Apple must pay 13B euros in back taxes, EU's top court rules
cnbc.com
cnbc.com
Here's some example limitations: https://eur-lex.europa.eu/EN/legal-content/summary/tackling-...
I focused on direct taxation, but in indirect taxation I think there's even more examples.
The problem is the selective tax rates that Ireland gave to many multinationals, often as low as 0.005% (effectively in return for ensuring x amount of jobs were created in Ireland). I think these are really very much sneaky schemes.
Basically, from the other side of the ocean I don't see much to care about here beyond the microtactics of business development decisions. Let Europe sort out its business on its own.
So if you’re building hotels or factories in the haven that’s fine. If you’re hiding money we demand our pound of flesh.
Two words: Dutch Sandwitch
Because it’s one market, unless countries coordinate, you get massive tax loopholes with profits being shifted to tax heavens.
Practical implications override hypothetical concerns
Did GP change the original text? The closest match I can find to your assertion is where they said "or non-EU readers, note that taxation is explicitly not a competency of the EU"
Eg Ireland might give a tax incentive if a large Fortune 500 company hires X people in Ireland.
Question: does this ruling prohibit that common practice?
Plus tax cuts for the employees of ASML, which is fully legal under EU legislation and prohibitions.
The EU hands out billions in direct aid to companies every year. Many times together with the country governments. So there's no such prohibition in practice. In the EU regions I am familiar with, at least 70% of companies live on getting subsidies from the EU mainly and income from actual customers as a secondary concern. And I'm not talking about agriculture, but every industry.
Few businesses will even start any economic activity before they've received at least a hundred thousand in subsidies and investment grants. Not loans, which is a different matter.
Just one example: https://commission.europa.eu/business-economy-euro/economic-...
That seems like a bit of a perverse incentive for countries to offer deals they may know will get overturned later because they'll get the money eventually.
If Ireland is willing to give the same tax incentive to any company hiring X people in Ireland, it's fine.
If Ireland only grants the rebate to Fortune 500 companies in a bid to lure specific US investment, it's the state creating a competitive distortion i.e. state aid.
You are allowed to make rules, but you can't offer deals.
I agree with your recollection. AFAIK the rules were changed years ago.
Apple said in 2017 that it had an effective tax rate of 21 percent on foreign earnings. The Commission said its effective tax rate on European profits was 1 percent in 2003 and 0.005 percent in 2014.
[Edit] To be fair to CNBC they did cover the tax structure Apple set up some years ago [2].
[1] https://www.politico.eu/article/commission-scores-surprise-w...
[2] https://www.cnbc.com/2016/08/30/how-apples-irish-subsidiarie...
My understanding is that the U.S.A. double-taxes both corporations operating abroad, as well as it's own expats. If this is true, then it's quite the remark to say _the country you're actually in_ is the one double-taxing you.
The fact that your "income was already subject to taxes in the US" isn't the fault of the hosting country.
Companies, and people, make decisions based on the tax laws of the day eg deciding to work in the UK, Ireland or the US. States shouldn’t be able to simply retroactively change the tax rules and take money already earned and already taxed.
If they can do it to Apple, why not to regular citizens?
This is not correct, it is only practically true in trivial cases. Excess taxation is a very real pain point for Americans living overseas, never mind the other indefensible things the US government does to its expats like FATCA.
Many types of income cannot be offset nor or they covered by tax treaties. Every time there is an impedance mismatch between US tax code and foreign tax code, including basic things like classification of income, deductions, and exemptions, you can end up with liabilities in both countries. It is not uncommon to pay more taxes in aggregate as an expat than you would pay in either country separately.
The way the US government, and some State governments, treat American expats is quite fucked.
That's news to me and I've been doing international tax for 15 years. Please, tell me what types of income earned by a U.S. expat isn't covered by a tax treaty?
It is not uncommon to pay more taxes in aggregate as an expat than you would pay in either country separately.
This is objectively false. For an expat, income taxes paid to a resident country are a dollar-for-dollar credit against your U.S. income taxes, and that's on top of the inclusion threshold that doesn't subject the first $X of foreign income to any U.S. taxation at all.
Then they retired, returned to the UK, sent their kids to subsidized state universities (in the UK), receive free healthcare on the NHS, and receive state benefits for retirees.
They receive all of these state benefits and they paid almost no taxes to the UK government for most of their adult life. Is that fair?
Glad to hear it, because what Americans told me (that they get taxed for the same money they paid tax on in their host country) is bonkers.
EDIT: Seems there's some disagreement ;) The other commentor echoes what I've heard from Americans living in Europe. Absolute madness. I also heard it's very costly to try and give up your American citizenship, exactly to protect that juicy free tax America gets from it's expats.
