€13bn wings its way back to Apple after Euro court rules Irish tax deal wasn't 'state aid'
- Reference: 1594825811
- News link: https://www.theregister.co.uk/2020/07/15/apple_13bn_irish_tax_ruling_overturned/
- Source link:
This is the latest in the ongoing feud between Apple and the European Commission, which in 2016 declared Apple had been [1]the recipient of competition-harming "state aid" that allowed the business to avoid paying the huge sums of tax on EU profit. It asked Ireland to reclaim that money.
In setting aside the original decision, the EU's General Court argued the commission had failed to meet the burden of proof required to show the Irish state was at fault. The ruling stated that Ireland hadn't cut a special deal that "was a result of discretion exercised by the Irish tax authorities" with Apple, but rather was operating within the boundaries of Irish tax law.
This corresponded with Apple's previous protestations, where CEO Tim Cook said [2]in a 2016 open letter : "We never asked for, nor did we receive, any special deals."
Apple paid the tax bill in 2018, with the [3]money sitting in an escrow account managed by the Irish government , which reportedly [4]cost €3.9m to establish .
It is believed that the money will remain in escrow until the case has exhausted its final appeal. The European Commission has the right to appeal to the European Court of Justice within 14 days, although it has not confirmed that it will do so.
Ireland has one of the lowest corporate tax rates in the European Union. Irish tax law previously permitted tax structures like the infamous " [5]Double Irish ", which allowed multinationals to further reduce their tax burden by incorporating in Ireland while declaring their profits in a tax haven like the Cayman Islands.
Apple's historic use of the Double Irish loophole* ultimately allowed it to pay an effective tax rate of 0.005 per cent in 2014, [6]according to European Competition Commissioner Margrethe Vestager .
It's pertinent to note that it was Ireland that appealed the Apple tax ruling. The nation's permissive tax structure and anglophone status has allowed the country to attract high-technology and pharmaceutical companies, such as Medtronic, Google and, of course, Apple. In 2018, the International Monetary Fund attributed a quarter of Ireland's 2017 GDP growth of 7.8 per cent to Apple.
The country's position is probably that the jobs brought by these companies are more valuable than added taxation.
Applauding today's ruling, Apple said the case was not about "how much tax we pay, but where we are required to pay it."
"We're proud to be the largest taxpayer in the world as we know the important role tax payments play in society. Apple has paid more than $100bn in corporate income taxes around the world in the last decade and tens of billions more in other taxes."
That said, surely it's important how much an organisation pays. Taxation underpins the social safety net, which has become increasingly threadbare since the late-2000s financial crisis. It pays for hospitals, teachers, and unemployment benefits. Firms already pay a much lower percentage of profits as taxes than their own employees do income tax. [7]Ireland , which had a budget surplus in 2019, is forecasting a deficit of €30bn, or 10 per cent of its GDP, this year as the government commits money to help businesses and the health service in the wake of the pandemic.
This development represents a major setback for Vestager, who has made corporate tax avoidance a focus of her position. Last year, the Danish politician [8]lost a case against Starbucks , which was accused of avoiding €30m in back taxes to the Dutch government. ®
* Ireland ended the tax scheme with legislation enacted 2015, although firms already using it were given until 2020 to phase out their use.
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[1] https://www.theregister.com/2019/09/17/apple_eu_tax_appeal/
[2] https://www.apple.com/ie/customer-letter/
[3] https://www.theregister.com/2018/09/19/apple_alleged_state_aid_ireland/
[4] https://www.irishtimes.com/business/economy/ireland-s-apple-escrow-account-cost-3-9m-to-set-up-1.4035238
[5] https://www.theregister.com/2014/10/14/ireland_to_clamp_down_on_apple_google_and_company_tech_tax_breaks_eventually/
[6] https://ec.europa.eu/commission/presscorner/detail/en/IP_16_2923
[7] https://www.reuters.com/article/us-health-coronavirus-ireland-exclusive/exclusive-irish-budget-deficit-could-top-10-of-gdp-finance-minister-idUSKBN22X22Y
[8] https://www.politico.eu/article/eus-vestager-loses-starbucks-tax-case-wins-fiat/
[9] https://whitepapers.theregister.com/
Re: Apple said the case was not about "how much tax we pay, but where we are required to pay it."
