Apple Tax issues in Ireland

[VincentHanna]

I'd love to know how much that 2% of "a lot of money" is, per annum though.

Are there figures?

 

[Tefal]

IIRC Apple have deliberately and consistently held most of their non American profits in off shore accounts (as have a number of over companies), as they've been hoping for an amnesty deal from the American government before they move it to the US (basically waiting for the US government to offer them a tax break).

Last I heard Apple had something like 50 Billion offshore awaiting such a deal.

i think its about 3 times that much

one thing is though say apple get fined 13 billion.

they pay that back from the US branch via say loans to the Irish branch, they now claim a massive loss in America and thus have billions to offset against the tax rate of 35% in America.

 

[Tefal]

I'd love to know how much that 2% of "a lot of money" is, per annum though.

Are there figures?

http://europa.eu/rapid/press-release_IP-16-2923_en.htm ( link to the Eu comissions actual release)


actually it seems much of the money was taxed nowhere.

link has much more in depth and its no where near as simple as first seemed.

Apple Sales International is responsible for buying Apple products from equipment manufacturers around the world and selling these products in Europe (as well as in the Middle East, Africa and India). Apple set up their sales operations in Europe in such a way that customers were contractually buying products from Apple Sales International in Ireland rather than from the shops that physically sold the products to customers. In this way Apple recorded all sales, and the profits stemming from these sales, directly in Ireland.

The two tax rulings issued by Ireland concerned the internal allocation of these profits within Apple Sales International (rather than the wider set-up of Apple's sales operations in Europe). Specifically, they endorsed a split of the profits for tax purposes in Ireland: Under the agreed method, most profits were internally allocated away from Ireland to a "head office" within Apple Sales International. This "head office" was not based in any country and did not have any employees or own premises. Its activities consisted solely of occasional board meetings. Only a fraction of the profits of Apple Sales International were allocated to its Irish branch and subject to tax in Ireland. The remaining vast majority of profits were allocated to the "head office", where they remained untaxed.

Therefore, only a small percentage of Apple Sales International's profits were taxed in Ireland, and the rest was taxed nowhere. In 2011, for example (according to figures released at US Senate public hearings), Apple Sales International recorded profits of US$ 22 billion (c.a. €16 billion[1]) but under the terms of the tax ruling only around €50 million were considered taxable in Ireland, leaving €15.95 billion of profits untaxed. As a result, Apple Sales International paid less than €10 million of corporate tax in Ireland in 2011 – an effective tax rate of about 0.05% on its overall annual profits. In subsequent years, Apple Sales International's recorded profits continued to increase but the profits considered taxable in Ireland under the terms of the tax ruling did not. Thus this effective tax rate decreased further to only 0.005% in 2014.

it seems far more likely that "individuals" in power in Ireland profited rather than the Irish treasury.

Recovery

As a matter of principle, EU state aid rules require that incompatible state aid is recovered in order to remove the distortion of competition created by the aid. There are no fines under EU State aid rules and recovery does not penalise the company in question. It simply restores equal treatment with other companies.

 

[Trifid]

they are not rewarding the enabler.

If you look at it there is not simply 2 parties, apple and the Irish government.

there are three, apple, the Irish government and the Irish taxpayer/citizens.

in a deal between the first two the third was deprived, its the third that's being paid back

The Irish Government represents the Irish Citizen though. And how is the fine going to distributed down to the Irish Citizen?

 

[Randomface74]

Apple didn't break the law. Ireland did. Apple will win the case. EU may as well give up.

 

[Tefal]

And how is the fine going to distributed down to the Irish Citizen?

as link above says its not a fine, its simply restoring them to where they should be.

looks like this isn't a punishment thing but a anti monopoly/competition thing they've worked this through.

but the ~"fine" would go back to the Irish by going into the general government coffers to be spent in the budget. where it always should have been

 

[do_ron_ron]

Another good thing about the EU, they are willing to take on these Corporations. Compare and contrast that to the UK's 'sweetheart deals' and 'light touch' when it comes to Corporations.

 

[Tefal]

Another good thing about the EU, they are willing to take on these Corporations. Compare and contrast that to the UK's 'sweetheart deals' and 'light touch' when it comes to Corporations.

yet the three countries being investigated for these deals are all continental European countries?

 

[VincentHanna]

http://europa.eu/rapid/press-release_IP-16-2923_en.htm ( link to the Eu comissions actual release)


actually it seems much of the money was taxed nowhere.

link has much more in depth and its no where near as simple as first seemed.




it seems far more likely that "individuals" in power in Ireland profited rather than the Irish treasury.

Exactly.

Lets assume Apple are generous with wages and they pay well over the odds.

So lets say they pay €200 million in wages.

They paid €50 million in tax in 2011, you've got to assume it's not grown by a great deal since then (infact it sounds like they pay less!)

So it looks like Ireland would take about 50 years to get the same financial benefit they would get from a €13 billion windfall tax payment.

In what way is taking that "short term" thinking??

Sounds absolutely corrupt to me.

 

[mid_gen]

Good. Multinationals have been taking the urine like this for far too long, channelling profits around to avoid taxation.

Can't fault them for trying it, and taking the offer Ireland gave them, but it needs to stop.

 

[Terminal_Boy]

I full expect Apple's legal team of $10,000 an hour shysters to fight this for the next decade.

 

[shiver]

http://www.apple.com/ie/customer-letter/

 

[Cosimo]

Just think, Apple might buy the UK after Brexit and we'll be paying them tax.