> If they can do it to Apple, why not to regular citizens?
They already do. Knowledge worker migrants were promised eight years of tax breaks by the Dutch government, who later changed their minds after those people already moved to the Netherlands.
This isn't even that though, this is the EU saying the agreement made by Ireland with Apple wasn't legal. It's like how they get people who avoid tax by finding loopholes to pay back-taxes once the tax office catches them (yes, this happens too).
The USA has FEIE, (no federal taxes the first $120k/yr), but not all states (like Cali) honor that and may still charge you state income tax.
and FEIE doesn't exempt you from self-employment taxes.
and doesn't exempt non-earned income (dividends, etc.).
Americans can come out ahead (if they earn less than $120k/yr and live in a 0% tax country). But a non-American (like Canadian) doing the samething, would have less restrictions.
because Apple is literally made from tens of hundreds of "regular citizens"
or to keep it simple: Apple is a citizen made out of thousands of 'regular' citizens.
The regular citizen doesn't debate-ably owe billion in taxes.
Sure, maybe if you're a centi-billionaire the Winds of Winter might change.
If companies avoid tax and rich people avoid tax it means more tax for normal people who work for a living.
I have a mortgage. This mortgage is worth more than the cash I own. That doesn't mean I'm bankrupt. The mortgage is paid on a fixed schedule over 30 years, and during those 30 years I'll have a home and be able to accrue other assets. If I didn't get a mortgage then I would still be saving for my home.
The same is true with the US balance sheet. It has accrued 35T in debt, but it's used that to fund it's operations. Those operations generate more for the US. As long as the US has enough to pay it's obligations over the next few decades there are no issues
That of course doesn't change the fact that tax loopholes can be problematic
While I do agree that personal finances are a bad analogy for state finances, that is not an illustrative example as to the reasons. An employed person can absolutely improve their yearly wage by going into debt, be it for investing in education to aspire to better paying positions, buying a car which increases their employment catchment area, or even —for a flexible definition of wage— investing in setting up a business.
If you spend 1/2 your tax income on just servicing the debt, that means either fewer services for people, or borrowing yet more, just to keep things going.
If you borrow more, then it gets even worse.
I really prefer that 1/2 my tax bill doesn't go to interest payments.
This is accurate, regarding preferences for optionality, and how our economy currently works. But I think it's worth questioning the expectation that giving up that optionality deserves compensation, whether morally or practically (resulting in compounding "money-on-money returns", usually at low risk if sufficiently diversified).
The Italian economist Silvio Gesell noted, that no other good besides currency works this way. Every other good with a use value (food, houses) tends to lose value over time (entropy being fundamental to the universe), and/or, to carry risk (a share of stock which represents unpredictable ROI). There is course an exception in land, which doesn't intrinsically depreciate, but whose value trends upwards thanks to location value (and which can be addressed separately via Georgist land tax).
Gesell proposed a "demurrage currency" [0], which gradually loses value as it is held: the idea being, rather than being entitled to a return, retaining high long-term optionality is actually a privilege that one should have to pay for, since the real-world value it represents is depreciating. And the incentive to invest (whether at high or low risk) instead becomes to break even (with the rate of demurrage tracking what we currently call the discount rate).
I have no idea if such a concept is practical in a trans-national, growth-dependent global economy (with deflationary crypto-currencies as a BATNA!); if anything, I'm fairly confident it's not. But it's at least worth thinking about: that it's not at all axiomatic that holders of value should be entitled to compensation for "forgoing consumption" (not only because the wealthy don't necessarily need such an incentive, but also because increased consumption can mean an increase in the velocity of money, and more total value created, per the multiplier effect, and the "hotel riddle" [1]).
[0] https://en.wikipedia.org/wiki/Silvio_Gesell#Economic_philoso...
[1] https://www.econlib.org/archives/2012/01/an_answer_to_a.html
But now imagine that you are never allowed to pay it off: you only pay the interest. And the debt will be passed to your children, and their children. This is the US Govt debt.
In feudal times, you worked for your lord and master. If you didn't pay, armed men would come and take your stuff. In modern times, you still work for your lords and masters, and if you don't pay, armed men will come and take your stuff. How they did this was to create an income tax, and then have their cronies in the house and senate spend more and more and never "pay off the mortgage".
Well it’s how this economist and Citibank’s former number 1 trader describes our debt based money system. So maybe you’re the naive one here. Please watch this video and enlighten yourself: What is Money? https://youtu.be/_gcNMu40jqs
> As long as the US has enough to pay it's obligations over the next few decades there are no issues
This is rather my point, as more wealth is transferred from individuals and governments to the rich (who the tax system is largely optional for) there simply won’t be that tax take to support the debt.
