Seems kinda crazy to retroactively assess taxes/fines on a company that was doing something completely legal in the country it was operating in. If you don't like the rules, change them - but to go backward in time and say what was clearly legal shouldn't have been is crazy.
That'd be like re-scoring the 1890 World Series based on today's MLB rulebook.
That depends heavily on whether Apple received clarifications and information about the existing tax code, or whether they received special-case tax breaks that didn't apply to everyone. The latter might violate EU requirements.
Yes, indeed, the legality of something depends on the facts on that something. As the first paragraph notes, the European Commission deemed it illegal state-aid, or a special-case tax break.
The down side of this approach is that some times big corporations don't pay taxes and then citizens have to put money for the fines. So the final result depends on how corrupt is the government, how much it wants to protect the corporations and how much hate it will accept from their citizens.
There is no way it wasn't legal. It's complete politically motivated bullshit that will be thrown out on appeal to the European courts, mark my words. The EU commission is not supposed to have any say over tax issues, they are overstepping the mark here.
The EU Commission usually doesn't put the hammer down because of trivialities, especially when they are as politically hot as this is. If they push, it's because they're pretty certain that they have grounds (and political support across the Union) for it.
In addition, EU directives are often relatively generic, giving grounds for 1) different national approaches and 2) flexible interpretation by the courts. When courts are called to have their say, they usually follow the political climate pretty faithfully. I can tell you the appetite for a tax shakedown of multinationals is huge in Europe at the moment.
Should Ireland weasel out of this ruling they will face ostracism elsewhere, at a time when they can ill afford it (being one of the countries that will suffer the most if Brexit is not resolved in an amicable manner). They will try (they have to, to save face), but it's unlikely that they will succeed. The party is over.
> The EU commission is not supposed to have any say over tax issues
Au contraire: rules against industrial state-sponsoring have been on the books since Maastricht, I believe. One of the main critiques of the EU is exactly that this straight-jacked national governments, which found themselves without powerful levers to manage their economies. In practice, these rules have been selectively applied, depending on the political climate. Such climate is now very unfavourable towards "onshore tax havens".
> When courts are called to have their say, they usually follow the political climate pretty faithfully.
> In practice, these rules have been selectively applied, depending on the political climate.
What a really bad practice. I think it's true, too, and not just in the EU (though it may be more obvious in that case.) I can't understand why people wonder how Brexit passed.
It's not really that different from Common Law (aka "this is the law, until enough judges say it's not"). Besides, the alternative would have seen even more people crying the "EU Soviet" had taken sovereignty away.
They're not going to 'weasel' out of anything, but you can bet your bottom dollar they will appeal it. A competitive business tax rate has been one of the cornerstones of Irish industrial policy for decades, and as you've just alluded to this is a politically motivated ruling, and stands on shaky legal ground. I think any appeal has a good chance of being successful: http://m.independent.ie/business/irish/irelands-appeal-has-s...
One anonymous (Irish?) official does not Spring make. As I said, Commissioners don't like to take unnecessary flak, and if they act it's because they have enough evidence and political muscle to take home a victory.
2017 is an election year in France and Germany; and both elites have an interest in tightening EU policy against external forces (US, Brexit etc). All indicators are against Ireland and Apple.
That's a political choice for Ireland to make. They put Apple in this position in order to (illegally) bolster their economy; they might want to absorb some (or all) of the blow, to avoid a reputation hit.
TBH, it's about damn time Ireland gets the bill for 25 years of thinly-veiled dumping. Luxembourg and Netherlands should be next on the list.
> You know its bad when the US Treasury department even disagrees with the EU commission
The US Treasury may be biased in favor of their constituent, whose CEO recently claimed is the largest taxpayer in the country,[0] and other constituents in similar circumstances.
Not just that. Once the income has been taxed outside the US, it can no longer be taxed by the US.
And so far, the US Treasury considered this income as "not taxed", meaning it would have been taxed at the corporate US tax rate when and if moved to the US.
Which is why Apple hasn't moved that money to the US, and has something like $190 billion sitting outside the US.
So the treasury is being extremely disingenuous here, they just want to be the ones to tax this income.
> Not just that. Once the income has been taxed outside the US, it can no longer be taxed by the US.
