EU Commission rules against Apple tax

Missy reports:


How to win friends and influence people the EU way.

Today the EU commission have ruled on the investigation into tax paid by Apple in Ireland. The ruling has found against Apple and ordered Ireland to bill them 11bn pounds (13bn Euro). I will admit now that I was unaware of this case, and don’t really know the background to it, but my understanding it is part of the EU supposedly cracking down on tax evasion, however, this ruling could cause a number of political problems for the EU, problems that they won’t be wanting right now.

Ireland and Apple are going to appeal the decision, and Ireland have stated they will not be collecting the money – apparently the jobs and investment in Ireland by Apple is worth more to them over the long run, which is fair enough if they see it that way, it is their country after all. The EU commission have made the ruling on anti competition laws, rather than tax law.

  1. The first is that this is seen very much as the EU getting close to infringing on a member country’s sovereignty. From what I understand from some tax experts, the EU could be on shaky ground demanding Ireland collect the tax, as the law they are using to condemn Apple and make the ruling is to do with competition as opposed to actual tax – though I believe it is around the fact that a member state cannot offer favourable conditions (including tax breaks) to one company and not another.
  2. This could damage the relationship between the EU and the US, and with the trade agreement between the two in the midst of negotiations there could be some problems for the EU to get the agreement they want from the US.
  3. The EU could have some credibility issues here. The EU Commission President, Jean-Claude Juncker, is a former Finance Minister and PM of Luxembourg, which is widely considered a tax haven – despite coincidentally not being named on the EU’s list of tax haven countries last year. The tax laws, culture, and deals that have made it a very favourable place for large Multinationals to do business, and avoid paying too much tax, were largely developed – or exploited – during Juncker’s time in office. To be going after a Multinational, and another EU member state, for doing what their own President had actively encouraged, shows more than a little hypocrisy.
  4. Apple have threatened the EU that if they enforce this payment then their business in the EU could be downsized quite significantly – if not completely. Now, whilst this is an attempt at either blackmail or bullying (or both) on the part of Apple, it does show that Apple could be in the stronger position here. Apple employ 6000 in Ireland alone, and 10,000’s more throughout the EU, if they were to pull out – or significantly downsize – then this could have a serious impact on an already fragile economy. The UK have, quite rightly in my opinion, jumped on this and told Apple they would be more than welcome to set up shop here.
  5. Apple are not the first Multinational that the EU have gone after, appeals are waiting to be heard on rulings against Starbucks and Fiat for not paying enough tax. There is an opinion that with the latest ruling against Apple some Multinationals may think twice about investing in the EU, and with the UK looking to Brexit, it could make the UK a more attractive option for many. Google and Amazon are rumoured to also be in the firing line – leading the Americans to accuse the US of discriminating against US companies.

Only time will tell how this pans out, but it is looking to be a case of two of the playground bullies squaring up against each other, if it ends up a case of the smarter one winning then I will be putting my money on Apple, the EU Commission are too arrogant with an overinflated sense of the EU’s importance, and delusions of grandeur. But if it is a case of the most stubborn winning, or it being a game of chicken, I think that the EU may edge it.

 

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89 Comments

  1. Blazer

     /  31st August 2016

    I expect Apple to pay the tax requested.And then the Irish govt can find a way to give it back to them.The fervent right wing ,’greed is good’ faction think Dotcom is a criminal ,but think special rules for multi nationals to avoid their fair share of tax is o.k!Self righteous,deluded…prats.

    Reply
    • Corky

       /  31st August 2016

      The only Prats will be those who feel the backlash from corporates. I’m sure the coffers of groups wanting out of the EU will overflow with corporate funds.

      Reply
      • Gezza

         /  31st August 2016

        I forget the exact figure Apple pays on its revenues in Ireland but because of how their tax arrangements are structured, according to the graphic on TVOne news, the tax they pay on all their European revenues is 0.005% so the total of all the tax they pay is almost zero, according to their intrepid newsreader, wotsisname who was married to wotsername, who’s now got a female partner.

