commission will launch a formal investigation on Wednesday into Apple Inc's (AAPL.O) tax arrangements in Ireland, Irish state broadcaster RTE reported, without naming its source.

The EU's competition authority said last year that it was looking into corporate tax arrangements in several member states and had requested information from Ireland.

Antoine Colombani, a spokesman for competition issues at the Commission, declined to comment on the RTE report. Ireland's finance ministry said it had not been informed of any investigation.

Irish Prime Minister Enda Kenny declined to comment on whether the Commission might be preparing to open an investigation but said he was confident of the legality of Ireland's tax system.

"We believe that our legislation ... is very strong and ethically implemented and we will defend that very robustly," Kenny told journalists in Dublin.

A U.S. Senate subcommittee investigation revealed last year that Apple had cut billions from its tax bill by declaring companies registered in the Irish city of Cork as not tax resident in any country.

Senator Carl Levin, chairman of the subcommittee, said the Apple structure represented "the Holy Grail of tax avoidance."

Apple in the United States entered into deals with the Irish subsidiaries whereby the Irish units received the rights to certain intellectual property that were subsequently licensed to other group companies, helping ensure almost no tax was reported in countries such as Britain or France.

Apple's Irish arrangement helped it achieve an effective tax rate of just 3.7 percent on its non-U.S. income last year, its annual report shows – a fraction of the prevailing rates in its main overseas markets.

The focus of the investigation will likely be tax regimes that are favorable to certain companies, including Apple, rather than the companies themselves. Technology companies such as Google Inc (GOOGL.O) and Microsoft Corp (MSFT.O) have cut their overseas tax rates to single digits by establishing Dublin-registered subsidiaries, which they have designated as tax resident in Bermuda.

Go get them, Almunia.

 

[Dead Man]

Nothing will come of it. Sadly.

 

[Funky Papa]

Nothing will come of it. Sadly.

If there's any truth in this world, is that European Commission gets his jollies by giving a proper buttfuck to any corporations willing to piss on its fence. Arbitration is preferred, but when it comes to collusion and taxes, you better don't cross the commissars. Microsoft knows as much (even if they apparently need another lesson).

 

[ymmv]

Hmm ... I think Apple is in trouble now. There are only a few countries like Ireland and the Netherlands benefiting from tax loopholes, most countries would benefit financially by closing them. The potential of getting billions of dollars from the biggest multinational companies in the world could be a strong incentive for the EU to finally do something about corporate tax evasions. If all the EU countries would close the various loopholes, companies like Apple would have no choice but to finally pay up. Paying an effective tax rate of 3.7% compared to what ordinary European citizens pay is criminal.

Take those suckers down.

 

[jorma]

The only thing worse than a tax-dodger is a wealthy tax dodger.

4% tax total on their foreign income? That's fucked up and i hope their unsatiable greed backfires hard for once.

 

[GeoGonzo]

Good, I say.

We certainly see a ridiculous price hike when Apple sells their stuff here, so the least they could do is pay their taxes.

 

[Ninja Kn1ght]

These tax loopholes might need to be shut down but there's no doubt they've helped to attract a lot of major corporations to Ireland. I hope getting rid of the perks doesn't do too much harm to the economy.

 

[Khaz]

These tax loopholes might need to be shut down but there's no doubt they've helped to attract a lot of major corporations to Ireland. I hope getting rid of the perks doesn't do too much harm to the economy.

Which is exactly why Irish Prime Minister Enda Kenny is reacting like he is. The tiny amount of taxes the companies are paying are going to Ireland and they provides plenty of jobs for Irish residents who also pay taxes.

 

[Famassu]

Which is exactly why Irish Prime Minister Enda Kenny is reacting like he is. The tiny amount of taxes the companies are paying are going to Ireland and they provides plenty of jobs for Irish residents who also pay taxes.

The point is, Apple is swimming in an ocean of money, so they can afford to pay the correct taxes, which will leave Ireland (and a lot of other places) even better off.

 

[Ninja Kn1ght]

The point is, Apple is swimming in an ocean of money, so they can afford to pay the correct taxes, which will leave Ireland (and a lot of other places) even better off.

But what if they choose to leave Ireland rather than pay some higher rate of tax? The tax rate was set that way to attract companies. Ireland has been under pressure from the EU to increase it. And Apple may be wealthy enough to pay a higher rate but they're not the only company doing this by any stretch.

