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Comment by vasco | Hacker News Reader

I think you make it seem like EU doesn't care at all about what member states do in regards to taxation but there's many limitations to what can be done by any member state in order to harmonize and prevent corruption etc. This in practice makes the EU have a lot of say in regards to taxation. Moreover the EU has special rules to limit moving funds to jurisdictions that have taxes that are deemed too low (read tax havens) - this directly implies no member state has agency to lower their own taxes as much.

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.

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Specifically in Ireland, corporate taxes were being lowered from late 1980s until 2003, in a series of agreements with the EU regulators. It's not like Ireland lowered the taxes in a sneaky scheme, or grandfathered-in an abnormally low rate.

At the same time it's clear that Ireland has been "gaming the system" here, and the proof is the huge delta between the effective tax rates between member nations we're seeing in the judgement. I don't know that there's much of a moral or principled argument to be made here, every system gets gamed, and the European Commission is another such system. And Ireland absolutely agreed to be bound in that game as a price of joining the EU in the first place.

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.

Punishing Ireland for gaming the system by paying Ireland 13 billion hardly makes it seem like the EU is super concerned about Ireland's transgressions.

Apple having to pay those 13 B means that companies won't be as eager to have a headquarter in Ireland as they have been in the past. They could move somewhere else in the EU. That's a damage for Ireland and that's why Ireland sided with Apple for all this litigation.

Correct, Ireland fought very hard against getting that 13B.

Sure but the taxes are only part of the equation. Native english speakers familiar to US tech giants common law system. Large number of skilled workers. Flexible immigration system.

So - at this point is Apple and other companies going to move out of Ireland? I mean they have invested a lot and got there, probably they did alright in the situation, Ireland is a relatively nice place to move your company, it just isn't as nice as it was before - that is to say I'm not sure how bad it really is for Ireland.

Apple has been in Ireland since 1980. In the past 5 years it has invested €250 million into its Cork campus alone, and has just announced an expansion to bump its 6,000 strong workforce to 9,300.

https://www.irishtimes.com/business/technology/apple-to-expa...

They are going absolutely nowhere.

If I were an Irish citizen paying taxes I'd be incredibly pissed that my own government is fighting against 13 billion from the richest company on the planet. I'm subsidizing fucking Apple of all things!? Absolute buffoonery, whoever made this deal in the first place should be in prison.

Our Corporate tax receipts for last year alone were almost double that.

We have almost every American Tech Company of note with their EMEA HQ and often their EMEA R&D wings based in Ireland. Making a case on behalf of our commercial tenants to protect long-term interests was exactly the right decision. Currently, one in every €7 collected by the Irish state comes from just 10 firms.

For context, Ireland has one of the highest gross public debt levels in the world, at just over €42,000 per person, due to the IMF/EU collusion that forced us to bail out unsecured bondholders in German banks, and to effectively nationalise our banks to prevent a contagion effect.

They're not subsidising Apple.

Apple is providing thousands of jobs - they pay taxes on those people, and those people pay income tax / VAT / fuel tax / death tax / etc and they consume from other companies that pay lots of taxes as well, and import tariffs as well. It's taxes and tariffs all the way down.

No one is paying Apple money. It's not a subsidy.

There are Irish customers buying Apple products. Some of that money goes into the salaries of Irish Apple employees, which pay their taxes in Ireland. Some of that money goes into other expenses in Ireland. What's left goes to the USA where Apple pays taxes on the part of them that turns to be a profit. The idea is that part of that money (the tax) should not go to the USA but stay in Ireland. In that way the money of Irish customers would stay in Ireland, which is probably good for Ireland but it's a matter of opinions.

There is also a 15% corporate minimum tax of big corporations, in effect since the beginning of this year [1] I think that there are many ways to keep circumventing even this attempt at keeping EU money inside the EU, but we will see.

[1] https://taxation-customs.ec.europa.eu/taxation/business-taxa...

