Apple ordered to pay up to 13 billion dollars in back taxes for taxes credits illegally granted by Ireland

[Malintent]

Sales or value added taxes is where we need to go. Tax the product where the consumption is taking place. No fuss, no worry, no dispute on who owes what.

Note with the Apple case, however, that Ireland is actively fighting against this ruling. It seems quite bizzare that the EU is ruling that Apple owes Irish tax authorities money which Ireland is saying is not the case.

This is what Apple says about it, regarding why Ireland is defending them:

The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process. The opinion issued on August 30th alleges that Ireland gave Apple a special deal on our taxes. This claim has no basis in fact or in law. We never asked for, nor did we receive, any special deals. We now find ourselves in the unusual position of being ordered to retroactively pay additional taxes to a government that says we don't owe them any more than we've already paid.
The Commission’s move is unprecedented and it has serious, wide-reaching implications. It is effectively proposing to replace Irish tax laws with a view of what the Commission thinks the law should have been. This would strike a devastating blow to the sovereignty of EU member states over their own tax matters, and to the principle of certainty of law in Europe. Ireland has said they plan to appeal the Commission’s ruling and Apple will do the same. We are confident that the Commission’s order will be reversed.

 

[Alcoholic Actuary]

I know this might be hard to imagine for those who think the government should grab whatever it can whenever it can (worked so well in Venezuela), but maybe they are worried it will cost them more in the long run.

Except they already ARE going to lose business. The  Double Irish Arrangement ended for new companies last year and will end for existing companies by 2020. So under the circumstances it actually IS a good strategy to grab whatever it can whenever it can. It actually wouldn't surprise me if Ireland itself tipped off the EU to the fact that it might be getting screwed over.

aa

 

[Jayjay]

Apple does have a point. If the mistake was entirely on Irish government, then it does seem unfair that Apple would have to pay back taxes.

 

[Loren Pechtel]

But when you have a VAT system you in effect have worldwide taxation anyway.

No, not the same thing. The US does not get the VAT tax revenue on a product sold in Europe. It currently does get income tax revenue from profits generated in Europe. One country getting taxes on sales or profits generated anywhere in the world is what we are talking about here.

I'm saying the European company pays VAT on the stuff it sells even if it's made abroad.

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Why is it unfair?

I don't know about VAT but sales taxes are considered extremely regressive. If you care at all about income inequality, which you may not I don't know, then this is not the type of tax you should be championing.

http://www.citylab.com/work/2015/01...get-the-poor-and-widen-the-income-gap/384643/

Agreed. Really, the only progressive taxes are personal income tax and luxury goods taxes. That's why I would like to see pretty much all government funding being from personal income tax.

 

[crispy]

deleted

 

[crispy]

Apple does have a point. If the mistake was entirely on Irish government, then it does seem unfair that Apple would have to pay back taxes.

That is laughable. Like Apples lawyers didn't know EU law...

 

[Axulus]

Apple does have a point. If the mistake was entirely on Irish government, then it does seem unfair that Apple would have to pay back taxes.

That is laughable. Like Apples lawyers didn't know EU law...

You do realize how the legal system works, right? This is the first time a case like this has happened with Ireland. No, no one knows the law with a specific case like this until a ruling is made and all appeals have been exhausted.

 

[SimpleDon]

Sales or value added taxes is where we need to go. Tax the product where the consumption is taking place. No fuss, no worry, no dispute on who owes what.

Note with the Apple case, however, that Ireland is actively fighting against this ruling. It seems quite bizzare that the EU is ruling that Apple owes Irish tax authorities money which Ireland is saying is not the case.

Ireland is resisting because they stand to lose a lot of corporate offices and the jobs that go with them if they can't offer the tax breaks to companies like Apple. There is nothing bizarre about it.

Consumption taxes, not too surprisingly, suppress consumption. This is fine when the economy is booming, the taxes take money out of the economy which reduces the possibility of inflation. The problem with that is when the economy isn't booming, like now and like the economy has been for the last forty years or so. The neoliberal economics that we have been under in that period sacrifices growth in the economy by suppressing wages to increase profits and the incomes of the high earners. Suppressing wages suppresses the demand that the economy needs to realize its potential growth. In effect, neoliberal economics gives the rich a bigger slice of a smaller pie.