 

[rezuth]

So the issue here is not about Apple but rather about Ireland letting Apple do it?

 

[RedShift]

The point is, Apple is swimming in an ocean of money, so they can afford to pay the correct taxes, which will leave Ireland (and a lot of other places) even better off.

The point isn't to leave Ireland better off, it's to get them to pay tax on what they sell in the country they sell it. Ireland is getting a pretty good deal at the moment aren't they? Getting tax that should be paid in other countries.

 

[Ghost]

Sad thing is that if you made Apple (or anyone else) pay local tax on profits made in that country all they'd do is tack it on to the retail price of their products and even then probably find a way to keep it for themselves.

 

[Enter The 36 Chambers]

There's no way we are gonna change that corporate taxation rate. That's single handedly attracted big companies to set up here. To fuck with the the tax rate would mean potentially killing 1000s of Irish jobs and losing large amounts of money.

Again, no way we will change the the corporate tax rate.

 

[ksan]

Feels like the quote by the PM could just as well been said some years ago by the banks that collapsed during the financial crisis.
Can't say that I'm a huge fan of building an economy on unproductive incentive schemes.

 

[gcubed]

Apple? Just about every global company from the US does the double Irish crap or whatever it was called

 

[redlemon]

There's no way we are gonna change that corporate taxation rate. That's single handedly attracted big companies to set up here. To fuck with the the tax rate would mean potentially killing 1000s of Irish jobs and losing large amounts of money.

Again, no way we will change the the corporate tax rate.

This isn't to do with corporation tax. It's to do with tricks used to bring down their tax to single digits.

 

[entremet]

Why is the EU messing with corporations. These laws and loopholes are there because Ireland allows them.

 

[Coriolanus]

There's no way we are gonna change that corporate taxation rate. That's single handedly attracted big companies to set up here. To fuck with the the tax rate would mean potentially killing 1000s of Irish jobs and losing large amounts of money.

Again, no way we will change the the corporate tax rate.

Fixing loopholes =/= changing the tax rate.

Why is the EU messing with corporations. These laws and loopholes are there because Ireland allows them.

Because it is a collective? Ireland is shafting everybody else, and a race to the bottom helps only one person.

 

[HarryHengst]

Apple? Just about every global company from the US does the double Irish crap or whatever it was called

Yeah, the EU is also looking into the Netherlands' deal with Starbucks regarding lower taxes.

 

[Funky Papa]

So the issue here is not about Apple but rather about Ireland letting Apple do it?

Both.

Ireland and Apple are being investigated because the EC believes they may have engaged in illegal arrangements that provided Apple and a small number of powerful corporations with rates much lower than those offered to other companies, undercutting Ireland's already low corporate taxes.

Also, the EC seems pissed off at Apple's way to transfer its profits from its subsidiaries. Apple is specially sneaky and dastardly here. Instead of looking into ways to reduce the taxes they pay in each country, they have developed a complex system that allows them to pay no taxes at all. This has been done in rather unusual ways, such as giving some bullshit intellectual property to one of Apple's subsidiaries in Ireland, which in turn licenses it at onerous rates to the rest of Apple's subsidiaries in Europe, magically turning multibillion euro profits into losses. Apple pockets in Ireland all the profits from Germany, France, Spain, Italy and the rest of the European Union, and then pays some ridiculously low (and potentially illegal) taxes in Ireland while claiming tax returns across the Union for those poor, poor subsidiaries barely meeting ends. The EU is logically mad as hell, and Almunia's office is looking into it just in case they can claim concealment of assets or something to that effect.

To sum, Ireland's low tax rate is legal. What's happening behind closed doors, however, is some grandfuckery of the highest order.

IIRC Microsoft had similar deals across the board, with an Irish subsidiary selling boatloads of Windows copies to Microsoft Spain in order to crush their finances and pocket the Spanish operating profits in Ireland.

Yeah, the EU is also looking into the Netherlands' deal with Starbucks regarding lower taxes.

And Fiat's and Luxemburg's.

It took a ravaging crisis for the EU to finally comprehend that the Ireland-Luxemburg-Holland tax triangle wasn't just taking companies in, but bilking everybody else out of billions of euros.

The expectation is to make all states fall in line and avoid a race to the bottom, or at least remove the jetpacks from Ireland, Luxemburg and the Netherland's shoulders.