Just to clarify, money that is taxed outside the US gives you a credit towards your US taxes. So if the money is taxed at 2% in Ireland, and then repatriated into the US, they would still be taxed on the difference between the 35% US corporate tax rate and the 2% they've already paid. Now if Apple has to pay Ireland 12.5% instead of the 2% it's paying now, the US would still get the remaining 22.5%.
You can't be on the side of "pay taxes for the sake of paying taxes because..... society and fairness!" without having an opinion on who and what your expropriated productivity is supporting
Nobody at Apple or the Treasury Dept said that pledge for 13 years of their life to support roads in Ireland
This is income that was generated in the EU and taxed in the EU, except at ludicrously low rates due to a vehicle the Irish government came up with for Apple: a headquarter of their Irish operation that (for Irish tax purposes) is located nowhere in the world.
So, no, it is most definitely not their prerogative, just as it isn't the prerogative of the German or Irish government to tax Apple on their US income.
I still don't understand why companies avoid local taxes. It doesn't make any sense to me. Their fiduciary duty is to act in the best interests of their investors. Unless the investors all consider their best-case-scenario to live in a world of anarchy and lawlessness, it is obviously in everyone's best interest (financially and otherwise) to pay taxes as expected. Anything else is an affront to the structure of modern civilization.
It is not in the best interest of Apple shareholders for the quality of life in the US/California/etc to deteriorate due to missing tax dollars. Long-term, stable societies are much more useful for making money than a few billion in secret stash tax havens.
By your logic, everybody should pay far more than the taxes they owe.
The honorable judge Learned Hand (yes, really) once said
> There is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.
As long as companies are staying within the bounds of the law, it's perfectly reasonable for them to keep their tax bill as low as possible, and one might even argue that (for public companies) they're required to do so in order to perform their fiduciary duty to their shareholders. If you have a problem with the "loopholes" that companies use to lower their tax bill, you should take it up with the people who make the law, not the companies that follow the law.
Stop posting this damn quote. Just stop it. It's disingenuous and dishonest in the extreme, and whatever relevance it may once have had is long gone. I'm so sick of hearing it in every Hacker News discussion of corporate tax, by ostensibly intelligent people.
Here's why: for tax regulations created through a transparent democratic process and a popular mandate, this quote might be proper, but that's not what happens. The kinds of tax loopholes that allow for companies like Apple to dodge their obligations are created through corruption and regulatory capture, and would be choked off in a heartbeat if the general public actually had any say in the matter. Worse, they're simply not available to schlubs like you and me, so it's not a level playing field. To set up these loopholes in a corrupt way, and then use this quote (and the broader attitude of "It's legal, so it's OK!") to gag people from complaining about it, is despicable.
Whether or not you agree with the quote, that does not make it the slightest dishonest or disingenuous, and I'm feeling rather insulted by your comment. Apple did not create the tax loopholes, and there should be no expectation whatsoever that they should pay a higher tax bill than they're legally required to do. Not only because of their fiduciary duty to their shareholders, but also because paying more taxes than necessary puts them at a competitive disadvantage against companies that don't pay more taxes than necessary. As I said in my original comment, if you have a problem with the laws, take it up with the people who create the laws, not the people who follow them.
The entire point of having a representative democracy is that the representatives are supposed to look out for the best interests of the voters when making laws and regulations. If they write laws that benefit multi-billion dollar companies at the expense of everyone else than the representatives aren't doing their job correctly and need to be set straight by the voters.
The reason why the quote about tax minimization is BS is that the government still has to pay its bills. If every rich corporation is taking advantage of every conceivable loophole, and lobbying for ever more loopholes then the share of the bill starts to fall on the shoulders of everyone else, who doesn't have the time or money or both to lobby for special treatment. And that is unfair.
OTOH, there has to be some balance especially with the amounts of money we're talking about, or corporations will stop trying lobbyists and start hiring white collar crooks to hide their money. Which is why the proper place to settle this is in the legislature where everyone gets at least some way to sort out who pays and how much.
I am just curious, can you find a concrete example of where the interests of the people and state were put above the interests of the lobby groups of the big corporations?
