Apple Loses Major Tax Dispute in Europe, Must Pay Ireland €13 Billion

[surferfb]

The US cannot and will not want to do anything about this, least of all start a pointless and damaging trade war right now over the greed of a multinational, which did everything in its power to delay paying the taxes it owed to the US treasury until its hands were forced. This seems to be a peevish overreaction on the part of some commentators in this forum. Cooler heads prevail where power actually resides.

Again. I said I don’t expect the US to do anything about this. But it's clear the current EU leadership has a vendetta against big American tech companies, (this being just the latest of a long line of examples), and I would like it if the US did something about foreign abuse of regulatory and court powers to unfairly target US companies. Or in your terms, stop what I see as a pointless and damaging (cold) trade war that the EU already started. To be clear, I don't expect anything to be done there either, although I think either one of the two potential incoming administrations has the potential to be better on this than the current one has been (although again, likely won't).

Apple dreamt up and cooked up this mess and the Irish government went along with it. As far as the EU is concerned the buck stops with Ireland but that doesn't wash Apple's hands of the matter. Those were Apple's tax advisors paid with Apple's money and they were found wanting.

Ireland saw an opportunity to be more business friendly in 1991 and took it. Just because Vestager comes in decades later and decides that she doesn't like big American tech companies so much that she's going to sue an EU member nation to make them levy taxes they don't want, and then when she loses, appeal to overturn the lower court's ruling, doesn't mean anything about the arrangement was immoral.

The US is irrelevant. It had nothing to do with the case. How Apple decides its tax affairs outside of the EU is Apple's business and the EU has no jurisdiction or even interest in that. The case involves sales within the EU and within the EU only. Apple's motivation for proposing this tax arrangement is also not the issue. The EU only looks at the legality of what was arranged and in this case it was illegal.

If the US is put out by having to forgo some tax revenues, that is on Apple for underdeclaring the tax it owed overseas. Apple's fault.

Again this entire argument is about WHERE the tax was paid, the US or the EU. So, no, the US is not irrelevant. Apple was using Ireland to hold the money oversees before repatriating the money to the US, hoping for better terms IN THE US. If you actually read what was going on, I think you'll find it hard pressed to say Ireland deserved any of the money they're now getting. Ireland is being forced to tax a non-resident company for profits earned outside of Ireland. In what world does that make sense? What happened is Verstager came in, not understanding what she's regulating (literally, she said in an article about this case that she "learned on the job"), and decided the EU deserved that money so she was going to force Ireland to take it.

I'm not surprised the European Court of Justice went along with what Verstager wanted, because $$$ €€€, but it's easy to see what's happening here if you're not blinded by pro-EU bias.

 

[nebo1ss]

This is exactly how the EU works since it's considered a single market!

Let's say a Danish company who manufacturers furniture sells a sofa to a Swedish customers, they don't pay company taxes in Sweden (as a general rule).

Apple manufactures nothing in Ireland. it was nothing but a convenient Tax loophole. Don't see any similarities to your example.

 

[BaldiMac]

How do you know then - when Apple doesn’t release the figures?

Because that's the whole point of the tax arrangement we are discussing.

Read the article (from 2013!). “Since” doesn’t mean “before” and it doesn’t mean that it ended in 1996. The tax ruling contested by the EU dates back to 1991.

It isn‘t - but over time decreased down to that.

I read it. You presented it as evidence that Apple had an effective tax rate below 1% from 2004-2014. It did not support that claim.

…and that tells us what about tax liability in Ireland?

That you don't understand the issues.

 

[BaldiMac]

No - they paid tax additionally (not instead!) in the U.S. according to U.S. tax law:

“All countries tax income earned by multinational corporations within their borders. The United States also imposes a minimum tax on the income US-based multinationals earn in low-tax foreign countries (…) Most other countries exempt most foreign-source income of their multinationals.”

https://www.taxpolicycenter.org/briefing-book/how-does-current-us-system-international-taxation-work


…but the U.S. tax administration does.


They dodged paying foreign (Irish) tax in this case.


See above. Having to pay taxes in Ireland does not absolve Apple from additionally paying taxes in the U.S. - even though they may get credit for foreign tax paid.

The part that you can't seem to wrap your head around is that I'm not talking about foreign income. I'm talking about US income.

