For non-EU readers, note that taxation is explicitly not a competency of the EU (i.e. Ireland can set its tax levels to whatever it wants). The only thing in question here is whether it was applying the same taxation rules to all companies, as granting special exceptions to certain companies could be viewed as state aid (which is not allowed). Ireland claimed it wasn't, the current (over-)ruling says otherwise. This case is also specific to tax rules from many years back. AFAIK the rules have subsequently been tightened and the exemption no longer exists.
I think you make it seem like EU doesn't care at all about what member states do in regards to taxation but there's many limitations to what can be done by any member state in order to harmonize and prevent corruption etc. This in practice makes the EU have a lot of say in regards to taxation. Moreover the EU has special rules to limit moving funds to jurisdictions that have taxes that are deemed too low (read tax havens) - this directly implies no member state has agency to lower their own taxes as much.
Specifically in Ireland, corporate taxes were being lowered from late 1980s until 2003, in a series of agreements with the EU regulators. It's not like Ireland lowered the taxes in a sneaky scheme, or grandfathered-in an abnormally low rate.
Just to be clear - I don't think many people have (much) of a problem with ireland's "headline" 12.5% CT rate.
The problem is the selective tax rates that Ireland gave to many multinationals, often as low as 0.005% (effectively in return for ensuring x amount of jobs were created in Ireland). I think these are really very much sneaky schemes.
The problem with all of this is that it's all sneaky schemes.
You probably have something in mind for how a government is supposed to spend tax revenues. Assistance for the poor or something like that. But as a sovereign state they get to decide for themselves.
Except that as soon as you admit this there is no point in having any kind of minimum rate etc., because there are a thousand ways for the state to return the money to corporations if they intend to. Subsidize energy costs so they have the lowest electricity prices and tech companies build data centers there. Provide something like the earned income tax credit but with no phase out, subsidizing employers who hire workers there. Just offer generous tax credits and deductions in general, leaving the nominal rate high while lowering the effective rate.
There is no real way to prevent this kind of thing. Is a country that offers public healthcare subsidizing employers who then don't have to pay for employee health insurance? What if you create a 100% tax credit for constructing non-fossil power plants up to the amount of the buyer's total taxes? Apple would commission $13B in solar farms and nuclear reactors, take the credit and then turn around and sell them to get all the cash back. Can you even say that would be a bad policy? It might have a desirable result. But it would also zero out their taxes.
> > But as a sovereign state they get to decide for themselves.
> Not really no. The results of the court case prove that.
To be fair, none of the states that are part of the EU _are_ sovereign states, because there is a high authority over them. Admittedly, that's debatable, because they can choose to leave the EU (as was seen by Brexit), but unless they do, they're not in complete control.
You seem to be assuming that this isn't an iterative process. The process continues until the scheme is convoluted enough to satisfy the court while still being effective in attracting companies through de facto lower taxes.
Meanwhile Ireland now has $13B to throw at Apple somehow to convince them to stay.
> The problem with all of this is that it's all sneaky schemes.
The problems start if one member selectively introduces practices that benefit them at a significant cost to the other members.
Universal subsidies of healthcare or electricity come at a net cost for the country, and so doesn't create a competitive advantage. (It will lead to higher taxes that offset the benefit of specific reduced costs).
Target subsidies are different. While countries can still get away with it if done on a small scale, large scale cases come with a risk of this kind of response.
> Universal subsidies of healthcare or electricity come at a net cost for the country, and so doesn't create a competitive advantage. (It will lead to higher taxes that offset the benefit of specific reduced costs).
But it doesn't lead to higher taxes, because the whole point is to use the minimum tax rate and then achieve a de facto below-minimum rate by somehow refunding the excess money.
They're not trying to attract only Apple, they're trying to attract businesses in general. Subsidies for things employers would otherwise have to provide apply to all employers and lower the de facto tax rate across the whole country, which is exactly the idea.
> Target subsidies are different. While countries can still get away with it if done on a small scale, large scale cases come with a risk of this kind of response.
"Targeted" is essentially undefinable. All allocation of tax money is targeted at something -- the untargeted thing would be to use the money to uniformly lower the tax rate.
> They're not trying to attract only Apple, they're trying to attract businesses in general.
Ok, so this is about circumventing the 15% minimum corporate tax?
Is this somehow related to the objectives of directive 2022/2523? It seems to me that 2022/2523 is in place mostly to prevent transfer of profits from one jurisdiction to another to minimize the tax on profits generated elsewhere.
Unless, let's say, a Germany corporation registered in Ireland would somehow be affected by electricity costs or healthcare costs covered by the Irish government, I'm not sure if the benefit is large enough to matter.
Obviously, for companies with most operations happening within Ireland, the total tax pressure has a larger effect. But I don't think that was the type of problem this directive was designed to solve.
> There is no real way to prevent this kind of thing
You do realise that US, EU and China regularly sue each-other in WTO over this? What counts as subsidies, etc. is a constant subject of dispute. That’s normal,
They regularly sue each other because it's intrinsically ambiguous. There is nothing for a government to spend tax revenue on that isn't a subsidy to somebody. If anything they should be demanding that the other governments have lower taxes so they can't use the money for subsidies to distort international trade in their favor.
"There is nothing for a government to spend tax revenue on that isn't a subsidy to somebody."
That's just nonsense; so if the USA spent $1 and got a nuclear powered aircraft carrier in return that is subsidising the builder? More like running them out of business.
Government spending is only a subsidy if the government spends over the market price for something. And if your next statement is that the government *always* pays over the odds, you'll need some good evidence. Because although it does happen it is not always.
> Government spending is only a subsidy if the government spends over the market price for something.
All they have to do is control who gets the contract, because the market price for something already includes a margin.
But more than that, the subsidy isn't just who gets the money, its who gets the benefit of what's bought. Who benefits from the US having aircraft carriers, other than the defense contractors? Multinational oil companies, for example, who don't want their tankers captured by pirates or blockaded by adversarial nations.
Who benefits when a government subsidizes higher education? The schools, of course, but also the companies who hire the graduates.
"Well that's the good kind of subsidy", you might say. And so says everyone else about everything else.
"because the market price for something already includes a margin."; that's called value add, and all customers pay it, so it doesn't matter whether the government buys it or directs someone else to pay it, the value add becomes the profit.