Is this the case, though? How much profit is generated by Irish Apple customers compared to the giant amount of tax paid in the country due to Apple being there?

Not so giant. You can check https://en.wikipedia.org/wiki/Apple%27s_EU_tax_dispute which is updated with the latest ruling. The dispute was about taxes from 2004 to 2014. I wonder how much they'll owe to Ireland for the next ten years.

> Apple only paid an effective corporate tax rate that declined from 1% in 2003 to 0.005% in 2014.

Again though, you're only counting corporation tax. Apple has generated far more tax revenue than that.

As others are pointing out, Ireland was offering that discount to great impact, essentially taking over the UK's traditional spot as the core exchange for US companies in the EU. They absolutely would prefer not to be charging that tax.

If that were the case, they wouldn’t have had such a low tax rate to begin with.

Just to be clear - I don't think many people have (much) of a problem with ireland's "headline" 12.5% CT rate.

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.

Corruption with a twist: the government is the one who got the kickback.

The opposite, no? The government accepted _much_ less money than is required in exchange for jobs for their constituents.

This is an example of a government prioritizing benefits for some of their constituents (emphasis on some) over the collection of tax dollars (direct benefit to the "government") or monetary reward for themselves (corruption).

Apple settled on Ireland precisely because of that tax scheme. Had Ireland levied taxes at a normal rate, they wouldn't have gotten any dollars. The choice for Ireland was between jobs and nothing.

Apple (& al) played countries out against each other and had Ireland not done it another one would've. It's a tragedy of the commons, and as always, that can only be solved through collective action (cue TFA).

Competition is a good thing. We all lose when powerful players band together and form a cartel.

If companies did that - it's illegal. If government politicians do it - their populism brings them votes.

Correct: a market where sellers compete is good for buyers.

Unfortunately in this market the buyers are corporations and the sellers are democratic governments (us).

That’s why this is not good for people.

We aren't democratic governments. We are subjects to governments, who we must pay taxes to, and customers of corporations, who we pay if they can produce stuff we like for cheap enough.

This moves the conversation to questioning the notion of representation of a people by its government. It is true that the entire conversation about whether or not it's good if Apple can play governments out against each other in order not to pay any taxes, rests in part on that assumption. That's a fine conversation to have. But in TFA and in here so far, it is assumed.

Note btw that even in your narrower definition of what government is to us, you still mention taxes, and that is precisely what is in question here, so even according to your formulation everything holds and it is still good for us if corporations can't play out governments against each other to lower their tax bill, because that's directly us footing that bill. You'd have to find some kind of definition of government that doesn't cover that, or argue that if Apple doesn't pay taxes, all those gains are passed on to us, the people, in a better way than if they do. Through a stronger tech market leading to better tech products, or something?

Anyway I think the original assumption is fair and the discussion holds. "Cheating on your taxes = stealing from the people" is a such a well established fundamental axiom that challenging it basically changes the conversation entirely.

> "Cheating on your taxes = stealing from the people" is a such a well established fundamental axiom

Excuse me?! Cheating on your taxes is illegal. Minimizing your taxes is what everyone of us does - it is perfectly normal and justified behavior.

And the discussion was not about that - companies are paying their taxes just fine. The discussion was about governments colluding to form a cartel to uniformly raise taxes. That is not OK.

Even if the stated purpose is somehow justifiable, government collusion is not good for the people. By definition governments are natural monopolies, they don't have internal competition. The only competition keeping them in check is external. And it comes in two forms: destructive (wars) and constructive (free trade). Without competition democracy alone cannot keep governments in check - just witness the decay towards populism and autocracy together with the raise of left and right extremism of the Western governments during the last few years. We need alternatives. We, the people, need to be able to pack our bags and go to a place with values and laws better aligned to ours. Otherwise we will end up prisoners behind barbed wire on the borders like the Eastern Europe the Cold War or facing fines and exit taxes like certain countries already impose on their citizens today.