We definitely should not throw up our hands! But one of the first steps in fixing the problem is to convince more people that there actually is a problem, and that it is not bad or hypocritical to oppose the use of tax loopholes. That's why I bristle whenever that quote shows up here; it's a deliberate effort to convince people that there's not even a problem. Hacker News seems to have no problem understanding that "legality != morality" when it comes to drugs, so I don't understand why it's so much harder to grasp re: taxation.
I think the quote is used to point out that Apple did nothing (legally) wrong by following the existing law. It seems to be appropriate.
Do I think corporations should be paying more in taxes? Sure. But Learned Hand's point is still worth considering, especially in a climate where many think everyone should pay more taxes.
I say, OK, you first. There's a line on the tax form where you can voluntarily pay more. Put your money where your mouth is, I say.
> I think the quote is used to point out that Apple did nothing (legally) wrong by following the existing law.
I think you're simply wrong here. The quote very clearly refers to morality, not legality[0], so I criticize it on moral grounds.
> I say, OK, you first. There's a line on the tax form where you can voluntarily pay more. Put your money where your mouth is, I say.
Funny you should bring this up! This is the HN corporate tax argument I hate second-most, after the Learned Hand quote. It's a tu quoque fallacy that's simply used as a gag order to pre-emptively shut down any debate on the issue, since obviously no one meets that standard.
[0] And even if it didn't, that's how it's used in practice when it's posted here.
Learned Hand's remarks are moral in the sense that he says there is nothing sinister (wrong or evil) in following the tax law by arranging your affairs to pay the least, and also that those who say it is immoral to do so are wrong (in the legal sense). But it was a legal opinion rendered by a Supreme Court justice. (Sorry, I don't recall the particulars of the case he was addressing.)
As to the tu quoque fallacy, that is a moral argument, not a legal one. If you want to pass laws that only target some but not others, there is a moral judgment there. If you argue against doing so by pointing out that the advocates of such laws would not like to have them applied to themselves, that is a reasonable response to such an argument to highlight the hypocrisy of that position.
The bigger issue is what is usually implied by the quote, which is a sort of naturalistic fallacy of law. Namely, that whatever is legal is moral, and therefore by implication changing the law would be immoral.
The quote doesn't say that whatever is legal is moral. It makes a specific judgement that arranging your affairs to keep taxes as low as possible is not immoral, and it points out that everybody does this, rich and poor, corporations and people alike, and that demanding others pay more than their required amount is hypocritical and sanctimonious.
Yes, I agree. But let's not slander Learned Hand by attributing to him the intentions of those who quote him. In fact, compared to some more recent justices, I am confident that he would have filed outraged dissenting opinions in recent cases where the law made by representatives was set aside and, in some cases, new law was imposed from the bench.
How are you supposed to figure out the morality of something when there are hundreds of pages of very special case rules for how to follow the tax law?
I believe these cases should be judged on case by case basis. If the entity acts in bad faith I think it's fair to held it accountable. The laws should not be treated as a compiler. If you make billions profit in a country and pay no tax I think it's fair to assume that you acted in bad faith.
You're not going to change behavior by moralizing to people who consider what you think is moral to in fact be immoral, or who at least are amoral about the whole manner as corporations tend to be. Since we can't seem to agree on the moral issues of taxes, all that's left is the reality of law, and the incentives of the law. It's posturing to think we can solve the matter by any other means than top-down legislation and enforcement, if indeed there is a problem to solve. (Corporations and individuals both have many arguments for why they are paying enough taxes already thank you.)
You're not going to change behavior by moralizing to people who consider what you think is moral to in fact be immoral
You're right. Which is why I think a fair solution is to round up people who think taxation is automatically immoral (along with the rest of the "if a government did it, then it is by definition immoral" brigade), drop them somewhere with no government and no laws, limited resources and maybe a bunch of weapons, and let them put their philosophies to the test.
If there are any survivors, then when they make their way back to civilization they might have a different worldview.
It'd be a fun experiment, but I'm occasionally revolted by the supposed outcome people seem to fantasize will happen. Income tax, the tax people usually complain the most about, is only 100 years old, how did anything get done before it? If you did the experiment with Americans I'd sooner expect to see something like a 19th century Mormon settlement than Somalia or whatever hellish landscape is in your mind.
Fyi, Apple's stash of billions in foreign corporate structures is not "secret".[1] The IRS, the California State government, and all the Wall Street analysts know the money is over there in Ireland. In any case, Apple is complying with the law and paying the relevant foreign taxes (which are lower than the USA rates).