The government isn't some magical "outside the market" participant, as a purchaser it's a part of the market like all other participants. If they pay over the market price then they've been ripped off, just like if anyone else paid over the market price.
> "because the market price for something already includes a margin."; that's called value add, and all customers pay it, so it doesn't matter whether the government buys it or directs someone else to pay it, the value add becomes the profit.
And now the company has profit it wouldn't have had, as a result of the government, which can use control over that profit to attract businesses to the jurisdiction etc.
> If they pay over the market price then they've been ripped off, just like if anyone else paid over the market price.
Only if the thing they want is the thing they're nominally buying, instead of the thing they're actually getting for the money, e.g. convincing a corporation to employ local workers or move into the jurisdiction and declare international profits there.
> And now the company has profit it wouldn't have had, as a result of the government, which can use control over that profit to attract businesses to the jurisdiction etc.
That only works if the government buys something that no one else wants; in which case it is buying at a price, ipso facto, that no one else will pay (at that price which is above the market price).
But if the government buys something at the same price (or lower) that everyone else pays, then it isn't a subsidy.
> That only works if the government buys something that no one else wants; in which case it is buying at a price, ipso facto, that no one else will pay (at that price which is above the market price).
Not at all.
Suppose the government funds research. Private entities fund research too. It's clearly worth something. But if the government funds it, the research happens in their jurisdiction. Even if the exact same private company paying the taxes that fund the research might have done the research themselves, they might have done it somewhere else, so the government is now creating a subsidy for doing research in their jurisdiction.
The value of the research could be fully identical regardless of where it happens, but the government subsidizes it because they want it to happen there.
> But if the government buys something at the same price (or lower) that everyone else pays, then it isn't a subsidy.
It could only not be a subsidy if the thing they're buying is identical in all respects to the thing the taxpayer would have bought had they been left to keep the money. Otherwise it's subsidizing the thing the money is being allocated to over the thing it would have been allocated to. That's what subsidies are -- the reallocation of resources through action of law. It's a synonym for spending tax money.
No, we entered a common trade market. We're not even part of Schengen. We're an odd fish in terms of EU membership overall given our geographical position, size, and CTA with the UK.
We are the only EU member state that are obliged to hold public referendums on Treaties. Ratification of the Treaty in all other member states is decided upon by the states' national parliaments.
Ireland, Netherlands, and Luxembourg also have veto powers when it comes to EU wide regulations.
In short, if we didn't have so many of our national parliament trying to appease the bureaucrats in the EU so they could land cushy numbers in the European Parliament for retirement, you'd see a lot more sabre rattling from Ireland regarding EU interference.
The opposite, no? The government accepted _much_ less money than is required in exchange for jobs for their constituents.
This is an example of a government prioritizing benefits for some of their constituents (emphasis on some) over the collection of tax dollars (direct benefit to the "government") or monetary reward for themselves (corruption).
Apple settled on Ireland precisely because of that tax scheme. Had Ireland levied taxes at a normal rate, they wouldn't have gotten any dollars. The choice for Ireland was between jobs and nothing.
Apple (& al) played countries out against each other and had Ireland not done it another one would've. It's a tragedy of the commons, and as always, that can only be solved through collective action (cue TFA).
We aren't democratic governments. We are subjects to governments, who we must pay taxes to, and customers of corporations, who we pay if they can produce stuff we like for cheap enough.
This moves the conversation to questioning the notion of representation of a people by its government. It is true that the entire conversation about whether or not it's good if Apple can play governments out against each other in order not to pay any taxes, rests in part on that assumption. That's a fine conversation to have. But in TFA and in here so far, it is assumed.
Note btw that even in your narrower definition of what government is to us, you still mention taxes, and that is precisely what is in question here, so even according to your formulation everything holds and it is still good for us if corporations can't play out governments against each other to lower their tax bill, because that's directly us footing that bill. You'd have to find some kind of definition of government that doesn't cover that, or argue that if Apple doesn't pay taxes, all those gains are passed on to us, the people, in a better way than if they do. Through a stronger tech market leading to better tech products, or something?
Anyway I think the original assumption is fair and the discussion holds. "Cheating on your taxes = stealing from the people" is a such a well established fundamental axiom that challenging it basically changes the conversation entirely.
> "Cheating on your taxes = stealing from the people" is a such a well established fundamental axiom
Excuse me?! Cheating on your taxes is illegal. Minimizing your taxes is what everyone of us does - it is perfectly normal and justified behavior.
And the discussion was not about that - companies are paying their taxes just fine. The discussion was about governments colluding to form a cartel to uniformly raise taxes. That is not OK.
Even if the stated purpose is somehow justifiable, government collusion is not good for the people. By definition governments are natural monopolies, they don't have internal competition. The only competition keeping them in check is external. And it comes in two forms: destructive (wars) and constructive (free trade). Without competition democracy alone cannot keep governments in check - just witness the decay towards populism and autocracy together with the raise of left and right extremism of the Western governments during the last few years. We need alternatives. We, the people, need to be able to pack our bags and go to a place with values and laws better aligned to ours. Otherwise we will end up prisoners behind barbed wire on the borders like the Eastern Europe the Cold War or facing fines and exit taxes like certain countries already impose on their citizens today.
In a world of bigger and bigger governments, with larger and larger budgets and deficits but smaller and crappier results, inter-national competition is the only recourse we have left. For example, the EU would be supremely satisfied with itself right now if USA's economic performance didn't point out that the Emperor is naked.
> argue that if Apple doesn't pay taxes, all those gains are passed on to us
Yes, smaller costs for Apple directly translate in cheaper products for us or larger profits for its shareholders - which is also us. On the other hand, that money going to the tax man will fund millions of fat bureaucrat jobs and countless wasteful government programs out of which an extremely tiny part will actually benefit us.
> democratic governments (us)
Even if you think democratic governments represent us (a debatable idea at best, then logically you should want competition for them. Because like us, without competition, they go lazy, wasteful and abusive.
At the same time it's clear that Ireland has been "gaming the system" here, and the proof is the huge delta between the effective tax rates between member nations we're seeing in the judgement. I don't know that there's much of a moral or principled argument to be made here, every system gets gamed, and the European Commission is another such system. And Ireland absolutely agreed to be bound in that game as a price of joining the EU in the first place.
Basically, from the other side of the ocean I don't see much to care about here beyond the microtactics of business development decisions. Let Europe sort out its business on its own.
