web analytics

Apple and Ireland Win Tax Case

By Phantom On July 15th, 2020

Apple wins. Apple has won a lot since Jobs returned in 1996.

Europe’s second-highest court ruled on Wednesday that the Republic did not give Apple illegal state aid, overturning a European Commission decision four years’ ago that the iPhone maker owed Revenue €13.1 billion in back taxes.

The General Court in Luxembourg ruled that the commission “did not succeed in showing to the requisite legal standard” that Apple received tax advantages from the Republic.

The ruling may still be appealed by the commission before the Court of Justice of the European Union, the EU’s highest court. It could take up to a further three years before there is a final outcome on the case, stemming from the world’s biggest-ever anti-trust decision.

( Irish Times )

The EU case never made sense to me. Apple employs 6000 persons in Ireland and it pays tax to the Irish government. The relationship is beneficial to both sides.

Ireland’s corporate tax rate is lower than that of Germany or France, but that doesn’t mean that Ireland is subsidizing anybody.

International corporate taxation is a hugely complicated mess, esp with massive and international companies like Apple. If the EU wants to sort that out, let it, but not via fake lawsuits like this.

I cannot imagine what a good solution would be, the issue is that complex.

65 Responses to “Apple and Ireland Win Tax Case”

  1. A needed win for Ireland.

  2. Apple seemingly never loses.

    They are hugely involved in China and in the US, and there is a nasty trade war now between those giants. You would think that Apple would be harmed by this conflict, and by the virus, which caused their Chinese factories to be shut down for a time.

    But they are doing fine.

    On January 1, when the virus first emerged, AAPL stock was about $300 a share. It’s now at $388. And it pays a dividend.

    https://www.google.com/search?q=aapl+stock&rlz=1C1GCEA_enUS777US777&oq=aapl+stock&aqs=chrome.0.69i59j0l7.1870j0j4&sourceid=chrome&ie=UTF-8

  3. It’s the correct decision.

    It seems like EU law disagreed with the ‘wait to the EU changes your tax laws’ predictions by some erstwhile commentators here.

  4. Vindication for Ireland and its tax laws and a slap down for the Commission and its political decision.

  5. I don’t know the details of this case, but Apple have some very dubious business practices. Mind you, what large corporation doesn’t these days.

  6. “I don’t know the details of this case, but Apple have some very dubious business practices. Mind you, what large corporation doesn’t these days.”

    I think it would be reasonable to make the argument that the Irish government shouldn’t have these tax systems in place (though I wouldn’t necessarily agree with that argument given the value they bring to the Irish economy). But it is a decision for the Irish government, and the Irish people through their elected representatives.

  7. Dave

    The international tax system doesn’t make any sense, and it invites gaming

    And there is no more international company than Apple.

    In its manufacturing and sales.

    National taxes are often based on profits but that is a stupid way to do it because profits can be manipulated to show whatever the company wants them to be much of the time.

    Your iphone contains parts from a bunch of countries and ( just as importantly ) software from the USA and other places. if you bought it in Germany, where should be profit be recognized? Tens of thousands of lawyers and accountants will help decide the answer to that. The answer is not easy at all.

    The Ireland tax dispute was unwise from the start in my opinion. Any answer would have been wildly inadequate. Asking Ireland to take billions of euros that it didn’t want was stupid.

    The real question is how national taxes work in a hugely interdependent world?

  8. Phantom.

    I’m perfectly willing to accept that Apple didn’t do anything wrong, legally in this instance.
    I agree with what you’ve written in your post above.

  9. I wonder if the Highest court will reverse the ruling and side with the Commission. If that hapens what will Ireland do ?

  10. Most likely not. The Court of Justice can only reverse the ruling if the ruling was wrong on a point of law. The case today was decided on a burden of proof (ie if the court was 49% sure that it violated state aid) then it would rule against the Commission, because they had not met the burden of proof. An appeal would depend on being wrong on a point of law, not by meeting the burden of proof. So even if the Court of Justice felt that they maybe had met that burden unless the Court found that the General Court made an error in law then the decision will stand. It is a very high bar to meet.