It would be great if everybody just stopped committing crimes, or being rude even when legal, altogether.
But what are our alternatives other than just waiting for everyone to just do this? Also, how will everyone know how to just contact me to just find out when using the law to avoid taxes when you can is just evil, when it's just the smart thing to do, or when avoiding a tax is just justice, hard-fought and well-deserved?
It would also be just great if it were autumn all year, and if alcohol and sugar were just good for you.
About half of treasuries are held by the Fed or foreign investors which largely means other governments and foreign companies. Most of the rest are owned by pension funds, banks, local government, insurance companies, etc.
> About half of treasuries are held by the Fed or foreign investors which largely means other governments and foreign companies. Most of the rest are owned by pension funds, banks, local government, insurance companies, etc.
So what? That doesn't mean you shouldn't think about it in terms of a rich person, like the GP suggests.
The modern capitalist system is a very slippery thing to think about, and there are all kinds of traps to mislead people. For instance, facts like the one you point out can draw people away from understanding the truth behind scenarios where the rich are the group that greatly disproportionally benefits while not being the group that benefits the most in absolute terms.
On a related note: IMHO the 401k is one of the greatest propaganda coups in the history of democracy. You have vast swaths of the public owning tiny, insignificant slivers of the overall pie; while the rich own big, disproportionate slices. But then the public votes to increase those tiny, tangible slivers by trading much more valuable but less tangible things.
If you don't your competition will.
We just need more spine in the country's legislation to close ANY loophole, because this wasn't illegal tax evasion, it was legal tax ellusion.
The point is that EU judged this unfair by Ireland and that effectively it stole revenue from other European counties to favor jobs in ireland.
Basically saying "you (country) can't have a lower tax rate than X" in our economic union.
Smaller countries with few industries would benefit disproportionately from bigger companies moving here the HQ.
The EU is a pretty one-sided solution to the prisoner's dilemma
The only solution is to NOT have taxes, NOT have a government and then the market is fair for everyone. Unless you are into anarchy / voluntarism you won't like this solution, so keep enjoying your broken system with increasing inequality between the top 0.01% who colludes with the government and the rest - while the middle class gets their money stolen to pay for both rich and poor.
Your solution would end with the reintroduction of feudalism as the only way that the rich and powerful can hold on to their wealth without it being plundered by the rich guy next door.
Markets can only be fair if everyone in the market has the same degree of financial power. This can never happen in large scale anarchies. The only chance of it happening is by having strong regulation.
Tax shouldn't be seen as the countries income but as a tool for redistribution of wealth and to keep trust in the currency as a whole. If you don't have debt you don't have money, every printed dollar goes into the system and can be used in various things not only an asset earning interest
Which is exactly what is happening, with the gap between rich and poor increasing in the western economies.
A) These bankrupt countries are exactly why we should think twice about funding their spending habit, with reevaluation only when they address their spending habit
B) These companies are tax compliant, barring when the ECJ rules against them
C) if what you meant was equivalent taxation - no amount of taxation of profits or income would fill these bankrupt countries budget holes
D) the countries tell you exactly how not to pay tax, they incentivize certain transactions and tax the remainder of funds that weren't involved. (The ECJ overruled an entire country, with retroactive logic)
>Spending by a government that issues its own currency is nominally self-financing. *However, under a full employment assumption, to acquire resources produced by its population without potential inflationary pressures, removal of purchasing power must occur via government borrowing, taxes, custom duties, the sale or lease of natural resources, and various fees like national park entry fees or licensing fees. When these sovereign governments choose to temporarily remove spent money by issuing securities in its place, they pay interest on the money borrowed.* Changes in government spending are a major component of fiscal policy used to stabilize the macroeconomic business cycle.
You first :/
For example, the US federal government + state governments spend about $10 trillion a year. The US has a GDP of about $25 trillion. And the US isn't exactly known as a high tax country. France is estimated to be at 58%...
The expectation that government provides certain services...
The nature of fiat currencies and what actually makes the USD worth anything or even usable as a medium of exchange...
Basic economics. Government spending == business revenue; the money doesn't just vanish.
Of course not.
Laughs in government contractor
It effectively indicates that you're working for the manor lord Monday and Tuesday (and Wednesday in France), and are allowed to work on your own field from Wednesday to Friday. At the extreme it is obvious that this would discourage work and starting businesses. If the government took 100% it wouldn't make sense to do anything (legally). Therefore the question is: at what percentage does this start happening too much?
This is an important question, because government budget as a percentage of GDP has been increasing over the last century. At the start of the 20th century this percentage was around 3-5%. Today it's around 40-60%. And it seems to be increasing even today.
