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Comment by rayiner | Hacker News Reader

The IRS negotiates all the time, as noted below. Moreover, in this case, Apple paid what Ireland asked. The EU came along and said Apple’s tax deal violated EU law. People don’t go to jail for doing what the IRS told them (or indeed, for having a reasonable but ultimately mistaken view of the law). The law has estoppel provisions that protect parties who rely on the IRS’s representations with respect to their taxes. (E.g. where they say a certain thing is okay then hangs their mind.) Plus, the IRS is a litigant like anyone else. If they think they might not win on their legal interpretation in tax court, they’ll settle to mitigate the risk.

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Earlier this year I was trying to reach the IRS, and couldn't get through via phone after N attempts with no email options. I called my congressperson, complained, and got it resolved through an aide in my congressperson's office with a couple easy phone calls and email. It was super nice. I highly recommend.

When asking for help:

- be specific about the problem

- say you've made a good faith effort to resolve the matter on your own (keeping a log of calls made recommended)

- complain about being a person trying to give money to the IRS, and you shouldn't be having this problem

- be nice when talking to the congressperson's aide who tries to help you

- don't feel like your burdening the congressperson's aide by working with them directly, as resolving your complaint/issue is exactly the reason they exist, and you're helping them feel good about serving, because that's exactly what their doing

- when the matter is resolved, thank them directly

- for future matters regarding "call your congressperson to say X" campaigns, you now have a direct line to the congressperson's office (don't abuse it)

"don't feel like your burdening the congressperson's aide by working with them directly, as resolving your complaint/issue is exactly the reason they exist"

surely it's why their job exists, not them selves? :D that would be a weird answer to have to your existential questions, like the butter passing robot in Rick and Morty

> People don’t go to jail for doing what the IRS told them

The problem with this analogy is that the systems have one fundamentally important difference.

In the US, the IRS are federal enforcers. This means both regulation and enforcement are federal. In the EU, only regulation is, while enforcement is state level. This is much more comparable to the situation with patent regulation in East Texas.

Ireland is East Texas.

Actually in the EU corporation tax is meant to be state level too. After the Irish rejected the Lisbon treaty in a referendum, they were given explicit assurances by the EU that the EU would never interfere with their corporation tax policies, which are domestically popular there. Then they made the Irish vote again, and they got it passed that time.

However, that assurance turned out to be worthless, as here they are, telling the Irish how to tax corporations.

The EU has a history of making written assurances and then violating them later. After Lisbon gave the EU courts control over human rights law, the UK and a couple of other countries negotiated written opt outs. That opt out is written in the treaties, clear as can be. But later on the ECJ decided that the opt out shouldn't have been granted and voided it. Now the UK has to obey the ECJ in an area of law the EU explicitly agreed to leave alone.

> they were given explicit assurances by the EU that the EU would never interfere with their corporation tax policies

They were given assurance that the EU would not interfere with their low corporation tax rate

> that assurance turned out to be worthless, as here they are, telling the Irish how to tax corporations

Their interference here is not to do with Ireland's application of its tax laws or rates, but rather to do with favourable treatment of one company over others. Ireland's tax rate is 12.5% - charging Apple 0.005% instead of the already low 12.5% gives Apple a market advantage over any competitors paying 12.5%.

The specific violation is in Article 107 here[1], which is more concerned with competition law than tax law. And was not excepted in Lisbon.

[1] https://www.ecb.europa.eu/ecb/legal/pdf/c_32620121026en.pdf

No, it just isn't right. The EU's figure of 0.05% isn't even properly calculated. But even if it was, Ireland can set whatever tax rates it likes by area or by individual company. By treaty the EU just doesn't have jurisdiction over it at all.

Now, I know the article in question here. 107 is a classic example of badly drafted law, like most EU law is, but even so let's read it shall we?

http://www.lisbon-treaty.org/wcm/the-lisbon-treaty/treaty-on...

"Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market"

Key word: AID. Key word: THROUGH STATE RESOURCES.

Ireland is not giving Apple "aid" under any dictionary definition of the term. Taxation at any level is not "aid" because "aid" means giving someone something, not taking it away. Tax would never be described in this way by anyone who didn't have a political agenda. Also note: through state resources (i.e. state budget). Obviously irrelevant in the case where the budget is getting larger as a consequence of this "aid".