The basic arrangement is Apple charges IrishApple a fee for its IP. For example, IrishApple brings in $100 and Apple charges them $90. IrishApple makes $10 in income and pays the 12.5% Irish corporate tax ($1.25). The remaining $90 is revenue for Apple in the US and they pay taxes on that in the US. All of this is normal and has nothing to do with the dispute.

Because the EU determined that the way Apple set up their Irish subsidiaries in order to delay repatriating the $90 to the US constituted illegal aid, the EC is making Apple pay Irish income tax on the full $100. Even though it was never intended to be income in Ireland.

To be clear, Apple had no way to know that anything was wrong with the arrangement. When the EU complained, they proactively made changes.

 

[I7guy]

You’ve said it countless times before - and no matter how often you misleadingly repeat it:
The DMA is not concerned with hardware devices and doesn‘t regulate them - it regulates their operating system software (and select other software/services provided in connection with them).

The EU defined the universe in such a way as to disadvantage apple. I can’t say it enough times. By defining the market as App Store rather than cell phone - the eu grossly misidentifies there are only two markets. Whilst at the same time ignoring there are no legal barriers to entry.

That’s why your “hundreds of manufacturers of cell phones” comment is misleading - given that basically all of those phones sold and used in the EU run one of the two dominant operating systems (iOS and Android).

It is not apples problem that cell phone manufacturers do not invest in software research. The way the market was identified disadvantages apple when there are no legal barriers to entry.

I don’t know why it’s so hard to acknowledge:
Yes, there is a duopoly in operating systems for mobile phones.

Because there really isn’t. The EU needed some foundation, any foundation to be able to have the DMA. As I said house of cards.

(which is neither illegal per se, nor are does it mean that there are legal barriers preventing entry of competitors).


…and it still that that doesn’t mean there’s no duopoly.

“Monopolies may be naturally occurring due to limited competition because the industry is resource intensive and requires substantial costs to operate”

The upfront investment required to establish and market a competitive ecosystem of third-party app (in addition to developing an OS itself) prevents competitors from competing with iOS and Android.

Anyway don’t know what can be said more about this.

 

[webkit]

There is no legal limitation for entering the market with any operating system. The above is just a red herring.

Microsoft was declared to have a monopoly with Windows in the desktop OS market. What "legal limitation for entering the market" was there for desktop operating systems in that situation? The reality is that several desktop operating systems had entered the market and existed yet Microsoft was still declared to have a monopoly with Windows.

Are you asking the question from a revenue point of view or market share point of view?

Whichever you used to conclude that there is no App Store/Play Store app store duopoly in the EU and whichever you used to conclude that there is no iOS/Android mobile OS duopoly in the EU.

There is nothing precluding, other than time, money and ingenuity in this market place.

Microsoft was declared to have a monopoly with Windows in the desktop OS market. What was "precluding, other than time, money and ingenuity in this market place"? The reality is that several desktop operating systems had entered the market and existed yet Microsoft was still declared to have a monopoly with Windows.

It is not apples problem that cell phone manufacturers do not invest in software research.

What does that have to do with anything?

Was it Microsoft's "problem" that more computer makers didn’t invest in "software research" to create their own operating systems or use one of the several others that existed? Yet Microsoft was still declared to have a monopoly.

Was it Google's "problem" that more companies, including Apple, didn't invest in "software research" to create competitive/desirable enough web search engine technology? Yet Google was still declared to have a monopoly.

"Insufficient" efforts of others do not mean a company can't be or shouldn't be declared a monopoly or part of a duopoly and potentially face related consequences e.g., just because Apple may not have done more to be competitive in the desktop OS market or may not have done more to be competitive in the web search market isn't necessarily relevant.

 

[BaldiMac]

Apple manufactures nothing in Ireland. it was nothing but a convenient Tax loophole. Don't see any similarities to your example.

Actually, the only Apple-owned manufacturing facility is [was?] in Ireland. Not sure if that is still true.

Inside Apple's secretive iMac plant in Ireland

When people talk about Apple's Irish operations, it's normally negatively, regarding questionable tax practices. But the company operates a 4,000-person

www.cultofmac.com

 

[AppliedMicro]

The EU defined the universe in such a way as to disadvantage apple. I can’t say it enough times. By defining the market as App Store rather than cell phone - the eu grossly misidentifies there are only two markets. Whilst at the same time ignoring there are no legal barriers to entry.