People don't like austerity, but if our current system is built on an ever-increasing share of government spending of the economy, then eventually we're going to be hit with austerity x10.
Can you share where you get this numbers?
And healthcare is unavailable anyway. Several month long waits to see a specialist.
1. Retroactive application of arm's length principle
The Court's reliance on the arm's length principle, despite acknowledging it's not required by EU law, is problematic. As stated in paragraph 124:
> "Article 107(1) TFEU gives the Commission the right to check whether the level of profit allocated to such branches... corresponds to the level of profit that would have been obtained if that activity had been carried on under market conditions."
2. Burden of proof
The Court's criticism of the General Court's approach to evidence, as noted in paragraph 245, lowers the burden of proof for the Commission in State aid cases:
> "As the Commission stated in recital 441 of the decision at issue, its approach is based on an infringement of Article 107(1) TFEU, which has been part of Ireland's legal order since its accession in 1973, and not on a failure to have regard to the framework defined at OECD level."
But, overall, yes, I get the concerns about legal certainty and applying rules retroactively. They're valid points. But when I weigh everything, I still think this ruling does more good than harm. It's a big step towards fairer taxes and more transparency in how big companies operate.
Yes, it might ruffle some feathers in the short term. But in the long run, it's setting us up for a tax system where everyone plays by the same rules – whether you're a small local business or a tech giant.
They just found that Ireland's tax rules from 1991 and 2007 are illegal tax benefits according to the preexisting rule.
Just because they took so long apply existing law doesn't make it retroactive.
The central difference of opinion is of course whether outright gaming the system is acceptable regardless of the written rules being followed to the letter.
From _today_ in a judgement pretty much identical to the one on Apple/Ireland:
> Commission orders recovery of around €14 million in incompatible German State aid from Frankfurt-Hahn airport and Ryanair
https://ec.europa.eu/commission/presscorner/detail/en/ip_24_...
---
> On Friday, January 31, 2020, courts in France, the United Kingdom, and the United States approved analogous versions of a deferred prosecution agreement (DPA) between prosecutors and Airbus that include a combined fine of $3.96 billion for the aircraft manufacturer. The resolution ends multi-year investigations by the French National Financial Prosecutor’s Office (Parquet National Financier or PNF), the U.K. Serious Fraud Office (SFO), and the U.S. Department of Justice (DOJ)
https://www.ropesgray.com/en/insights/alerts/2020/01/four-ye...
> Antitrust: Commission fines car manufacturers €875 million for restricting competition in emission cleaning for new diesel passenger cars
https://ec.europa.eu/commission/presscorner/detail/en/ip_21_...
A law that says "you aren't taxed on money you send to overseas subsidiaries" is trivially gameable. A law that says "don't evade tax" is not, so corporations hate not knowing which side of the blurry line they're on. An ethical corporation (as if that exists) would just stay clear of the blurry region and have no problem.
That would be a truly wonderful thing to behold.
- Apple goes to a country and makes a deal with that country
- They pay the tax in the country and they comply with all the rules at that time in Ireland
- After a few years the EU government says "hey, Ireland that's not a correct deal"
- So they don't punish the Ireland government who didn't comply with EU regulation (as far as I understood) and retroactively charge the tax on Apple, who complied with all the regulation. Doesn't the burden of non-compliance be on the party that broke the EU rules and not the company who complied with all the rules?
Several questions arise:
- Was Apple breaking any rules in those years when they had the deal with the government?
- How can any company be sure that if they comply with current tax laws they won't be back charged in the future?
- Isn't that a bad precedent of "we change the rules now", but will punish you for you past behavior for non-complying with the new rules? (e.g. why don't charge back the increase in taxes for this year for the past 3 years)
These are not related to the ethical/moral or fairness evaluation of the situation. It's unfair to charge different taxes at all, flat taxes should be the norm, not charge more if you earn more. However the legal logic doesn't seem to be there.
Can you help me understand the situation?
Apple isn't blameless here, but it definitely kinda feels like they got a little bit defrauded by the Irish government who now essentially is getting rewarded with billions of dollars for their illegal conduct.
Yeah, but that only ever ratchets in one direction. Putting everyone on the same rules won't reduce taxes for anyone.
I don't see any problem with this. They knew they were gaming the system, and knew they could get in trouble for it. The law is NOT a computer program where all outputs can be fully predicted from the source code - it also takes common sense into account.
We should just pass a law that says gaming the system is illegal, then we won't need to find silly justifications against people who game the system, but silly justifications work too.
* to be fair, this varies with legal system: my personal opinion is that one finds significantly more successful rules lawyering attempts in common law systems than in code systems.