In a world of bigger and bigger governments, with larger and larger budgets and deficits but smaller and crappier results, inter-national competition is the only recourse we have left. For example, the EU would be supremely satisfied with itself right now if USA's economic performance didn't point out that the Emperor is naked.

> argue that if Apple doesn't pay taxes, all those gains are passed on to us

Yes, smaller costs for Apple directly translate in cheaper products for us or larger profits for its shareholders - which is also us. On the other hand, that money going to the tax man will fund millions of fat bureaucrat jobs and countless wasteful government programs out of which an extremely tiny part will actually benefit us.

> democratic governments (us)

Even if you think democratic governments represent us (a debatable idea at best, then logically you should want competition for them. Because like us, without competition, they go lazy, wasteful and abusive.

The problem with all of this is that it's all sneaky schemes.

You probably have something in mind for how a government is supposed to spend tax revenues. Assistance for the poor or something like that. But as a sovereign state they get to decide for themselves.

Except that as soon as you admit this there is no point in having any kind of minimum rate etc., because there are a thousand ways for the state to return the money to corporations if they intend to. Subsidize energy costs so they have the lowest electricity prices and tech companies build data centers there. Provide something like the earned income tax credit but with no phase out, subsidizing employers who hire workers there. Just offer generous tax credits and deductions in general, leaving the nominal rate high while lowering the effective rate.

There is no real way to prevent this kind of thing. Is a country that offers public healthcare subsidizing employers who then don't have to pay for employee health insurance? What if you create a 100% tax credit for constructing non-fossil power plants up to the amount of the buyer's total taxes? Apple would commission $13B in solar farms and nuclear reactors, take the credit and then turn around and sell them to get all the cash back. Can you even say that would be a bad policy? It might have a desirable result. But it would also zero out their taxes.

> But as a sovereign state they get to decide for themselves.

Not really no. The results of the court case prove that.

> There is no real way to prevent this kind of thing

Well. No way, except for through the result of an EU court case that just ruled that the tax scheme wasn't allowed.

> Apple would

Woulda coulda shoulda. The real question is "did they"? And the answer is no.

They didn't do these other schemes, and they lost the court case.

You seem to be assuming that this isn't an iterative process. The process continues until the scheme is convoluted enough to satisfy the court while still being effective in attracting companies through de facto lower taxes.

Meanwhile Ireland now has $13B to throw at Apple somehow to convince them to stay.

> The process continues until the scheme is convoluted enough to satisfy the court

That works both ways. The courts can act as well by simply punishing even more convoluted schemes with larger and larger fines.

> > But as a sovereign state they get to decide for themselves.

> Not really no. The results of the court case prove that.

To be fair, none of the states that are part of the EU _are_ sovereign states, because there is a high authority over them. Admittedly, that's debatable, because they can choose to leave the EU (as was seen by Brexit), but unless they do, they're not in complete control.

> There is no real way to prevent this kind of thing

You do realise that US, EU and China regularly sue each-other in WTO over this? What counts as subsidies, etc. is a constant subject of dispute. That’s normal,

They regularly sue each other because it's intrinsically ambiguous. There is nothing for a government to spend tax revenue on that isn't a subsidy to somebody. If anything they should be demanding that the other governments have lower taxes so they can't use the money for subsidies to distort international trade in their favor.

"There is nothing for a government to spend tax revenue on that isn't a subsidy to somebody."

That's just nonsense; so if the USA spent $1 and got a nuclear powered aircraft carrier in return that is subsidising the builder? More like running them out of business.

Government spending is only a subsidy if the government spends over the market price for something. And if your next statement is that the government *always* pays over the odds, you'll need some good evidence. Because although it does happen it is not always.

> Government spending is only a subsidy if the government spends over the market price for something.

All they have to do is control who gets the contract, because the market price for something already includes a margin.

