I've been asked what my reactions to the EU decision on Apple might be. These are some of them.
This is a great day for the sovereignty of the EU's nations when it comes to tax. They will now be able to choose their own tax policies knowing another state should not be consciously undermining them when doing so.
This might be the beginning of the end for tax competition in Europe, or tax warfare as it is better described.
Today might herald the creation of what Europe has always wanted, which is a level playing field on which all businesses compete.
Anyone who believes in markets should be welcoming this morning's decision.
Today's a good day for smaller businesses in Europe: they can at last begin to believe that they're getting a bad deal from states who are only interested in fostering big business at cost to Europe's real entrepreneurs.
The Irish state has for too long been committed to tax abuse, unfair competition and secrecy, all of which are designed to undermine fair competition and increase inequality. Maybe this is the moment when they will realise this is not longer a sustainable economic policy.
Ireland has long been considered Europe's tax pariah: now we know that's true. It's time for it to come in from the cold and act as a responsible member of the group of nations of which it is a part. Any appeal by it would be a big mistake.
If Ireland believes in free markets rather than abusive ones it will admit its past mistakes and not appeal this case.
I might provide an update when we know the numbers
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From the relatively little I have read, this appears to be a state aid case rather than a purely tax one.
Where do you stand on state aid as a matter of principle?
It seems to me the strangest of all laws, given it is a law that governs the conduct of the state itself.
If you love state aid, do lots of it.
It you hate state aid, don’t do it.
But where we have a bizarre mix. Outwardly it is banned. But the fun game in town is to use clever lawyers to find loopholes in the complex body of law. Similar mindset to tax avoidance — ‘how do we get around this’.
It’s a very complex body of law. I have briefed QCs on the issue and walked away feeling even they didn’t fully understand it.
I’m opposed to state aid for the reasons you set out. No single firm deserves special treatment over others, and the state should not be distorting competition.
Typical of the tax avoidance industry to invent false distinctions — now it’s “state aid” not “tax”. Of course it’s 100% about tax.
In national law, tax ruling is best understood as a conspiracy to defraud a foreign tax authority by the ruling tax authority and the company. If a finding like this is not fraud I don’t know what is:
“The rulings endorsed a way to establish the taxable profits for two Irish incorporated companies of the Apple group (Apple Sales International and Apple Operations Europe), which did not correspond to economic reality: almost all sales profits recorded by the two companies were internally attributed to a “head office”. The Commission’s assessment showed that these “head offices” existed only on paper and could not have generated such profits. These profits allocated to the “head offices” were not subject to tax in any country under specific provisions of the Irish tax law, which are no longer in force. As a result of the allocation method endorsed in the tax rulings, Apple only paid an effective corporate tax rate that declined from 1% in 2003 to 0.005% in 2014 on the profits of Apple Sales International.”
The EC’s competence is on state aid not breach of national laws. It is for national tax authorities that were defrauded by a conspiracy between Apple and Ireland to take civil or criminal action against Apple as the EC invited them to:
“In fact, the tax treatment in Ireland enabled Apple to avoid taxation on almost all profits generated by sales of Apple products in the entire EU Single Market. This is due to Apple’s decision to record all sales in Ireland rather than in the countries where the products were sold. This structure is however outside the remit of EU state aid control. If other countries were to require Apple to pay more tax on profits of the two companies over the same period under their national taxation rules, this would reduce the amount to be recovered by Ireland.”
The tax authorities of the OECD countries like HMRC and the IRS are in the pocket of big business and will do nothing. Those in developing countries may not have the expertise and resources to do anything.
Thanks Steve, I am not in the tax avoidance industry, so not sure to whom your opening line was directed.
The BBC and FT seem to be reporting this as a state aid issue – that Apple was offered a sweetheart deal not available to comparable companies, that presumably would have been just as illegal if Ireland had simply written Apple a cheque.
As I understand it, the Commission has no competence about tax, only state aid on this matter. If this is right, then this does seem to be about state aid.
It is about state aid
Are you seriously suggesting that you cannot see any difference between this case and a state aid by way of a one-off lump sum to rescue the steel industry, for example? This is a state aid ruling on TAX. You can have state aid on any number of subjects including tax. Tax and state aid are not mutually exclusive. As I stated the EC do not have competence on national tax laws but this decision is essentially about EU tax law. You will find the principles derived from the recent state aid decisions on Starbucks, Fiat and now Apple in any decent book on TAX because it is about TAX.