Since their revenue shuffling is not illegal, the more accurate criticism is if Apple is abusing legal loopholes. A lot of people feel they are.
The shuffling was illegal, that is why they are going to be made to repay billions. It was illegal for the Irish to not charge them the standard rate, not illegal for Apple to try to do a deal.
Apologies, the British Virgin Islands, not Bermuda.
"Apple has assigned partial ownership of its Irish subsidiaries to Baldwin Holdings Unlimited in the British Virgin Islands, a tax haven, according to documents filed there and in Ireland. Baldwin Holdings has no listed offices or telephone number, and its only listed director is Peter Oppenheimer, Apple’s chief financial officer, who lives and works in Cupertino. Baldwin apples are known for their hardiness while traveling."
Baldwin Holdings Unlimited appears to be a shareholder, not a subsidiary, with one share of ownership (amounting to .01%) of Apple Operations International and one share of ownership in a few other of Apple's Irish subsidiaries. Aside from holding one nominal share in each of the Irish subsidiaries, this company does not appear to be materially significant to Apple's international operations, and I can find no evidence that Apple's international profits have been transferred to this company.
From what I can tell, Apple's money remains in Ireland, where they already enjoy an extremely low tax rate, and therefore have no reason to move it out. (Of course, this is why the EU is going after them now.)
That Wikipedia article describes the general strategy of the "double Irish arrangement" as employed by many multinational corporations, but does not actually describe Apple's international corporate structure specifically, and to the extent that it mentions Apple, is actually rather misleading.
I'm just going to go ahead and state, as a matter of fact, that Apple does not have any subsidiaries in Bermuda or any other Caribbean country, and anyone who believes otherwise is mistaken. Apple's international tax structure was thoroughly documented when they were called up to testify before the Senate, which you can read about in the Senate Subcommittee Memo on Offshore Profit Shifting and Apple[1], and while they do have several Irish subsidiaries, they do not have any subsidiaries in the Caribbean or move any money into the Caribbean.
This is further reinforced in Apple's testimony before the Senate[2]:
> Apple does not move its intellectual property into offshore tax havens and use it to sell products back into the US in order to avoid US tax; it does not use revolving loans from foreign subsidiaries to fund its domestic operations; it does not hold money on a Caribbean island; and it does not have a bank account in the Cayman Islands. Apple has substantial foreign cash because it sells the majority of its products outside the US. International operations accounted for 61% of Apple’s revenue last year and two-thirds of its revenue last quarter. These foreign earnings are taxed in the jurisdiction where they are earned (“foreign, post-tax income”).
I don't know if shareholders would take the drastic route of sueing Apple rather than pressuring them to fire the CFO that didn't use every tax loophole and replace him with one who does. The big holders[1] of stock like Vanguard, Blackrock, etc could influence other shareholders to vote a certain way and elect a new Board of Directors... the directors then fire the CFO and hire one who channels revenue through Ireland so they can save billions of dollars. That way, they can compete with the other companies[2] like Microsoft/Google/Oracle/etc using the aggressive tax avoidance strategies to save billions.
Excerpt:
The US has peculiarities in its income tax code that create these incentives for companies to avoid repatriation. The last time those peculiarities were lifted was in 2004 when then-President Bush allowed a one-year repatriation tax break. Over $300 billion flowed back into the US. Discussions about repeating that tax break are stymied in the current administration. Estimates are that as much as $1 trillion in repatriation would potentially occur if the Congress and the White House could agree on this issue.
With the election approaching this is one issue on which Trump speaks eloquently.
> I still don't understand why companies avoid local taxes.
I would invite you to sit in local legislation and see how local taxes are enacted.
Specific to this scenario, you have a Sovereign nation (Ireland) that has it's tax laws, which Apple (presumably) is complying with. Then comes a bigger body, the EU, challenging Ireland's original tax laws.
If you're Apple, what do you do? You're doing business in Ireland, so why not follow their tax laws which have obvious benefits.
> Their fiduciary duty is to act in the best interests of their investors.
And if you paid every bill collector who came up with their hand out without first doing due diligence, you would be in breach of that duty.
Apple specifically did business in Ireland because of tax break incentives.