        Reply
  2. Alan Wilkinson

     /  31st August 2016

    EU is on a hiding to nothing here. The U.K. is about to become/already is a huge tax haven on their doorstep.

    And of course what they ignore, but Ireland doesn’t, is that all Apple’s staff and shareholders pay tax anyway and the rest of the money goes into reinvestment, development and growing the company which is great for whichever country hosts it. Bureaucratic socialist morons are too utterly ignorant/blatantly self-interested to see the truth.

    Reply
    • Gezza

       /  31st August 2016

      I see the truth Al and I’m not an ignorant blatantly self-interested socialist moron (unlike someone I could mention).

      Reply
      • Blazer

         /  31st August 2016

        Be interested in what ‘truth’ you see and how you justify it .Have a go.

        Reply
        • Gezza

           /  31st August 2016

          I think Apple are tax avoiding arseholes. My justification is that they are tax-avoiding arseholes.

          Reply
          • Gezza

             /  31st August 2016

            How did I do?

            Reply
            • Blazer

               /  31st August 2016

              o.k in my book,don’t know what the ‘ blatantly self-interested socialist moron ‘….will have to say though.

            • Gezza

               /  31st August 2016

              Much the same, but a bit more rudely.

            • Gezza

               /  31st August 2016

              I should add that the EU Commissioners are arseholes too. But they’re power-grabbing, overpaid, dictatorial, petty arseholes. It’s important to be aware of the difference. And hopefully now the Irish realise that.

    • Blazer

       /  31st August 2016

      so give all corporations the same treatment based on your rationale….yes???

      Reply
    • Yes, the billions in salaries and personal taxes, VAT, and the arrangement made with the Irish government over 20 years ago mean nothing to the money grabbing Eurocracy. Let’s grab that 13b Euro and use it to help with immigrants assimilation. Help us arm our new EU army and force rogue states who refuse to take migrants into submission.
      Who cares about Irish autonomy; we don’t care about nationhood, we’re about “no borders” now. Sieg Heil.

      Reply
      • Blazer

         /  31st August 2016

        I though the ‘Monster Raving Looney Party’ was defunct!When did you revive it,too funny and too ludicrous to take you seriously.

        Reply
      • Gezza

         /  31st August 2016

        The EU’s rooted. They just haven’t cottoned on to it yet.

        Reply
      • I’m damned well sick of having to upvote myself – sheesh blazer….

        Reply
        • Gezza

           /  31st August 2016

          No one can compete with the dozens who sometimes upvote Blaise, Trav. You just have to accept these things I guess.

          Reply
          • Blazer

             /  31st August 2016

            matters not to me geeza…I can give you some ticks though ,if it will help your self esteem.

            Reply
            • Gezza

               /  31st August 2016

              Cheers Blaise. Yes it would. I have very low self-esteem. Very decent of you. Socially responsible too.

              Half a dozen upticks should be enough to start with thanks. We’ll see how I go after that. If the downticks start racking up & I need any more upvotes, I’ll just give you a call.

  3. Remember Tax Haven New Zealand? The Apple case occurred because Ireland changed its laws to deliberately provide a tax haven for Apple in exchange for the investment and jobs Apple brought to an Ireland which was one of the poorest Western countries around, a situation which was reversed. The Irish are allowing Apple to get away with paying only token amounts in New Zealand, Australia etc etc. So once again the Kiwi taxpayers is being robbed of its true taxation base. Its not just the EU that is suffering is the message.

    Reply
    • Blazer

       /  31st August 2016

      Hindsight col. ..used to be known as the cultic. ..tiger!

      Reply
    • David

       /  31st August 2016

      “Kiwi taxpayers is being robbed of its true taxation base”

      Can you please explain what economic activity NZ is being robbed of as a result of Apple conducting large amounts of it business in Ireland? What economic activity would occur in NZ if it didn’t happen in Ireland?