Punishing Ireland for gaming the system by paying Ireland 13 billion hardly makes it seem like the EU is super concerned about Ireland's transgressions.
Apple having to pay those 13 B means that companies won't be as eager to have a headquarter in Ireland as they have been in the past. They could move somewhere else in the EU. That's a damage for Ireland and that's why Ireland sided with Apple for all this litigation.
Sure but the taxes are only part of the equation. Native english speakers familiar to US tech giants common law system. Large number of skilled workers. Flexible immigration system.
So - at this point is Apple and other companies going to move out of Ireland? I mean they have invested a lot and got there, probably they did alright in the situation, Ireland is a relatively nice place to move your company, it just isn't as nice as it was before - that is to say I'm not sure how bad it really is for Ireland.
Apple has been in Ireland since 1980. In the past 5 years it has invested €250 million into its Cork campus alone, and has just announced an expansion to bump its 6,000 strong workforce to 9,300.
If I were an Irish citizen paying taxes I'd be incredibly pissed that my own government is fighting against 13 billion from the richest company on the planet. I'm subsidizing fucking Apple of all things!? Absolute buffoonery, whoever made this deal in the first place should be in prison.
Our Corporate tax receipts for last year alone were almost double that.
We have almost every American Tech Company of note with their EMEA HQ and often their EMEA R&D wings based in Ireland. Making a case on behalf of our commercial tenants to protect long-term interests was exactly the right decision. Currently, one in every €7 collected by the Irish state comes from just 10 firms.
For context, Ireland has one of the highest gross public debt levels in the world, at just over €42,000 per person, due to the IMF/EU collusion that forced us to bail out unsecured bondholders in German banks, and to effectively nationalise our banks to prevent a contagion effect.
Apple is providing thousands of jobs - they pay taxes on those people, and those people pay income tax / VAT / fuel tax / death tax / etc and they consume from other companies that pay lots of taxes as well, and import tariffs as well. It's taxes and tariffs all the way down.
There are Irish customers buying Apple products. Some of that money goes into the salaries of Irish Apple employees, which pay their taxes in Ireland. Some of that money goes into other expenses in Ireland. What's left goes to the USA where Apple pays taxes on the part of them that turns to be a profit. The idea is that part of that money (the tax) should not go to the USA but stay in Ireland. In that way the money of Irish customers would stay in Ireland, which is probably good for Ireland but it's a matter of opinions.
There is also a 15% corporate minimum tax of big corporations, in effect since the beginning of this year [1] I think that there are many ways to keep circumventing even this attempt at keeping EU money inside the EU, but we will see.
Is this the case, though? How much profit is generated by Irish Apple customers compared to the giant amount of tax paid in the country due to Apple being there?
Not so giant. You can check https://en.wikipedia.org/wiki/Apple%27s_EU_tax_dispute which is updated with the latest ruling. The dispute was about taxes from 2004 to 2014. I wonder how much they'll owe to Ireland for the next ten years.
> Apple only paid an effective corporate tax rate that declined from 1% in 2003 to 0.005% in 2014.
As others are pointing out, Ireland was offering that discount to great impact, essentially taking over the UK's traditional spot as the core exchange for US companies in the EU. They absolutely would prefer not to be charging that tax.
This us a fairly common strategy not limited to tech.
For instance, Starbucks in the UK:
> Starbucks Coffee Company (UK) made a £149m “gross profit” in the year to October 2023, up from £129m the year before. But after “administrative expenses” of £127m, its pre-tax profits were reduced to £16.9m, on which it paid £7.2m tax...
In 2012, it was revealed that Starbucks had paid just £8.6m in taxes on £3bn in UK sales since 1998,
you're ignoring the 20% VAT on those 3bn sales, which provided 600m tax revenue. Why is it so important that they paid 7m in corporate tax instead of any other amount?
Their business apparently has high cost of sales (like stores, personnel etc.), where by the way also taxes occur, e.g. for wages...
So I suggest to think twice if you want to paint the picture that Starbucks does not contribute it's fair share to taxes in the UK.
VAT is paid by the consumer, not the business. The business merely collects it in behalf of the tax office. Starbucks contributes 0 taxes by collecting VAT. Look up the definition of consumption taxes as opposed to corporate income taxes.
If you want to give other examples of ways companies contribute you can mention property taxes on owned properties, or jobs created which usually also have some part of pension etc contributed by the business, vehicles paying excise tax and fuel taxes, but I don't think VAT is a correct one to use.
It's like saying "the employee doesn't pay employee tax; the business does". The cost is still there for the business, who could otherwise be paying you it. Or using it to employ more people. Tax is tax.
In this case, the business could charge the same amount but keep what is currently the VAT portion. It's still tax revenue generated by a business doing work, paid by a consumer who does taxed work elsewhere to get the money, and all the government does is collect the money. Doesn't really matter which tax it is.
If business A buys from business B which buys from business C...Only the end customer pays VAT on the final transaction, none of the entities before do.
If the tax raises all of their costs and it's a competitive market then they'll all have to raise prices, because competitive market = competitive pricing and it has to come from somewhere.
The most common case where it doesn't raise prices is when they don't have any competition and are already charging the monopoly price, so the money has to come from the company because if there was any more to extract from the customer, the monopolist would have done it to begin with. But we don't really like those markets or want to promote their continued existence.
What this doesn't depend on much is the form of the tax. If it's a competitive market then VAT and corporate income tax are both getting passed on to the customer. If it's a monopolist then either one will typically come out of the monopoly rent, because charging the customers more would bankrupt them or cause them to extend the life of used goods instead of buying new ones etc.
However, corporate income tax is generally easier for multinational corporations to avoid than VAT, so they have a pecuniary interest in making people think that VAT is worse than income tax.
There's a third option: they're competitors are small business that don't have the means to do the clever tax optimization/evasions, so they were already paying full tax. So now Starbucks if it were to pay full taxes, would have to either raise their prices (but then competitors could stay at the same price, because they've already been paying those tax rates), or they can lower their margin.
It's true that these taxes make things more expensive for local businesses, but also for all businesses, as they have to employ very expensive tax lawyers to figure out the best places to put their businesses. What a waste of mental effort that could've gone into more productive careers. But that's corporation tax for you.