  11. Thanks Seamus. You are either an encyclopedic genius… or a very prolific Googler 🙂

  12. Paul –

    “It seems like EU law disagreed with the ‘wait to the EU changes your tax laws’ predictions by some erstwhile commentators here.”

    But no laws haven’t been changed, so nothing’s changed. This is a massive and public blow to the EU, which will fuel its desire to gobble up corporate tax law as another competence.

    So, wait till the EU does that.

  13. “Thanks Seamus. You are either an encyclopedic genius… or a very prolific Googler 🙂”

    I like to know things. And dislike not knowing things.

    “So, wait till the EU does that.”

    Which would require a treaty change, which the Republic would have a veto of.

  14. International corporate taxation is a hugely complicated mess

    No, not really. Basically it’s all about shifting profits from high tax countries to low tax countries. So for example, profits earned in the UK (tax rate 19%) are artificially shifted to Ireland (tax rate 12.5%) by a variety of scams. These include loan charges, patent fees and roralties. The UK has a diverted profits tax to counter this but so far it seems to have been used very little.

    The solution starts with forcing the scammers to report true profits on a country by country basis. Failing that, ignore reported profits completely and charge a tax on sales. Some EU countries are about to take this step.

  15. In any case this could well be a short-lived “win” for Ireland:

    “There are those in the Commission who would dearly love to establish a level-playing field on tax within the single market — and their defeat today will embolden efforts to abolish the internal tax havens. According to a report in the Financial Times, the plan is to use Article 116 of the EU treaty which is about eliminating Single Market “distortions” caused by “law, regulation or administrative action in Member States”. The wording looks vague enough to include tax policy. Crucially, using this mechanism to strike down cushy tax deals would be subject to Qualified Majority Voting i.e. the tax haven countries wouldn’t have a veto…”

    https://unherd.com/thepost/eu-hands-a-pyrrhic-victory-to-ireland-over-tax/

  16. Maybe not do tax on profits in the first place.

  17. Yes, how about abolishing all profit/Corporate taxes and shift it entirely to VAT/Sales taxes instead ?

  18. Companies should pay tax for the simple reason that they depend on publicly provided goods and services in order to operate successfully. Things like an educated workforce, decent infrastructure and above all a reliable system of property law and enforcement. Why should they be allowed to freeload on those?

    Taxes on sales are regressive because the rich spend a much lower proportion of their income on necessities. That’s why you will always hear the rich arguing for sales taxes and against income taxes.

  19. Peter,

    One word: veto. And Ireland wont be the only one.

  20. Colm,
    //Yes, how about abolishing all profit/Corporate taxes and shift it entirely to VAT/Sales taxes instead ?//

    So you want companies to pay no tax and the people buying the goods to pay even more tax?

  21. The price of the product should go down and it would be impossible for companies to play shell games on tax.

    There would be thousands of tax advisors, accountants, and lawyers put out of work

  22. A balance of taxes is essential. If you have too few taxes then in order to raise enough revenue you have to have it at high amounts. That causes distortions and avoidance. In reality the principle cause of the Irish tax arrangements was the pre-2017 corporation tax rate in the United States of 35%. It was too high so companies were always going to try and find ways to avoid it.

    Instead of having a small number of taxes at high rates the key is to have a large number of taxes at small rates. That way you continue to raise revenues without substantial distortion or incentives to avoid.

    “So for example, profits earned in the UK (tax rate 19%) are artificially shifted to Ireland (tax rate 12.5%) by a variety of scams.”

    Profits are earned only in the country of the company, not the country of the sale. If an American company sells goods to Britain then that profit is generated in the United States, not in Britain, and should be taxed in America, not in Britain. So the only way that profits are shifted from Britain to Ireland is via moving the company there.

  23. Peter –

    Companies don’t pay tax. The incidence must always fall on people.

