European Union Accuses Ireland of Giving Apple Illegal State Aid with Tax Deals

[zipa]

Really? I figured EU laws were below local laws... it seems quite odd to me that nations would choose to join if it meant giving up some of their own sovereignty.

It is in no way different than what you have in the American Union of States. Local laws can't override national laws.

It is more like a legislatory standard, i.e. it usually sets a "baseline" which you must meet, but can exceed if you want to. The idea is to make the Union appear as one single entity to the outside, so that when someone is doing business in the EU, they can be assured that if they are in compliance in one of the member states, they will be in compliance in all of them.

 

[takao]

They can't because Apple is moving within legal boundaries. They can declare specific tax holes illegal, but can't do anything retroactively.

An agreement found out to be illegal doesn't fall under any protection from retroactive penalties.


And do your really think that would stop any government in the world to apply laws retroactivly ?

3 years ago Germany changed their divorce & family laws for all marriages dating back to 1979. More than 30 years into the past. Of course a State can do such things.
Never underestimate the reach of any government. A state is always on the longer end of the scale.

 

[zipa]

If Apple knew, then pay

It is their legal obligation to know. You can't break laws and get away with by saying that you didn't know it was illegal.

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Ah, I see, so I can't actually buy anything. I can't buy something from Walmart, because they may have stolen it and now I'm liable for it. Hell, I should go out and steal stuff and then resell it with this logic - nobody will consider me, the criminal, responsible. Of course, it's kind of useless to have money in this world that you're imagining because you can't legally buy anything with it, so there's no point in selling it.

Basically, we're saying that every item that anyone owns is actually illegally obtained and that for all to be just, we should rid ourselves of all of our belongings and return it to the Earth.

You can't make an argument based on your ignorance, strawmen or any of the other logical fallacies in you post.

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And what race would that be?

Gingers.

 

[zipa]

I know that. I was responding to the comment that Apple's taxes should be higher. So Apple's taxes is a business expense that gets passed on to the consumer. So the consumer is paying not only sales tax, but also the business tax.

Tax is not a business expense. It is paid based on profit, so expenses have already been deducted from that. Also, a business can simply elect to not make any profit by spending everything that comes in or paying it out as salaries/bonuses.

Also, it is the business that pays the tax, not the consumer. The consumer is completely disconnected from the money at that point, whereas with VAT the business is merely collecting the tax on behalf of the government, so the "ownership" of the money goes from customer to government and with business tax the ownership goes from business to government.

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They can't because Apple is moving within legal boundaries. They can declare specific tax holes illegal, but can't do anything retroactively.

Those loop holes have been illegal to begin with, so there is nothing being done retroactively.

 

[Jambalaya]

I agree that is too low. The vast amount of foreign MNC taxes in Ireland is booked in Bermuda however, look it up, it's shocking.

Yes I know but the Apple deal allows them to route profits (make in say UK, Germany etc) out of Ireland without paying Irish tax. The money then ends up in Bermuda.

 

[Happybunny]

I would also like to point out to those who think that the EU Commission probe into Ireland/Apple tax scam is politically motivated. You are 100% right, nothing gets this far in the halls of power in Brussels without very serious powerful backing.
It is my experience that to have made it this far, at least two more likely three major members states, UK:Germany:France/Poland have signed off on this. In the present set up it is also very important to have a majority in the EU Parliament. This means that two of the power blocks have also signed off on this, this grants a majority.

Another thing is it has never happen, that if a case gets this far, that the defendant has ever been found INNOCENT.

It is my firm belief that this case will be used to show member states and large corporations that it’s best to play ball.

 

[haravikk]

where does it say that is its first responsibility and exactly what it entails and what it docent?

That's just how businesses work; the only exception really are business that are sole-traded or owned by a group of investors/partners who have goals other than simply making a profit. But when it comes to publicly traded companies, or companies with private investors that expect a return, then failure to grow and profit is suicide.

how does the u2 promotion fall under that

Publicity. I'm not saying that just because companies need to profit that they can't be ethical or do things for free, but when it comes down to it they're not doing these things out of the goodness of their hearts; as much as I like Apple, I know that their commitment to green energy and recycling is as much a part of their brand and appeal to customers as it is a philanthropic act. It helps to generate publicity, just as charity involvement and other good things do, which helps to drive awareness and thus sales.

Giving stuff away "for free" is the same; there are tons of examples of companies that use promotions to generate interest, and you'll often find that their balance sheet is the healthier for it, which is why these things aren't strictly free. In fact, giving iLife and iWork away for free with new Macs and offering new OS X versions for free in general is another great example; Apple's money comes from hardware, and giving software for free adds value to it, and helps to drive sales.

