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U.S. Warns Apple Tax Probe in Europe Could Set 'Undesirable Precedent'
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Apple has $180B in offshore cash. $18B is a small chump, so let them pay. I mean the US regulatory agencies like SEC seem to have no problem fining European banks billions for their violation of US laws.
I find Lew's comment that US taxpayers are getting screwed by this quite disingenuous. Apple like most US firms who parked most of their oversea profit in Ireland has no intention of repatriating their offshore cash at 35%. They are waiting for US tax holiday (15% or less) from Hilary or Obama -- meaning US tax payers get nothing or little either way. Lew's insincere comment that US taxpayers have to offset what EU recovers in tax adjustment is laughable. And now Lew wants to retaliate the EU!
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It always amazes me how people can defend a company paying a ~2% tax rate. Are you for real?! And no, just because you would do the same if you could still doesn't make it ok. I doubt we have the billionaires posting on MR so you guys maybe need to step back a notch and rethink your position..just saying.
I agree with you but 15% of alot is still incredibly more than nothing at all. It is my understanding that this is a common practice so I'd say the US definitely needs a new tax-system.
You really need to read up on this a little more. "Ireland set up a tax" sure they did it was 15 percent while most of the rest of Europe is 25 percent. "If apple paid the due taxes that the sovereign nation required then I don't see how the EU can intervene?" Well except they did not. Apple pays 2 percent in Ireland because of a sweetheart deal that the EU considers to be illegal.
Most of us consider the bigger issue is that Apple sells phones all over Europe and claim the revenue in Ireland. You can perhaps compare this to if all the income from iPhone sales in the USA was booked in Bermuda and no US taxes were paid.
American companies already get tax credits in the US for taxes paid abroad.
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Brexit does not imply that companies will be allowed to completely rip off the UK.
Sweet lord!! Someone who understands this EU investigation. I was wondering when someone would post this. Well done sir.
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Afraid not, the government has closed the loopholes due to unsurprising very negative public reaction to the tax dodging.
I know that I have to read more about it, that's why I am asking. Why is the EU intervening now, and not when the legislation was made? Your argument that the rest of Europe has a 25% tax is invalid for the simple reason that it doesn't matter. Tax brakes and taxation are supreme powers of the soveirgn countries; if a country can survive (and pay EU dues) with a 1% taxation, good for her.
As for your example is faulty. Bermuda is not part of the US. It's like Apple claiming revenue in CA for phones sold in TX. Guess what? That's what happens. The Feds can't force TX or CA to put higher state taxes.
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To be fair, I don't think that anyone is defending Apple per se. For all I care they can pay 99% in taxes.
The 25 percent had nothing to do with my point which was that Apple is not paying the country tax of 15 percent because of a sweetheart deal. They are actually paying 2 percent. Those types of deals are illegal.
In addition Guess what Ireland is not part of the France or Germany or the UK. It is no difference than Bermuda is to the USA.
Although imperfect, the similitude resides in US --> EU, US State --> EU Country. It's not like Bermuda and the US, otherwise how could the EU have any jurisdiction on Ireland?
The EU avoids the sovereign taxation limitations by using their other regulatory powers concerning State Aid.
DG Competition Working Paper On State Aid And Tax Rulings
A cursory read of the Consolidated version of the Treaty on the Functioning of the European Union will likely reveal to you how much power can be garnered, including taxation by any other name, through its non-specific, abstract language.
I haven't, as of yet, read anything regarding a statute of limitation on the EU in regard to their State Aid powers.
Thank you, I will certainly read this (entertaining?) documentation. I am seriously trying to understand what powers does the EU have.
That is because European law requires the beneficiary to repay, not the donor. You are arguing on a point of personal preference - it makes no difference, the law is clear on who pays the penalty for receiving unlawful state aid. That is the law. If you run a company in the European Union and you disagree with legislation you are bound by, you have two choices: you leave the single market, or you stay and comply. And I can imagine the same would be expected of European companies operating in non-European markets, like the United States.
Companies like Apple have enough resources and money to get legal counsel before entering a market like the European Union, and any potential legal implications of their operations, products and business plans. Every item of legislation that a company in the European Union is governed by is published and readily available, just like in the United States. Apple, like every other company operating in the single market, ought to know (or get experts who do know) what the rules and regulations are. And if they fail to do that, then reasonably speaking, who's fault is that?
Lots.
That might be why the UK electorate voted to leave the European Union ;-).
Unless you paid 0% taxes overseas, the rate is never going to be 35%. Repatriating money to the U.S. allows you to deduct the rate that you already paid overseas. So if you paid 20% in a foreign country, then it would be an additional 15% to repatriate. You're credited for the money you already paid. Apple is complaining about this because Ireland didn't really expect them to pay much of anything to begin with.