But more than that, the subsidy isn't just who gets the money, its who gets the benefit of what's bought. Who benefits from the US having aircraft carriers, other than the defense contractors? Multinational oil companies, for example, who don't want their tankers captured by pirates or blockaded by adversarial nations.

Who benefits when a government subsidizes higher education? The schools, of course, but also the companies who hire the graduates.

"Well that's the good kind of subsidy", you might say. And so says everyone else about everything else.

"because the market price for something already includes a margin."; that's called value add, and all customers pay it, so it doesn't matter whether the government buys it or directs someone else to pay it, the value add becomes the profit.

The government isn't some magical "outside the market" participant, as a purchaser it's a part of the market like all other participants. If they pay over the market price then they've been ripped off, just like if anyone else paid over the market price.

> "because the market price for something already includes a margin."; that's called value add, and all customers pay it, so it doesn't matter whether the government buys it or directs someone else to pay it, the value add becomes the profit.

And now the company has profit it wouldn't have had, as a result of the government, which can use control over that profit to attract businesses to the jurisdiction etc.

> If they pay over the market price then they've been ripped off, just like if anyone else paid over the market price.

Only if the thing they want is the thing they're nominally buying, instead of the thing they're actually getting for the money, e.g. convincing a corporation to employ local workers or move into the jurisdiction and declare international profits there.

> And now the company has profit it wouldn't have had, as a result of the government, which can use control over that profit to attract businesses to the jurisdiction etc.

That only works if the government buys something that no one else wants; in which case it is buying at a price, ipso facto, that no one else will pay (at that price which is above the market price).

But if the government buys something at the same price (or lower) that everyone else pays, then it isn't a subsidy.

Government purchasing isn't an automatic subsidy.

> That only works if the government buys something that no one else wants; in which case it is buying at a price, ipso facto, that no one else will pay (at that price which is above the market price).

Not at all.

Suppose the government funds research. Private entities fund research too. It's clearly worth something. But if the government funds it, the research happens in their jurisdiction. Even if the exact same private company paying the taxes that fund the research might have done the research themselves, they might have done it somewhere else, so the government is now creating a subsidy for doing research in their jurisdiction.

The value of the research could be fully identical regardless of where it happens, but the government subsidizes it because they want it to happen there.

> But if the government buys something at the same price (or lower) that everyone else pays, then it isn't a subsidy.

It could only not be a subsidy if the thing they're buying is identical in all respects to the thing the taxpayer would have bought had they been left to keep the money. Otherwise it's subsidizing the thing the money is being allocated to over the thing it would have been allocated to. That's what subsidies are -- the reallocation of resources through action of law. It's a synonym for spending tax money.

> The problem with all of this is that it's all sneaky schemes.

The problems start if one member selectively introduces practices that benefit them at a significant cost to the other members.

Universal subsidies of healthcare or electricity come at a net cost for the country, and so doesn't create a competitive advantage. (It will lead to higher taxes that offset the benefit of specific reduced costs).

Target subsidies are different. While countries can still get away with it if done on a small scale, large scale cases come with a risk of this kind of response.

> Universal subsidies of healthcare or electricity come at a net cost for the country, and so doesn't create a competitive advantage. (It will lead to higher taxes that offset the benefit of specific reduced costs).

But it doesn't lead to higher taxes, because the whole point is to use the minimum tax rate and then achieve a de facto below-minimum rate by somehow refunding the excess money.

They're not trying to attract only Apple, they're trying to attract businesses in general. Subsidies for things employers would otherwise have to provide apply to all employers and lower the de facto tax rate across the whole country, which is exactly the idea.

> Target subsidies are different. While countries can still get away with it if done on a small scale, large scale cases come with a risk of this kind of response.

"Targeted" is essentially undefinable. All allocation of tax money is targeted at something -- the untargeted thing would be to use the money to uniformly lower the tax rate.

> They're not trying to attract only Apple, they're trying to attract businesses in general.

Ok, so this is about circumventing the 15% minimum corporate tax?