Legal barriers are irrelevant. The non-existence of them does not mean that monopolies or duopolies aren’t monopolies or duopolies.

And it wasn‘t defined to disadvantage Apple - but according to economic reality.
The duopoly exists in operating systems - and that’s what’s relevant.
It does not exist - as you correctly stated - in sold devices. There are many device manufacturer.

👉 Developers (usually) do not develop hundreds of app versions for hundreds of device manufacturers - that all run one of two operating systems. Just as developer of Windows apps do not develop separate apps for HP computers, Levovo computers, ASUS computers etc.

Anyway don’t know what can be said more about this.

I agree - there‘s nothing more to say.
The existence of a duopoly (for whatever reason) in one market isn‘t negated by the hundreds of manufacture in a separate but related market - or a market for base platforms.

The way the market was identified disadvantages apple when there are no legal barriers to entry.

There are no relevant barriers - but there are economic entry barriers.
Antitrust and competition law aren‘t restricted to cases of legal entry barriers. Simple as that.

It may frustrate you and you may disagree. You may be of the opinion that government should not intervene in such cases.

I just don‘t get why it‘s so hard to acknowledge that, yes, there is a de facto monopoly in mobile phone OS (…but „since there are no legal entry barriers to that market, I believe government regulation is unwarranted and the duopolists should be able to exploit that market as they see fit“).

 

[I7guy]

Legal barriers are irrelevant. The non-existence of them does not mean that monopolies or duopolies aren’t monopolies or duopolies.

And it wasn‘t defined to disadvantage Apple - but according to economic reality.
The duopoly exists in operating systems - and that’s what’s relevant.
It does not exist - as you correctly stated - in sold devices. There are many device manufacturer.

👉 Developers (usually) do not develop hundreds of app versions for hundreds of device manufacturers - that all run one of two operating systems. Just as developer of Windows apps do not develop separate apps for HP computers, Levovo computers, ASUS computers etc.


I agree - there‘s nothing more to say.
The existence of a duopoly (for whatever reason) in one market isn‘t negated by the hundreds of manufacture in a separate but related market - or a market for base platforms.


There are no relevant barriers - but there are economic entry barriers.
Antitrust and competition law aren‘t restricted to cases of legal entry barriers. Simple as that.

It may frustrate you and you may disagree. You may be of the opinion that government should not intervene in such cases.

I just don‘t get why it‘s so hard to acknowledge that, yes, there is a de facto monopoly in mobile phone OS (…but „since there are no legal entry barriers to that market, I believe government regulation is unwarranted and the duopolists should be able to exploit that market as they see fit“).

I don’t suppose after probably hundreds of posts we will ever agree on the thinking of this and the needle threading that went into the justification and writing of this legislation. (And economic barriers are not a problem of the incumbent. It’s false to claim that because a business venture requires time, effort and capital to slap a “monopoly” label on the incumbent. As the thinking here demonstrates as all ventures require the same)

 

[AppliedMicro]

It’s false to claim that because a business venture requires time, effort and capital to slap a “monopoly” label on the incumbent

Monopoly or duopoly just describe the condition of the market - whether desirable or undesirable.

 

[I7guy]

Monopoly or duopoly just describe the condition of the market - whether desirable or undesirable.

It’s not the market, it’s the definition. The market for cell phones are quite vibrant.

 

[Mrkevinfinnerty]

Hogwash. The dam exists as a thinly veiled attempt at consumerism but in reality take applesmorofits away by providing free access to the App Store. There is no duopoly as there are hundreds of manufacturers, things are getting made up.

Since 2020 the effective tax rate is about 15%.

Hundreds of manufacturers

 

[AppliedMicro]

It’s not the market, it’s the definition. The market for cell phones are quite vibrant.

...but the market for operating systems and distribution of mobile apps (for phones) isn't. That's the entire point.

 

[I7guy]

...but the market for operating systems and distribution of mobile apps (for phones) isn't. That's the entire point.

The market for cell phones are vibrant with each manufacturer choosing how to manage their smartphone business. None of that is on apple. Apple does not have a monopoly in anything except the sale and distribution of its own products and services.