Again, I'm happy that Apple does things more ethically than many other companies, but they're still a company, and still driven by profit. If they can move operations or money to Ireland and pay a fraction of the tax that they would elsewhere, then they'll do it; but Apple is far from the only company that does this, as just about every company that can do it, does do it. That's why it annoys me when companies are singled out for doing it; it's what companies do, as it's what capitalism encourages them to do.

I read an article once about the morality of capitalism, about how a company can be forced to act ethically if their customers are outraged enough. However, ultimately people are too apathetic; I doubt this news is impacting Apple's sales in any meaningful way at all, and thus far it's only had a minor impact on share-price as share-holders become worried that more tax means less profit.

 

[jeremy h]

If you have a VAT number you normally don't pay the VAT

In the UK you absolutely do. (I can't speak for Spain/France/Germany etc).

I have one and pay VAT. I then claim back the difference between purchases and sales after completing a return.

My understanding is that on cross border purchases / sales within the EU if you have a VAT number you don't pay/charge VAT. Perhaps that's the confusion here.

 

[69650]

Hey, I'm not a lawyer, tax lawyer or otherwise. But, as far as I can tell, Apple has been following the (Irish) law. Quite openly. I don't see the fraud or deception. Of course, I only know what I read in the New York Times. But, if the law and regulations need to be changed, change them.

More generally, if the EU does not want for individual countries to compete with each other via tax treatment, it needs to set common tax laws across the EU. I think with situations like the current one, and, the banking crises (the "PIGS", etc.), I think it is apparent that the EU's "common market" has a lot of internal inconsistencies. Didn't matter much back when in every country, there was agriculture, manufacturing, and mostly local services. Now that a large part of the economy of every country depends on services that can be provided in part from abroad, all those inconsistencies are a huge problem.

The U.S. has a similar problem -- states are competing with each other on the basis of favorable tax treatment. Every state offers itself as a location for businesses to incorporate under state law, and, at tax time, it makes a difference. There goes your "level playing field". It didn't matter that much in the past, but, in the Internet Age, it matters a lot.

I think a common set of rules for corporate taxation should be at the center of the WTO. When the commodity flowing across borders is information, tariffs become insignificant compared to corporate taxes.

EU Law overrides Irish law. If the EU find illegal state subsidy they will make Apple payback all the tax they've avoided whatever they agreed with the Irish Government.

 

[ArtOfWarfare]

It is in no way different than what you have in the American Union of States. Local laws can't override national laws.

Right, but this makes the EU seem more like a nation and all of the member nations look more like states.

I guess it kind of looks like what the pre-US states looked like under the Articles of Confederation and Perpetual Union.

 

[tevion5]

Yes I know but the Apple deal allows them to route profits (make in say UK, Germany etc) out of Ireland without paying Irish tax. The money then ends up in Bermuda.

That's what I'm saying

 

[Eraserhead]

Right, but this makes the EU seem more like a nation and all of the member nations look more like states.

I guess it kind of looks like what the pre-US states looked like under the Articles of Confederation and Perpetual Union.

Kinda, yeah.

 

[sransari]

Tax is not a business expense. It is paid based on profit, so expenses have already been deducted from that. Also, a business can simply elect to not make any profit by spending everything that comes in or paying it out as salaries/bonuses.

Also, it is the business that pays the tax, not the consumer. The consumer is completely disconnected from the money at that point, whereas with VAT the business is merely collecting the tax on behalf of the government, so the "ownership" of the money goes from customer to government and with business tax the ownership goes from business to government.

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Those loop holes have been illegal to begin with, so there is nothing being done retroactively.

You say tomato I say tom-ah-toe. Either way, tax is money leaving the business, so businesses increase prices (or cut expenses elsewhere) to compensate.

 

[zipa]

You say tomato I say tom-ah-toe. Either way, tax is money leaving the business, so businesses increase prices (or cut expenses elsewhere) to compensate.

I have never heard of financial planning and forecasting that would use profit after tax as a goal. Besides, the more you increase prices or cut expenses, the more you pay tax, so your math doesn't really add up either.

And I'm not talking about produce. Taxes are very, very precisely defined, there is (well, should be) zero room for interpretation.

No, I just don't believe that you are right.

 

[Macky-Mac]

... If the EU find illegal state subsidy they will make Apple payback all the tax they've avoided whatever they agreed with the Irish Government.

From what I've read that's really not the case.

The commission has the authority to determine that Ireland is providing illegal state aid and require that Ireland stop, but beyond that the commission's authority is rather limited.