Also income and inheritance taxes redistribute income and wealth from the rich to everyone else. Without this redistribution income and wealth accumulates in progressively fewer and fewer hands over time. Economists have shown this to be true by studying many different capitalistic economies over hundreds of years.

 

[SimpleDon]

No, like S corporations. and limited partnerships the shareholders will pay taxes in the country that they live in. No matter where the money is made.

Not true - only the United States has this concept of taxing "worldwide income" - most countries don't require you to pay taxes on foreign income.

I am only familiar with Germany, which does tax overseas earnings, but at a reduced rate. I will take your word that most countries don't tax overseas earnings, probably because of the point that you make below.

Additionally, a foreign subsidiary has to be set up in the country where business activities are taking place. The local authorities tax the profits of that subsidiary (and/or the dividends paid out to the owners when they get paid out). The tricky part is when the parent company sells the product to the subsidiary (or vise versa). If the parent company overcharges (undercharges), it can transfer profits to the parent from the subsidiary (or from the parent to the subsidiary).

There are all other sorts of more complicated arrangements than what I describe above as well, where there is no clear agreement on how to allocate the profits between companies when it involves an intercompany transaction - which take place all the time these days with multinationals.

I worked for a German company for more than thirty years, in four different countries and subsidiaries. I know about most of the tricks for transferring income from the subsidiary to the parent company or going the other way. They are done for tax reasons and also for currency exchange reasons, to convert income from a currency dropping in value to one increasing in value and to convert expenses into a currency that is dropping.

I worked for four years in the PRC in the early 1990's when the RMB was tightly controlled by the Chinese government and wasn't convertible into a hard currency. We sold products and services to the Chinese, for some of our sales we accepted RMB. We had a license that allowed us to convert some million dollars worth of RMB ¥ into dollars. But when we had more we ran it through our New Delhi subsidiary. The Indians owed the Chinese money so that they needed RMB. We bought products in India, mainly alloy steel castings, using rupees ₹ that we got for our RMB and sold the products around the world to get our hard currency.

Perhaps I wasn't clear, an American company would make profits that would be taxed as income for the individual shareholders. A foreign stockholder would be liable for the US taxes. It is enforced for foreigners by withholding anticipated taxes from any disbursement or stock sale.

Actually, I see that I misspoke by saying that individuals would be taxed where they live. It is beyond me right now to reduce the proposal to the 140 character limit that people here prefer. Maybe tomorrow.

I want to get the corporations out of the business of operating as a tax shelter for the stockholders. I want corporations to stop the soft bribery of Congress, it undermines our democracy. I want large, established corporations to surrender at least some of the advantages that they have over smaller businesses, especially start ups, that we depend on for our growth and most of our innovation. I think that having corporations as people, especially as it relieves the corporate executives of any legal responsibility for their actions, is a very bad idea. I want corporate executives to be responsible for more than just making a profit for the shareholders, they should be responsible for the well being of their employees, responsible to their customers to deliver the products and services that was promised and above all that they are responsible to society as a whole.

 

[SimpleDon]

Maybe it's time for Irexit.

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

Pretty clear explanation of the dispute. What isn't said here and what surprised me was that Apple's effective tax rate in Ireland was much less than 1%, effectively zero. And there is precedent in both International law and in the European Community compact that countries have to charge a uniform level of taxes to all corporations. I am not sure that Ireland can show that they are doing this in this case, which might be behind this ruling.

I should have mentioned that I own Apple shares, both directly and indirectly, in mutual funds and holding company shares.

 

[barbos]

Taxes should be paid where money are being made.
Corporate taxes should be set to zero or at a low enough level to make it unattractive to move to tax havens.
Increase sales or VAT tax. I mean Google not paying taxes in countries where they sell their ads is stupid
The whole thing is stupid, they are using ancient tax laws which were created when there were no such things as tax havens. They should have immediately changed the law the moment that bullshit was invented.

Why would the taxes have to be paid in the country that the money is made? If you can come up with a reason for this and a way to do it, I will consider it.

Because alternative clearly does not work, Do you think people who invented corporate tax intended it to be overcome with tax havens?
What is the point of of corporate tax let say 20% if nobody pays it?

Clearly, neither is the case now. I am proposing to tax the owners of the businesses on the profits made.

You need to know the owners first. In tax evasion business you rarely do. and why citizenship of the owner have to affect how much money country collects?