Docket: https://curia.europa.eu/juris/documents.jsf?num=C-48/22%20P
Ruling: https://curia.europa.eu/juris/document/document.jsf?text=&do...
And other news reports confirming the same:
https://www.reuters.com/technology/eu-court-upholds-googles-...
https://www.bbc.com/news/articles/cjw3e1pn741o
CNN also has links to both (summaries of the) rulings: https://www.cnn.com/2024/09/10/tech/europe-ruling-apple-tax-...
> ASI's 2014 structure was an adaptation of a Double Irish scheme, an Irish IP–based BEPS tool used by many US multinationals. Apple did not follow the traditional Double Irish structure of using two separate Irish companies. Instead, Apple used two separate "branches" inside one single company, namely ASI.[34] It is this "branch structure" the EU Commission alleged was illegal State aid, as it was not offered to other multinationals in Ireland, which had used the traditional "two separate companies" version of the Double Irish BEPS tool. Under the Double Irish structure, one Irish subsidiary (IRL1) is an Irish registered company selling products to non–US locations from Ireland. The other Irish subsidiary (IRL2) is "registered" in Ireland, but "managed and controlled" from a tax haven such as Bermuda. The Irish tax code considers IRL2 a Bermuda company (used the "managed and controlled" test), but the US tax code considers IRL2 an Irish company (uses the registration test). Neither taxes it. Apple's subsidiary, ASI, behaved like it was IRL2, it was "managed and controlled" via ASI Board meetings in Bermuda, so Irish Revenue did not tax it. But ASI also did all the functions of IRL1, making circa €110.8 billion[6] of profits from non–US sales. The EU Commission contest IRL1's actions made ASI Irish, and the functions of IRL1 over-rode the Bermuda Board meetings in deciding the "managed and controlled" test. The commission had not brought any cases against US multinationals using the standard double two separate companies Irish BEPS tool. (https://en.wikipedia.org/wiki/Apple%27s_EU_tax_dispute)
In other words if they had actually set up two separate Irish companies instead of just using two separate branches of a single Irish company, their tax scheme would have been fully legal and not considered state aid. (Since many other companies availed themselves of such a scheme.)
Something tells me there's more to the story here.
Here's the CJEU press release about the Google judgment: https://curia.europa.eu/jcms/upload/docs/application/pdf/202...
Inside that PDF press release, there is a link to to the case docket, including the final judgment and an abstract of the judgment: https://curia.europa.eu/juris/documents.jsf?num=C-48/22%20P
And here's the full judgment linked in the above docket: https://curia.europa.eu/juris/document/document.jsf?text=&do...
The full judgment is available in English and French; the abstract is available in French but not English.
I should also note that there were actually four CJEU judgments released today, not two. But the other two were unrelated to tech.
The right fix would be EU wide legislation to prevent EU member states of fighting against each other on who can screw over the taxpayers by providing the biggest tax breaks in exchange for corporations' bread crumbs in a race to the bottom, as this causes all EU taxpayers to loose and corporations to win, and then we wonder why we have no money for education, healthcare and infrastructure. Well of course we don't if you help big companies avoid paying tax and then your state budget relies only collecting tax from citizens and small business who can't dodge taxes.
The notion of Ireland somehow getting a '13 billion payday' due to malfeasance or illegality is fantastical beyond belief.
Ireland gave illegal tax breaks to attract business from other countries which it succeeded in, and now also gets the tax back.
> fantastical beyond belief
You might disagree with something I've said but it's certainly not "fantastical beyond belief"
Why would you expect them to pay corporate taxes on all the income they make outside of the US? Would hardly make much sense...
Does this also have the knock on affect that these companies can now write off this tax so their owed US taxes are much less (assuming they ever repatriate these earning - which they have often avoided to avoid paying US tax)?
Anyways, writing the above shows me how much I don't understand about these cases.
This is hard to implement in practice.
Imagine selling in a country with 50% tax, and having a country with 10% somehwere, anywhere in the world.
For easier math, let's say you buy dildos from a chinese manufacture for 1eur (including shipping), and sell them for 11eur to end customers. You've just earned 10eur, and you're taxed 5eur, giving you 5eur of profit.
What you then do is open a company in a low-tax country, the company is "completely independent" and the owner (your cousin) works with both the manufacturer and you. You buy the dildos from your cousin for 10eur, he buys them from china for 1eur has them shipped directly to you, and you sell them for 11eur.
So, your cousin earned 9eur, and will pay 10% tax on that (90c, 8.10eur of profit) and you earned 1eur, and will pay 50% tax on that (50c, 50c of profit for you).
So instead of paying 5eur in tax, you only paid 1.40eur, and pocketed 8.6eur. Yes, there are some additional costs (another company + paperwork, some percentage for your cousin) but you still earned more.
