"According to one diplomat, the strongest level of opposition came from Ireland, Malta and Cyprus. Luxembourg was said to have raised a series of practical problems about the proposal, arguing it would introduce a lot of complexity into the tax system."
Go figure. Noncompetitive EU countries complaining the loudest.
France has a lower effective rate of tax than Ireland's for companies in the CAC40 - 8%. There's a lot of hypocrisy whirling around about tax. The larger a company is, the lower tax it pays in France owing to various breaks and deals. A bunch of this criticism is just another way of saying France First.
Can't help notice that three of the four are tiny countries. And the fourth, Ireland, is not that big either.
I'm starting to thing that there might also be a geopolitic reason to become a tax heaven, not just an economic one, something along the line "Let's convince Amazon to book profits here, and there let's see who will dare mess with us, given that Amazon will be protected by USA"
For a small nation, it's one of the few outsized competitive advantages they can try to offer (that is, something they can do that can benefit them far beyond the scale of their population).
Ireland's corporate tax rate + joining the European single market, resulted in one of the greatest booms in modern economic history. From $40 to $280 billion in GDP in just 17 years.
Given the extreme nature of the benefits, a small nation is probably crazy not to do it.
Ireland is closing its loopholes. Specifically, if a company is managed outside the country but registered in the country, it was considered non-resident for tax purposes. That changed in 2014, with a grandfathered provision that expires in 2020.
>More would be accomplished by protesting the government that allows certain loopholes.
I'm not so sure about this as I'd question that it's possible for a single government to close loopholes on its own. Arguably yes, governments should be pressured into closing "certain loopholes", but not because this necessarily leads to a better outcome.
>Apple is a public company with an obligation to its shareholders to make money
Not everyone agrees that companies ought to maximise only shareholder value.
> More would be accomplished by protesting the government that allows certain loopholes.
If such a loophole exists, and it's blatantly obvious that you're a dick for using that loophole, yes, that loophole should be fixed. But that doesn't mean you're not a dick for using it in the first place.
To put it in another perspective: If there was a loophole that allowed me to kill someone without facing any consequences, yes, that loophole should be fixed. But that doesn't mean that I'm not a dick for using it.
It’s relatively easy to argue that murder is immoral even if there was a legal loophole. It’s much more difficult to argue that employing legal methods to reduce your tax burden is immoral.
> It’s much more difficult to argue that employing legal methods to reduce your tax burden is immoral.
I mostly don't care, but for the sake of argument, setting up shell corporations and then saying they made this purchase or that deal for tax reasons isn't exactly being honest.
It reminds me of the "characters" Bunbury and Ernest from Oscar Wilde's "The Importance of Being Earnest":
"""
You have invented a very useful younger brother called Ernest, in order that you may be able to come up to town as often as you like. I have invented an invaluable permanent invalid called Bunbury, in order that I may be able to go down into the country whenever I choose. Bunbury is perfectly invaluable. If it wasn't for Bunbury's extraordinary bad health, for instance, I wouldn't be able to dine with you at Willis's to-night, for I have been really engaged to Aunt Augusta for more than a week.
Seems as dead simple to me as to argue about murder. If you're a company that's present in a certain geographic area, you're expected to pay taxes in that area. If you don't pay taxes and you actively work on not paying taxes, you're immoral. Done.
Yes, but the precise amount of taxes you should pay is not some moral principle. If the current tax laws were the “correct” amount, then the government passed a tax cut, are you morally obligated to keep paying the higher amount?
Western Europe consists of modern welfare states. This is the model that we, Europeans, chose democratically over the span of decades or even centuries. In a welfare state, people and companies that are better off pay (more) taxes to support welfare, education, infrastructure, etc.
Apple doesn't get to decide for us what our collective moral values are. If they don't like them, they should stop doing business in Europe. Otherwise, they should just pay their dues like nearly every person and small/midsize company in Europe does. Since Europe is a hugely profitable market, this is the better option for them.
This comment comes off as extremely offensive. You are basically saying that you, European people, democratically and unilaterally chose that you can extort people at gunpoint to make better living for yourself, parasiting on other peoples work.
This comment comes off as extremely offensive. You are basically saying that you, European people, democratically and unilaterally chose that you can extort people at gunpoint to make better living for yourself,
If you want to do business in a country, you have to live by the laws of the country. If a country's laws specify that a certain percentage of profit should be paid as taxes, it is like it is.
Some countries prefer free-for-all capitalism. Other countries prefer to have state-mandated universal health care, a decent amount of holidays, a certain income for unemployed, etc. Those facilities have to be funded somehow.
I wouldn't exactly call these values "moral".
Sure, for someone who believes in pure capitalism, it is not moral. For someone who believes in social democracy, it is. For a typical EU citizen (making a large generalization), US-style capitalism is immoral. Unfortunately, the US tries very hard to export their model to the rest of the world (which is of course in the interest of the US).
Apple should just pull out from Europe.