Is this somehow related to the objectives of directive 2022/2523? It seems to me that 2022/2523 is in place mostly to prevent transfer of profits from one jurisdiction to another to minimize the tax on profits generated elsewhere.

Unless, let's say, a Germany corporation registered in Ireland would somehow be affected by electricity costs or healthcare costs covered by the Irish government, I'm not sure if the benefit is large enough to matter.

Obviously, for companies with most operations happening within Ireland, the total tax pressure has a larger effect. But I don't think that was the type of problem this directive was designed to solve.

> sovereign state

Well thats the rub, by being a part of the EU they are effectively semi-sovereign. Not to sound like a Brexiter

No, we entered a common trade market. We're not even part of Schengen. We're an odd fish in terms of EU membership overall given our geographical position, size, and CTA with the UK.

We are the only EU member state that are obliged to hold public referendums on Treaties. Ratification of the Treaty in all other member states is decided upon by the states' national parliaments.

Ireland, Netherlands, and Luxembourg also have veto powers when it comes to EU wide regulations.

In short, if we didn't have so many of our national parliament trying to appease the bureaucrats in the EU so they could land cushy numbers in the European Parliament for retirement, you'd see a lot more sabre rattling from Ireland regarding EU interference.

Atm however, we have a lot of issues with Asylum legislation that has to be dealt with as prioirty https://en.wikipedia.org/wiki/Dublin_Regulation

All tax havens are like that and they should be obliterated. 1% bs.

Maybe they should do it like Roth IRAs. You can move the money to a tax haven only after you’ve paid taxes on it.

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.

It's more difficult to determine where the value in software is being created. Still, big tech has a lot of R&D offices in Ireland.

That is definitely a difficult paper trail. If you make valves in Ireland they at least have to be shipped. Code just moves on the network. As do commands.

But wouldn’t Ireland see their taxes as “working” if Irish coders are being hired to do the work?

There’s absolutely no employment requirement outside of any PR deals that IE may impose on Apple to satisfy their citizens. The tax evasion scheme they used does not necessitate any real humans in any jurisdictions - it’s almost literally just documentation.

I’m not sure that’s the case. I worked for Irish subsidiary of a financial software company. Management openly said the main reason we were there was for the tax benefit. We cut standard code for the product, then once a year had to fill out a form describing the ‘R&D’ component of what we had done. As I understood it, that was required for the tax treatment we received.

AFAIU it’s a soft requirement so that IE can claim that losing taxes is offset by employing (a few) people. The actual tax structuring discussed in this case and similar for other FAANG, is all about where the company is registered vs making revenue vs paying taxes, and how none of it is intuitively what you’d expect.

You get a 33% tax rebate via a research credit. You probably filled out a form for PWC to attest to that. There's 10s of 1000s of Engineers directly employed in R&D in Ireland, spanning automotive, telecoms, fintech, SaaS etc.. with a large number of companies receiving the credit.

We have a HUGE network effect now via the Silicon Docks and the other tech hubs around Ireland - Cork, Galway and Dublin are absolute inundated with groups of companies in certain industries. Seven of the ten of the world's top pharmaceutical companies including Janssen, AbbVie, Eli Lilly, Pfizer, Merck/MSD, Novartis, and Thermo Fisher Scientific are based within 50km of each other in Cork.

That's not what really Apple did in Europe to pay little taxes.

The scheme was essentially like this:

- Apple Ireland bought iphones for 200$ or so (talking about pre X numbers, now they're likely slightly higher)

- Apple Ireland sold iPhones to Apple Italy for 599€s

- Apple Italy sold iPhones for 599€s + vat (thus avoiding to pay any corporate taxes in Italy while making billions)

- Apple Ireland had a special agreement with Irish tax so they paid like sub 1% corporate taxes on the 400€s of profit

This way not only Apple wasn't paying any tax in the countries they were doing business with, but also paying extremely low taxes in Ireland.

On top of that, which isn't illegal per se, it happened allegedly on top of preferential treatments (but I'm not much informed on the details here).