    Education, infrastructure and law all pre-date the state.

  24. Companies don’t pay tax. The incidence must always fall on people.

    Yes, to the extent that company tax reduces the amount available for dividends it’s fair to say that corporation tax is paid by the shareholders. But most multi-national companies have shareholders all over the planet, so profits earned in the UK would not result in more UK income tax if the shareholders are mostly in the USA. Whereas UK corporation tax is paid in the UK and nowhere else.

  25. It is also worth pointing out that (low corporation tax) Republic of Ireland takes 15% of its tax take from Corporation Tax. In the UK it is less than 7%. The Republic raise about 17% of GDP in tax every year. The UK is over 30%. The Republic is a low tax economy, not just a low coporation tax economy.

    “But most multi-national companies have shareholders all over the planet, so profits earned in the UK would not result in more UK income tax if the shareholders are mostly in the USA.”

    How do you calculate what profit is earned in which place? If a company invents someting in America (at considerable expense), produces it in China for $1, and sells it in Britain for $10, is profit $9? Or is it $9 minus that share of the considerable expense? And if so how do you calculate that? And if the profit is $9 is that profit generated in Britain, where it is sold, China where it is made, or America where it was invented?

  26. Education, infrastructure and law all pre-date the state.

    Yes, but they weren’t all funded by the state. Education and infrastructure were privately financed until at least the 1880s. Roads were tolled, canals and railways were joint stock companies and education was paid for privately or by church congregations. Only law was a true state service from Anglo-Saxon times.

  27. The Republic is a low tax economy, not just a low coporation tax economy.

    Indeed, and that is not totally disconnected from one of the worst housing shortages in the EU. The €13 billion that it has gifted to Apple’s billionaire owners would have built a lot of social housing.

  28. They didn’t gift any €13 billion to Apple

    Apple is a net taxpayer and job provider

    If Apple was expected to pay €13 billion to be in Ireland, why would they choose to be there?

  29. “The €13 billion that it has gifted to Apple’s billionaire owners would have built a lot of social housing.”

    And how much would losing the €8 billion a year that foreign multinationals pay in corporation tax help?

  30. Ireland has played a skillful game that has actually maximized the tax take while also adding a bunch of jobs that may not exist otherwise.

    Big error to say that the corporations are being subsidized.

  31. How do you calculate what profit is earned in which place? If a company invents someting in America (at considerable expense), produces it in China for $1, and sells it in Britain for $10, is profit $9? Or is it $9 minus that share of the considerable expense? And if so how do you calculate that? And if the profit is $9 is that profit generated in Britain, where it is sold, China where it is made, or America where it was invented?

    You mean it’s like how many angels dance on a pin? This is the line beloved of the multi-national billionaire tax scammers like Apple and their paid mercenaries in the legal and accountancy professions, and of course by their political and media cheerleaders and hangers-on.

    Charges for IP and royalties can be fairly calculated, as can interest rates on loans from tax-haven companies to real trading companies. It’s not rocket science and it can be done if the political will is there. If that’s too complex there could be a small levy on sales which would be something like the alternative minimum tax which is levied by states like California. And sales jurisdiction would be determined by the residence of the customers.

  32. “You mean it’s like how many angels dance on a pin?”

    How about answering the question? Where is the profit generated? Where it was sold, produced or invented?

  33. I would like to see anything that is vastly simpler and tending towards fairness.

    The existing tax systems date from the time when there were true national economies, when most stuff that was bought might be produced in that country. That’s totally not the case now.

  34. If Apple was expected to pay €13 billion to be in Ireland, why would they choose to be there?

    Because of its highly educated workforce, English language, membership of the EU, infrastructure, lack of corruption, time-zone etc. And the €13 billion covered several years.

