So here’s an interesting question about Apple and tax

We’re going to have a parade of numpties saying they were right all along. And it’s obvious that I, myself, was wrong.

The thing is, can anyone find any of those numpties identifying the specific bit that the EU used here?

Yes, we’ve had Murphy shouting that tax should be where the sales are. But that was a line specifically rejected by the Commission’s report. We’ve had Murphy again shouting that IP shouldn’t be allowable and all that. And yet the Commissions specifically said that that was just fine. And if Apple paid more to the US for IP then their tax bill in Ireland would fall.

Is there anyone at all among those campaigners who got the excuse the Commission used correct? TJN? Sikka, Murhp, anyone?

42 thoughts on “So here’s an interesting question about Apple and tax”

  1. Yet Tim Cook’s letter says that “nearly all of our research and development takes place in California, so the vast majority of our profits are taxed in the United States.”

    Yet, there are $215bn of untaxed profits sitting offshore that are clearly not taxed in the United States.

  2. @Sinsei – and how many billions of profits generated in the US were taxed in the US?

    Is the “offshore” profit not largely sales profit?

  3. The large point here is not transfer pricing, booking sales through Ireland or whatever.

    The problem is that the Commission is assuming the power to effectively write a Bill of Attainder against a company that seeks to retroactively write National tax law, against the wishes of the member state.

  4. Isn’t this just another example of the EU creating EU law by the backdoor through a court ruling?

    The start of a EU federal tax code?

  5. @Salamander: Yes.

    Power grab.

    They already set a minimum VAT level.

    First it will be harmonisation of corporate taxation, then just wait for that to be extended to personal taxation.

  6. It seems to me (and I am clearly not a tax expert), that the Commission is acting as though fiscal consolidation acorss the EU already exists and that they are the ultimate tax authority.

    This is how they want to be able to act. Make the rules and then break them when it suits them.

    I’m glad the UK is getting out. Any bets on Ireland being next?

  7. I don’t think the EU itself is entirely sure of the legal basis for the sum demanded, despite official statements to the contrary. If the line is that the tax breaks in Ireland amount to State Aid it makes the viability of Luxembourg as an independent entity surely open to question, as almost its entire economy is based on having lower tax rates than anyone else.

    In answer to your question, you have already pointed out that Murphy’s two canards were wrong. I would imagine given his documented commitment to Green economics, People’s QE (or whatever it masquerades as now) that State Aid would not only be legal but actively encouraged so the exact piece of the law the EU used is not one I have seen cited by any of the usual suspects. It is possible the superb Noel Scoper might be able to find a tweet or old link where he condemned state aid as wrong but that’s more a function of his verbal diarrhoea than any coherent analysis.

    On a separate note, worth seeing your reaction to the second post on TRUK today re: globalisation – it’s not far short of advocating economic autarky so I’m guessing you might parse a Forbes column from it?

  8. If the EU stops Ireland attracting international companies with incentives and low tax rates that fucks Ireland’s one competitive advantage. Why stay in the EU?

  9. No State Aid, but you can have an entire fucking EU economic policy designed to protect French farmers.

    That Progressive, idealistic EU!

  10. Personally I’d tell the US treasury, the President and the members of Congress and the Senate to go and fvck themselves up the arse with rusty bargepoles.

    The most belligerent extra-territorial finer, penaliser, taxer and policemen in the fvcking world complaining about a legitimate attempt to deal with a defect in their own fucking tax system that they don’t have the balls to fix is just getting a very minor taste of the nasty medicine they pour down the throats of foreign-to them citizens and companies of countries all over the world on a continual basis.

  11. I’n confused.

    Is the tax situation that Apple have in Ireland available to anyone, given they meet the same criteria Apple do? If so how is their position any different to any special tax rule that a government introduces? For example the UK has R&D tax allowances for anyone who qualifies – does that mean every company that has availed themselves of those allowances has received ‘state aid’?

    It appears that the EU Commission are just saying ‘Company X has received Y benefit from lack of tax, ergo that is state aid’ regardless of whether anyone else has had similar benefit, or could if it qualified.