That sounds like something Hollywood does when they want to cut out profit sharing with the cast.

One of their affiliate companies makes an absolute killing on services rendered and the studio itself takes a bath on the movie.

> avoiding to pay any corporate taxes in Italy

This us a fairly common strategy not limited to tech.

For instance, Starbucks in the UK:

> Starbucks Coffee Company (UK) made a £149m “gross profit” in the year to October 2023, up from £129m the year before. But after “administrative expenses” of £127m, its pre-tax profits were reduced to £16.9m, on which it paid £7.2m tax...

In 2012, it was revealed that Starbucks had paid just £8.6m in taxes on £3bn in UK sales since 1998,

https://www.theguardian.com/business/2024/apr/05/starbucks-p...

you're ignoring the 20% VAT on those 3bn sales, which provided 600m tax revenue. Why is it so important that they paid 7m in corporate tax instead of any other amount? Their business apparently has high cost of sales (like stores, personnel etc.), where by the way also taxes occur, e.g. for wages...

So I suggest to think twice if you want to paint the picture that Starbucks does not contribute it's fair share to taxes in the UK.

My understanding is that the VAT exists independently of Starbucks paying UK income tax or using various strategies to avoid doing so.

The object here is to avoid recognizing income in nations with a higher tax rate as much as possible.

VAT is paid by the consumer, not the business. The business merely collects it in behalf of the tax office. Starbucks contributes 0 taxes by collecting VAT. Look up the definition of consumption taxes as opposed to corporate income taxes.

If you want to give other examples of ways companies contribute you can mention property taxes on owned properties, or jobs created which usually also have some part of pension etc contributed by the business, vehicles paying excise tax and fuel taxes, but I don't think VAT is a correct one to use.

Corporate tax is also paid by the consumer. They raise prices by exactly the amount of their corporate tax.

Or not. If their competition doesn't raise prices, maybe they won't either.

Their competition also needs to pay these taxes. There's no free money - adding to corporate taxes just makes things more expensive for the consumer.

If the tax raises all of their costs and it's a competitive market then they'll all have to raise prices, because competitive market = competitive pricing and it has to come from somewhere.

The most common case where it doesn't raise prices is when they don't have any competition and are already charging the monopoly price, so the money has to come from the company because if there was any more to extract from the customer, the monopolist would have done it to begin with. But we don't really like those markets or want to promote their continued existence.

What this doesn't depend on much is the form of the tax. If it's a competitive market then VAT and corporate income tax are both getting passed on to the customer. If it's a monopolist then either one will typically come out of the monopoly rent, because charging the customers more would bankrupt them or cause them to extend the life of used goods instead of buying new ones etc.

However, corporate income tax is generally easier for multinational corporations to avoid than VAT, so they have a pecuniary interest in making people think that VAT is worse than income tax.

There's a third option: they're competitors are small business that don't have the means to do the clever tax optimization/evasions, so they were already paying full tax. So now Starbucks if it were to pay full taxes, would have to either raise their prices (but then competitors could stay at the same price, because they've already been paying those tax rates), or they can lower their margin.

It's true that these taxes make things more expensive for local businesses, but also for all businesses, as they have to employ very expensive tax lawyers to figure out the best places to put their businesses. What a waste of mental effort that could've gone into more productive careers. But that's corporation tax for you.

> VAT is paid by the consumer, not the business

This doesn't matter.

It's like saying "the employee doesn't pay employee tax; the business does". The cost is still there for the business, who could otherwise be paying you it. Or using it to employ more people. Tax is tax.

In this case, the business could charge the same amount but keep what is currently the VAT portion. It's still tax revenue generated by a business doing work, paid by a consumer who does taxed work elsewhere to get the money, and all the government does is collect the money. Doesn't really matter which tax it is.

It obviously matters.

Because VAT is only applied on consumers.