    No doubt it could save tax if it moved to one of the toilet countries which lack Ireland’s advantages. And for those advantages Apple pays tax at a rate of 0.05% in Ireland:

    “”I suspect that many people in Ireland think… ‘Why is there a company that pays 0.05% in taxes?’ I pay more taxes than Apple, for that matter. Many people pay more taxes.”

    https://www.bbc.co.uk/news/business-53416206

  35. Charges for IP and royalties can be fairly calculated, as can interest rates on loans from tax-haven companies to real trading companies.

    I’m sure that this is so, if you have a vast army of auditors to calculate such things.

    What should the division of Apple that created siri charge Apple for that? What is facetime worth? Apple Pay?

  36. How about answering the question? Where is the profit generated? Where it was sold, produced or invented?

    Where it was sold. No sale, no profit. If the intra-group charges for IP and production were fair there would be no issue. But they are shamelessly gamed, for example by extortionate rates of interest, to ensure that the vast bulk of the profits are “earned” in tax-sewer states like Ireland.

    Why are you such a shill for multi-national tax-dodgers?

  37. And how much would losing the €8 billion a year that foreign multinationals pay in corporation tax help?

    If being a tax-sewer state is such a brilliant winner, why is no public housing being built in Ireland?

  38. Phantom

    Apple can afford to spend hundreds of millions on lawyers and accountants to help it minimise its tax. So the simplest solution would be a sales tax levied in the country where the customers live. Because that cannot be gamed, unlike everything else. And if Apple tried to pass that on to its customers it would lose out to competitors and possibly be faced with consumer boycotts. Remember how Starbucks UK caved a couple of years ago.

  39. “Where it was sold. No sale, no profit.”

    No development no profit. No production no profit. Why is the point of sale where the profit is created?

    “If being a tax-sewer state is such a brilliant winner, why is no public housing being built in Ireland?”

    Well firstly public housing is being built. There were 4,000 new public houses built last year. Secondly, the problem in housing has been caused by a failure of political attention, not a lack of money. In fact many of the more obvious solutions to the housing crisis (including regulatory changes, reducing the cost of new builds [costs more due to building standards to build a house in the Republic than it doesn’t in most of Europe]) won’t have a tax and spend consequence.

  40. I’d vote for that.

    The existing system is hateful.

  41. “Because that cannot be gamed, unlike everything else. And if Apple tried to pass that on to its customers it would lose out to competitors and possibly be faced with consumer boycotts.”

    Except they won’t because their competitors would also have to pay the same tax.

  42. Ireland’s housing issue is compounded by the incredible growth in just one expensive place – Dublin. Very many companies and persons want to be there.

    There I think is not much of a housing issue in much of the rest of the country.

    My relatives there are not rich by any means, but except for the young ones fresh out of college they all own their own homes. The rate of home ownership there is very high.

  43. No development no profit. No production no profit. Why is the point of sale where the profit is created?

    Because if there is no end customer all of the costs incurred are losses. As I tried to explain to you, the profit on the final sale can reflect fair charges for invention and production and funds borrowed etc. But what you don’t seem to get is that the charges for those services are way out of line and of course are earned exclusively in tax havens. That’s what profit-shifting means. There is nothing complex about it, that’s what they want you to think.

  44. Except they won’t because their competitors would also have to pay the same tax.

    Not necessarily. Multi-nationals who don’t take the piss would be assessed on a normal profits basis because their profts would be real, not artificially depressed by scamming.

  45. Well firstly public housing is being built. There were 4,000 new public houses built last year. Secondly, the problem in housing has been caused by a failure of political attention, not a lack of money. In fact many of the more obvious solutions to the housing crisis (including regulatory changes, reducing the cost of new builds [costs more due to building standards to build a house in the Republic than it doesn’t in most of Europe]) won’t have a tax and spend consequence.

    So all will be for the best then. I’m sure that’s a great consolation to the hundreds of thousands who are shafted. If they just wait a few more years…

  46. “Multi-nationals who don’t take the piss would be assessed on a normal profits basis because their profts would be real, not artificially depressed by scamming.”

    How would the government assess who was taking the piss and who wasn’t?

    “As I tried to explain to you”

    Yeah when I need something explained to me I’ll be sure to ask you.