That said, note the huge get-out clauses too:

aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest

... is explicitly allowed. This paragraph is essentially meaningless: Ireland could claim that - if they accept for a moment the idea that tax and aid are the same thing - it is to facilitate the development of the tech industry in Ireland, and that such "aid" does not affect trading conditions because Apple products are available all over Europe. But then the Commission can claim that anything that disadvantages higher tax countries is "contrary to the common interests" and around we go again.

Basically, EU law is garbage. The treaties are extremely imprecise and whatever they say is irrelevant because the Commission and courts will simply re-interpret it to suit whatever their current political objective is.

I think the EU ruled that Apple's deal violated Irish law, not EU law. The 0.005% effective tax rate should of been a fair bit closer to Ireland’s 12.5% corporate tax rate.

Why? If a company has $200B it wants to deposit in your banks, what tax rate should it pay on the interest on that deposit? If Ireland said 12.5% (which is ridiculously high), Apple would have deposited it somewhere else, outside of the EU likely.

Accepting bank deposits is a good thing, it didn't create any costs for the government of Ireland. On the contrary, it likely funded lots of economic development. Which is exactly why Ireland did and should have offered a near zero tax rate.

I'm not certain if you are just being obtuse, but the entire arrangement Apple (and other companies) have set up with Ireland, is to avoid taxation inside the EU entirely, that "money deposited" is counted as a loss for other subsidiaries inside the EU and paid as "licensing fees" to Apple Ireland.

Nope, that's not true. Apple pays billions in income taxes in Britain, France and Germany. This is about where they deposit their after tax earnings.

You mean employees pay income taxes, don't you?

And since they conspired to reduce wages they cheat on income taxes paid by their employees too.

Since Apple has driven up wages in all of it's markets, you mean they conspired to increase taxes paid by it's employees and it's competitors employees.

Nope, Apple pays corporate income tax in every country where it has a presence.

There's no such thing as corporate income tax in the UK, not sure about Ireland.

Ireland is 12.5%

It kind of is true, perhaps not to the letter, but certainly in principle. As someone not familiar with the nuances of tax legislation as I'd bet a lot of us are, you can chase terminology all day, but ultimately it all boils down to Ireland given Apple discounted access to the European market at a knockdown rate. The specific point at issue, is not the discount though, it's the fact that this discount isn't available to others.

Nope, has nothing to do with market access. Ireland's tax discount was an incentive for Apple to base their IP there and deposit it's after tax earnings, i.e. foreign earnings after paying corporate income taxes to France, Germany, etc, etc.

Apple paid all the taxes it needed for "market access", this is just a question of what they do with the remaining profits after they paid those taxes. And where they base their IP, which obviously isn't going to be France or Germany.

Yes the reasoning being that they “pay those in the USA” or otherwise they would be paying them in Europe. Now whether or not they actually pay them in the US is another matter but, the manner in which it was determined which taxes should and should not be deferrable is what is at issue.

I'm not sure if you're actually ignorant of the argument, or if you just chose to pretend you'd never heard it. But, basically, it is:

The EU has rules to prevent a race to the bottom. In the long term, they are good for every single EU country, because they allow to actually tax companies, instead of lowering taxes to around 0.01 Euros annually otherwise. Yes, Ireland may have made the best offer this time around. But a year later, it would have been Croatia or Luxembourg.

The value of having a base within the EU is shown by Apple going to Ireland, instead of 0-tax jurisdictions like the Caymans. That value, which Apple uses to create its profit, needs to be financed by taxes.

The EU actually convinced Apple to move their savings to the Isle of Man. That's not a race to the bottom, that's throwing the baby out with the bath water. Taxing bank deposits like you tax an operating business is a ridiculously dumb policy.

They're taxing the interest gained not the deposits just like everyone else has to pay tax on their interest. Fair is fair.

There are many countries that don't tax the interest on bank deposits, just none in the EU anymore. And those countries are where the EU is driving companies to move their deposits to.

For now. We’re not going to continue to let these unethical companies to operate in the EU forever without contributing.

You probably think this sounds silly, but it’s what the majority of the voters here want and the EU though slow is moving with the people not the corporations.

It's not silly, just dumb. A foreign company that wants to deposit billions in your countries banks without any other services in return is an immense benefit to your country. Trying to tax them for it on top is short sighted and greedy.