      Reply
      • David it is like this. Apple employs a (cheaper) Chinese work force in China to make the components and assemble them and sells them to HQ Apple at a reduced cost. Then Apple HQ in Ireland “sells” the finished product to Apple (NZ) and the item is sold to an Apple enthusiast (like me!!). End of year, tax return time, Apple (NZ) uses the tax system in NZ to claim recompense for the cost of producing the item to Apple HQ in Dublin, where 1% tax is payable (fact). GST and other NZ taxes are regarded as a cost of manufacture and selling, and are claimed as production cost for tax purposes. So, with a few dibs and dobs Bobs your Uncle and Apple evades a significant amount of tax from NZ, pays a puny tax to Ireland and the US and the Kiwi taxpayer is the loser. E&OE.

        Reply
        • Gezza

           /  31st August 2016

          Gave you an uptick but I haven’t got a clue what E&OE means.

          Reply
          • errors and omissions excepted, its an arse cover in case you make a mistake or leave something off.. normal a quote or invoice..

            Reply
            • Gezza

               /  31st August 2016

              Bastards. Thanks dave.

            • Gezza

               /  31st August 2016

              This would be like when, when we had our first house built, we subsequently chose the middle quote from a builder to enclose the open space under the house, once we’d saved enough to have it built in as a proper double garage. We said we wanted it all lined with gib board.

              They were 3/4 of the way through the job when he said “oh, you wanted the roof lined too?”

              Don’t recall E&OE on that quote – but I wouldn’t make that mistake again.

        • David

           /  31st August 2016

          The economic activity for an Iphone is almost entirely centered in California The ultimate tax liability is in the US, which only through a quirk of US tax law allows apple to hold these profits offshore until they decide to repatriated and tax then paid. The tax is not avoided, only delayed.

          No additional tax is payable in NZ in any case. Note that the EU has ruled that Ireland must tax Apple on activity that has not occurred in Ireland, and under existing tax laws should never be taxed in Ireland. It is the US treasury who are being rob by this ruling. They will kick back against it, hard.

          Reply
        • David

           /  31st August 2016

          Just to add this quote from the Irish treasury;

          “While requiring Ireland to recover the tax sums, the Commission is also acknowledging that the sums may in fact be taxable in other jurisdictions,” the ministry said. “The European Commission is also incorrect to state that profits allocated to the Apple companies’ head offices were not subject to tax in any country under a specific provision of the Irish tax law. This refers to a mismatch between different countries’ tax rules, which by definition cannot be the responsibility of Ireland alone.”

          The EU is ordering Ireland to collect ‘tax’ that is not taxable in Ireland, and they know it.

          Reply
        • Alan Wilkinson

           /  31st August 2016

          I think you are wrong in significant respects on that BJ.
          First, Apple must collect and pay GST on all its NZ sales. That can’t be avoided. They operate a sales distribution and support operation in NZ which makes little or no profit simply serving to operate as a sales channel for the Irish company. However all the NZ employees pay NZ tax. The profits from the sales accrue to the Irish company where 12% company tax is paid and no VAT is payable since the sales are outside that jurisdiction. Accordingly VAT payments made for local goods and services are offsets against the company tax liability. However that simply is a redirection of the tax payment via Apple’s suppliers rather direct to the tax dept. The profits made are distributed to shareholders and are taxable in their hands, wherever they are – and most will be in America. The low taxed undistributed profit will be reinvested in R&D providing jobs and future profits.

          The problem with all that is exactly what?

          Reply
          • Blazer

             /  31st August 2016

            the problem is that it is not a level playing field…it is called a RIPOFF…verstehense?Google transfer pricing,and learn something besides being a kneejerk shill for usury and debt slavery.

            Reply
            • Alan Wilkinson

               /  31st August 2016

              Transfer pricing is irrelevant to the above scenario and is anyway well regulated via international standards.

            • Blazer

               /  31st August 2016

              @AL if you think it is irrelevant,you don’t understand it.Go to bed.