  12. Max, nice link, thanks.

    BraveFart – you seem to be of the opinion that “they wuz asking for it” is a legitimate defence. It’s not.

  13. I just remembered that the EU once did put a bill of attainder on a British cheese producer a while back (Bowland Dairy Products Limited, back in 2006).

  14. Geoffers

    Sorry I don’t quite get your interpretation.

    I am saying that the government of US rarely shows much obvious respect for the generally accepted principles of the rules of international law or the limits of its own sovereignty, so to that extent I say fvck em and well done to the EU for attacking a foreign US corporation in the same way that all departments of government in the US do repeatedly to non-US entities and citizens.

    As to whether the EU should have issued this demand for tax against Apple, that’s a different story all together. I am not saying one way or the other if I think that is right, although at this early stage I certainly think there are grounds to say the EU has a point in principle.

  15. @bravefart,

    You have a point in that the US regularly shakes down foreign banks and stuff, and believes that its financial domain extends far beyond its own borders, but that doesn’t excuse the EU for acting similarly as part of a power grab.

  16. @Jim “For example the UK has R&D tax allowances for anyone who qualifies – does that mean every company that has availed themselves of those allowances has received ‘state aid’?”

    Yes.

    R&D is classified as ‘a notified state aid’ and limited to 7.5m Euro per project under the SME scheme.

  17. I find it interesting that the Irish parties (except the loony lefties) are fighting this – a nice, rare example of long-term thinking from politicians, since it puts their entire model at risk and takes away legal certainty.

    The lefties, of course, are licking their chops at the glint of filthy lucre.

  18. Is it a defining quality of the left that they don’t understand how incentives work? I mean, obviously you could find counter-examples on either side, but still.

  19. Charlie Suet

    Oddly before I was persona non grata I trapped Murphy himself into admission that he is either a grotesque hypocrite or is wilfully peddling a false prospectus. I managed to get him to argue that disincentives do exist for low income earners. I of course (as almost everyone here would) agreed wholeheartedly and thus the logical corollary would be to reduce taxation on poorer members of society and thus the state itself? His response was to call me a troll and throw me off the site (at that time temporarily) but it was a rare moment where he found himself exposed prior to invoking the infamous ‘comments policy’.

    They do understand how incentives work (at least some of them) but they choose to ignore it as it ‘doesn’t fit the narrative they want to create’

  20. The US Treasury’s write up of the legal position last week is also very good. Basically (and amongst other things) the EU Commission has decided that it is entitled to form it’s own view as to how contracts between jurisdictions should be priced, which is contrary to the internationally agreed standards (as negotiated between democratically elected leaders).

    And these aren’t old standards either – the EU Commission’s view differs from the agreements reached as part of the OECD BEPS process in the last year or two.

    I’m nowhere near as anti-EU as most here, but this is the most grievous example of non-democratic overreach that I’ve seen from the EU. You should all be spitting blood.

    (Accepting BraveFart’s comment re: whether the US have any moral right to complain, but that doesn’t change the quality of the legal analysis).

  21. Is the gist of it that the profits are just resting in Apple Sales International’s accounts? They’re on their way to the US and will be taxed when they get there but haven’t quite got there yet.

  22. Jim

    “Is the tax situation that Apple have in Ireland available to anyone, given they meet the same criteria Apple do? If so how is their position any different to any special tax rule that a government introduces?”

    This is an extremely nuanced point, and one that is lost in all the write ups I’ve read.

    State Aid is a nebulous concept. The idea is that countries are able to set their local laws (tax and otherwise) across all markets as they see fit, but should not selectively subsidize businesses in a way that distorts international markets.

    So far, I think most here would support the blocking of inefficient government interference in the markets.

    In order to be State Aid, it has to be selective. Setting your tax rate at 12.5% for all companies is fine – offering a specific company a lower tax rate is not. You get very grey areas where lower tax rates are given in a targeted way – at what point is it too selective? Can you have a lower rate for technology companies only? Online technology companies only? Technology companies with fruit in their logo only?