The same can be done with patents and licences, branding deals, etc. Company in rich country made 100M of profits... just have the company in a cheap-tax country charge them 99M for licencing, 1M gets taxed in the expensive-tax country, and 99M in the cheap one.
A great number of tricks go away if you treat subsidiaries as a single company. Countries are reluctant to pierce the corporate veil, but it’s all arbitrary rules.
And for every regulatory change will bring changes to tax avoidance... subsidiaries will just get "one more step" removed from the main company...
The irony as I see it, was that the software was developed by us locally and used by local clients, but somehow ended up being "owned" by carribean islands.
Harry Potter and the Order of the Phoenix (2007) ended up with a $167 million loss on paper after grossing nearly $1 billion. According to New Line's accounts, the LOTR trilogy made "horrendous losses" and no profit at all. Same as Forrest Gump, Men in Black, and Return of the Jedi.
The Music industry is far worse in its financial machinations.
With some minor exceptions, the companies involved in this are all American.
As I wrote in another thread, that's not how business works in the EU. If Volkswagen, incorporated in Germany, sells a car in Poland, they're not required to pay a corresponding sliver of their net profits to the Polish exchequer. It all stays in Germany.
The second it advantages another EU country at their expense, however...
I believe that part of the reason is that they still pay other taxes (eg VAT) in the country of sale.
This is will force a political crisis as the government is complaining it has no money to build houses. So all the those comments saying other EU countries just has to sue Ireland to get some of that won't happen.
If Germany gave state aid to Deusche Bank and DB operates in many EU countries it wouldn't make any sense for Spain to get a cut of that if they were forced to hand it back, even if the revenue was generated in other countries by DB this doesn't concern the state aid given.
The government couldn't even spend an allocated €1 billion of its housing budget over the last three years. https://www.thejournal.ie/housing-budget-underspend-6038256-...
If you were Irish you'd know exactly the issue - a mix between the local planning and rural needs schemes which prevent one-off building in established rural communities, and the farce that is An Bord Pleanála - our Planning Authority.
Given our absolute position as a Republic and a Democracy, we have incredible powers for individuals to block major developments. The one in the major Dublin suburb of Dundrum, adjacent the largest shopping Centre in Europe, is just the tip of the iceberg.
https://www.independent.ie/podcasts/the-indo-daily/indo-dail...
no it won't
> as the government is complaining it has no money to build houses
no it isn't
I think it should be 0 and we should tax use of resources and consumption instead. Then let countries compete to create business friendly environment. It doesn't provide enough revenue to be worth all the hassle with enforcement and accounting.
Until these fines become meaningful, companies will just continue breaking the law and asking for forgiveness later, as the changes to their market cap can offset this fine in hours.
Tax bills have to be paid in cash, not stock. A better analogy is to simply look at Apple’s net profits, since that’s where the money will come from.
$13B is not nothing, even for Apple.
Might give a slight wobble in the stock price, but that's nothing unusual for AAPL at this time of year anyway.
Up until recent years the EU didn’t even know if it could take action against U.S. based tech giants. Now that the EU has established wins in fines, usb-c, user replaceable batteries, and alternate app stores, I expect EU regulators to take even bolder action.
What do you mean by that? Due to geopolitics? Or at a technical level of the current law?
Geopolitics, but the technical level of law certainly plays a part. Europe had no idea what the effect of leveling lawsuits against a fortune one company would yield. However the EU has proven rather adept at identifying technological practices harming consumers and a strong capacity for rectifying them. Now that the EU is beginning to find its stride, I expect it to become more assertive in how international commerce is conducted.
(This is in addition to the other commentators, who have correctly pointed out that if you just divide market cap by the fine, you're producing a number that isn't useful for anything but misleading people).
We are assigning moral value to this? You don’t think EU is a self interested party looking to interpret the law as favorably as they can?
13bn would cover the cost of Dublin's first metro system, unlike most European capitals Dublin does not have a metro. This is what this ruling means for the Irish public. shame on the government putting corporate interests ahead of public finances.
Given the propensity for the EU to throw us under the bus when the Teutonic books don't balance, its a lot more important for us to maintain our special cultural, economical and political relationship with the USA.
In any case, that money would never end up ringfenced for a Metro that has been in planning hell since the 80s. We're well able to afford white elephants (e.g. the new Children's Hospital).
It's an odd comparison and is dishonest to minimize the payment through a speculative value that the market decided on. If Apple owned 50% of the shares and sold all their shares today, they would not be getting 50% of that $3T because of market forces.
Ιf that is true it should be easy to prove. Letting them pay peanuts is an insult to the whole of EU by the Irish government
https://curia.europa.eu/juris/document/document.jsf?text=&do...
