European Probe of Apple's Irish Tax Policies Extended to 2016

[MacRumors]

A decision in the European Commission probe of Ireland's alleged "sweetheart tax deal" with Apple will likely be delayed until after the Irish elections in early 2016, as Financial Times reports the executive cabinet has now requested supplementary questionnaires in the lengthy investigation.

The European Commission began Apple's Irish tax probe in June 2014, and the Brussels-based executive body formally accused the iPhone maker of receiving illegal state aid from Ireland in September 2014. A decision was originally expected earlier this year, but the additional information requested will likely cause further delays.

Apple's tax policies have been scrutinized on numerous occasions over the past three years, as the company is said to utilize multiple subsidiary companies located in the Irish city of Cork to move money around without significant tax penalties. Apple continues to deny any wrongdoing, and Ireland vows to take the European Commission to court over any negative ruling, according to the report.

Apple's Irish tax probe is part of a larger crackdown by the European Commission on possible corporate tax avoidance in EU countries. Earlier this month, the commission reportedly accused McDonald's of "benefiting from arrangements that allowed it to pay no tax on European royalties in Luxembourg," and Fiat and Starbucks were ordered in October to repay up to EUR30 million in back taxes.

Article Link: European Probe of Apple's Irish Tax Policies Extended to 2016

 

[Crazy Badger]

I don't know why this is so difficult to resolve. Companies know how much it costs to operate in each territory and the profit they make in them. Taxes should therefore be paid at the appropriate local rate, and it should be illegal to move it outside the territory. Simples

 

[H2SO4]

Of course they’re being creative with their accounting. But they are no different from virtually any other company out there, (which doesn’t excuse any wrong doing). They are a focus because of their size, (financially). A successful prosecution would make the time spent worthwhile when fines are levied.

 

[tevion5]

As an Apple fan and member of an Irish political party currently in power, this is going to be fun to watch.

Of course they’re being creative with their accounting. But they are no different from virtually any other company out there, (which doesn’t excuse any wrong doing). They are a focus because of their size, (financially). A successful prosecution would make the time spent worthwhile when fines are levied.

I find it funny how Apple takes 99% of the flack for bad working conditions in China when half the industry uses Foxconn too. It's just trendier to attack apple to show how unique you are.

Not that Apple is a saint, but I'm just saying if you actually care about workers and taxes, then don't focus weirdly on one purportrator.

 

[iLoveDeveloping]

and Fiat and Starbucks were ordered in October to repay up to EUR30 million in back taxes.​

Article Link: European Probe of Apple's Irish Tax Policies Extended to 2016

30milliom from Starbucks? That's NOTHING. Tim Cook could pay that out of his wallet!! I don't think Apple have anything to worry about. Our government is Ireland knows how important it is to keep these companies here they will put up a big fight.. Even if it doesn't work, 30 million is change..

 

[H2SO4]

I find it funny how Apple takes 99% of the flack for bad working conditions in China when half the industry uses Foxconn too. It's just trendier to attack apple to show how unique you are.

Not that Apple is a saint, but I'm just saying if you actually care about workers and taxes, then don't focus weirdly on one purportrator.

I see that but imagine;

• Case 1. I employ 5 people and I’m treating badly. The turnover of my company is £100,000 per annum. They prosecute me, I go to jail and pay £15,000 in fines. The value of that fine doesn’t cover the costs of the staff the authorities employed to catch me.
• Case 2. Foxconn employs 1.09 million people and some of them are being treated badly. The turnover of that company is far more significant. They prosecute the company, probably nobody goes to jail however the value of the fines does cover the costs of the staff the authorities employed to catch them and the bad press spreads to Apple so the ‘return’ on the investment of time spent by the powers that be if you like is far better?

But they are still cooking the books and everybody knows it. Not just here either.

 

[0098386]

30milliom from Starbucks? That's NOTHING. Tim Cook could pay that out of his wallet!! I don't think Apple have anything to worry about. Our government is Ireland knows how important it is to keep these companies here they will put up a big fight.. Even if it doesn't work, 30 million is change..