            • Blazer

               /  1st September 2016

              @Al–‘Apple Inc’s New Zealand subsidiary Apple Sales New Zealand recorded $732 million in sales for the year, up nearly a third from 2014. But despite this stellar growth in sales the company reported relatively meagre profit margins here of only 3.6 percent, after its parent billed $702m for costs of goods sold.

              That transaction led to the subsidiary reported profits of only $17.8m, leading to a mere $8.8m being paid in income taxes to Inland Revenue.’NZH.

            • Alan Wilkinson

               /  1st September 2016

              @Blazer, brain-dead idiotic. Why on earth would the profit be large here when all the R&D, production, global marketing and management is done from overseas? I am amazed the profit is as large as it is then and NZ has done very well out of it. You of course, being a Lefty ideologue, avoid noticing that the NZ taxpayer collected $95M in GST from those sales thus doing very well indeed out of NZ’s small contribution to the Apple corporate enterprise.

          • Blazer

             /  1st September 2016

            $732 million in sales for the year, up nearly a third from 2014.- its parent billed $702m for costs of goods sold.Its called a RORT.period.

            Reply
            • Alan Wilkinson

               /  1st September 2016

              B.s., Blazer, you wouldn’t have the faintest clue. In contrast, I was director of a company that ran a US subsidiary and had to manage transfer pricing within the international rules that applied.

            • Blazer

               /  1st September 2016

              @Al….yesterday …’Transfer pricing is irrelevant to the above scenario ‘….

              today…’ I was director of a company that ran a US subsidiary and had to manage transfer pricing within the international rules that applied.’….

              be surprised if you could run a bath!

            • Alan Wilkinson

               /  1st September 2016

              Blazer, I have experience and knowledge. You have ignorance and rudeness. Give it up.

            • Blazer

               /  1st September 2016

              @Al…experience at contradicting yourself,and the knowledge is self acclaimed.You give up,or think before you leap in.

          • Alan, events have moved on since mine and your comments. The simple answer is to look at the size of the profits Cook says he will repatriate to the US in 2017. I remain fairly confident that we Kiwis are missing out on tax that should be paid by overseas investors for cost of goods and services sold in NZ.

            Reply
  4. Apples argument is in the US, which is there real home country, Corporate tax is on the order of 40%, plus there are state taxes to pay as well ranging from 0 to whatever…. and 40% plus is OTT.

    So they base themselves where they can get a fairer, in their view, tax rate.

    Socialists don’t like it because it takes away their power which is a power to control and usurp wealth either as cash via tax or as straight usurpation via nationalisation, death taxes etc etc.

    The EU will not win in this. The US tax base may win via Apple moving cash back into the US system via one of the every now and then repatriation tax bills the US congress passes.

    What will the EU do – seize assets? Ban product sales? Piss of the Apple purchasing class in the EU countries? Not likely

    The US will start playing retaliation games if the EU try and force this. VW, Mercedes, BMW all do big business in the US and will be vulnerable to similar types of imposts.

    I do wonder if the EU is trying to start a trade war to cover up the fact that their economy s a whole is poked and will be even more poked when GB leaves…. shit this is a huge opportunity for GB to exploit.

    Bottom line here – a globally consistent corporate tax is the answer but that won’t happen

    Reply
    • Blazer

       /  31st August 2016

      ‘Socialists don’t like it because it takes away their power which is a power to control and usurp wealth either as cash via tax or as straight usurpation via nationalisation, death taxes etc etc.’…take your hand off it Dave…in your world corporations would pay no tax at all!

      Reply
      • Blazer – if you want to be an abusive dick and make assumptions about what people think then this is my last ever response to you.

        You are a pathetic waste of space, with an over inflated ego who thinks he is a gift the world should delight in when really you are turd floating on the bowl that refuses to flush.

        Ciao little flicker.

        Reply
      • David

         /  31st August 2016

        “in your world corporations would pay no tax at all!”