Your statements on our current taxation system not taking into account the current economy are spot on.

Whether we use income taxes or consumption taxes like VAT or sales taxes is a question of how you want to manage the economy. We actually need both. Neither is better than the other, both impact the economy but in different ways. Neither is the right solution for the economy all of the time.

Income taxes are paid primarily by the high earners. Consumption (and earnings, i.e. FICA) taxes are paid primarily by everyone else. How we balance the two impacts the economy more than any other single factor that we have control over, including interest rates and OMO, i.e. bond sales or purchases.

You forgot to mention credit default swaps and other bullshit.
You are talking about current completely fucked up economical system. It does not matter how you collect taxes as long as you collect them reliably. And corporate taxes are not being collected.

This balance of methods of taxation impacts the balance between inflation and deflation, between savings and debt, the distribution of incomes between the rich and the poor, the balance between wages and profits, between aggregate supply and demand.

Bullshit, if you look at the history you will see that different taxes were invented without any thought about balance or anything. They were invented as they went.

 

[Loren Pechtel]

Perhaps I wasn't clear, an American company would make profits that would be taxed as income for the individual shareholders. A foreign stockholder would be liable for the US taxes. It is enforced for foreigners by withholding anticipated taxes from any disbursement or stock sale.

This would be a horrible idea--you would all but kill the startup this way because you would make them distribute their earnings rather than reinvest them--otherwise the shareholders would get a tax bill and no money to pay it with. You would also considerably slow the growth of somewhat more mature businesses for the same reason.

 

[barbos]

Perhaps I wasn't clear, an American company would make profits that would be taxed as income for the individual shareholders. A foreign stockholder would be liable for the US taxes. It is enforced for foreigners by withholding anticipated taxes from any disbursement or stock sale.

This would be a horrible idea--you would all but kill the startup this way because you would make them distribute their earnings rather than reinvest them--otherwise the shareholders would get a tax bill and no money to pay it with. You would also considerably slow the growth of somewhat more mature businesses for the same reason.

Yeah, paying money for owning stock would do magic for the economy......of Ireland
All American companies would magically became Irish or something

 

[Malintent]

Apple does have a point. If the mistake was entirely on Irish government, then it does seem unfair that Apple would have to pay back taxes.

I think Apple's point (in what I quoted earlier) was that the business relationship they had within Ireland was neither "special" nor "unusual" in any way, and for the EU to step in and say that Ireland is doing their taxes like the EU wants them to is exactly the kind of thing that triggered the Brexit, and undermines European country's sovereign rights as individual entities with the right to charge whatever they want for the services they provide.

 

[SimpleDon]

American Double Taxation turns into Double NON Taxation if you have the pull of Apple.

But the money is stuck in accounts, piling up and not being sent to the shareholders. It will be taxed once it is, but Apple is engaging in tax arbitrage - patiently waiting for reform to lower taxes in the future. It's a smart game and is founded on the current high US rates and the ridiculousness of those high rates applying to world wide income, even when everything to earn that money was done outside the borders of the US.

Obama offered to reduce the nominal tax rate to the OECD country average of 25% with no other tax breaks for specific industries or companies, a 40% reduction in the rate, (assuming the problem with S corporations could be solved.) The Republicans refused to do this. Why wasn't this be acceptable to American corporations?

 

[Jayjay]

Apple does have a point. If the mistake was entirely on Irish government, then it does seem unfair that Apple would have to pay back taxes.

I think Apple's point (in what I quoted earlier) was that the business relationship they had within Ireland was neither "special" nor "unusual" in any way, and for the EU to step in and say that Ireland is doing their taxes like the EU wants them to is exactly the kind of thing that triggered the Brexit, and undermines European country's sovereign rights as individual entities with the right to charge whatever they want for the services they provide.

Whether Apple was acting in good faith, is a separate issue from whether the Irish government was giving Apple special tax breaks. Even if Apple did not ask for preferential treatment, but got it anyway, would still not exenorate Ireland.

EU governments (national, as well as state and local governments) have strict rules about treating all corporations fairly and in equal manner. Ireland stil can "charge whatever it wants for its services", but what it can't do is charge Apple with a different rate than other businesses.

 

[SimpleDon]

Let me see if I have this correct.