Exactly, it's not much to them so one has to wonder why they fight so hard to keep it.

 

[2457282]

In all cases, whether apple or mcdonalds or whatever, the government extended a tax break to the company in order to have them stay in country. If it was illegal, isn't it the fault of the government for offering the tax break? I am no lawyer, so I may be missing something, but why is it always the fault of a company to accept an offer from a government that made the darn law in the first place. Why isnt the EU going after Ireland?

In the US, Delaware is a state that many companies incorporate because of the tax and documentation requirements (almost non-existent). Should the US go after the companies or the state? Actually they go after neither because there really is nothing wrong. It's called competition. If the EU blocks the tax break, what will likely happen is that Apple will move on to the next country that offers them a sweet deal. That's the reality of a company, they will go where the terms are most favorable.

Not sure why this is a problem.

 

[woody74]

In all cases, whether apple or mcdonalds or whatever, the government extended a tax break to the company in order to have them stay in country. If it was illegal, isn't it the fault of the government for offering the tax break? I am no lawyer, so I may be missing something, but why is it always the fault of a company to accept an offer from a government that made the darn law in the first place. Why isnt the EU going after Ireland?

In the US, Delaware is a state that many companies incorporate because of the tax and documentation requirements (almost non-existent). Should the US go after the companies or the state? Actually they go after neither because there really is nothing wrong. It's called competition. If the EU blocks the tax break, what will likely happen is that Apple will move on to the next country that offers them a sweet deal. That's the reality of a company, they will go where the terms are most favorable.

Not sure why this is a problem.

The reason that it is a problem is that Ireland is in the EU and under EU law countries, states, etc are not allowed to give state aid. The reason is to allow fair competition within the EU. This is not happening and many many companies are paying ridiculously low tax or none at all. Facebook for example paid something like £4000 in corporation tax last year in the UK on revenues of £130m. I would agree that it is not really the companies fault but corrupt and incompetent tax departments that have allowed this to carry on with out clamping down on companies or changing the law. Many many corporations have just become to big and have more power than governments. Imagine the legal costs in trying to take Facebook to court over tax when they make £130m in revenue and have such tiny operating costs. Isn't it funny how most tech companies have their European head offices in Ireland or the Netherlands. It's not like Ireland is a large market with a population of only 6million compared to the EU that has a population of 500million

 

[furi0usbee]

Apple scamming the system. Apple's solution? Add more workers to their Ireland building... that must be a great job. Sit around all day playing games on your iPhone. Technically you are an employee, and technically Apple does some sort of business there. But that's where it ends. 100% tax scam on Apple's behalf. They would be nowhere near Ireland if not for the money it's saving them. I guess they need a place to hold all that money they don't want to pay taxes on if they brought it back to the USA.

I have no faith in our tax code, so Apple (and every other corporation) will continue to take advantage of the idiotic text.

 

[Rocketman]

For you folks saying what "should" happen, remember it is our own congress that sets the tax policy that our companies are responding to. Ireland allows companies to operate in their country without a firm "home base" as we require thus allowing the famous tax strategy so many companies use with Ireland. After their civil war they were desperate for tax revenue so set policies that attracted multi-nationals since their own domestic economy was devastated and in no position to recover.

That huge sucking sound you hear is companies from all over the world moving to Ireland.

The Republican congress passed a budget with regional taxes, a reduction of the tax on foreign income and lower rates for capital and businesses. It was DOA in the prior D Senate and now that an R senate is likely to pass it, it will be DOA with a D President.

 

[Wondercow]

Of course they’re being creative with their accounting. But they are no different from virtually any other company out there, (which doesn’t excuse any wrong doing). They are a focus because of their size, (financially). A successful prosecution would make the time spent worthwhile when fines are levied.

There won't be any fines applied against Apple. Apple has been operating under Irish law. The EU probe would determine if the government of Ireland did anything wrong. If the Irish tax deal is found to be illegal Apple would have to pay no more than the difference between the taxes they did pay and the "proper"tax amount.

 

[Wondercow]

But they are still cooking the books and everybody knows it. Not just here either.