I gather it can't even fine Ireland for giving illegal state aid, nor can it directly order Apple to pay Ireland some specified amount of "back" taxes since the EU doesn't have the authority to dictate what Ireland's tax rate must be.

Rather Ireland would be left to figure out how to proceed and what that might or might not mean in terms of Apple tax payments.

 

[Oletros]

From what I've read that's really not the case.

The commission has the authority to determine that Ireland is providing illegal state aid and require that Ireland stop, but beyond that the commission's authority is rather limited.

I gather it can't even fine Ireland for giving illegal state aid, nor can it directly order Apple to pay Ireland some specified amount of "back" taxes since the EU doesn't have the authority to dictate what Ireland's tax rate must be.

Rather Ireland would be left to figure out how to proceed and what that might or might not mean in terms of Apple tax payments.

The EU has done that many times, they have forced the states that had illegal aids to recover them and they have fined the states (one of the lasts ones Spain) if they are not diligent recovering them.

Can you link to those articles saying that the EU can't do anything?

 

[Macky-Mac]

The EU has done that many times, they have forced the states that had illegal aids to recover them and they have fined the states (one of the lasts ones Spain) if they are not diligent recovering them.

Can you link to those articles saying that the EU can't do anything?

well, I didn't actually say "the EU can't do anything", and certainly that wasn't my intention.....and I don't think that what you've posted is all that contrary to what I've read.......The EU determining that a state has given illegal aid certainly requires the state to correct the situation....but it's still the state that is responsible for correction and recovery, and not the EU. The letter from the EU commission to Ireland addresses. (somebody posted a link earlier in the thread).

If Ireland is "not diligent" in correcting the illegal state aid, then I wouldn't be surprised if some treaty authorizes a penalty....I suspect what I read meant that as a first course of action, the commission couldn't fine a state.......perhaps they have to wait until a state is "not diligent" in correcting the illegalities before they're authorized to issue a fine?

When it comes to what might be illegal state aid in this case, it's interesting that the EU letter focuses so much on transfer pricing. That might suggest the EU feels it could have a hard time making a case that simply having low tax rates is illegal state aid.

But that's just what I've read

 

[69650]

From what I've read that's really not the case.

The commission has the authority to determine that Ireland is providing illegal state aid and require that Ireland stop, but beyond that the commission's authority is rather limited.

I gather it can't even fine Ireland for giving illegal state aid, nor can it directly order Apple to pay Ireland some specified amount of "back" taxes since the EU doesn't have the authority to dictate what Ireland's tax rate must be.

Rather Ireland would be left to figure out how to proceed and what that might or might not mean in terms of Apple tax payments.

Given the state of EU member state finances believe me they will find a way to make Apple payback the billions of dollars in tax they've avoided paying through this little scheme. It will cost Apple an absolute fortune.

See this interesting Forbes article on the matter: http://www.forbes.com/sites/robertw...-tax-deal-is-illegal-fines-could-be-billions/

 

[carlgo]

If corporations want to be "people", make them pay on income just like us people do, not on cooked-book "profits".

 

[jnpy!$4g3cwk]

EU Law overrides Irish law. If the EU find illegal state subsidy they will make Apple payback all the tax they've avoided whatever they agreed with the Irish Government.

Out of curiosity, did the EU tell Ireland that their tax deals were illegal? Did the companies involved know about the dispute? Are there links that explain any of this?

Right, but this makes the EU seem more like a nation and all of the member nations look more like states.

I guess it kind of looks like what the pre-US states looked like under the Articles of Confederation and Perpetual Union.

That is still how the EU looks to me. Just like the under the Articles of Confederation. It didn't work over here. ;-)

I have never heard of financial planning and forecasting that would use profit after tax as a goal.

I don't know where you have been, then, because there are whole countries whose economies are built on helping companies optimize their profit after tax.

Besides, the more you increase prices or cut expenses, the more you pay tax, so your math doesn't really add up either.

And I'm not talking about produce. Taxes are very, very precisely defined, there is (well, should be) zero room for interpretation.

I'm assuming that you must live in Germany or France. I think that you would find that taxes have not been so "very precisely defined" in, say, Spain or Greece.

The EU has done that many times, they have forced the states that had illegal aids to recover them and they have fined the states (one of the lasts ones Spain) if they are not diligent recovering them.

Can you link to those articles saying that the EU can't do anything?