Any sane country would rather have the economic boost from the jobs and then take their cut as income tax from that. than tax the company directly, Not to say they will not tax the company, but corporate law is often intentionally designed to let a company pay little tax if it is dumping the money it makes into the economy. why kill the goose that lays the golden eggs?
> Any sane country would rather have the economic boost from the jobs and then take their cut as income tax from that. than tax the company directly
What jobs does Starbucks create, exactly? There were no coffee shops in UK before them? They outcompete local shops because they don’t have to pay taxes, and still sell a croissant for $5.
Alternatively, highly skilled population and innovative people are the goose that lays the golden eggs
> Apple Italy sold iPhones for 599€s + vat (thus avoiding to pay any corporate taxes in Italy while making billions)
Isn't that the whole point of the European Economic Area? That you can freely sell your goods to other countries within the EEA without having to pay corporate taxes to each individual country?
Sure, but I think it's the sort of "self-dealing" that's the problem.
Suppose it were possible for a wholesaler in Ireland to purchase a product in bulk at around 1/3 of MSRP. Market equilibrium would drive the price of that product down, right? If any other company could do that, price competition would prevail and eventually the delta between the import cost (in Ireland) and the export price (to an Italian phone shop) would shrink. Likewise, the retailers that wholesaler sells to would want to have some margin as well. This would put pressure on the wholesaler - likely competing with other wholesalers - to have a small margin as their "value added" is insubstantial.
But, crucially, this is not a case of three independent entities: a manufacturer, a wholesaler, and a retail business. This is one entity, with three subsidiaries and setting prices between them to minimize tax burden, and setting prices in ways that are simply nonsensical, like selling products from one subsidiary to another at or below cost, and then to another at full retail price. If they were three separate companies, the manufacturer and the retailer would go under. In this scheme, the wholesaler is somehow adding all of the value to the product, despite doing nothing more than acting as a shipping hub.
The issue arises from Apple allegedly getting a preferential treatment in Irish taxes on top of that, thus paying extremely low taxes overall for their entire European business.
I apologize if this is a stupid question but aren't GST and VAT (basically) the same thing? It is just an "advanced" sales tax, no? It still does not fix the problem of income tax...
The big problem from what I remember from earlier is some companies like grocery stores operate on razor thin margins -- like they buy tomatoes for USD 0.90 per kilogram and sell for USD 1.00 or whatever so if we charge income tax on the whole USD 1.00, the rate would have to be RIDICULOUSLY low or the grocery store simply won't survive.
Problem I want to see fixed with some kind of sales tax upgrade (VAT/GST/whatever) is if a company / conglomerate "sells" goods and services to itself, it should have to pay this tax on the pre-discount rate. For example, if Google web search has an advertisement for Google Chrome, Google should have to pay this tax on the market value of the ad placed, not on the actual money amount that changed hands (which is likely zero dollars). Same thing with Apple Music on iPhone. There are MAJOR ads placed when you first set up an iPhone and later continuing ads that show up saying "hey, how about now? do you want to pay for Apple Music EXTREME THUNDER edition now?" These are ads that have a lot of value and Apple should have to pay (upgraded) sales tax for displaying these ads.
Value added tax is a tax on the difference between the purchase price of the inputs and the sale price of the outputs; that is, it's a tax on the value that company specifically adds.
The way it works in practice is VAT is added to the the sale price, but the VAT actually sent by the business to the government is reduced by any VAT that was paid for inputs. This way, you don't end up with increasing amounts of tax just because a supply chain has lots of middlemen.
This setup creates an incentive to report VAT at each level of the supply chain, reducing fraud. Because the tax doesn't compound with multiple steps, it's fairer.
Sorry, I don't know anything about VAT, but in Australia, consumers pay 10% on all products except food, financial services, and a few other things.
When Apple sells an phone to a consumer in Australia, 10% of the sale price is collected by the retailer, and paid directly to the government, rather giving the full sale price to Apple, then allowing Apple to work out later what was profit and what was not.
There are mixed feelings about it, but I've always liked it. If you consume a lot of stuff, you pay a lot of tax. Sounds fair to me.
> If you consume a lot of stuff, you pay a lot of tax. Sounds fair to me.
Most economists view VAT/GST as a regressive tax. I don't know why so many highly advanced, liberal democracies are so dependent upon VAT/GST for tax revenues.
No, VAT is a tax on consumers, which is why I left it out of the calculation.
To recap: Apple Ireland made 400€s of profit by getting iPhones at 200€s and selling them at 600€s to Apple Italy.
The 400€s profit went virtually untaxed due to Apple having privileged corporate tax.
Thus, in conclusion, Apple paid little to no taxes on EU sales for ages.
What the EU contested wasn't that the whole thing was illegal, after all it's Irish business how much do they want to tax corporate profits (albeit as you can imagine the whole schema was to push for more trading, not corporate loopholes), but that Apple (and some other companies) got a special treatment compared to other businesses in Ireland.
Isn't sales tax (and/or GST also a tax) on consumers? GST is just in theory much simpler and cheaper to administer.
> The 400€s profit went virtually untaxed due to Apple having privileged corporate tax.
> Thus, in conclusion, Apple paid little to no taxes on EU sales for ages.
The standard VAT rate in Italy in 22%, so Google tells me. The real problem: Apple runs stores in Italy (and hence a business in Italy), but doesn't pay any corporate income tax in Italy. So, Italy is missing out on tax revenues.
That is definitely a difficult paper trail. If you make valves in Ireland they at least have to be shipped. Code just moves on the network. As do commands.
But wouldn’t Ireland see their taxes as “working” if Irish coders are being hired to do the work?
There’s absolutely no employment requirement outside of any PR deals that IE may impose on Apple to satisfy their citizens. The tax evasion scheme they used does not necessitate any real humans in any jurisdictions - it’s almost literally just documentation.
I’m not sure that’s the case. I worked for Irish subsidiary of a financial software company. Management openly said the main reason we were there was for the tax benefit. We cut standard code for the product, then once a year had to fill out a form describing the ‘R&D’ component of what we had done. As I understood it, that was required for the tax treatment we received.
You get a 33% tax rebate via a research credit. You probably filled out a form for PWC to attest to that. There's 10s of 1000s of Engineers directly employed in R&D in Ireland, spanning automotive, telecoms, fintech, SaaS etc.. with a large number of companies receiving the credit.
