Meanwhile the EU is not a tax collection body, it does not set tax policy and it does not issue tax rulings. It has no power to do this and I'm unaware of any countries that want it to have this power.
In my opinion it is highly unethical to construct such financial mechanisms with the only aim to reduce tax payments.
Damn me, the linguistic backflips in this thread are amazing. Tax is the taking of something. Low taxes mean you take less, not that you are generously paying people!
That is a terrible straw-man - no one ever claimed that in this thread. Additionally - your argument relies on word play: in practise, Walmart giving you a $10 bill after you buy a $100 item has the same effect as giving you a $10 discount on the item.
When one corp (Apple) pays less taxes than others in the same jurisdiction (Ireland in this case), it is unfair - logically and according to European law. If Irish taxes were uniformly low to all companies (including the German, French & Greek ones), the EU would have no case.
in practise, Walmart giving you a $10 bill after you buy a $100 item has the same effect as giving you a $10 discount on the item
I guess you meant a $90 discount? But regardless, the wordplay is on your side: if Walmart charge you $10 for an item then by definition that item costs $10. If they charge other people more, perhaps because they don't have a loyalty card, that doesn't mean they're giving you "aid" under any normal definition of the term as they're still charging you money. Aid would be if they gave away their products for free, or explicitly made a donation to some cause. Merely having differential pricing isn't "aid" for the same reason that an airline charging me less to fly economy isn't "aid", nor is it a discount.
In this case in particular, describing the financial benefit as "lower taxes" instead of "giving money", when "giving money" is illegal, probably isn't a loophole that should be allowed, when the result is the same.
Are you intentionally ignoring this line?
It's not about lower taxes in general, it is about lower taxes for a single specific company. And that constitutes state aid which is (mostly) forbidden under EU rules, as it is massively uncompetetive.
Apple isn't headquartered in Ireland, Apple Sales International and Apple Operations Europe are. The EU says these subsidiaries have been making untaxed profits, but it's not obvious that they've made any profits, ever (that's the whole point of the tax scheme in the first place.)
The grey area seems to be that there has been a cash hoard in Ireland which legally is on the Apple Inc. balance sheet, but hasn't been taxed. Again, however, Apple Inc. is not domiciled in Ireland so it's not the Irish governments job to collect that tax.
What am I missing?
Are they completely legal or is this just a case of they are legal, until a court finds that they actually aren't legal.
Even if they are legal, I would argue that convoluted schemes to avoid paying taxes is unethical in the same way that moving manufacturing to a place with lax environmental or labor laws in unethical. Apple might be able to make phones with what is effectively slave labor legally, but they shouldn't.
To the extent that things are generally legal until they aren't.
The complaints from the US treasury are that the decision goes against pre-existing case law, and so shouldn't be applied retroactively. [1]
A 'power grab' is an adequate description of what's going on; the EU commission is basically forcing member states to redefine their own arm's length principle and their application of it. They would call it 'tax harmonization.'
1] https://www.treasury.gov/resource-center/tax-policy/treaties...
Some countries may pat you on the back for finding loopholes in the law while other may simply order one to pay hopefully without calling that criminal offence. We have no idea how this will turn out
The low rate of corporation tax in Ireland is not really a loophole, it is a specific strategy to attract employers to a country that might otherwise not have much to offer, and it has worked fantastically well for them. This policy has been in place for decades and it is (or was) popular - the Irish prefer the jobs to the corporation taxes.
What is the EU is doing here is trying to ban tax competition between countries on the grounds that if you don't charge much tax, you're offering illegal "aid". Beyond a strange interpretation of the word "aid" this is really a very serious problem - if the EU successfully forces countries to pick a single corporation tax rate across the bloc under the doctrine of illegal "aid", despite having no mandate to set tax policies, then what comes next? What if the French start arguing that countries with laxer worker rights than France are providing illegal state aid to their corporations?
Zero-rating corporation tax is a perfectly reasonable policy for a country to have, there are plenty of economic arguments for it, and even if other countries might feel the outcome is unfair, well, so what? Competition is about different people making different tradeoffs and seeing what happens: if the Irish prefer to prioritise employment over collecting corporation tax (one of the hardest taxes to collect anyway), why should they be prevented from doing so?
> if the EU successfully forces countries to pick a single corporation tax rate across the bloc
The EU is forcing no such thing. It is forcing countries within the bloc to not give any one company special treatment. The distinction is critical.
If a country can't charge different tax rates to different companies based on their own arbitrary policies, then they have lost a significant component of their own sovereignty. If the EU wants its members to give up tax policy to Brussels then they should propose a treaty change and make corporation tax a competency of Brussels, then it can be the EU that decides which companies pay more or less tax according to their own political priorities. But they haven't done that and I bet they won't, because they know that they'd lose any such argument. Hence, the back door approach.
Member states are not free to set different tax rates for different companies. This is part of the deal of joining the EU and has been part of the treaties since the beginning. The only surprising thing here is that it took so long for the EC to stop this.
The EU did not suddenly discover what Irish tax laws were. They were legislated in an open process and were public records and were trumpeted loudly by the Irish government to attract investment. This state of affairs existed for decades. The EU simply wants to get its grubby little hands on Apple's money so they can use it for more dole-outs to friends of the bureaucrats and also use this as a precedent so they can expand their powers into areas where their power has been explicitly curtailed by treaty.