If business A buys from business B which buys from business C...Only the end customer pays VAT on the final transaction, none of the entities before do.

does the UK have an income tax?

Any sane country would rather have the economic boost from the jobs and then take their cut as income tax from that. than tax the company directly, Not to say they will not tax the company, but corporate law is often intentionally designed to let a company pay little tax if it is dumping the money it makes into the economy. why kill the goose that lays the golden eggs?

> Any sane country would rather have the economic boost from the jobs and then take their cut as income tax from that. than tax the company directly

What jobs does Starbucks create, exactly? There were no coffee shops in UK before them? They outcompete local shops because they don’t have to pay taxes, and still sell a croissant for $5.

Alternatively, highly skilled population and innovative people are the goose that lays the golden eggs

And where was this against the law?

A good argument for GST. With a 10% GST the Italians would have at least seen 10% of the 599.

I apologize if this is a stupid question but aren't GST and VAT (basically) the same thing? It is just an "advanced" sales tax, no? It still does not fix the problem of income tax...

The big problem from what I remember from earlier is some companies like grocery stores operate on razor thin margins -- like they buy tomatoes for USD 0.90 per kilogram and sell for USD 1.00 or whatever so if we charge income tax on the whole USD 1.00, the rate would have to be RIDICULOUSLY low or the grocery store simply won't survive.

Problem I want to see fixed with some kind of sales tax upgrade (VAT/GST/whatever) is if a company / conglomerate "sells" goods and services to itself, it should have to pay this tax on the pre-discount rate. For example, if Google web search has an advertisement for Google Chrome, Google should have to pay this tax on the market value of the ad placed, not on the actual money amount that changed hands (which is likely zero dollars). Same thing with Apple Music on iPhone. There are MAJOR ads placed when you first set up an iPhone and later continuing ads that show up saying "hey, how about now? do you want to pay for Apple Music EXTREME THUNDER edition now?" These are ads that have a lot of value and Apple should have to pay (upgraded) sales tax for displaying these ads.

Value added tax is a tax on the difference between the purchase price of the inputs and the sale price of the outputs; that is, it's a tax on the value that company specifically adds.

The way it works in practice is VAT is added to the the sale price, but the VAT actually sent by the business to the government is reduced by any VAT that was paid for inputs. This way, you don't end up with increasing amounts of tax just because a supply chain has lots of middlemen.

This setup creates an incentive to report VAT at each level of the supply chain, reducing fraud. Because the tax doesn't compound with multiple steps, it's fairer.

Sorry, I don't know anything about VAT, but in Australia, consumers pay 10% on all products except food, financial services, and a few other things.

When Apple sells an phone to a consumer in Australia, 10% of the sale price is collected by the retailer, and paid directly to the government, rather giving the full sale price to Apple, then allowing Apple to work out later what was profit and what was not.

There are mixed feelings about it, but I've always liked it. If you consume a lot of stuff, you pay a lot of tax. Sounds fair to me.

    > If you consume a lot of stuff, you pay a lot of tax. Sounds fair to me.

Most economists view VAT/GST as a regressive tax. I don't know why so many highly advanced, liberal democracies are so dependent upon VAT/GST for tax revenues.

> I don't know why so many highly advanced, liberal democracies are so dependent upon VAT/GST for tax revenues.

See above discussion, when wealthy people are responsible for declaring their own income, it tends to be low.

GST is "regressive". You have to charge everybody the same 10%. You can't ask wealthy people to pay 40% like you can with income tax.

I actually have no idea what percentage of tax revenue is GST vs Personal Income Tax vs Company Tax. I'm interested now, I'll go do some research.

This is what I found https://www.abs.gov.au/articles/insights-government-finance-...

Aren't they already getting 22% of it?

No, VAT is a tax on consumers, which is why I left it out of the calculation.

To recap: Apple Ireland made 400€s of profit by getting iPhones at 200€s and selling them at 600€s to Apple Italy.

The 400€s profit went virtually untaxed due to Apple having privileged corporate tax.