I can see all the difference
This was about Ireland aiming to undermine the law of other members states, in secret, to advantage one company
If you think that’s fair competition and results in optimal market outcomes you need to do some serious reading
As I stated in the beginning, I believe it is tax fraud. As it happens, Eva Joly was on BBC shortly after you and made the point that the French tax authority would almost certainly launch a Google style fraud investigation. Despite Tim Cook’s protestation, Apple settled a tax fraud case in Italy over the same double Irish structure last year.
So I do not disagree with you one bit. I object to the creation of false distinctions to legitimise tax fraud. Once the EC made clear that there was UNLAWFUL and ILLEGAL state aid, which demolished the mantra that “tax avoidance is legal”, I expected the apologists to seek to make the tax/state aid distinction. That’s all.
Understood
Eh? European countries are free to decide their own policies as long as they aren’t more business friendly than another country? So everyone has to have the same policy?
The ruling makes clear they are not allowed to secretly exempt companies from tax anywhere
…… but surely until someone has the moral courage and debating skills to convince the 27 to adopt a copperbottomed pan european common tax policy for direct, indirect, corporation and inheritance, member states can do what they like and multinationals will duly continue to exploit loopholes and cherrypick!
Twas ever thus…… and probably forever will be ( vide Monaco , Labuan, Vanuatu , Mauritius, Montevideo , Delaware, Wyoming , Arizona et al)
And I suspect that we agree that an open, fair and consistent tax system is essential in most circumstances.
But your comment was not directed at a country providing a consistent tax environment, it was about not allowing tax competition between countries. That is, towards harmonised taxation.
Very different from secretly exempting a business from tax.
I described very accurately what Ireland did
You’re just dissembling
And shortly on BBC News Professor Michael Devereux, tax expert, will be giving his pearls of wisdom to the masses. Expect a pass for Apple and the Irish govt…
Let’s see!
Heard Cato’s Dan Mitchell on radio earlier. What a useless interview.
1. He kept saying that the ‘plan’ was open to any multinational – no query as to why just multinationals get the privilege.
2. He said that governments don’t know how to spend money – no question of making a contribution to the infrastructure and services which the multinationals use.
3. He reckons the solution to a level-playing field on tax is to abolish CT altogether – no question as to where the taxes to pay for infrastructure will come from – no question of where the third world countries, where they make profits, should get their revenues from.
Why on earth don’t they put up competent people (like you, Richard) to interview them?
Oops, nothing to do with third world countries, just EU.
What station?
He really is hopeless
Must have been Radio 4 PM programme (I was at the gym – distracts me from the boredom and awfulness of exercises).
🙂
I heard it too and was shocked that Bbc. Gives air time to such views. Balanced reporting? Ha.
Have to say that if I was an Irish voter who had been through austerity and half the young people in the country emigrating I’d be hopping mad at the sight of politicians racing to fight this ruling.
So would I
The Irish government says it doesn’t want the £11bn!
Richard, as much as anything, this result is a vindication of your work. £11b for a result isn’t that bad!
I should ask for a cut
Apple shares down just 0.96% today. A potential interpretation: One giant step for national governments, one small blip on Apple’s balance sheets.
Maybe Luxembourg, and the Netherlands will receive big tax bonuses too!
Richard – is this what is called paying the right tax in the right place at the right time ?
Fintan O’Tooles article is ib broad agreement http://www.irishtimes.com/opinion/we-should-collect-apple-s-13-billion-and-change-ireland-1.2773136 and may explain some of the historical perspective. With a 26% GDP growth rate last year Ireland needs to rethink most importantly in the wake of Brexit.
As usual, Fintan is right
It looks like there will be a meeting of the Cabinet of the sovereign Irish government shortly, and they will be appealing the decision.
( Sent from my iPhone 5 )
For readers sakes, this would appear to be the Irish finance minister
But I cannot confirm that it is not a spoof
If there is no longer tax competition does this mean the equalisation of all tax rates. And if so at what level? Does every country automatically impose the highest possible tax rates and then expand their public sector to fill the gap, or do some countries reduce their taxes and public sector?
That is for their people to decide
You may have heard of the ballot box. If not, try reading about it
But what is not true is that corporations working from captured states should impose a uniformity, as is their aim now
And if the Independent is to be believed, the government sees this as an opportunity to attract Apple to the UK. Confirming suspicions that the Brexit camp see this as a great opportunity to turn the UK into even more of a tax haven than it is already.
No doubt the EU negotiators of Brexit will be taking that prospect into account in their planning.
I fear that your good work may be better appreciated in the EU than the UK, Richard
The Brexit camp probably have no clue about the OECD and the Base Erosion and Profits Shifting progamme that we have signed up to