    What Ireland are saying is that any business could have got the deal Apple did. What the EU is saying is that Apple got a special deal that they could have only got by having access to Ireland’s finance minister, which it only got due to its scale (and so a smaller company couldn’t have got that deal).

    What seems clear is that the EU has gone way beyond anything it has before. It appears to have decided the burden of proof doesn’t lie with the EU, but with the taxpayer and authority – they have decided that the deal doesn’t look “right”, and so it must have been selective. As far as anybody is aware, the EU hasn’t shown that the arrangements are contrary to Irish law. Which, if true, is extraordinary.

  23. but this is the most grievous example of non-democratic overreach that I’ve seen from the EU.

    Compared to sacking the Italian government, over-riding various referenda results, the appalling treatment of Greece and not sacking Drunker?

    Okay, I’ll give you the latter one. It is egregious but hardly non-democratic.

  24. “They do understand how incentives work (at least some of them) but they choose to ignore it as it ‘doesn’t fit the narrative they want to create’.

    They’d ignore gravity if it suited their narrative.

  25. “Compared to sacking the Italian government, over-riding various referenda results, the appalling treatment of Greece and not sacking Drunker?

    Okay, I’ll give you the latter one. It is egregious but hardly non-democratic.”

    The first few were all governmental decisions. The EU itself didn’t sack the Italian government; local governments ran the referenda and decided to rerun the ones it didn’t like; and the treatment of Greece was pretty much dictated by Merkel. Each may be influenced by the EU, or effected through the medium of the EU, sure. And you might not like the outcomes. But democratically elected leaders made those decisions, for better or worse.

    This is a non-democratically elected body (the EU Commission) deciding to wield a rule in a way that it was never intended to be used, to overrule a system that democratically elected leaders agreed to as recently as this year.

    I think this is a fecking disgrace, personally.

  26. I think this is a fecking disgrace, personally.

    Indeed.

    I’ll be in Manhattan tomorrow, incidentally. Weather looks good there for the next week or so!

  27. Bloke in North Dorset

    The test of whether or not Apple got special treatment and therefore State aid can be tested by seeing how many other technology companies complained. AFAIA the answer to that is a big fat zero.

  28. “I’ll be in Manhattan tomorrow, incidentally. Weather looks good there for the next week or so!”

    We’re entering the Goldilocks period from September to early December where human beings can survive outside.

  29. Forget Hitler… I read a comment on a Guardian article yesterday that stated with no irony that the British have always been anti European cohesion because we fought Napoleon. Lots of likes for it too. That’s how mental they are.

  30. Manhattan Brit sums up State Aid very well. So the answer to Jim’s question must be – MUST BE – no, this treatment isn’t available to everyone in Ireland. If it were, it wouldn’t be State Aid.

    However, State Aid and tax are not the same thing. The Commission itself acknowledged it had no jurisdiction over the transfer pricing elements of Apple’s arrangements or indeed it’s PE in Ireland. So the Richard Murphy’s of the world are talking through their right hands again.

    This will go now to the ECJ. It appears to be about the Irish accepting a false PE somewhere that doesn’t really exist; it seems to be following the UK’s DPT efforts but through litigation instead of State. The Commission’s problem would appear to be State Aid needs to be a conscious agreement with the authorities; just not checking returns very well probably won’t cut it.

    Finally, Manhattan Brit’s challenge is a good one: if this is State Aid then we all agree Ireland done bad, right?

  31. I don’t know enough about Irish or EU tax law to answer the posed question. What I do know is that the UK can’t get out of the EU fast enough. The biggest worry is that, given the current political climate in the US, you can’t look to us to save you from what appears to be building. We have our own problems with authoritarians and despite my best efforts we will have Clump to deal with.

  32. I haven’t looked at the specifics of the Clump that closely to know if it is that strain. All I know is that the chances of infection are projected to be virtually 100% in early November.

  33. Salamander:
    “Isn’t this just another example of the EU creating EU law by the backdoor through a court ruling?”

    Actually, this was not a court ruling, right? This was a decision by the commission, trying to establish a practice, but it will likely be tested in the European Court of Justice.

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