Apple, You, Me, and anyone else have no obligation to pay anymore than the barest minimum taxes legally allowed.
You are assuming that the government is going to use those resources better than the company avoiding the taxes. Not everyone agrees with this. From this point of view everyone is acting rationally, they only might disagree about one specific assumption.
This is precisely the tragedy of the commons. Apple's share of the tax base, while enormous compared to say mine, is still small. Furthermore, Apple's investors are a very small portion of the population, so only see a small part of the benefit of tax spending. So it's clearly worth saving a giant pile of money in exchange for very slightly worse gov't services.
What op doesn't realize is that he already does. It's called the CEOs salary and its sometimes 30000 times that of the lowest paid worker, who of course survives with welfare.
"We live on an internet created by corporate persons, our government is hacked by Russian spies, and virtual reality is real now, dear." - https://www.youtube.com/watch?v=gazACJ0R1Hc
Really? At least with taxes your money is likely to stay local (whether you agree with how it is spent or not), whereas with a multinational corp like Apple, Tesla or Google your money is just as likely to go somewhere outside the country.
AI and clean energy, once researched and developed, will never go away. The vast majority of government expenditures are for mundane transient things like Social Security, Medicare, Medicaid, and bombing brown people across the ocean. None of which will last past beyond our lifetimes.
> mundane transient things like Social Security, Medicare, Medicaid
You might dislike some of the details but aren't those things there to stop people dying, starving or living in misery?
Doesn't the entire developed world have programmes similar to those you've just dismissed as 'mundane and transient' - presumably to stop the masses rioting in the street?
Which libertarian paradise should we be looking to for guidance here?
> aren't those things there to stop people dying, starving or living in misery?
Ubiquitous AI and clean, cheap energy would be more effective in accomplishing the same thing. Not to mention off-world colonies would stop the human race as a whole from dying.
Ensuring you and I and Grandma enjoy a little more comfort and security throughout our measly lifespans doesn't seem as inspiring and deserving of, what, $2 trillion a year?
You act like the choice is "Send Granny on an iceberg or we won't have Nerd Rapture for Everyone". It's not an either/or here and there's plenty of money (government or otherwise) to do both. Also, hundreds of millions of voters would disagree with you, so I guess the choice is "pay SS tax" or "move to sea-topia". Godspeed to ya.
Amusing that Ireland are going to appeal a decision which results in their receiving billions of dollars. They accurately calculate that a few billion is scant compensation if the Masters of the Universe then choose to go elsewhere for their tax-avoiding needs.
Not really. Apple have been in Ireland since the eighties and are one of the biggest private sector employers in Cork. There are a lot of jobs on the line, it's not like they are some kind of brass plate company with no actual presence here.
The eighties are about when that Ireland tax heaven thing began..
Notice that these jobs were always mandatory part of the tax breaks. They'll likely disappear with the tax break, given that Ireland has since dramatically elevated it's living standard on the basis of low corporate tax (and special tax) and wages are no longer competitive for something like support jobs.
A pretty wide variety of things at this point. So ignore the borderline racist sibling post. And you'll also note they've just announced another 1000 hires despite the ruling.
Not just the "Masters" but any other foreign company that incorporates in Ireland that have incorporated there and may do so in the future. Its a smart move for Ireland to appeal it.
I think it's quite amusing how Apple(+other companies) and their tax avoidance scheme earned them a fortune in "tax heavens" and now both the EU and the USA are trying their best to get some of the money back.
Here is to hoping EU politicians fix the tax system and force companies to pay a meaningful tax in the countries where they sell their products.
Personally, I'm not very optimistic considering J.C. Juncker is still one of the most influential EU politicians.
>>Here is to hoping EU politicians fix the tax system and force companies to pay a meaningful tax in the countries where they sell their products.
They already did. The tax is VAT and recent changes on electronic services had exactly the goal you mentioned in mind.
It's just that the idea of income tax for companies is silly as it requires the tax authority to verify valuations of transactions (for brands, services etc.) and that will never be doable. The fixing would be to get rid of income tax for companies and substitute it with different taxes (like VAT for example).
> The tax is VAT and recent changes on electronic services had exactly the goal you mentioned in mind.