 

[Combat squirrel]

They got pay £13 billion now ?! thats pocket change to them !! lol

 

[Superficial]

Another good thing about the EU, they are willing to take on these Corporations. Compare and contrast that to the UK's 'sweetheart deals' and 'light touch' when it comes to Corporations.

You do realise that the reason these deals are possible is because these nations are exploiting the EU's single market right? This is an intrinsically European problem.

Don't get me wrong I am glad that the EU is getting to grips with this but the issue is of the EU's making...or at least prior lack of action.

Further more what does it say about Ireland, Luxembourg and The Netherlands? These countries have cynically manipulated tax regulations and precipitated a race to the bottom with Luxembourg leading the charge...I firmly believe the other two (and moves by large nations to level the playing field including the UK) have simply followed Luxembourg's example and to top it off the guy that set it all up - Jean Claude Juncker set the whole thing up and is now a major leader in the European project.

The Idea that the EU at large comes of well in this debacle is symbolic of the retarded logic that has beset the pro European mind-set...that when the EU solves a problem of it's own making it is not 'righting it's own wrong' but a beacon for justice.

 

[Zethor]

So the EU is at fault because weak governments make shady deals with huge corporations?

 

[PlacidCasual]

Did anyone listen to Radio 4 tonight. They had an "economist" from the Kato (Cato?) Institute on. He was maddening, the intereviewer kept asking him rational questions on the technical/legal details of the case and he kept ignoring the issue and banging on about tax harmonisation and a hard low tax political agenda.

Now i have no issue with discussing the merits of tax but he was asked on as an expert and refused to engage with an entirely reasonable line of questioning about a third party. Basically leaving us no better informed about the strengths or the weakness of the case made. We were however very clear he wanted taxes to be very low everywhere.

No wonder we're in a post expert World.

Amazingly this morning a Green MEP spoke sense (I know!) and addressed the technical issues of the argument discussing the same story.

 

[Arazi]

Apparently they don't want the money either

 

[dowie]

This gets banded around a lot without people thinking it through.

Let's take an iPhone at a revenue of £500 at a retail store in the UK. Let's assume the costs to Apple are as follows:

- £20 in operational costs for the retail of the product in the UK.
- £200 in manufacturing costs of the product with a third party in China.
- £25 in marketing costs. They have a European contract with their advertisers that is paid for by Ireland.
- £5 in costs to manage their suppliers. This is also done in Ireland.
- £50 in costs for the strategy, design, etc of the product. This is incurred in the US.
- £15 in programming performed by a team in Germany.

very true, however the problems arise when you get companies deliberately loading things like IP costs onto certain subsidiaries so that even though they're making substantial sales in that area they don't technically make a profit (see starbucks)

also the issue of sales actually being made in the UK, by UK based account managers/sales people, for advertising/services delivered within the UK but the contract being made with the Irish HQ entity (see various tech firms)

Another good thing about the EU, they are willing to take on these Corporations. Compare and contrast that to the UK's 'sweetheart deals' and 'light touch' when it comes to Corporations.

Not sure this is a strength of the EU really, this has been enabled in the first place in part because of the single market. The UK is cracking down on this, or attempting to (they're certainly protesting it), the reason the EU is clamping down in this particular case is simply a breach of state aid rules (something the UK and other EU member states have been pushing them on) - the wider problem still exists though.

In one of the worst offenders, Luxembourg, the man behind the dodgy tax deals is none other than EU commission chief Jean-Claude Juncker!

https://www.theguardian.com/world/2014/dec/14/jean-claude-juncker-luxembourg-tax-deals-controversy

When did any book I purchased ever get to Luxembourg?” a furious Margaret Hodge, chair of parliament’s public accounts committee, asked the hapless junior director dispatched by Amazon to Westminster two years ago to answer MPs’ questions on the group’s tax affairs.

Before he could get an answer out, she had another question: “Do you have books in Luxembourg?” The answer was no. “So you are telling me that the bills are printed in Luxembourg?” inquired an increasingly incredulous Hodge. The bills, the sheepish director explained, were printed in one of Amazon’s UK warehouses.

But yes, all sales to British customers on the amazon.co.uk website were, for tax purposes, transactions that technically took place in the grand duchy.

The equally impatient Conservative MP Stephen Barclay waded in. “So what is the effective tax rate that you pay in Luxembourg?” he asked. That proved too tricky to answer. Barclay seized on other figures: sales of €9.1bn that generated only €20m of profit “suggests you are stripping out the profit in Luxembourg”.

Investigators are examining whether a 2003 tax ruling secured in Juncker-run Luxembourg was so generous to Amazon as to amount to illegal state aid on the part of the tiny nation. Had news of Almunia’s investigation been rushed out for fear that the incoming Juncker would otherwise have sought to kill it?

Certainly, back in 2003, as Luxembourg’s prime minister and finance minister, Juncker had proudly taken the credit for having successfully courted Amazon investment — though in recent weeks he has claimed he had nothing to do with the 2003 tax deal.

His latest defence of the tax culture he created, transforming Luxembourg into a honey pot for multinational corporations, has gone further and he now says that the grand duchy’s past courtship of big business was no different to that of other nations. Moreover, all Luxembourg tax rulings given to multinationals were within the law — a claim that appears uncomfortably close to prejudging the Almunia-instigated inquiry into suspected illegal state aid.

 

[do_ron_ron]

yet the three countries being investigated for these deals are all continental European countries?

The point was something is being done as opposed to the UK.