"Cooking the books" means that they are doing something illegal. They aren't. Apple's accounting is very creative, but not illegal.

 

[HiRez]

Sounds like some lawyers want to keep milking that cash cow.

 

[H2SO4]

The reason that it is a problem is that Ireland is in the EU and under EU law countries, states, etc are not allowed to give state aid. The reason is to allow fair competition within the EU. This is not happening and many many companies are paying ridiculously low tax or none at all. Facebook for example paid something like £4000 in corporation tax last year in the UK on revenues of £130m. I would agree that it is not really the companies fault but corrupt and incompetent tax departments that have allowed this to carry on with out clamping down on companies or changing the law. Many many corporations have just become to big and have more power than governments. Imagine the legal costs in trying to take Facebook to court over tax when they make £130m in revenue and have such tiny operating costs. Isn't it funny how most tech companies have their European head offices in Ireland or the Netherlands. It's not like Ireland is a large market with a population of only 6million compared to the EU that has a population of 500million

Funny things is, if this were you or I we’d stand in the dock and be told that no matter from whom/or where the assistance was provided, ignorance of the law is no defence.

 

[H2SO4]

There won't be any fines applied against Apple. Apple has been operating under Irish law. The EU probe would determine if the government of Ireland did anything wrong. If the Irish tax deal is found to be illegal Apple would have to pay no more than the difference between the taxes they did pay and the "proper"tax amount.

Yeah great. I get on the bus without a ticket and only if and when I’m caught I pay the fare I would have had to in the first place. How ethical.

 

[mossy]

No doubt that Apple has a deal with the Irish government. Ive heard it is down around the 2-3% mark. Lots of other multi-national companies have deals also - paying in the range of 6%. The previous governments along with the current government couldn't care less about how much tax is actually raised. Its more important for the government (past and present) to make sure that the jobs are protected. I am in favour of the multi-nationals paying the actual 12.5% which would really help the people of Ireland (health system is third world at this stage from Austerity imposed by previous and current Government) - but according to this and previous governments - the sky will fall down if we as a country actually charge the multi-nationals the full MASSIVE 12.5% - which is still the best deal in town.

Irelands tax regime of 12.5% (still the best deal in town) is a thorn in the European Union’s side. Not naming other countries here (you could probably hazard guess - go on - you know the ones I am talking about) but I am sure they would be over the moon - shouting from the rooftops with having all the Silicon Valley cool dudes and dudettes in there capital city (imagine - just close your eyes and picture it for a second). They could be the cool cats of the EU then. I can understand the clamouring by governments to get the technology companies to set up base in a country but basically they (other EU countries) were outmanoeuvred a long time ago by Ireland (think the 1980’s).

So the charade of the European Union continues!
Just say NO to competition. Competition is the cornerstone of the markets - yet - competition with tax rates seems to be excluded in reference to Irelands 12.5% rate. If the entire EU had one tax band for multi-nationals for the entire block - the problem would disappear overnight. Cant see that happening anytime soon though. Seems like they (the EU Troika) did not want to waste a good crisis either (you remember the one - just a few years ago - when private debt of banks around Europe MAGICALLY became sovereign debt - but thats for another day). The EU tried and tried there best to get us to increase the corporation tax rate during the negotiations with the undemocratic Troika during the bailout process - but the government of the day held off on that demand (probably the only one, God bless em).

So there is really only one logical option left on the table. Seems the most fair and honourable thing to do is attack said sovereign nation’s tax regime - whip them into line and poach the multi-national companies from said country. Do the right thing. There really is no other alternative.

 

[macpeach55]

Yeah great. I get on the bus without a ticket and only if and when I’m caught I pay the fare I would have had to in the first place. How ethical.

No, not really. More like the conductor (Ireland) telling you you don't need a ticket whenever you are on his Bus, but then one Day the inspectors (EU Commission) get on and tell you that you do. So who was in the wrong? Really, the Conductor for telling you you didn't have to pay when you travelled on "his" Bus.