Thus, in conclusion, Apple paid little to no taxes on EU sales for ages.

What the EU contested wasn't that the whole thing was illegal, after all it's Irish business how much do they want to tax corporate profits (albeit as you can imagine the whole schema was to push for more trading, not corporate loopholes), but that Apple (and some other companies) got a special treatment compared to other businesses in Ireland.

Isn't sales tax (and/or GST also a tax) on consumers? GST is just in theory much simpler and cheaper to administer.

> The 400€s profit went virtually untaxed due to Apple having privileged corporate tax. > Thus, in conclusion, Apple paid little to no taxes on EU sales for ages.

Sure but how would GST help?

The standard VAT rate in Italy in 22%, so Google tells me. The real problem: Apple runs stores in Italy (and hence a business in Italy), but doesn't pay any corporate income tax in Italy. So, Italy is missing out on tax revenues.

> Apple Italy sold iPhones for 599€s + vat (thus avoiding to pay any corporate taxes in Italy while making billions)

Isn't that the whole point of the European Economic Area? That you can freely sell your goods to other countries within the EEA without having to pay corporate taxes to each individual country?

Sure, but I think it's the sort of "self-dealing" that's the problem.

Suppose it were possible for a wholesaler in Ireland to purchase a product in bulk at around 1/3 of MSRP. Market equilibrium would drive the price of that product down, right? If any other company could do that, price competition would prevail and eventually the delta between the import cost (in Ireland) and the export price (to an Italian phone shop) would shrink. Likewise, the retailers that wholesaler sells to would want to have some margin as well. This would put pressure on the wholesaler - likely competing with other wholesalers - to have a small margin as their "value added" is insubstantial.

But, crucially, this is not a case of three independent entities: a manufacturer, a wholesaler, and a retail business. This is one entity, with three subsidiaries and setting prices between them to minimize tax burden, and setting prices in ways that are simply nonsensical, like selling products from one subsidiary to another at or below cost, and then to another at full retail price. If they were three separate companies, the manufacturer and the retailer would go under. In this scheme, the wholesaler is somehow adding all of the value to the product, despite doing nothing more than acting as a shipping hub.

If proving this weren’t the issue the whole thing could have been wrapped up in a day. Good summary though.

Yes, there's nothing wrong with that.

The issue arises from Apple allegedly getting a preferential treatment in Irish taxes on top of that, thus paying extremely low taxes overall for their entire European business.

The other weird part is that I beleive the situation had been resolved before any investigation.

.. thus removing a significant portion of income from these so-called tax havens, which generally tend to be poorer countries. No one has accused Germany of being a tax haven, for instance.

This list disagrees with "poorer countries": https://worldpopulationreview.com/country-rankings/tax-haven...

   1 British Virgin Islands
   2 Cayman Islands
   3 Bermuda
   4 Netherlands
   5 Switzerland
   6 Luxembourg
   7 Hong Kong
   8 Jersey
   9 Singapore
  10 United Arab Emirates

> so-called tax havens, which generally tend to be poorer countries

Smaller, not poorer.

Unless you think that current or historical "tax havens" like Ireland, Luxembourg, Netherlands, Switzerland etc. were/are poorer than Germany.

If you have less than a handful of million people even getting a few percent + several thousands of jobs from corporations like Apple is a huge deal. It would be a drop in the bucket for Germany so they have no incentives to make such deals.

> this directly implies no member state has agency to lower their own taxes as much.

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

https://en.wikipedia.org/wiki/Dutch_Sandwich

Hence why a lot of European companies have incorporated in the NL in the last couple of decades.

> I think you make it seem like EU doesn't care at all about what member states do in regards to taxation

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"

The EU directly writes tax legislation for countries all over the world with the use of their black and grey lists, which restrict companies in those jurisdictions from trading with the EU, or trading with companies that trade with the EU, or from using any banking in the EU or banking that is especially connected to the EU.

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