    “the profit on the final sale can reflect fair charges for invention and production and funds borrowed etc.”

    How?

    “Because if there is no end customer all of the costs incurred are losses.”

    And if there is no development and no production then there isn’t anything to sell.

  47. “So all will be for the best then. I’m sure that’s a great consolation to the hundreds of thousands who are shafted. If they just wait a few more years…”

    No it probably won’t be for the best. But it is a political problem, and one caused by a lack of proper ideas on how to fix it from the governing parties. But the idea that it would be solved by a one off €13 billion (which would most likely reduce the €8 annual tax taken from multinationals) is insane.

  48. How would the government assess who was taking the piss and who wasn’t?

    By setting rules in the Taxes Act.

    How?

    Based on actual costs fairly apportioned.

    And if there is no development and no production then there isn’t anything to sell.

    No shit?

  49. But the idea that it would be solved by a one off €13 billion (which would most likely reduce the €8 annual tax taken from multinationals) is insane.

    Sez you.

  50. “By setting rules in the Taxes Act.”

    And those rules would be?

    “Based on actual costs fairly apportioned.”

    And how would you determine that? And who would decide what fairly means?

    “Sez you.”

    Yes. Says me. Does need to be amended to every statement?

  51. I still dunno why Ireland won .
    They could have done with 11 billion in tax.
    Above my pay grade this stuff freely admit.
    Tim Apple he’s the head of apple or is it Amazon
    Heard the president say so

  52. “They could have done with 11 billion in tax.”

    Because in the long run it would have cost the Republic of Ireland tax.

  53. Peter,

    Apple can afford to spend hundreds of millions on lawyers and accountants to help it minimise its tax. So the simplest solution would be a sales tax levied in the country where the customers live.

    A tax the company pays when the goods are sold. That’s an interesting idea Peter.

  54. Wait till these people hear about VAT…

  55. In the long run were all dead
    JM Keynes 🙂

  56. Ireland didn’t want the money because it wasn’t legally owed to them.

    Asking for it or joining the EU lawsuit would have broken all their good faith understandings with the major, influential company.

  57. “Asking for it or joining the EU lawsuit would have broken all their good faith understandings with the major, influential company.”

    And say to the other multinationals (who contribute €8 billion in corporation taxes, and 250,000 jobs) that the government doesn’t have their back.

  58. “In the long run were all dead
    JM Keynes 🙂”

    Indeed. Though I do think the deployers of that particular quote believe that Keynes was being more profound than he actually was being.

  59. Yep.

    Your word is your bond.

    Ireland honored its word, never considered not doing that.

    US and world businesses like doing business there, and that is one major reason why.

    English speaking, on the way to America, right next to England, hugely comfortable with both bigger nations, in the EU, etc.

    Maybe some adjustments should be made to tax at some point, but this approach has served Ireland well until now.

  60. Maybe some adjustments should be made to tax at some point

    Yes, why not go to 0%? That should attract gazillions more “investment” and dozens of new jobs in Dublin’s “financial sector” money-laundering offices. And it would be competitive with the Bahamas and the British Virgin Isles and the Netherlands Antillies and Delaware etc. Way to go for Ireland! That’s the future for sure!

  61. “Way to go for Ireland! That’s the future for sure!”

    For all its problems standard of living is much higher in the Republic than in Britain. So yes. Way to go.

  62. How does this ruling affect whether Ireland is a tax haven or not? It seems to confirm that Ireland is a tax haven country.

  63. Ireland is a low tax jurisdiction as is its sovereign right. It is not a tax haven by any sensible or accepted standards. Just because politically-biased opinion pieces say so, does not make it so.

  64. Federal government makes 7% of its revenue from corporate taxes. The UK government makes 7% of its revenue from corporation tax. The Republic makes 15% of its tax take from corporation tax. But the Republic is the tax haven?

  65. Seamus.

    The amount of revenue gained from corporation tax does not define whether a country is a tax haven or not.