And the truth of the matter is that individual income tax is a far higher percentage of revenue relative to GDP than corporate income tax. Back in the 1950s it used to be closer...individual was a bit under 6% and corporate was a bit under 4%. However, the difference is now more like 8% individual and 2% corporate. Corporate taxes have plummeted relative to GDP in the last 60+ years, so Tim Cook is not correct when he claims that the taxation is "unfair".
If Apple and Ireland illegally colluded to set Apple's tax at an improper rate, then, obviously, Apple owes back taxes. But, if the tax rate was legally set, and then, the EU taxmen decided that it wasn't a good deal after all, and, retroactively set a new tax rate, then, that is bad-- it would be illegal in the U.S., but, I'm not sure about the EU. What is confusing is that certain terms like "tax avoidance" mean different things to different people. The question is, was Ireland-Apple's tax-avoiding-behavior legal at the time? 2%, 15%, or 25% -- nothing good or bad about any particular rate -- was it legal? If it was legal, and, you don't like the outcome -- change the law.
I realise, but the point is you are losing a total of 35% by repatriating money to the United States, which is the world's largest economy, and yet has the third highest corporate tax rate in the world.
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Dear UK,
This is how one commits an economic own-goal (see WSJ article).
Thank you for paying more for our exported goods, services, electricity and food that we send to the UK. Really. We love it.
Love,
the EU
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Dear UK,
This is how one commits an economic own-goal (see WSJ article).
Thank you for paying more for our exported goods, services, electricity and food that we send to the UK. Really. We love it.
Love,
the EU
The value of the pound will no doubt begin to stabilise to pre-referendum levels when the post-EU relationship becomes clear after the details are finalised between the UK and other EU governments. You should know there are businesses in the UK that have benefited from the pound's falling value.
Yes - I understand a devalued currency can be a two-edged sword. However, it means we'll pay more for everything imported, and that's even before any tariffs, duties or trade wars evoked by Brexit. Also, the slide of the pound has been predicted to continue, and it hardly speaks of high confidence on the long-term economic prospects of the UK. Obviously the UK economy will grow, but it'll grow less.
I agree that the US corporate tax is too high, but I think Apple would have pulled every stops to avoid paying anything higher than 2%. Also, What tax rates would you consider "fair" for a company that has in the past received gov't protection against foreign competitors (eg, Obama's reversal of Apple iPhone import ban)?
Well most countries around the world have lower corporation tax rates than the United States. Of course most big corporations will do everything legally possible to reduce their tax burden as much as possible; Apple is no exception. It requires a concerted effort by lots of countries working together to legislate real tax reform, but there are too many competing interests and too many big corporations lobbying their own selfish interests to make that possible.
A veto on an import ban from the International Trade Commission can easily be appealed and I remember quite clearly attached to the veto letter was an acknowledgement that Samsung has the right to appeal the decision in Court, which I am sure they would have done. I can understand how it might be seen as protectionism but I think the United States does a far better job at staying fair against foreign companies in contrast with a country like China which repeatedly attacks foreign firms that become successful and start to threaten the monopolies or success of Chinese companies, or companies with affiliations to the Chinese government. Of course this is nothing new that we don't already know. I'm not suggesting the US has never put domestic companies' interests first, but they are certainly not aggressive against foreign investment and competition like China is.
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Sure, I think no corporation/person should pay more than what is required by law, but as the EU commission has found, the special arrangement offered by Ireland was illegal. Also, is Apple like most companies who exploit cheap labors in the third world nations in search of higher profit? I thought Apple wanted to market itself as a socially, politically, environmentally progressive, or "different," company, or is that just a marketing ploy (and why is Cook so vocal about his sexuality that nobody cares about?). I just wish that Apple could stop with this false pretense of being a good corporate citizen, etc, BS, and focus on making money. Most countries with sound gov't don't have single digit corporate taxes, unless Apple wants to park all its oversea profit in some banana republic.
Obama's veto was final -- as in "no appeal." Sure, it's all pay to play everywhere, especially the communist China, but it's a false moral equivalent fallacy.
A tax adjustment would be payable to Ireland, not directly to the EU. The EU would probably receive slightly more from Ireland due to this, but it wouldn't be that significant. As for the other companies, some of them were investigated for practices that can be disallowed in the US.
Starbucks specifically was accused of overpaying subsidiaries so that their local businesses would run at a loss. The subsidiaries were located in low tax countries. They didn't really do much. They were just there for tax purposes, even though the profits themselves were generated elsewhere and the products were created elsewhere. In the US payments sales and purchases made to and from subsidiaries have to follow what's called an arm's length transaction. It means that you can't pay them above fair market value in order to shift money to a low tax jurisdiction.
Fun fact: Ireland is a receiver state. The EU-subsidies are way higher than what EU takes away from them.