 

[69650]

I don't know why it's taken so long for the EU to act on this. Ireland's preferential tax rate for Apple is a clear breach of EU rules. I sure hope somebody is going to get a large multi-billion dollar tax bill for this. Apple can afford it.

 

[navaira]

If the entire EU had one tax band for multi-nationals for the entire block - the problem would disappear overnight.

Yup, this exactly, plus strict enforcement of paying taxes on profits made in the country of residence. No, indeed, it is not going to happen.

One of the schemes used (not sure if Apple does this or something else) is:
• company Pear Inc. opens company Pear-Shape Inc. in a country with very low taxes and "sells" its name, say, Pear Inc. to them. Pear-Shape Inc. only owns one asset: the name "Pear".
• company Pear Inc. makes $50 million profit a year in a country with high tax rate
• company Pear Inc. pays Pear-Shape Inc. $49.999.999 a year for license to use the name Pear Inc.
• Pear Inc. pays high taxes from remaining $1, while Pear-Shape Inc. pays low tax rate from $49.999.999

There are many, many companies that do this. Ireland isn't always their choice, it's also Cyprus or Arabian Emirates. I believe that the reason Apple are singled out is that they are the biggest, and also Ireland is the bigger fish to fry for the European Commission. I'm curious of the outcome but I'm not holding my breath. What is going to happen is most probably Apple being ordered to pay €20 million or similar small change on profits from previous years, appealing, losing, appealing again, etc., while continuing to make exorbitant profits due to the tax scheme remaining in place.

 

[Wondercow]

Yeah great. I get on the bus without a ticket and only if and when I’m caught I pay the fare I would have had to in the first place. How ethical.

That's not analogous to what's going on. Try this:

The Chair and head committee of the transit service allow you to ride the bus for a steep discount. Eventually, the municipal government says to the Chair, et al., "you can't allow people to ride for a discount anymore!". Then the municipality comes to you and says "you've done nothing wrong since you just following what those in charge allowed. So, just pay the difference and we'll call it even."

 

[rmatthewware]

Yeah great. I get on the bus without a ticket and only if and when I’m caught I pay the fare I would have had to in the first place. How ethical.

So you're saying you don't take any deductions when you file your taxes? Why would you let the government take more money than the law allows?

Besides, your argument is flawed. Apple didn't get on the bus without paying. They took advantage of a discounted fair.

If you're going to get mad at someone, get mad at the governments for creating tax codes that aren't fair.

 

[Wondercow]

So you're saying you don't take any deductions when you file your taxes? Why would you let the government take more money than the law allows?

These threads always attract a lot of people who claim "Apple should pay their fair share of tax!" or the like. The thing is, though, that Apple is doing just that: they pay what the law requires--as do you, me, our neighbours, anyone!

If one thinks that Apple, or anyone else, should be paying a higher tax rate or have fewer deductions, then one should contact their governmental representatives and lobby for a change to tax law.

 

[Crazy Badger]

Starbucks sell the cups it uses from a subsidiary in a low-tax area to those in high-tax area, at ludicrously inflated prices to shift profits.

It shouldn't be difficult to clamp down, but needs an internationally joined up approach which seems almost impossible in the world we live in today

I fear the net result would be consumers in the higher-tax areas paying more to cover the increased tax-burden, but at least it would result in competition and choice based on a level playing field. The current situation makes a mockery of our so called 'free market economy'

 

[ApfelKuchen]

Exactly, it's not much to them so one has to wonder why they fight so hard to keep it.

A million here, a million there, and soon it adds up to real money!

Would anyone here turn away a chance at $30 million because "it's not worth the bother?" No. The sum only seems insignificant when compared to the tens of billions in profits some companies earn, or trillion-dollar government budgets. "I just saved 1,200 $25,000/year jobs!"

This isn't the CEO or Finance Minister devoting all his/her time to $30 million. It's a bunch of soldiers in the trenches doing it, at a far lower cost.

Everyone needs to justify their pay check, and saving the company/earning the government $30 million is a pretty good justification (whether for finding a tax loophole, defending the loophole, or closing the loophole). At the least, if you succeed, you can dodge being downsized for another year.