Did that.
Was made to buy a ton of iPads for a workplace.
Got them from some grey import from Singapore in the end. Damn sight cheaper, and I have an invoice from the usual IT supplier to say we paid for them in full - they're legit, and I wouldn't be liable for any taxation reinspection on them, so it's not my business where they have come from.
Signed them all up, they all worked, for many years - some still in use years later despite my protestations. Never had a problem.
The only issue is that Apple won't support them, but given responses received from Apple's support on a number of issues in the past, that's actually one headache less than if I had bought them in this country.
Our usual suppliers threw all kinds of accusations at the company that supplied them (who we obviously went with because they were so much cheaper), but as a customer, that's not my problem - we weren't dealing with cowboys, so where our supplier gets them is their business, and they were very upfront in emails etc. that they were imports from Singapore.
I'm far more concerned that it's cheaper to buy the same product in Singapore, ship it halfway round the world and STILL undercut all your competitors, than it would be to just buy the product direct in this country. That's the issue, as far as I can tell. And I don't believe that whoever imported them didn't actually pay import taxes, etc., as they were quite openly on the record doing so and it's not easy to import thousands of iPads under the radar, I imagine.
When the profit margin for all involved happily ships expensive containers of heavy, valuable items around the world and still wins, there's something wrong with the business model.
Re: Apple said the case was not about "how much tax we pay, but where we are required to pay it."
@macjules
Yes. You can buy anything from anywhere. it is called the "internet"
Cheers… Ishy
Re: Apple said the case was not about "how much tax we pay, but where we are required to pay it."
> Oh great. So from now on is it ok for us to buy Apple equipment from somewhere else in the world where it might be much cheaper?
Erm, yes. Why would it not be?
Having made the tax rules it must be annoying when you find somebody obeys them and the outcome isn't what you want. It's almost like you got them wrong.
IIRC the Irish use GNP when discussing their economy - GDP is too misleading due to this financial engineering.
Good
The gov is not entitled to private property and that includes money. Good luck to Ireland as the EU attempts to go after low tax areas to even things up (reduce competition).
Re: Good
So you want, for instance, all roads to (eventually) return to dirt tracks or become toll roads then, right?
Re: Good
I think you’ll find that most governments have decided that they are entitled to a percentage of any money you make, private or not. The only question here is whether or not Ireland was following the rules over how much they decided that Apple owed them.
Re: Good
Your "private property" only exists because there is a government to insure that I don't take yours and make it mine.
The Elephant in the Room
So called Intellectual Property. The USPTO is a big part of the problem. Many of the big multinationals have massive teams of patent lawyers creating both regular patents and "Design Patents" (what the UK calls Registered Designs, like the shape of the fluted coke bottle or a kettle). Companies like Starbucks and Apple assign these to an HQ at some Offshore tax friendly place (Like any British Overseas, or now even IOM or Jersey). Quite a few companies in Ireland (like Eircom aka Eir) have their HQ in Jersey.
Companies even "patent" or Register their Franchise, Trade marks etc and then pay "royalties" to the offshore HQ.
So it's possible that neither Apple or Ireland broke aid or tax rules. There needs to be a better definition of Intellectual Property and reform of Patents, Registered Designs etc and the possible "royalties" or this sort of legal tax evasion will continue. Apple should have been paying 10% tax, not 0.5 down to 0.005%
I can't see how the EU can win this if it's just Apple was "clever". The rules on IP creation and so called "royalties" on it need changed on a Global basis.
Apple said the case was not about "how much tax we pay, but where we are required to pay it."
Oh great. So from now on is it ok for us to buy Apple equipment from somewhere else in the world where it might be much cheaper?