Apple made a business decision to invest in the EU based in part on the tax rates at the time which went into it's calculations of expected rate of return. Of course they probably did much better than what they expected, but many who made similar decisions lost money too. If tax laws are subject to change retroactively, investors have to start taking uncertainty about the tax rate and the expected rate of return into account and will demand a (potentially much) higher rate of return to invest. This is why it's so hard to attract investment in countries without stable governments and a strong rule of law even though the purported rate of return is much higher. If this continues it will lead to further slowdown in the EU economy. The current slowdown is not apparent to EU citizens only because the market is not charging the EU a credit risk premium on EU bonds and so EU governments are still able to fund public benefits by borrowing. This is something that will change quickly and lead to a Greece like situation if the EU starts acting in this manner.
As an outside observer, I did not think Brexit was a great idea but this event frankly is a very good argument for why more countries should consider EUExit and/or the national governments need to figure out how to defang the EU. The EU was supposed to be about free movement, no "TARIFFS" as in impediments to TRADE within the block and a single currency. What it seems to have turned into is unelected bureaucrats in Europe dictating to elected national governments what their tax policy must be.
>The EU simply wants to get its grubby little hands on Apple's money so they can use it for more dole-outs to friends of the bureaucrats...
I'm not sure why so many people think this was a move about fairness.
It's just a grab of money and power from politicians, as expected. I wish this money/power grab were not so widely defended by so many people.
What exactly is the argument against whistling back governments colluding with foreign corporations at the expense of domestic businesses?
> The EU was supposed to be about free movement, no "TARIFFS" as in impediments to TRADE within the block and a single currency.
The EU is about working together instead of each country racing each other to the bottom at the behest of non-EU interests and power blocks.
> unelected bureaucrats in Europe dictating to elected national governments
or you could read up on how it actually functions.
This is exactly the sort of job I would expect a EU competition commissioner to do. It's now up to the courts to verify if the findings are correct.
Regardless of the outcome, I'm very happy to see this part of the system works.
Unfortunately inflation stats cannot be relied upon because they ignore large and important sectors of the economy. For example, they often don't include house prices, or stock prices, or bond prices. The real inflationary pain is being felt by pension funds but consumer price indices don't reflect that.
It allowed Apple to pay an effective rate of tax much lower than that typically required of companies in the sector. De jure, no, they did not set a different tax rate. De facto, yes, Apple paid a significantly lower tax rate.
The argument is that the deal that Apple brokered would not have been available to any other company.
A country regulating an industry's tax across the whole industry, affecting every player equally, is very different to a sweetheart deal with one company that puts other players in that same market, both at home and abroad, at a grave disadvantage.
The modern EU is based on freedom of access to market and equality of opportunity. This is what is enshrined in the treaty currently enforced. The EU is not forcing "its members to give up tax policy", it is forcing its members to treat companies fairly across the bloc according to those policies which they have each set. Whilst this could be seen as an assault on their sovereignty, for a collective union to work there has to be common rules, and everyone has to play by them; thereby fairness is ensured. Everybody concedes an equal amount of their sovereignty for the common good (c.f. the ECJ). When one country doesn't play by the rules for its own gain, the others are disadvantaged, and so it is only fair that the central body of that union enforces the previously-agreed rules.
Group fairness doesn't trump individual liberties, as long as that individual doesn't harm someone else.
What Ireland did with Apple is the same as a company hiring away developers from its competition by paying them more.
Does it hurt them? Sure, they lost a talented developer. Is the proper response wage controls? Dear god no.
Do you think that bureaucrats and politicians "play by the rules"?
I contest this unsupported assertion; you provide no argument to back it up. Ensuring a fair marketplace cannot cause "bad outcomes on the individual" for everybody, as this implies nobody benefits from fairness (a.k.a a law-regulated environment) (an everybody-lose situation simply doesn't make sense, otherwise anarchy would have taken hold centuries ago).
> Group fairness doesn't trump individual liberties
... In your humble opinion. This is an ideological statement with no support.
> What Ireland did with Apple is the same as a company hiring away developers from its competition
... Except that it's not the same, as the two are in no way equivalent:
* the labour market is very different to the market for corporate domiciling
* private companies have no necessity to exist; failure (consequent from labour market failure) is acceptable whereas a state's failure (or a diminished form, a state's failure to collect adequate tax revenues) is unacceptable
* The market for corporate domiciling in the EU was regulated and there were regulations in place to prevent this action. There is usually no such regulation in employment law.
So really, the two are not "the same" at all.
> Does it hurt them? Sure
This is in contradiction with your statement "doesn't trump individual liberties, as long as that ... doesn't harm someone else". In this case the poaching company is harming the target company, and so by your argument group fairness ought to trump individual liberties. On the one hand you argue for constrained liberty, and on the other you accept unconstrained liberty. The two aren't compatible on this simple a level.
Long term gains are very hard to pick over short term gains, especially if that would incur some short term loss. The free market [long term] goal of EU can be roughly expressed as a fight for competition over monopolies. It may look extremely lucrative to lower taxes for a corporation to pay significant lump of money (create jobs, capital movement, etc) even at low rate, than to let the corporation set its foot at another country. As it was stated in other comments, a multinational naturally attempts to increase profits by any means and incorporating at different location with significant tax discount is one of the ways. Although, globally (or EU wise) this is simply tax discount for a corporation that is already pretty much resembling a monopoly.
Think about the EC decision in this light.
If Ireland want a 0% tax rate for all corporations, as far as I know they are allowed to do it. They just cannot afford it.
> The Commission can order recovery of illegal state aid for a ten-year period preceding the Commission's first request for information in 2013.
from the press release http://europa.eu/rapid/press-release_IP-16-2923_en.htm