 

[Walshicus]

We really need to just harmonise corporation tax and come up with better methods of focusing investment into struggling regions.

 

[Dead Man]

If there's any truth in this world, is that European Commission gets his jollies by giving a proper buttfuck to any corporations willing to piss on its fence. Arbitration is preferred, but when it comes to collusion and taxes, you better don't cross the commissars. Microsoft knows as much (even if they apparently need another lesson).

True. I was being more pessimistic about the chances of structural reform and the likely hood of this changing anything in the long term.

 

[Funky Papa]

True. I was being more pessimistic about the chances of structural reform and the likely hood of this changing anything in the long term.

Yeah. Sadly, it's going to be a slow, slow process. Too many interests, apparent and hidden.

 

[CyclopsRock]

Why is the EU messing with corporations. These laws and loopholes are there because Ireland allows them.

Did you read the OP?

"The focus of the investigation will likely be tax regimes that are favorable to certain companies, including Apple, rather than the companies themselves. "

 

[4444244]

Didn't Starbucks announce that they are moving their HQ to the UK recently over something similar to this?

 

[numble]

The point is, Apple is swimming in an ocean of money, so they can afford to pay the correct taxes, which will leave Ireland (and a lot of other places) even better off.

Global companies set up big European HQ operations in Ireland (look at how many employees are there: Apple: 4000, Google: 2,500, Microsoft: 2,000) to justify their presence (they are not just shell companies that the European subsidiaries pay into, though many corporations actually do just set up empty shells in Ireland--just take a look at how many European airplanes are registered to a shell Irish company with the same name as the airplane's serial number). It is not necessarily true that Ireland will be better off if these tax incentives are removed.

Inertia may make companies decide to stay. But they also might 1) move off to some other tax friendly location, 2) disperse their concentrated staff amongst Europe or only keep some minor operations in Ireland or 3) just dispense with the notion of needing to have staff in Ireland/Europe (they only put them there because shell companies with no operations are increasingly being scrutinized as not being able to receive tax benefits--look up discussions regarding "beneficial ownership" at the OECD) and run those operations through their US headquarters and contract out services that still need a European presence.

 

[CyclopsRock]

We really need to just harmonise corporation tax and come up with better methods of focusing investment into struggling regions.

Without tax incentives, all you have left is government subsidy.

 

[Funky Papa]

Without tax incentives, all you have left is government subsidy.

God forbid talent development and infrastructure improvements.

 

[ksan]

Without tax incentives, all you have left is government subsidy.

What?

 

[Funky Papa]

Also, can we find a way to raze the City once and for all? I mean, now that we are finally getting down to business...

 

[numble]

Both.

Ireland and Apple are being investigated because the EC believes they may have engaged in illegal arrangements that provided Apple and a small number of powerful corporations with rates much lower than those offered to other companies, undercutting Ireland's already low corporate taxes.

Also, the EC seems pissed off at Apple's way to transfer its profits from its subsidiaries. Apple is specially sneaky and dastardly here. Instead of looking into ways to reduce the taxes they pay in each country, they have developed a complex system that allows them to pay no taxes at all. This has been done in rather unusual ways, such as giving some bullshit intellectual property to one of Apple's subsidiaries in Ireland, which in turn licenses it at onerous rates to the rest of Apple's subsidiaries in Europe, magically turning multibillion euro profits into losses. Apple pockets in Ireland all the profits from Germany, France, Spain, Italy and the rest of the European Union, and then pays some ridiculously low (and potentially illegal) taxes in Ireland while claiming tax returns across the Union for those poor, poor subsidiaries barely meeting ends. The EU is logically mad as hell, and Almunia's office is looking into it just in case they can claim concealment of assets or something to that effect.

To sum, Ireland's low tax rate is legal. What's happening behind closed doors, however, is some grandfuckery of the highest order.

IIRC Microsoft had similar deals across the board, with an Irish subsidiary selling boatloads of Windows copies to Microsoft Spain in order to crush their finances and pocket the Spanish operating profits in Ireland.



And Fiat's and Luxemburg's.

It took a ravaging crisis for the EU to finally comprehend that the Ireland-Luxemburg-Holland tax triangle wasn't just taking companies in, but bilking everybody else out of billions of euros.

The expectation is to make all states fall in line and avoid a race to the bottom, or at least remove the jetpacks from Ireland, Luxemburg and the Netherland's shoulders.