Full ruling: https://curia.europa.eu/jcms/upload/docs/application/pdf/202...
Fascinating, how does that work? Can anybody explain in simpler terms how that was legal to begin with?
> Both companies were incorporated in Ireland but not tax resident in Ireland. Those tax rulings approved the methods used by ASI and AOE to determine their chargeable profits in Ireland in relation to the trading activity of their respective Irish branches.
Judgment: https://curia.europa.eu/juris/document/document.jsf?text=&do...
> "Ireland granted Apple unlawful aid which Ireland is required to recover," the Court of Justice said on Tuesday.
This is one of the reasons the EU is set to remove the single country veto rule since it was open to abuse. You'll then need two countries on your side to alter the EU's rulings.
Not because I particularly dilike Apple or big US tech firms (I have a whole bunch of Apple stuff right here), but because Ireland has been able to undermine the tax regime of the whole EU, by giving these sweetheart tax deals to big firms, who can then run their entire EU business from there.
This gives an unfair tax advantage to the multinationals over homegrown EU companies, skewing the market.
Is it Apple's 'fault'? That's not really the interesting question here, IMHO.
The secrecy and exclusivity were central to the judgement. The EU requires a level playing field for all companies, which is why individual governments striking secret tax deals not available to all companies are seen as an illegal thing.
I bet if Ireland had opened the same tax deal they did to Apple, to all companies this would not even have been a matter for the courts.
https://taxfoundation.org/data/all/eu/patent-box-regimes-eur...
In Luxembourg, it's higher at 5%.
I remember Netherlands had 0% at some point, but they might have changed it.
In any case, multinational corporations pay peanuts in taxes using that scheme.
btw: I also agree with your economic reasoning
Good that Apple was punished for it. It should happen more often.
Well, that's absolutely not orthogonal to the "screwing over Europe" statement. That simply makes two countries trying to gain an unfair competitive advantage.
Nicely hypocritical from the Netherlands by the way, as they are always the ones on their high horses complaining about the financial laxness of the southern and eastern European countries, while at the same time draining them of tax revenues through such constructs.
I understand that the issue here is the nature of the deal with a specific company, but the EU does not want member states to have too much leeway to cut taxes in any case. They have set minima for corporation tax and VAT, for instance.
Ultimately this is a question of competitive advantage and of ways for small, peripheric countries to survive and prosper. If everything was the same everywhere in the EU, then why would companies pick Ireland?
The US have "domestic tax-heavens" and the country is not falling apart... The EU isn't at risk, either, including because of the huge VAT levels compared to corporation tax.
Effectively, I think this boils down to powerful EU states who want to have high taxes and don't want others to undercut them.
It's odd that the view here, at least among Europeans, seems to be that the higher the taxes the better when the issue is obviously much more complex.
[1] https://taxation-customs.ec.europa.eu/taxation/business-taxa...
Probably not, because their home country would go after them / make Ireland liable. These kinds of schemes usually work across jurisdictions
yeah but "negotiate" is not how this is supposed to be, because it creates a non-level playing field. If I planned to move my single-person enterprise to Ireland I should be able to get the same deal as Apple did without having friends in the government.
One can argue that countries should be able to do this, but EU countries have agreed not to do it.
Ireland itself probably doesn't want to do this, since those deals exist for a reason.
This was formerly the case, but actually now they no longer can set them that low, due to a deal by many countries to effectively force a 15% minimum. This was also largely aimed at Ireland's low 12.5% tax rate, which is being phased out as a result.
Not suggesting that Ireland did this expecting to get both sets of benefits, but seems a little counter-productive that they are in fact receiving those.
Scam the rest of the EU countries?
The EU court judges that a member country didn't tax a company enough, so the EU takes the money? That would be ripe for abuse.
I mean, look, the EU is still a place that is more or less governed by rule of law. All I'm saying is that, if the EU keeps the money, that creates the temptation to abuse it.
Of course Apple should've known better. Their lawyers warned them about the risks of these deals (I do not have internal knowledge, I just know they did, they do to everyone who enters into deals like this). For years (rather, decades) everybody bet on this being too widespread to be corrected like it is now. You can't really blame them for trying, but in the end, this is the corporate/tax version of 'fuck around, find out'.
I'm not entirely sure what to think myself about the fairness of this. But going forward I definitely prefer that corporations will have to be careful about engaging in unfair tax deals in the EU.
Otherwise those corporations would just be looking for the next country to take advantage of - risk free.
Edit: Please downvote me if you must but also post a comment about why I'm wrong. Thanks!
Of course you can, because EU law has precedence over Ireland's deal in this situation.