Even with the normal taxation tariffs (that smaller companies cannot dodge), Apple will make a large profit in Europe. So, that would be a large loss to them.
Taxation is the price of living (or participating in a market) in a developed country and benefiting from shared infrastructure. Apple needs somewhere for their distribution planes to land, their users need affordable electricity, no-one will buy new phones if they can’t afford to eat. Maybe we can obsolete airports, national energy grids and food distribution networks one day but until then, taxes need to be paid?
France does tax Apple on its own. They still pay VAT of course as well as on any profits classified as French (e.g. retail). The question is then everything else whose origin isn’t obvious.
The issue is using various IP transfer schemes to make it look like their French division has no profits while the Isle of Man division is earning billions.
Technically speaking, almost all of the value is created in the USA via R&D. I don’t think Apple has any significant amount of R&D creation in France (hopefully a lab or two). Then there is some by order manufacturing in China, along with component acquisition, leaving just retail and distribution for local markets. Now, Apple can and has done some dodgy IP transfers to tax havens, but France wouldn’t have been the wronged party in that, the USA would be.
Value is only created when you sell products, not when you create them (and especially not in R&D which is gamble cost for most companies), otherwise all the startups would be rich. If there would be no value creation in France, Apple would not have any business there.
Ridiculous, how would that even work? Profit is “sales - expenses.” So how would Apple account for the R&D in the states, or does Apple France just want to tax them assuming all the inputs don’t exist?
That’s why Apple USA sells iPhones to Apple France at some price above hardware production costs. It doesn’t make sense any other way. Value isn’t created on sale, it is only realized as money at that point.
Welcome to the world of tax avoidance. For example, if the software is assigned to a subsidiary in the Isle of Man, which "licenses" the use of the software to Google France, then Google France in the high tax jurisdiction pays these licensing fees to Google Isle of Man, shifting profits from the high tax to the low tax jurisdiction. This is one of many tricks available.
See this Forbes' article on transfer pricing as tax avoidance:
R&D is a cost center, not a profit center and as you pointed out, you need to sell your products at a higher price to recover that cost. If the value was created on R&D, it would mean that you could manufacture just about anything and it would create profit magically, which is obviously wrong as countless companies fail to monetize products. The value is created at the time you sell the product itself, by demand of consumers.
R&D is not a cost center, it is widely regarded as a profit center in a tech company. By your definition, Microsoft (assuming they aren’t selling hardware) should be paying all of its profits to where its software is sold vs. where it is produced, because it’s entire operation is just a cost center!
Like it or not, taxation internationally is currently based on where value is produced which is why...
> Under the current international tax system, profits are taxed based on where the value is created. The taxes Apple pays to countries around the world are based on that principle. The vast majority of the value in our products is indisputably created in the United States — where we do our design, development, engineering work and much more — so the majority of our taxes are owed to the US.
The value is not created at time of sale! Well, some value is created by virtue of the sale itself that go into retail profits, but the store has to pay its suppliers the price they charge regardless of the supplier’s markup. Imagine it’s a department store (Nordstrom’s or whatever) selling LV bags, LV is not charging the department stores just production cost. France in turn is taxing LV on the design value added in France, that tax money isn’t going to China or the USA where the bag is sold. France would be pissed otherwise.
If France wants to tax America’s R&D, then they can change their laws, but the USA isn’t going to be very happy about that, obviously.
Apple is heavily biased on the subject so I would not take their PR at face value. It's in their best interest to pretend that all the value is created in the US in order to reduce taxes.
Let's say I can recreate the new IPhone with only 1/1000 of the budget of Apple's R&D, would I make a profit? Yes of course I would. If Apple could create their new IPhone for only 100$ of total R&D, be sure they would do it.
On the other hand, ask yourself why there is no Apple Store in a lot of African countries. It's because Apple does not meet the local markets requirements for a store there to be profitable, so they would not get any value out of it.
R&D being a cost center is the reason most of the countries in the world have tax-breaks specifically on R&D and also why the copyright laws are that harsh to prevent ripping of all the value by selling copies of your competitor.
If Apple was able to realize their R&D value income taxes in France rather than the USA on all French sales, they would probably pay less, not more, than what they are now.
At anyrate, value is well defined across the world. If it was define the way you want, the countries would see all their exporters as freeloaders, not paying for the infrastructure that is realizing their profit. Heck, places like Switzerland and Singapore wouldn’t be able to survive.
> If Apple was able to realize their R&D value income taxes in France rather than the USA on all French sales, they would probably pay less, not more, than what they are now.
Tax breaks are on R&D, not sales and Apple does not have any R&D in France so I don't follow you...
> At anyrate, value is well defined across the world.
There's no common tax laws across the world so this does not seem to be true.
> Sales is not the only source of value to be had. It is weird that you are on this site and think development is value free.
I find it the opposite, I find weird that you are on this site and think value magically appears out of R&D since the countless startups which are failing every month... Just look at YCombinator data from the past 5 year and I bet most of the startups back then (which had products) failed because they did not generate enough revenue to sustain themselves.