The findings for the dMa and the dma itself were crafted specifically to disadvantage apple by using revenue as a metric. Cell phone manufacturers that choose to use an open source/licensed operating system and fork the code generally grouped under android, have a 70% market share in the eu as of early 2024.

If the eu used market share as the benchmark the outcome would be vastly different. But apple is a money machine and revenue is the only metric that was possible.

 

[AppliedMicro]

Apple does not have a monopoly in anything except the sale and distribution of its own products and services.

iOS apps developed by third-party developers are not their own products.

 

[I7guy]

iOS apps developed by third-party developers are not their own products.

The App Store is their service just like Costco sells name brands and Kirkland. We just disagree on the baseline thinking of this.

 

[gimarbazat]

Apple has been building in Ireland long before the European Commission existed.

This cocaine snorting human trafficking passport selling mafia who rule the European Commission came long much later and decided they would like to stick their nose in between Apple and the Irish government so they can fill their pockets with billions of dollars of free money.

They will take Apple's money and will not spend that money on anything except for their own interests. They will give it to their own business friends.

And since the European Parliament is being gradually taken over by rightwing actual nazis those people will always demand some of that money which means you will get even more nazis.

Thinks before you make demands.

The EU existed long before apples been money laundering billions of dollars in Ireland!

 

[alchemistmuffin]

At the time, Apple CEO Tim Cook described the accusations as "total political crap," and he said the 0.005% tax rate was a "false number."

I would not be surprised if Trump retaliates against EU when he takes office by imposing tariffs to recoup the money on behalf of Apple.

(I just finally watched Apple event and catching up on Apple news after avoiding it for three months so apologies for weird reply post here)

 

[Zest28]

I would not be surprised if Trump retaliates against EU when he takes office by imposing tariffs to recoup the money on behalf of Apple.

(I just finally watched Apple event and catching up on Apple news after avoiding it for three months so apologies for weird reply post here)

Trump doesn't give a **** about companies like Apple and Google, as they have been anti-Trump.

Now if the EU would do this against X / Twitter, he'd strike back for sure. But I don't think the EU would be that stupid.

 

[alchemistmuffin]

Trump doesn't give a **** about companies like Apple and Google, as they have been anti-Trump.

Now if the EU would do this against X / Twitter, he'd strike back for sure. But I don't think the EU would be that stupid.

EU’s not stupid. They would fine Twitter just to give Trump the middle finger and say “come at me bro”. If he imposes tariffs on that, EU will respond in kind. They probably anticipate that response and are fully prepared for it.

They aren’t stupid. They know what they are doing.

 

[Zest28]

EU’s not stupid. They would fine Twitter just to give Trump the middle finger and say “come at me bro”. If he imposes tariffs on that, EU will respond in kind. They probably anticipate that response and are fully prepared for it.

They aren’t stupid. They know what they are doing.

You do realize the EU only exist because the USA is supporting them. Don't bite the hand that feeds you.

If the USA decides it no longer supports the EU, it's game over.

 

[weckart]

You do realize the EU only exist because the USA is supporting them. Don't bite the hand that feeds you.

If the USA decides it no longer supports the EU, it's game over.

This cuts both ways as you well know. Add China to the mix.

 

[Abazigal]

EU’s not stupid. They would fine Twitter just to give Trump the middle finger and say “come at me bro”. If he imposes tariffs on that, EU will respond in kind. They probably anticipate that response and are fully prepared for it.

They aren’t stupid. They know what they are doing.

No, the EU is not stupid, but they aren’t invincible either, and lord knows they have enough problems to deal with within their own borders at the moment.

 

[nostradumbass]

Trump doesn't give a **** about companies like Apple and Google, as they have been anti-Trump.

Now if the EU would do this against X / Twitter, he'd strike back for sure. But I don't think the EU would be that stupid.

The European Onion will never prosecute the actual crimes that are happening.

They go for big soft targets who have lots of money like Google and Apple. They fabricate all manner of accusations to get money out of them.

No action against the vast multi billion dollar theft by crypto companies/scams, data brokers, landlord cartels and human trafficking because they already donate dark money to the politicians and parties. The same people who bought Trump.