I am wondering if you can link to articles showing that the EU has been trying to enforce this over time against, e.g., Ireland and its corporate clients. Or, did this just start recently because someone noticed that Apple has a lot of cash? Is there evidence that companies in Ireland secretly conspired with the Irish government to illegally avoid paying taxes, and, that the EU only found out about it later? I'm confused, because, it has been no secret at all that companies have booked income in Ireland to reduce tax liability.

Given the state of EU member state finances believe me they will find a way to make Apple payback the billions of dollars in tax they've avoided paying through this little scheme. It will cost Apple an absolute fortune.

If Apple owes the tax because it did something illegal, Apple should pay. But, "tax avoidance" is legal. I "avoid" paying taxes, for example, through pre-tax income withholding-type things (pension, health, et al.), which the U.S. Congress specifically encourages. Not only legal, but, encouraged by the U.S. government. I reject the idea that Apple "should" pay more taxes because they are highly profitable. Apple should pay taxes it is legally obligated to pay.

That is why I think this stuff has to be made consistent across the WTO countries.

 

[Oletros]

I'm assuming that you must live in Germany or France. I think that you would find that taxes have not been so "very precisely defined" in, say, Spain or Greece.

bv

What the heck are you talking about?

I am wondering if you can link to articles showing that the EU has been trying to enforce this over time against, e.g., Ireland and its corporate clients. Or, did this just start recently because someone noticed that Apple has a lot of cash? Is there evidence that companies in Ireland secretly conspired with the Irish government to illegally avoid paying taxes, and, that the EU only found out about it later? I'm confused, because, it has been no secret at all that companies have booked income in Ireland to reduce tax liability.

You know that there is a world outside Apple and that the EU doesn't revolve about Ireland and Apple?

The EU has been just ruling if some aids were legal or note for years.

 

[sransari]

I have never heard of financial planning and forecasting that would use profit after tax as a goal. Besides, the more you increase prices or cut expenses, the more you pay tax, so your math doesn't really add up either.

And I'm not talking about produce. Taxes are very, very precisely defined, there is (well, should be) zero room for interpretation.

No, I just don't believe that you are right.

I never brought up planning/forecasting. My only point is that increasing taxes on a business impacts the consumer. When a business pays a higher rate in tax, they have to either raise prices, or cut costs (which could mean a cut in quality) in order to compensate for the higher tax rate. Are you disputing this?

Yes, increase in profits means more taxes paid. So what? It also means a higher nominal after-tax profit.

Think about this. If business taxes didn't impact the consumer, why not increase the rate to 50%, or 75%? Would that increased rate cause prices to rise (or expenses and quality to fall)?

 

[jnpy!$4g3cwk]

bv

Bouvet Island? No wonder you don't realize how flexible the tax code can be in many (most?) countries.

You know that there is a world outside Apple and that the EU doesn't revolve about Ireland and Apple?

Yes, I am aware of that.

The EU has been just ruling if some aids were legal or note for years.

And-- do you have links showing that Ireland and Apple were aware that their tax deal was not legal? When?

 

[Oletros]

And-- do you have links showing that Ireland and Apple were aware that their tax deal was not legal? When?

I'm not sure if you're notserious or just that you don't know a **** about what has been talking about , in any case you're just waiting our time.

 

[69650]

Out of curiosity, did the EU tell Ireland that their tax deals were illegal? Did the companies involved know about the dispute? Are there links that explain any of this?

If Apple owes the tax because it did something illegal, Apple should pay. But, "tax avoidance" is legal. I "avoid" paying taxes, for example, through pre-tax income withholding-type things (pension, health, et al.), which the U.S. Congress specifically encourages. Not only legal, but, encouraged by the U.S. government. I reject the idea that Apple "should" pay more taxes because they are highly profitable. Apple should pay taxes it is legally obligated to pay.

This article explains it well http://www.forbes.com/sites/robertw...-tax-deal-is-illegal-fines-could-be-billions/

You're missing the point. Nobody is saying that Apple did anything illegal.

Let me explain it. The Irish Government gave Apple a sweetheart deal with a lower corporate tax rate. The Irish government didn't offer the same deal to other companies in Ireland. That is deemed to be "State Aid" which is illegal under EU law. So it's the Irish Government that have acted illegally. However Apple will still have to pay all the tax they should have paid in the first place. Now that may or may not be restricted to Apple's tax liabilities in Ireland.

A quite separate issue is the on-going EU investigation into widespread corporate tax avoidance whereby companies like Apple effectively sell good to themselves at vastly inflated prices so they make all the profit in a low tax jurisdiction like Ireland rather than say the UK. It's not illegal but it is a loophole the EU and it's member states intend to close so Apple will not be able to continue to exploit that loophole in the future.