        Corporations don’t pay tax. Corporation tax is simply a mechanism to hide how much tax people pay. The tax incidence isn’t on the corporation, its on the shareholders, the customers and the employees of the corporation.

        Reply
        • Blazer

           /  31st August 2016

          hey don’t waste your enlightenment on me…tell Apple ,the Irish govt and the EU!

          Reply
      • Alan Wilkinson

         /  31st August 2016

        There is a good argument that corporate tax is either redundant or double taxation dependent on imputation rules because the profits are taxed in the shareholders’ hands.

        In the case of an international company like Apple it is impossible to recompense all shareholders equally and fairly with imputation credits and therefore the sensible and fairest solution is to base in a low company tax jurisdiction.

        Reply
        • Blazer

           /  31st August 2016

          thats a theoretical argument with no merit.

          Reply
        • Gezza

           /  31st August 2016

          But the shareholders don’t get all the profits, do they Al? o_O

          And aren’t their dividends income, like interest on bank term deposits? Which also gets taxed because it’s income?

          Did you see:
          https://yournz.org/2016/08/31/eu-commission-rules-against-apple-tax/#comment-128691

          Reply
          • Alan Wilkinson

             /  1st September 2016

            Shareholders may get more or less than the total profits. In a growing company they will get less because of the need to fund growth including increased cash requirements but in a stable company they will get it all on average.

            Reply
          • Alan Wilkinson

             /  1st September 2016

            Yes, their dividends are income and get taxed accordingly. However if their dividends have already been taxed as company tax before distribution residents of the country that levied the company tax will get a rebate equal to the level of company tax already paid on that profit.

            Interest is a whole different discussion with major unfairness centred on the inflation component.

            Reply
        • Blazer

           /  1st September 2016

          http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11607336

          what a waste of time,should be chasing down …welfare fraudsters.

          Reply
          • Gezza

             /  1st September 2016

            Great article B.

            Reply
            • Alan Wilkinson

               /  1st September 2016

              No it isn’t, it is pig ignorant journalistic crap. As pointed out above, when all the R&D, production, global marketing and management is done overseas why on earth would anyone claim the profit here should match that overseas???

            • Gezza

               /  1st September 2016

              Now I just feel so sorry for pigs I can’t even think of a reply at the moment, Al. Need a bit of time to get my emotions under control again

              Pigs get such a bad press. Unfair.

            • Alan Wilkinson

               /  1st September 2016

              You are right, Gezza. Pigs know more about business than journalists.

            • Alan Wilkinson

               /  1st September 2016

              And even journalists know more about business than Blazer.

            • Blazer

               /  1st September 2016

              ‘why on earth would anyone claim the profit here should match that overseas???’….NO ONE is claiming that!FFS you have no idea.

            • Alan Wilkinson

               /  1st September 2016

              Read your own silly link. It ends by comparing the tax paid by the parent companies.

            • Gezza

               /  1st September 2016

              But Al, if I am just an ordinary employee, my salary is taxed, I pay GST on everything too, and what’s left over from my salary is my profit, which is banked, & the interest taxed. What’s left of that income I also have to use to pay suppliers & operating expenses, maintenance, equipment replacement, and investments in R&D to hopefully keep my job and secure future profits, and only the balance after tax is what is available to my shareholder(s) as income.

              So why should it be any different for companies?

            • Alan Wilkinson

               /  1st September 2016

              Because if you were your own company shareholder you would get taxed again on the same income. That is the point.

            • Gezza

               /  1st September 2016

              But I wouldn’t have been taxed again on my income from my company’s profit, only on my income after the company’s profit had been taxed. The shareholder does not contribute money to the company’s profit (unless he or she purchases its products, in which case they are just customers for those transactions, like everybody else). They contribute to its operating expenses.

            • Gezza

               /  1st September 2016

              Put another way, the company is not the shareholders. It is a separate entity. The shareholders have put money in to the company to establish and/or maintain it – in the expectation the company will trade and make more money than it costs to maintain and operate.

              The company makes a profit. That is taxable because it is the company’s income.

