EU verdict: Apple received €13bn in illegal tax benefits from Ireland The European Commission has ruled that tax arrangements between Ireland and Apple were in breach of the EU's state aid laws, and said the American corporation needs to cough up €13bn in back taxes, plus interest. Delivering her judgment in Brussels this morning, the EU's competition commissioner, Margrethe Vestager, said: …
Foreign taxes paid are a direct credit against US taxes. All this means is that Apple will (assuming the ruling holds) pay the €13 billion sooner, rather than being able to delay it for an arbitrary length of time by choosing not to bring the money home.
Apple is already carrying a deferred taxes item on their balance sheet that's several times this amount, to reflect the US taxes owed on money they are holding overseas that will become due when it is brought back. When they pay the €13 billion their deferred taxes will drop an identical amount so the net effect on their market cap / stock price is zero.
While the market cap / stock price piece is a wash, expect the US to chime in. If those taxes are paid in the EU, it reduces the amount the US can expect to claim if the money is ever repatriated. (Never mind that the taxable business was conducted in the EU....)
Apple is only "investing" the money is the most conservative investments possible, so they will lose one or two percent, which is less than the interest the US government is going to charge them...
While the US may "chime in", they have little to say about how the EU's tax laws are interpreted. But if the EU prevails, this does NOT go into EU coffers. It goes into Ireland's coffers alone. The reason the EU is fighting this is because they feel that Ireland is getting an unfair advantage over other EU countries.
Wonder if the UK would offer them a deal after brexit?
I suspect they would only be seriously interested if we remained in the EEA (and that didn't prevent similar preferential deals)
The way I read it is that the EU are chasing dodged taxes for profit within the free market, not having an HQ within that would make it far harder to for Apple to avoid that, with import duties etc.
that when you have an issue with the TaxMan, they have been known to seize your properties until you get to an agreement.
I repeat : seize the property of the company that possesses ALL OF APPLE's IP RIGHTS...
Forgot what number we were at, but the next point should be "Profit"...(or thermonuclear war, depending ^^)
A good part of tax avoidance is the "transfer" - if in name only - of intellectual property rights and then "licencing" them back to yourself from a low-tax country to a high-tax country whereupon the money that you pay to yourself (if not in name) is a tax deductible expense.
Politicians of all sorts rant about tax avoidance but in almost every bloody case, the corporate tax lawyers are only taking advantage of the laws that the politicians have written.
"Politicians of all sorts rant about tax avoidance but in almost every bloody case, the corporate tax lawyers are only taking advantage of the laws that the politicians have written." --- and most likely those laws were written after lobbying by the very corporations that said politicians rant and rail against in their increasingly futile efforts to show how they are with the 'little people'.
"I wonder if they will now leave Ireland, since the benefit maybe isn't there, and if other high tech firms will follow?"
It depends on what the EU decides about the other arrangements with Luxembourg etc. but for US companies 12% plus English as a 1st language is probably going to be a competitive deal.
"That is happening too - Fiat, a couple of fashion houses, etc. She is not taking prisoners."
Exactly. I've seen a few comments from over the pnd that "they" are just going after rich American companies. The reality is that all companies trying it on have "them" coming for them. It;s just that the big US companies seem to be the most prolific and, as a tech site, the big US tech companies garner the main headlines here on El Reg. And Apples slice of the pie seems to be pretty damned big. Big enough to make headlines not just in the mainstream press here but around the world.
/Rant/ It's not like we can allow the rule of law to be applied like that, to all alike! /Rant off/
So this'll be a case for the courts. How much will the lawyers' fees be when the matter in question is a puny13 beeellion? And what LR units do we have for that? The price of 20 million iphones?
So too has America - the EU doesn't have the right to tax American companies - that right is reserved by the US ... and no doubt, at some point in the future, they will get around the thinking about doing something about it - or not.
Governments everywhere have to start recognizing that in a global economy they all have to co-operate and agree to a uniform tax structure - this sort of thing (moving your income on paper, assigning intellectual property rights to convenient locations) will continue otherwise.