We have a HUGE network effect now via the Silicon Docks and the other tech hubs around Ireland - Cork, Galway and Dublin are absolute inundated with groups of companies in certain industries. Seven of the ten of the world's top pharmaceutical companies including Janssen, AbbVie, Eli Lilly, Pfizer, Merck/MSD, Novartis, and Thermo Fisher Scientific are based within 50km of each other in Cork.
AFAIU it’s a soft requirement so that IE can claim that losing taxes is offset by employing (a few) people. The actual tax structuring discussed in this case and similar for other FAANG, is all about where the company is registered vs making revenue vs paying taxes, and how none of it is intuitively what you’d expect.
.. thus removing a significant portion of income from these so-called tax havens, which generally tend to be poorer countries. No one has accused Germany of being a tax haven, for instance.
> so-called tax havens, which generally tend to be poorer countries
Smaller, not poorer.
Unless you think that current or historical "tax havens" like Ireland, Luxembourg, Netherlands, Switzerland etc. were/are poorer than Germany.
If you have less than a handful of million people even getting a few percent + several thousands of jobs from corporations like Apple is a huge deal. It would be a drop in the bucket for Germany so they have no incentives to make such deals.
> I think you make it seem like EU doesn't care at all about what member states do in regards to taxation
Did GP change the original text? The closest match I can find to your assertion is where they said "or non-EU readers, note that taxation is explicitly not a competency of the EU"
The EU directly writes tax legislation for countries all over the world with the use of their black and grey lists, which restrict companies in those jurisdictions from trading with the EU, or trading with companies that trade with the EU, or from using any banking in the EU or banking that is especially connected to the EU.
What’s interesting is that it’s common for governments to give tax incentives to companies that will result in driving more economic value for their region.
Eg Ireland might give a tax incentive if a large Fortune 500 company hires X people in Ireland.
Question: does this ruling prohibit that common practice?
There is a general prohibition on EU member states granting state aid to companies, but there are exceptions to this where the aid is justified in order to promote economically underdeveloped regions. There are a lot of rules and court cases about when state aid will fall on one side or the other of that line. See eg https://competition-policy.ec.europa.eu/state-aid/legislatio...
The Dutch government is spending billions to keep ASML in The Netherlands. To circumvent these prohibitions, the money doesn't go directly to ASML but is invested in better infrastructure, housing and education in the local area. More trains and busses to bring people to the company, better energy grid to power all the ASML offices, more money towards STEM studies of the local universities so they are creating the new ASML workforce, building extra homes so the company can hire more people.
Plus tax cuts for the employees of ASML, which is fully legal under EU legislation and prohibitions.
This seems like a pretty fair way to do it - the government invests in being a place worth staying in, rather than just subsidizing or lining the profits of the target business. If ASML left, it might blow up the economic model of tax + investment, but the constructed infrastructure and social assets would remain.
Not complaining! It's wonderful that we are finally getting investments in a better environment. And ASML provides a big boost to the economy as well.
But a bus line that goes from the train station directly to one company, together with housing that will be filled with the expats from ASML is obviously an (indirect) company subsidy.
I had to research this claim. It looks true for some. <<This allows certain workers recruited abroad to keep 30 percent of their income without paying tax on it for a period of five years as compensation for relocating.>> Ref: https://nltimes.nl/2024/03/25/cabinet-close-eu14-billion-pla...
The 30% ruling isn't specific to ASML, it's a general tax credit you get if you're a non-EU national that moves to the Netherlands (plus a bunch of other conditions) on a sponsored work visa.
> There is a general prohibition on EU member states granting state aid to companies
The EU hands out billions in direct aid to companies every year. Many times together with the country governments. So there's no such prohibition in practice. In the EU regions I am familiar with, at least 70% of companies live on getting subsidies from the EU mainly and income from actual customers as a secondary concern. And I'm not talking about agriculture, but every industry.
Few businesses will even start any economic activity before they've received at least a hundred thousand in subsidies and investment grants. Not loans, which is a different matter.
I think it applies only to aids for specific companies? e.g. if all companies that satisfies some requirements (e.g. N number of employees/new jobs , specific geographic area, industry etc.) cam receive the aid it's legal.
This said, if the incentives are tailored a bit too much (i.e. there is clearly only one company that satisfies the prerequisites), it could be challenged as state aid. You still need someone to start the challenge though - either a competing company or a Commissioner.
I don’t think Deutsche Bank has ever received direct state aid, they’re quite proud of that fact. Though they have benefitted indirectly when institutions that owed Deutsche Bank money received state aid.
To be clear: Germany also heavily subsidized a lot of other large companies, especially in the automotive industry during the pandemic but the politicians involved were mostly smart enough to hide this behind grants with tailor-made requirements that only incidentally happened to perfectly match those companies and few else.
At least VW and BMW have certainly received state aid in the past, mostly around opening new factories, but I can’t find anything where they got specific aid during Covid. Of course they were able to use support that’s open to all companies, e.g. Kurzarbeit, but that’s not considered state aid in the EU context.
Kind of. It's already prohibited, depending on what you mean. It would be legal to say all companies can have a tax break if they hire X people in Ireland. It's not legal to give the tax break to one company and deny it to another.
It does feel a little weird then that Apple is being fined here then? It seems like Ireland did the thing that's against the rules by offering the deal, not Apple? Obviously they worked on it together, but it feels odd that Ireland has now essentially gotten all the benefits of offering this illegal deal by having Apple do business there and now also gets all the back taxes that Apple probably wouldn't have paid to Ireland if they hadn't gotten the deal.
That seems like a bit of a perverse incentive for countries to offer deals they may know will get overturned later because they'll get the money eventually.
I read through the first part of the ruling to get a better idea of what happened. Apparently, Apple wrote to the Irish tax authorities, and said "this is how we plan to calculate our taxes" and the Irish tax authority said "okay, no problem, that works for us" and the EU commission investigated some years later, and said "wait, was that method of calculating taxes available to all Irish companies? We don't think so, so now Ireland has to collect taxes from all the way back many years." Ireland said "no bro, we're all good, they don't owe us anything", and Apple said "wait, we just did what we were told to do, and we already paid taxes on that income in the US instead of the EU, you can't retroactively change the rules" and the EU top court just said "Sorry, those tax rules go against EU law, and yes we can"
I kind of agree, but I'm not an EU citizen and don't have any say in EU laws, so whatever :) If I were Apple, I would be a little miffed at this situation, though. It certainly makes me question whether or not I want to ever expand into the EU. But tax laws are too damn complicated in most other countries too. so maybe just budget for government incompetence?