              The profit after tax is returned to the shareholders – sometimes after the poor fools have allowed the CEO & senior excecs & their fund managers to rapaciously milk them first – which is their income, and that is taxable.

              I have no probs with that.

            • Alan Wilkinson

               /  1st September 2016

              No, Gezza, shareholders contribute capital and are compensated by dividends paid from corporate profit. They are not operating expenses.

              You are quite wrong about double taxation of corporate profits as well, eg: http://www.ird.govt.nz/business-income-tax/imputation/imputation-basics/imputation-basics.html

              For example, you and your business partner create a consulting company and hire yourselves out to clients. You pay yourself a basic salary and divide up any excess profits as shareholder dividends to your and your partner. There is no reasonable reason why the dividends should be doubly taxed as both company tax and income to yourself. And it is not.

            • Gezza

               /  1st September 2016

              But your company is the entity making the profit from its employees – & you determine how much your basic salary is & how much your shareholder dividends are.

              So what is the point of establishing the company, except as a way to create another separate entity that will generate a profit (which is really income) that should not be taxable?

            • Alan Wilkinson

               /  1st September 2016

              I’m not quite sure what you are asking there, Gezza, but generally the point of creating the company is at least some of the following:

              1. To share and manage employees and overheads
              2. To create a corporate brand and create value for it
              3. To give your clients confidence in longevity and backup
              4. To simplify GST accounting
              5. To smooth out the peaks and troughs of your workload

            • Gezza

               /  1st September 2016

              And 6. to have it make money for you and get taxed on it as little as possible?

            • Alan Wilkinson

               /  1st September 2016

              It makes no difference to the amount you get taxed unless it increases the costs you can offset.

  5. Blazer

     /  1st September 2016

    @Al…still waiting…should be easy with your knowledge and experience…’name one listed company where shareholders are paid out 100% of profits.Clueless.

    Reply
    • Alan Wilkinson

       /  1st September 2016

      You twit, why should I do your research for you? There are heaps of companies that have continued to pay dividends even when making losses.

      Reply
      • PDB

         /  1st September 2016

        Blazer is still waiting for his house to devalue so his mortgage will go down…………’clueless’ indeed!

        Reply
      • Gezza

         /  1st September 2016

        Those companies are true philanthropists Al. if hey’re making losses, how do they do that?

        Reply
        • Gezza

           /  1st September 2016

          Memo to Self:
          Don’t quickly type and post messages on forums while standing up & leaning over because you’ve got a coffee in your hand & were heading in to the kitchen to make some kai but you suddenly read something and had a quick question.

          Reply
        • Alan Wilkinson

           /  1st September 2016

          Either by borrowing, paying down cash reserves or selling off assets. They do it to try to protect their share price.

          Reply
          • Gezza

             /  1st September 2016

            Oh. Ok. It’s not philanthropy: it’s an investment strategy. Thanks Al.

            Reply
            • Alan Wilkinson

               /  1st September 2016

              Or to protect themselves from a takeover bid at a cheap price.

            • Gezza

               /  1st September 2016

              Risk management. Gotta constantly watch out for marauding corporates & companies with management & investors whose interests are not the same as those of the original investors?

            • Alan Wilkinson

               /  1st September 2016

              … like competitors or asset strippers.

            • Gezza

               /  1st September 2016

              Oh gawd – let’s not get into asset strippers. The last time one of those who stripped off some of her assets went public with what happened next the discussions here got pretty heated at times, as I recall.

          • Blazer

             /  1st September 2016

            so those actions bolster the s/p do they Al?

            Reply
          • Blazer

             /  2nd September 2016

            definately not a Harvard Business school graduate are you Al.You have NFI.

            Reply
            • Alan Wilkinson

               /  2nd September 2016

              I guess you are a primary school graduate, Blazer. Achievement level in ignorance and pettiness.

      • Blazer

         /  1st September 2016

        different issue,that is not the so called ‘point’ you were trying to make.

        Reply

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