The US should be happy about this. It would discourage the many inversions that have taken place (where big US company buys smaller non-US company and moves HQ to lower-tax non-US location).
The reality of course is that those in charge of these big companies, or who are large investors in these big companies, have control of the US government (corruption, aka "lobbying") and other institutions and don't want to see people taking their big wads of money from them.
So too has America - the EU doesn't have the right to tax American companies
It isn't. The Irish government was giving preferential treatment to two Irish companies, set up by Apple with specific purpose of doing trade in Europe.
A uniform global tax structure is not only a pipe dream but completely illegal or unconstitutional for the majority of countries.
That's actually the point. All the competition commissioner did was determine that one EU state had granted illegal subventions to two EU companies. Normally that's a clear case, and I'm not aware any of the previous similar decisions have ever been contended, let alone successfully.
Of course, with a big name and a seriously big amount of money involved...
The companies in question are Irish subsidiaries of Apple. Apple could reduce its European tax burden by repatriating the money to the US, but then they would have to pay US taxes, which are higher.
Apple and Ireland will appeal, and they will lose eventually. I doubt Apple will move: Ireland will be the only English-speaking country in the EU, and its normal corporate tax rate (not the sweetheart deal) is lower than most.
The same ruling is also applicable to Google and other tech companies whose too-clever-by-half tax avoidance strategies have been laid bare, even though the EC has not even touched the main tax dodge of using arbitrary intra-company payments for "intellectual property" to shift profits to tax havens.
"Governments everywhere have to start recognizing that in a global economy they all have to co-operate and agree to a uniform tax structure"
Some governments - e,g, Ireland - realise that at the level of multinationals there's a free market in tax rates. Individual governments can decide whether they're better off being poor competitors in that market in order to clean up taxing purely domestic businesses so it's not going to be a race to the bottom, more a matter of strategic choices.
If the US wants to continue the high tax route it can scarcely complain about the obvious consequences with multinationals. Nobody's stopping them from lowering their tax rate if they wand to.
Countries such as Ireland, however, are better off with a low tax strategy. Would it be right for the US or anyone else to force them into a tax regime they don't want to apply?
So too has America - the EU doesn't have the right to tax American companies - that right is reserved by the US ... and no doubt, at some point in the future, they will get around the thinking about doing something about it - or not.
Quite right if the company is doing business in America. The problem here is that the company is doing business in Ireland and are not only using this to dodge Irish taxes by agreement with the Irish government but avoiding taxation elsewhere in Europe by channelling its booty back to Ireland at every opportunity.
If it wants to do business in Europe without paying taxes to the European base country they are working from, then close that company down and let them do their business directly from America instead, where corporates dodging taxes is a pretty common affair.
Oh Happy Day ... to be a lawyer in Ireland that is.
Considering how hard Apple corp litigates to protect rounded corners, they are going to go all in when it comes to real money.
What I don't understand is American citizens are liable for US income tax on any gains made outside the US. ( as per the IRS claiming capital gains on Boris Johnsons house sale.) But companies can offshore their profits until they are repatriated to the USA. Which suggests that overseas companies with US parents are truly 'foreign' and not under US law, so why the feigned outrage at the EU becoming supra-national within it's own borders??
After all it's not like the USA has ever tried to impose any supra-national authority around the world..
Apple don't have to do a thing, for the time being, it's the Irish government who are spending the money.
Only after the Irish government has either lost, given in, or run out of money to pursue the appeal against the decision and actually charged Apple the 13bn will Apple then spend money to appeal against the Irish government.
This one could run and run.
Of course, there's one other thing - if Apple do get charged 13bn in Ireland, they'll declare it as a loss to offset taxes in the US, so they won't lose the entire amount, and the US won't like that, as their tax take (40% of 13bn is 5.2bn) would be reduced, fairly appreciably, so they'll want to wade into the action. Fun days all round. We thought it was a protracted affair when one company sued another, add in nation states and probably our grandchildren will be watching the outcome of this.
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