The EU isn't going to get the taxes (certainly not the vast majority of them). They just ruled that it isn't OK for Apple to have been given this tax break via specific accounting rules. It's Ireland that gets the windfall, whether it wants it or not.
Other countries in the EU, however, can sue ireland for taxes they missed out on. Which is probably what will happen. The money will be divided up over many countries.
On what basis exactly? Income is taxed where the company (Apple subsidiary) is headquartered, so they would have to prove Apple would have chosen a different country, which is not going to happen.
> you can't retroactively change rules ... yes we can
Hence, fewer US companies will have significant production in the EU in general, and possibly Ireland in particular. Let's hope it will help native European industries flourish %)
They didn't retroactively change the rules. They retroactively found a contract invalid. I'd file this under "play stupid games, win stupid prizes" as it sounds like Apple tried to talk Ireland into giving it special treatment that wasn't actually legally possible under EU law and the EU found out and told them they can't actually do that after Ireland agreed.
If I get a tax agency worker to sign me a piece of paper that says I don't ever have to pay any taxes, I can insist that they said so all I want but I'll still owe the back taxes when someone finds out because that person had no authority to say I don't.
Also capital flight doesn't actually work like that no matter how often people parrot it. Ireland is the European HQ for US tech companies because they need a European HQ to access the extremely lucrative market and Ireland is willing to go to great lengths (clearly including "agreeing to conditions they can't legally agree to) to attract them to go there in particular. If Ireland becomes less attractive that means they will be more likely to go elsewhere but their European HQ will still be in the EU/EEA because that's what it's for. This wasn't a case of Ireland competing for Europe where Ireland losing is a loss to all of the EU, it was Ireland competing against other EU countries.
> it feels odd that Ireland has now essentially gotten all the benefits of offering this illegal deal by having Apple do business there and now also gets all the back taxes that Apple probably wouldn't have paid to Ireland if they hadn't gotten the deal.
Yes, there's a widespread view in Ireland that this was the best possible outcome: be seen to fight tooth and nail to prevent collecting the taxes, but get them anyway.
> That seems like a bit of a perverse incentive for countries to offer deals they may know will get overturned later because they'll get the money eventually.
I'm not so sure of this, though. The companies aren't fools and have better paid lawyers than the countries, so they won't enter these deals unless they rate their chances of getting away with it.
Sure, I'm not saying this is going to be a likely fraud, but there's much more subtly illegal ways to offer stuff that may be worth the risk for a company and then the government then lobbies via backchannels for the EU to find it illegal.
> It seems like Ireland did the thing that's against the rules by offering the deal, not Apple?
Well, Apple accepted the illegal deal, didn't they?
> That seems like a bit of a perverse incentive for countries to offer deals they may know will get overturned later because they'll get the money eventually.
There's also a perverse incentive for companies to defer paying taxes for 20 years. Apple isn't getting fined, they're just paying what they owe 20 years late.
edit: apparently the years were 1991 to 1997, so that's about 30 years actually.
Sure, Ireland did wrong by insinuating to Apple that they could have special treatment when in fact EU law prohibits it, but Apple failed to pay the prevailing tax rates which can be demanded long after the fact. Ireland has sovereign immunity from tort in this case. They could legislate to waive their immunity for tax assurances which would create an interesting constitutional issue in the EU.
EU law supercedes national law. Ireland can legislate as much as they want, but if they ignore ECJ judgements stating that their laws are incompatible with EU legislation, they will be fined.
Yes, potentially, but my understanding by following this case and others is that the EU has no legislation on taxes other than non-discrimination. So there is no EU law to supercede Irish law.
If the government approached Apple, to offer them a special (specific to Apple) tax deal in exchange for X ... why is Apple now being held accountable for Ireland doings.
Tax Abatements are a long, well understood practice that's been leveraged by city/state/federal governments for decades to incentivize desired outcomes.
Look at Electric Vehicles (EV's)
Both California and Federal government were giving tax incentives for individuals who purchase an EV.
This tax abatement was used to incentivize the adoption of EV's.
Apple and Ireland maintain that is no record of "a deal", yet Apple paid 1% of what the law says they owed. The only beneficiary of that favourable situation is Apple.
Let's be honest, if this happened in any "less reputable" jurisdiction, Apple would definitely be under FCPA scrutiny.
> Tax Abatements are a long, well understood practice
Yeah, the kind of "tax abatement" that is available only to a select few.
It's simple, EU law says Apple had to pay taxes at that time. Apple's ignorance of EU law is not an excuse, this doesn't work for individuals, why should it work for big multinational companies? Ireland doesn't have the power alone to overturn these kinds of laws, unless, of course, they decide to leave EU.
Apple's decision to put their trust completely in Ireland officials and sidestep the EU is their own mistake. Reminds me of when Trump tried to arrange a trade deal with Germany without EU, which was impossible.
> Apple's ignorance of EU law is not an excuse, this doesn't work for individuals, why should it work for big multinational companies?
It’s worse than that. What was being ignored was Irish law. The EU just said that this law should be applied equally without the Irish government cutting special deals.
> Apple's decision to put their trust completely in Ireland officials and sidestep the EU is their own mistake.
Indeed. But it is not a terrible mistake: you should be able to take a tax administration at their word, even though you should also know what you have to pay in taxes. They are not really being punished, they just need to pay what they owe, which I think is fair.
In the case of conflicting laws, who prevails? If the Irish pass a law that Apple can not pay certain taxes, does that not override EU law? Usually in cascading situations, the more local entity wins, n
Ireland cannot do that. That’s literally the whole point of the EU (or specifically a single market)
Effectively - your hypothetical proposed ‘apple law’ would, at some point in the Irish law passing process, be found to be incompatible with their commitments to being in the EU, and I assume it would be then an unconstitutional law. The price of admittance to the EU is basically having this process and constitution.
Now - they could go ahead and do it anyway in which case the enforcement from the EU could range from anything to an angry letter to some large monetary penalty - as is the case with Hungary currently being withheld some funds.
I mean, isn't that exactly the case here though? Ireland's law said they could do this. The EU says that's wrong, and Ireland is seemingly getting a reward for doing something illegal that the EU didn't decide was illegal for almost 30 years?