Ireland and Apple freely entered into an arrangement whereby Apple would pay Ireland an x% tax rate under agreed conditions.
Ireland and Apple both agreed that it is working well for them. Both are happy.

Why is the EU getting involved? What business is it of theirs? I thought Ireland not the EU determined Irish tax rates?

The Brexit is beginning to make more sense.

Once again, the rate that Apple and Ireland agreed on was effectively zero. Both the international trade accords, probably the WTC, and the European community, the EU, agreements that Ireland signed prohibit them from giving tax breaks to a corporation that they don't offer to other corporations and the same require that Ireland not give zero tax rates to anyone.

So it is the business of both the EU and the WTC.

The WTC filed notice that they were going to investigate the US because our effective corporate tax rate was so low. The nominal tax rate in the US is 35%, but the effective rate was only 12% in 2009, the last time that the IRS was allowed to calculate it.

 

[SimpleDon]

Sales or value added taxes is where we need to go. Tax the product where the consumption is taking place. No fuss, no worry, no dispute on who owes what.

That's what I said.

Note with the Apple case, however, that Ireland is actively fighting against this ruling. It seems quite bizzare that the EU is ruling that Apple owes Irish tax authorities money which Ireland is saying is not the case.

Of course Ireland says that, they will get 13bil and lose all their future tax haven "business".
Ireland have transferred some of their authority to EU, that's why EU can demand what they demand.
Tax havens must die.

VAT taxes are applied where the product is made, not where it is sold. Sales taxes are applied where the product is sold.

 

[SimpleDon]

I don't know about VAT but sales taxes are considered extremely regressive. If you care at all about income inequality, which you may not I don't know, then this is not the type of tax you should be championing.

http://www.citylab.com/work/2015/01...get-the-poor-and-widen-the-income-gap/384643/

This is bullshit which always get repeated over and over again.
Poor pay same amount of taxes regardless of how it's paid, be it directly through sales tax or through income of Walmart owners which they don't pay anyway, cause they use these tax havens.

I have just realized that I am lagging the discussion by two days and six pages. Forgive me if I repeat points that have already been made.

Sales and VAT taxes are considered to be regressive because they fall disproportionately the poor and the middle class. That is the poor and the middle class pay a higher part of their income on these taxes. The income tax is a progressive tax because it is paid primarily by the well off, the high earners. The higher your income, the higher your tax rate.

The two different types of taxes impact the economy differently. The economy actually needs both types of taxes, in different proportions depending on the status of the economy. The regressive taxes VAT, sales taxes and earnings taxes like FICA taxes, take money out of the economy and suppress demand, they can reduce inflation. The progressive taxes, income and inheritance taxes, don't impact the economy very much because the high earners who pay most of them have a greater propensity to save. Money that is saved doesn't impact the economy either. But we need progressive taxes to redistribute income and wealth back to the poor and the middle class. Without the progressive taxes income and wealth inequality both grow without end. Income and wealth will go into progressively fewer hands over time, increasing social frictions, increasing financial markets instability as they try to absorb the extra savings from the high earners and reducing demand, growth and inflation in the economy. As is happening in our current economy after forty years of decreasing income and inheritance taxes and increasing regressive taxes.

 

[SimpleDon]

Sales or value added taxes is where we need to go. Tax the product where the consumption is taking place. No fuss, no worry, no dispute on who owes what.

Note with the Apple case, however, that Ireland is actively fighting against this ruling. It seems quite bizzare that the EU is ruling that Apple owes Irish tax authorities money which Ireland is saying is not the case.

And unfair.

Why is it unfair?

Suppose tomorrow the U.S. signs and ratifies a treaty agreeing to imprison people for whatever the U.N. defines as hate speech. On Saturday the U.N. issues a ruling saying blaming religion for the Middle East's conflicts is hate speech. On Sunday Congress passes a law against it. On Monday the U.N. notifies the U.S. that you broke the law last year and takes the U.S. before the World Court for failure to uphold its treaty obligations. On Tuesday the U.S. points out that its ex post facto. On Wednesday the court rules for the U.N. On Thursday the FBI arrests you. Fair or unfair?

In the US ratified treaty obligations are considered to have the force of law second only to the Constitution. They can't be overturned by a law passed by Congress. They have to be renegotiated and ratified by the Senate. Your scenario is a non-starter.