A lot of the foreign-for-tax-purposes funds of US corps is held in US bank accounts in the name of the foreign subsidiary of the US parent. It's not doing any particular good for the economy that is the legal home of the subsidiary except to the extent that it is taxes there.

Not all of it. Even if Apple is only keeping 1% in Ireland, that's a few billion that Ireland banks wouldn't have had otherwise. What's the Keynsian multiplier on that?

The Irish Corporation Tax rate is 12.5%, but the interests from bank deposits are subject to the Deposit Interest Retention Tax with the current rate of 39%.

> On the contrary, it likely funded lots of economic development

It funded "a little" development. Provided a bunch of jobs down in Cork and the promise of a few more once their (now reneged upon) datacentre came online in Athenry. Nontangibles include putting Ireland on the tech map.

But, whatever the appropriateness of the remuneration for Ireland, the taxation was being applied Europe wide for access to the broader European economy.

So this tax is not only due to Ireland but the European economy as a whole.

I'm sorry if these nuggets of truth get under some people's skins but that's how it is.

This is unlikely, given that not surprisingly the judicial arms of the EU typically deal in EU law, not the laws of individual member States. It's pretty rare for a supra-national body like the EU to enforce individual State level legislation, as opposed to treaty obligations or similar.

In this particular case it was a breach of EU state aid rules, Ireland's Government has been very much opposed to the decision, which is why comparisons to the IRS don't really work all that nicely. From a legal perspective it's really more a question of competition law than tax.

It was a violation of Irish competition law, which as a part of the EU is harmonised with EU law. Seemingly the Irish officials were unaware of certain nuances, or at least were blithely ignorant.

It was not a violation of competition law either. The EU's basis for forcing Ireland's hand here is a novel redefinition of "state aid". Previously this part of the EU treaties had been understood to be talking about subsidies. The language contains a reference to the usage of "state's own resources" which is EU speak for government money. The goal was to stop the common practice of governments bailing out national champion firms.

But the EU can be relied upon to expansively re-interpret its powers after they have been agreed. It happens frequently. They have since decided that in Ireland's case, low tax rates are the same thing as direct subsidies. Obviously Ireland is not giving money to Apple, it's the other way around, but now "not enough" money is considered by the EU to be illegal.

This interpretation of the treaties was never raised previously and not surprisingly Ireland was very upset about it, as they'd been given assurances the EU would not interfere with their low corp tax regime. That's why Ireland is fighting it on Apple's side. It's not just about Apple. It's about the EU taking control of a policy that the Irish government thought they controlled.

That's not the case. Sorry. It certainly isn't that the EU redefined anything. These rules are quite clear.

What is less clear is the nuances of "just how" Apple was given favourable treatment.

It's very much in the fine details of Ireland's agreement with Apple, but what it boils down to is that Ireland gave an evaluation of Apple's tax liabilities tailored to Apple.

Even without this, Apple's tax liabilities would have been highly favourable but it is this "technical" matter that puts Apple & Ireland over the line, and is the basis of the 13bn figure, which is only a fraction of what Apple actually manages to avoid paying with their creative tax practices.

The best plea that Ireland can make in this regard is ignorance, but now that rules have been clarified the adjustments must be made.

I felt that Apple's whole response to this was highly disingenuous and inflammatory.

You should really discuss that with a tax lawyer. If the rules are so clear then why was Ireland taken by surprise and why did they fight it? The relevant section of the treaties are quite clear and readable. They simply would not be interpreted by any normal person in this way.

It is a power grab by the EU in an area that the treaties explicitly state the EU does not control. End of story.

edit: Also see below where I discuss the article in question, which is anything but clear

> Apple paid what Ireland asked.

No. Apple lobbied (bribed) Irish officials to tell them they needn't pay more taxes. It's not like Apple had been passive here.

I think, speaking as an Irishman here, it's as likely the Irish officials lobbied Apple ...

Far, far more likely that Ireland lobbied Apple to encourage them to move jobs to Dublin, rather than choosing say, London.

The income tax revenue from Apple's employees in Cork (their Irish HQ) is a tiny tiny percentage of the corporate tax discount they negotiated.

You may be right that the Irish government lobbied them, but if they did, it was more for the appearance of creating jobs for political gains, rather than any actual benefit those jobs might bring to the economy.

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