Again, not disputing that this is legally accurate to how things work, but that definitely strikes me as an environment that a lot of businesses would find hard to work with. Other smaller startups I've worked with had Irish branches because it was a good way to hire devs and governments gave us some incentives. Finding out, potentially decades later, that the Irish government had screwed us over would be a lot more catastrophic than this fine will be to Apple.
They're not really getting a reward, because this makes them much less attractive for investment. Meaning less tax revenue in the wider and longer perspective.
I guess, but given this precedent, I doubt anywhere else in the EU is going to give a better deal, so all the companies where Ireland gave them illegal deals probably won't have any reason to move to Germany or Spain or Belgium. Ireland probably gets to keep their business and tax revenue going forward, as well as getting back taxes.
Does it make the EU/Ireland a little less attractive to foreign investment? Maybe. Was it worth the gamble in the end for Apple and Ireland - probably.
No, not generally in federative states like the US or specifically for Union competencies in the particularly weird confederal entity that is today the European Union.
The Union competency in question had been established by treaty - the establishment and protection of the Single Market, and as I understand it, specifically the provisions restricting state aid - where by being members of the Union, countries have delegated regulatory and judicial primacy to organs of the Union.
If there is a legal conflict, EU law trumps all, the same way federal law trumps local law in US. The highest court is always an EU institution. EU countries give up part of their sovereignty in specific legal areas, like market competition regulations. They can always leave if they want.
This depends, though. The EU does not have laws covering everything that national or local law might cover in its member states. In many cases the EU court of law is more like the US Supreme Court in that it is more about establishing whether a given legal decision is compatible with the basic law (e.g. human rights). It's more about setting the boundaries within which member states can make their own laws. So national law might say "X is illegal" and EU law might say "nations can say X is illegal" (or that they can't).
> Ireland doesn't have the power alone to overturn these kinds of laws
How was apple to know what ireland could and could not do? Why should they have to? Irish government said to apple that the rules are as such. The precedent this sets is that companies should not trust governments' words, instead each company should somehow interpret the laws themselves, each (surely) in their own way. Are we sure we want to set this precedent?
five accountants will produce six results from the same input based on the same laws, all of which the IRS will accept. Laws are not code. They are not unambiguous and noncontradictory.
And forget apple! This means that any company in existence now needs a lawyer who understands the Treaty of Lisbon! Just in case some EU country tells them to do X, they now need to know if said country can actually say so!
I think you underestimate the damage of "we cannot trust the actual government to tell us what we can and cannot do"
> any company in existence now needs a lawyer who understands the Treaty of Lisbon!
Hyperbole makes you look hysteric. The reality is that every other company is doing just fine, paying the tax they owe. The only companies who have to worry are shady ones like Apple (abusing tax-havens since the '80s, with Braeburn etc): it's now established that secret agreements with cosy governments will not be tolerated in the EU, as it should be.
Except this agreement was 30 years old and hasn't been effect for over a decade. Even if you think doing everything else right, how do you know some EU court next year won't find that something you did decades ago where you asked the local regulators for approval and they gave it won't be found to be illegal.
If you think Apple and Google are the only two "shady companies" who work with the governments of the countries they operate in to optimize their taxes, I'm not sure what to tell you.
Do you really believe Apple-Ireland is the only cosy tax-based incentive that any EU member state has offered to any international company to invest and operate locally in the past 30 years?
What's next? All the member states that offered attractive VAT rates when the regime was different years ago and doing so was advantageous retrospectively get reset to some baseline rate around the bloc's average and every company that ever paid VAT at lower rates in those member states gets a bill?
> Do you really believe Apple-Ireland is the only cosy tax-based incentive that any EU member state has offered to any international company
Cases are prosecuted if someone (either competitors or the Commission) thinks they're worth the trouble. Apple and Google were clearly worth it, simply because of the massive amounts of money involved - nobody cares if an ice-cream stall is foregone 100 euros. If you know of other worthy cases, feel free to take them up with the courts.
You're mischaracterizing the issue, by the way. The problem is the way one specific company was treated, which was not in line with the practices the Irish had cleared with the EU. Other companies were not treated like that and were just fine.
> retrospectively get reset to some baseline rate around the bloc's average and every company that ever paid VAT at lower rates in those member states gets a bill
That would be an extremely popular measure, politically, but there is currently no indication that the Commission or the ECJ will ever ask for that, and it has nothing to do with this judgement.
I don't see what you think is mischaracterised here. Lots of companies have received individual favourable tax treatments within the EU in ways that would not fly today. Several member states have historically established competitive tax environments at the likely expense of their fellow members too. As I said before it is unrealistic to argue as if Apple and Ireland is the only such case.
And I doubt that retrospective VAT change would still be very popular after trading with the EU became completely toxic - which is not an unrealistic outcome from such a hostile act. Businesses already avoid EU customers because of the existing environment. Retrospective demands for more money would be much worse.
Dude, seriously? You’re acting like Apple was clueless here. This entire controversy is about Ireland and Apple colluding for over a decade to avoid paying corporate taxes anywhere else in the EU. Nobody involved was ignorant of the potential illegality, rather that was deliberately the point.
Laws are also often intentionally written in such a way to be both hard to understand and ambiguous. Such rarely exercised laws are really only made manifest once tested by a court of law.
It's basically impossible to protect yourself via the word of law. Because when the rubber hits the road the judge can interpret whatever they want. Unless there is precedent even the best lawyers are just guessing.
That argument is quite a stretch when the EU tends to pass relatively ambiguous legislation and leave interpretation relatively open compared to for example the legal framework in the US, when it was not some random law firm but literally the relevant national government that gave Apple the OK, and when that situation was widely known and apparently accepted for about 30 years before the EU intervened.
I think the EU will pay a high price for actions like this. It is retrospectively moving the goalposts decades after the fact and trying to shift billions in funds when ironically neither the company paying the taxes nor the member state government apparently compelled now to collect them want that situation. You can't play games like that and remain a credible environment for investment and growth.
This particular action is specific to Ireland but by the nature of the EU its willingness and ability to take such an action in one member state taints all other member states as well. And without constitutional change to the EU itself there will never now be anything that any member state can ever do to remove that stain. Businesses now can't trust that any incentives they are offered to invest and grow in any EU member state won't get reversed further down the line no matter what any government of any member state says. It's hard to overstate how devastating that reality could become to member states trying to attract investment and grow their economies.