I expect that Apple is like all other corporations and negotiates advanced pricing agreements with each of these countries (where each country approves that the payment to Ireland is an appropriate price). If the EU is mad at these companies, they should be mad at the individual countries' tax authorities that approved the pricing arrangements to begin with. Do you have a source that matches your claim that Apple European subsidiaries are actually reporting losses? I would think each countries' tax authorities would be looking at the APA they're negotiating if they see that their local Apple subsidiary is constantly reporting a loss.

 

[werks]

If apple wants to only pay the low Ireland tax then they should just operate in Ireland only. Creating shell subsidiaries to move profits from one country to another should be illegal.

 

[Zaptruder]

Rend these fuckers limb from limb. If they want tax free, drive them into Somalia I say.

 

[StayDead]

Corporation Tax dodging is a joke. The amount of money dodged by huge corporations in the UK each year could nearly, if not completely pay off our national debt. Is ridiculous how they can get away with it.

 

[ICKE]

There is no way to justify these rates.

You can make up excuses how Apple helps the local economy and provides jobs but the reality is that the global community as a whole suffers when the most powerful companies with monopoly power are allowed to use nations as a sandbox.

It's about time that governments took action and started to level the playing field.

 

[Funky Papa]

I expect that Apple is like all other corporations and negotiates advanced pricing agreements with each of these countries (where each country approves that the payment to Ireland is an appropriate price). If the EU is mad at these companies, they should be mad at the individual countries' tax authorities that approved the pricing arrangements to begin with.

Those arrengements are made between two parts, fully knowing that some deals may not be legal, and the EU is right being mad at both.

Do you have a source that matches your claim that Apple European subsidiaries are actually reporting losses? I would think each countries' tax authorities would be looking at the APA they're negotiating if they see that their local Apple subsidiary is constantly reporting a loss.

There you go.

Apple's retail units in France, Germany and Britain purchase goods from the Irish units. The prices are set at levels that ensure these units in bigger states do not report much profit.

This means the company avoids tax on sales in its bigger markets.

In 2011, the last year for which accounts are available, Apple Retail UK Ltd reported profits of 31 million pounds on sales of 860 million pounds and paid tax of 9 million pounds.

In the same year, Apple Retail France reported a loss of 21 million euros on sales of 346 million euros and paid income tax of 7 million euros.

Apple Retail Germany reported a 4-million euro loss on sales of 174 million euros and paid no income tax.

It should be noted that Apple consolidates all its European stores in an Irish holding that paid no corporate taxes at all for years despite hoarding billions upon billions of euros.

The main subsidiary, a holding company that includes Apple's retail stores throughout Europe, has not paid any corporate income tax in the last five years.

The subsidiary, which has a Cork, Ireland, mailing address, received $29.9 billion in dividends from lower-tiered offshore Apple affiliates from 2009 to 2012, comprising 30 percent of Apple's total worldwide net profits, the report said.

Corporation Tax dodging is a joke. The amount of money dodged by huge corporations in the UK each year could nearly, if not completely pay off our national debt. Is ridiculous how they can get away with it.

Over 70% of the tax fraud in Spain was commited by corporations despite constant claims of cheeky plumbers being behind our sorry economy. Each year we lose enough money to corporations to rescue the entire healthcare and education systems several times over. Of course, the government is doing jackshit about it and it'll probably need the EU to set the record straight if we want to curb this situation.

 

[numble]

If apple wants to only pay the low Ireland tax then they should just operate in Ireland only. Creating shell subsidiaries to move profits from one country to another should be illegal.

I don't think anyone would argue that their Irish operations are a shell.

The theoretical ground for profit shifting is based on risk and investment.

If Apple spent $300 (including R&D, labor, marketing) to make an iPad and then sold an iPad to Best Buy/Wal-Mart/whatever for $490 and Best Buy sells it for $500, that high profit margin for Apple and low profit margin for Best Buy is generally understandable, I believe. The concerns/arguments arise once the third party retailer is removed (even though legally a subsidiary is considered a third party).

Now what if Apple sold an iPad to a European subsidiary, which does nothing but operate online and retail stores. Does it make sense for the European subsidiary to make a margin equivalent to Best Buy/Wal-Mart, or is it doing operations that are more equivalent to Apple HQ? If there is no contribution to the risk that R&D and investment to make the iPad from the European subsidiary, do they deserve to have that high profit margin that Apple HQ generally enjoys, or are they more like a reseller?