At the same time, if bureaucrauts in Ireland were a bit smarter they could have just written in a special exemption for companies with certain specific requirements - which end up being Apple and a few big ones.
Apple was also pretty dumb to go to Ireland while Malta, Cyprus and Bulgaria offer pretty low taxes out of the box. I guess they did that to access UK talent / lower language barrier even if the fiscal setup was riskier.
The EU isn't applying any penalty here, this is owed taxes that apple were not billed by the Irish tax authorities.
Once you enter the EU, you forfeit part of your sovereignty. That's what Ireland failed to do here. There is no slippery slope. This is the very foundation of the union.
So EU runs Ireland’s tax system? What happened to sovereignty? How does this work?
They probably just screwed with the process and didn't get the deal in a generic enough format to be accepted by the EU.
This incompetence will cost dear to Ireland as the next big tech companies will go elsewhere to sell to Europe.
AFAIK Apple doesn’t have so many employees in Ireland that would generate enough revenue for a 13B tax bill. So they must have been booking offshore revenue via an Irish subsidiary.
When I buy software licenses here in India I’ve noticed that the billing almost always is in Ireland.
Strange.
Treaties bind nations to behave in certain ways all the time, it's basically what they are for.
EU membership is in effect a set of treaties that a member-nation signs up to, which create these supra-national bodies like the court and also a lot of trade and tax rules which get harmonised across the union. Ireland has signed these treaties, which give it access to the market and the benefits of being in the EU.
If it wishes to set its tax rules without reference to the EU, it will either need to get the EU rules changed through the political process, or leave the treaties and treaty organisations.
Yes, you can view this as ceding sovereignty, but in some ways every treaty does that.
The only way to force the EU to innovate is for US tech to pull out entirely, thus disabling vast swaths of technological infrastructure and product the EU relies on and takes for granted. The absence of this technology will force the EU to recognize its importance, and thus the importance of crafting a regulatory environment that enables such benefits to come about.
Without the fundamental recognition of the value of technology - and without this recognition happening at the level of the citizenry - the EU will continue to technologically stagnate while passing more and more regulations designed to rent-seek from the US.
There used to be a saying, if you can’t beat them, join them.
The EU seems to have modified to read, if you can’t beat them, hammer them with legislation until you can.
As a European, I find the tech situation in Europe (and UK) horrible - much lower salaries for tech workers, inconsistent and high taxation, no measurable innovation in tech since forever. At the same time EU wastes taxpayer money on "research" that is only slightly more advanced than a second year student's project, all in the name of promoting innovation.
Give me a break, I WISH Apple would fuck off out of Europe and I didn't ever have to deal with anything Apple-related ever again.
You know it's EU state aid rules that severely constrain government spending like that?
EU state aid rules don't stop governments building houses...
It's supposed to work against them, as a chilling effect for any company trying to work EU states against each other for preferential treatment. I'm sure Ireland will argue that they'll offer any multi-billion multinational this sort of treatment, but that's really the point. The EU doesn't want a race to the bottom and if EU-local businesses are unable to leverage this sort of accounting break, it's a massive leg up for external businesses.
While this is a large lump, this fine covers a decade of accounts, and this final decision comes 32 quarters after the original fine. Each of those quarters could have paid this off from flat profit. They're doing okay.
Consider how the ruling says "Ireland had renounced tax revenue, which had given rise to a loss of State resources". This means many people living in Ireland got less government resources than they would have, including people like children and immigrants who did not have the right to vote so cannot be said to have been involved in the cheating, even though they are part of Ireland.
Legally speaking it's not a "payout" but "recovery of unlawful state aid."
No it doesn't. Ireland did this deal to benefit from it. What they lost from direct tax in one area they gained in others. Had Ireland not made this deal, it's unlikely it would have become the conduit for Apple profits from around the world.
The subject of the ruling contains "concerning tax rulings issued by Ireland in favour of Apple"
Just because a country has children and immigrants does not absolve it of criticism.
Well, technically Malta also exists, but I imagine that not a lot of companies are looking to set up on a small island the size of Kansas City.
meantime the UK civil service was gold plating the EU rules and then came the brexit disaster
In the Irish language, the name of the country is "Éire", but saying that in English is like saying Magyarország instead of Hungary. The accent on the first letter isn't optional, and the pronunciation is difficult, it's hardly worth it.
Please just say "Ireland".
We have the same problem, even worse, with people calling the EU "Europe".
I can think of one set of EU rules where the UK used its considerable influence to secure major changes to the original proposals only for UK regulation to limit the benefits of those changes.
Of course, those rules were later held up by the UK Govt as an example of where the UK could reap 'Brexit benefits'.
Thanks again EU