The other thing that worries me here is the EU's seeming willingness to both not intervene quickly and not provide ways for companies to know for sure that they're on the right side of EU laws until they do or don't get sued.
Creating an ambiguous business environment is unfortunately a recurring pattern with the EU.
A few years ago we had some fierce debates on HN about EU measures like the GDPR. Some claimed the regulations were excellent and compliance was easy if you weren't doing anything wrong. Some were more cautious and thought the length and frequent ambiguity of the regulations meant it couldn't be that simple. The strident defenders of the GDPR as lightweight regulation that should cause no significant costs or problems for honest businesses might like to read Mario Draghi's assessment of it from his report this week.
And much the same with Apple and the DMA most recently. Do I think Apple is being a bad actor re: the DMA? Yes. But it does also seem like the EU is doing a lot of "Well, just release your product and we'll tell you after you ship it if we're going to fine you for billions of dollars". You see this with things like the upcoming iPhone Display Mirroring features that aren't coming to the EU where Apple has said they're not shipping them in the EU because they think it would violate the DMA, and the regulators have just blasted Apple for withholding features but explicitly not said whether the feature is compliant.
Having companies afraid of massive penalties if they mess up is fine and good, but only works if the conduct you're trying to disincentivize is one you're ok with them not doing at all.
See also certain popular and state of the art models in AI, which are not available in the EU because of similar fears. Sometimes it's like the EU and its defenders think the EU is too big for businesses to walk away no matter how hostile the environment becomes. This is unrealistic.
> That argument is quite a stretch when the EU tends to pass relatively ambiguous legislation and leave interpretation relatively open compared to for example the legal framework in the US, when it was not some random law firm but literally the relevant national government that gave Apple the OK, and when that situation was widely known and apparently accepted for about 30 years before the EU intervened.
That is because the EU is not responsible for the member-states’ national laws, so they leave some room for different implementations. It’s on purpose.
In the case of Apple’s situation, it’s completely different. What is relevant is Irish law, which is clear and unambiguous. What was misleading was the behaviour of the Irish government.
> I think the EU will pay a high price for actions like this. It is retrospectively moving the goalposts decades after the fact and trying to shift billions in funds when ironically neither the company paying the taxes nor the member state government apparently compelled now to collect them want that situation.
They are not moving the goalposts. It’s more analogous to the IRS saying that there was an error in someone’s tax filings some years ago and that they need to pay the back taxes. Again, there is no fine here. The amount Apple has to pay is what they should have paid according to Irish law at the time.
That is because the EU is not responsible for the member-states’ national laws, so they leave some room for different implementations. It’s on purpose.
That's not quite how it works. The EU makes binding legislation in three different forms. Regulations - such as the GDPR - apply directly in all member states. Directives are the indirect ones that establish a principle but require member states to implement their own laws to give direct effect to that principle. Finally there are decisions, which are binding on a specific party such as a company or member state.
But the decision in this particular case wasn't (directly) any of those things. It was a ruling by the ECJ in a case brought by the Commission.
What is relevant is Irish law, which is clear and unambiguous. What was misleading was the behaviour of the Irish government.
But this is the problem. Tax systems are always complicated and open to interpretation in numerous ways. Large businesses are always required to make judgements about what they need to do to be in compliance with all of the relevant rules and always take advice from experts on these matters. What this action by the EU means is that businesses - including properly run businesses that have no intent to cheat anyone of anything - can no longer trust that following advice even from what should be the most authoritative sources they can ask will be sufficient.
They are not moving the goalposts.
The arrangements this legal saga has been about ran from the early 1990s for more than 20 years.
The EU started the legal action in 2016 when those arrangements had already ceased anyway and has spent about 8 years chasing it through the various courts and processes to reach this point.
If the IRS went after someone's tax filings from a year or two ago because they hadn't paid the correct tax that would be one thing. This is more like the IRS going after someone's tax filings from 30 years ago after allowing the arrangements to continue unchallenged with its full knowledge for a further 20 years and knowing that the the individual had already paid tax to another tax authority during that period instead because they weren't paying it to the IRS.
Except it's not really like that either because in this case it looks like it was the equivalent of the IRS that gave its blessing to the arrangements in the first place. So it's more analogous to some hypothetical higher authority coming along over 20 years after the fact and declaring that there was an error in someone's taxes that had been reported according to an agreement with the federal government and accepted by the IRS.
The IRS isn't comparable to this case because there's 2 entities at play, the Irish tax authority and the EU's.
I'm not too familiar with how exactly it works in the US so excuse the probably poor example, but this is more like Texas deciding that they want to attract businesses by saying they'd lower taxes a bunch. They say to the IRS "Hey, we're going to be lowering all corporate taxes to 15% across the board, is this good with you?". The IRS says sure, not knowing that what Texas is actually doing is making sweetheart deals with companies like Apple to have them pay a tax rate that is basically 0 (0.005% as is the case with Apple in Ireland).
This tax-free opportunity is only provided to a single company. The lying here is relevant, because Texas explicitly told the IRS they'd be charging every business at 15%, only to then make a special deal with Apple that's unfair to all other businesses and Apple's competitors.
A decade later (more like 2 in this case), the IRS investigates and sees there's been a discrepancy between what Texas said they'd be doing (taxing them at 15% like they said they'd charge every business) and what they're actually doing. So, the IRS says that's not allowed, and that Apple now owes Texas that unpaid tax income whether Texas wants to take it or not.
Texas doesn't want it because it makes them look like they're double dipping. Apple doesn't want it for obvious reasons.
> Eg Ireland might give a tax incentive if a large Fortune 500 company hires X people in Ireland.
If Ireland is willing to give the same tax incentive to any company hiring X people in Ireland, it's fine.
If Ireland only grants the rebate to Fortune 500 companies in a bid to lure specific US investment, it's the state creating a competitive distortion i.e. state aid.
It’s a final ruling. Not a current (over-)ruling as you paint it. This is a decision from the European Court of Justice. No appeal possible. The 13B€ are already in an escrow account and will now be released.
Brilliant of Ireland. They get the Apple (and Google and Microsoft, etc.) business with low tax rates, thus bringing a lot of money into Ireland. Worst case scenario, a decade later some 3rd party they cannot be blamed for gets them billions more.
I agree with your recollection. AFAIK the rules were changed years ago.