There are arguments either way of course, but I hope my illustration helps show that it is not a cut and dry issue.

 

[ICKE]

It should be noted that Apple consolidates all its European stores in an Irish holding that paid no corporate taxes at all for years despite hoarding billions upon billions of euros

The subsidiary, which has a Cork, Ireland, mailing address, received $29.9 billion in dividends from lower-tiered offshore Apple affiliates from 2009 to 2012, comprising 30 percent of Apple's total worldwide net profits, the report said.
.

And then people wonder why these companies can just throw billions around buying off other companies to expand their portfolio. It's absolutely ridiculous.

 

[CyclopsRock]

God forbid talent development and infrastructure improvements.

That's all good, but it can only go so far. The EU itself makes that quite a bit harder to do, thanks to the free movement of people. There's a reason why the more developed countries attract far more pan-EU migration than the less developed countries, and many of those that move are the best and brightest from their countries who simply don't have the opportunities they want locally. A better education might help them, but it doesn't always help their local area as much. Tax breaks give them - or their potential employers - an incentive to set up in, say, Bulgaria, which might help stem the flow of talent away from these countries. Of course you need both, but just having better schools and airports helps a lot less in a common market.

 

[linsivvi]

How can people defend this? Come on, you can like Apple products all you want but it's undeniable that their tax avoidance is reprehensible.

 

[CyclopsRock]

How can people defend this? Come on, you can like Apple products all you want but it's undeniable that their tax avoidance is reprehensible.

I'd do it. If my accountant told me that there was a way I could pay 3.7% tax, I'd do it in a heartbeat.

 

[gcubed]

I'd do it. If my accountant told me that there was a way I could pay 3.7% tax, I'd do it in a heartbeat.

Yea, I don't blame apple for taking advantage of a situation, I blame the situation being available to them

 

[Funky Papa]

Yea, I don't blame apple for taking advantage of a situation, I blame the situation being available to them

More like corporations making sure that those situations are available to them.

Let's not be naive.

 

[Dead Man]

Yea, I don't blame apple for taking advantage of a situation, I blame the situation being available to them

Yeah, no companies lobbied for the tax laws in place. Not one of them.

 

[Gambit82]

Tax avoidance is completely legal. This is the problem with having governments try to create these complex tax systems. They allow corporations and the powerful to buy influence, and all the influence is built into the tax system, and a lot of people believe in a flatter tax system.

 

[poppabk]

They really do need to shut down these tax avoidance schemes, but the timing seems kind of bullshit, I am pretty sure Ikea masterminded this type of scheme a long time ago.

 

[ShutEye]

Basic explanation of the scam (cause that's what it is, legal or otherwise).

Here is a nytimes link with a graphic

There is another graphic that I've seen before but I can't seem to find it.

Here's a link to the IMF's explanation.

the problem is not just "Apple took advantage of dumb tax laws", it's "Apple took advantage of tax laws they lobbied for and helped write". Replace Apple with any large multinational with lots of patents.

 

[numble]

Those arrengements are made between two parts, fully knowing that some deals may not be legal, and the EU is right being mad at both.




There you go.


It should be noted that Apple consolidates all its European stores in an Irish holding that paid no corporate taxes at all for years despite hoarding billions upon billions of euros.

Thanks for the link. I don't think APAs can be illegal if the country signs off on it. If they need to reconsider their rules for APAs, but it may also be that the APAs are robust and these subsidiaries need to be compared to retailer operations and not the whole vertical operation from R&D on.

How can people defend this? Come on, you can like Apple products all you want but it's undeniable that their tax avoidance is reprehensible.

I may be or know tax lawyers working in these issues. What do you find reprehensible about the retail analogy I described? I also don't think it is reprehensible that these countries' tax authorities approve these arrangements in advance.

Places like Hong Kong and Singapore would not exist as we know it if they weren't able to operate the Irish equivalent in Asia. Hong Kong residents don't pay Hong Kong tax on their non-HK sourced income (and as of recently, UK and Japan citizens don't pay tax on foreign income either), because that is the law now, and I don't begrudge people for not paying tax when they don't have to.

I think tax deductions for mortgage interest and the capital gains tax rates are too low, but I will still take it when it is made available to me.

 

[megateto]

Amazon, you're next.