Those changes on electronic services make similarly little sense, as they require a service to apply taxes in the jurisdiction of the consumer rather than in the jurisdiction of the business. (And such regulations disadvantage EU companies, as a non-EU company with no legal nexus in the EU has no obligation to charge such taxes.)
By definition, a company or individual has no legal obligation to care about laws outside their jurisdiction. The EU can say anything it likes about what companies "must" do, but they have no jurisdiction over non-EU companies. (Unless their own country enters into some kind of mutual enforcement agreement, or unless they ship a physical item that has to go through EU customs.)
I think you've missed the point of the comment you replied to. You have no obligation to follow the laws (taxation or otherwise) of a country/territory that has no jurisdiction over you (and no other power of enforcement, such as customs for physical products).
Providing an electronic service to everyone in the world does not make you subject to the laws of every country in the world, as much as those countries might wish otherwise.
funny thing to say since the US Treasury is criticizing the EU over this abuse of tax law
The US and Ireland both signed off on the arrangement that apple and other companies use to avoid tax.
Now, a government that didn't exist at the time, is using new case law it has created, to retroactively change the tax laws of the governments underneath it.
> Now, a government that didn't exist at the time, is using new case law it has created, to retroactively change the tax laws of the governments underneath it.
It's kind of tricky because though the EU as it is today is relatively new Ireland joined the European Economic Community which essentially became the EU. Also whenever that rule came into effect the special rules Ireland gave Apple should have been reevaluated and removed. They've always been against the state aid rule it's just not been tried until now. As for "changing the tax laws of governments underneath it" that's part of being in the EU you give up parts of your national sovereignty in a number of areas for the benefits of being in the open market.
Isn't it Ireland's prerogative if they want to collect taxes on corporations or not? It's bringing in excessive amounts of jobs (and payroll taxes) and investments to their country.
This whole tax avoidance criticism just boggles my mind. There's a sale in China. One person pays money to another person in their country for a phone created in China that never left China. Yet somehow US citizens believe they are entitled to 30-40% of the money that exchanged hands there or it's "tax avoidance".
> US warning The investigation into Apple and similar probes into other US firms have been criticised by US authorities.
Ha! I like it. US all of the sudden is defending Apple. Not because it loves Apple, but because it was hoping it would get its hands on those billions ... somehow.
EU here is basically saying, "ok Uncle Sam, fish or cut bait, do something. If not get out of the way, we'll take that money". So Uncle Sam is a bit upset at that, he doesn't like to be handled that way.
They will probably be various threats of sanctions from US and EU will buckle eventually. Maybe some scheme to divide the tax penalty between US and EU eventually.
Ireland's position is understandable. It could lose those companies overnight basically if this goes through.
Ireland is still the lowest taxed place in Europe, although the UK is pretty good and Luxembourg was a good option (overall, exemptions matter too). As the money that flows into Ireland is profits form European sales, it will be taxed somewhere in the EU, at some rate.
Interesting that the US is backing Apple's tax shelter scheme, which isn't to say that EC isn't grasping way beyond any reasonable measure of where it should go.
I think it is hilariously hypocritical coming from a tax authority that wants to collect taxes on income their citizens earned while working outside of their borders. Talk about trying to be a 'supra-national tax authority'.
In some ways there is a fight going on with national governments telling corporations to start putting their hoarded cash to work in the various economies or else we'll take it and put it to work in the economies. In a number of dystopian futures there is an event in the past called the "corporate wars" and this kinda feels a bit like something you might call a corporate war.
If you think of Apple as simply a bellweather, and assume that the government is coopted by regulatory capture [1], it makes a lot more sense - they're just doing their masters' bidding.
Most US-based corporations who benefit from this scheme don't want their Double Irish with a Dutch Sandwich going away anytime soon [2].
Not too surprising. One interpretation of the government's role is to get the best deals for the citizens and companies under it's control. Also if the US ever wants to get that money back into the US via repatriation or by imposing taxes on overseas profits it's hard to do when it's already in the EU coffers.
Apple (with backing of the US government) vs EU. My money is on Apple winning this battle. I'm sick of these lawsuits against Apple/MSFT. Europe is just jealous that US/Korea/Japan can create global tech brands that anyone cares about.
That'd be like re-scoring the 1890 World Series based on today's MLB rulebook.