EU to accuse Ireland of giving Apple an overly peachy tax deal – report The European Commission is set to accuse Apple of profiting from unlawful state aid from Ireland thanks to the sweet tax deals the firm has enjoyed for the last 20 years, a newspaper has reported. Sources whispered to The Financial Times reported (behind its paywall) that the EC’s antitrust authority will this week reveal some …
At the present time, they'd be foolish to do so.
They have a deal with a democratically elected Government. The US has a beef with said Gov over that deal. Until the Gov and the EU come to some agreement, then it is (And so it should be) not a matter for Apple or Microsoft or Adobe or Starbucks etc etc etc.
Apple might renegociate the deal with the Eire Gov or it might move to another EU Country (queue for EU cycle to start all over again)
But this is really a matter between the EU and the Soverign (or not if you are a UKIP fan) Goverment.
Personally, I'd like the EU to win here. Then Google might not get away with their slight of hand in the UK over where their orders are placed despite their salesteams being in the UK, paid in GBP and signing the contracts in the UK etc etc etc.
A more level playing field (are you listeneing Luxembourg....) would help all round.
The companies are just trying to get the best deals for their Shareholders. Nowt wrong with that.
This is indeed a matter of State Aids and whether or not the bounds have been exceeded. It is quite different from the separate issue of whether the US government should permit Apple's current tax arrangements.
Eire has basically repurposed itself as a tax haven, not totally successfully. They have presumably got away with it because they are small and the EU core countries don't want to be seen as bullying them. But times have changed and really it is time, as you say, that the EU (and the US) cleaned up their acts on a taxation system which means that your local shop pays far more tax as a percentage than does a large corporation. The original idea of the level playing field has been lobbied and bribed out of existence, and it's time for the pendulum to swing back.
"But this is really a matter between the EU and the Soverign (or not if you are a UKIP fan) Goverment."
You realise that Ireland and Northern Ireland are totally different right? Where UKIP have some very definite opinions on Northern Ireland they have nothing to say on the subject of Ireland, which is as it should be considering that Ireland is a separate sovereign nation and in no way falls under UKIPs purview or any British political purview for that matter unlike Northern Ireland which is a territory of the United Kingdom (though not part of Great Britain).
He wasn't saying that at all. He was using the term "Sovereign[sic] Government" to refer to the Government of Eire, which is correct, and he was alluding to the fact that UKIP say that the EU has destroyed national sovereignty in EU states, which is correct. Nowhere did he say that the UK owned the Eire government.
The issue of State Aids is between the EU and national governments. If the Aid is found to be illegal Eire will have to try to get it back from Apple (long sarcastic guffaw) or try and find it themselves (even longer sarcastic guffaw.) Quite honestly, it couldn't happen to a nicer collection of crooks and accountants.
And their employees benefits from security, social, transport and health services. These need to be paid for through the various tax systems, not just national insurance and income tax! All rules have "bugs" which means there will always be a way around them. No rule book can cover all circumstances. The basic concept is that we all pay taxes for national services that we all benefit from, unless you are Apple, Google, Starbucks etc
Or the law on State Aids.
The one coming out later this year is even more expensive. You practically need a State Aid just to afford the books.
Statistics always lag behind but if we take the time period 1994 to 2011 time Irish GDP increased by more than three times which puts a slightly different perspective on a three times growth in expenditure from 1997 to date. Expenditure inceaases in line with income - shock.
GDP per capita increased by 4.1 times over the same period (over 5 times in 2008).
Public expenditure as a % of GDP is what matters. Not the raw figures. Taking Ireland back to 1997 levels of public expenditure would cause social collapse like you saw in Greece.
That didn't happen and the economy's showing the strongest growth in Europe at the moment.
It most certainly is not. The last thing we need is harmonised taxes and it's not going to happen outside of the Euro countries.
What is needed is the end of the - EU sanctioned - arrangements where a company can domicile itself in one EU country and then pay all of it's corporation tax in that country. Rather, these companies (all of them, not just Apple or Google or Starbucks) pay tax in the country that the profit was made and not be able to claim that they made no profit in the UK because their nasty Irish (or Lux or wherever) parent company charged them lots for stock
I can't think why they'd be worried, the UK corporate tax is about average. If the EU rates were harmoised the higher rate coutries would have to cut it, the lower rate countries would raise it and we would stay about the same. As a major business center more business would be attracted to the UK because there would no longer be an incentive to locate in Beneluxir
That's a great idea in theory, but how are you going to decide what "lots" is, and what a fair transfer price should be?
If it was that simple, it would have been done that way when the EU was formed. But different countries have different costs for labor, energy, production/importation of raw materials, etc. so it was never going as cut and dried as you seem to wish it would be.
When you have a large multinational organisation with loads of subsidiaries it's impossible to define any law that would adequately apportion the profits across the different companies and countries.
If, for example, UK Starbucks purchase expensive coffee beans from their own subsidiary based on the other side of the world and the bean producing company makes a profit but the UK branch does not, do you really think some bean counter in Whitehall can devise a law that would fix a price for beans that would force them to make a profit in the UK? Who on earth can set a fair price for Starbucks coffee beans?
They've actually paid billions to Ireland, because "hardly anything" of the many billions they've made over the years (especially in recent years) adds up to real money.
The reason Ireland did this in the first place was to attract just this sort of trade in companies running their taxes through Ireland. Better to take a small bite of something than a large bite of nothing.
The loan they received was peanuts compared to what Apple has saved by "locating" to Eire, and peanuts compared to what Boeing has had in overpriced military contracts. From a document published by Maastrich university:
"It is evident that in the absence of state aid measures, Airbus would exist today in a much different form, if at all. Without being held artificially alive, the Airbus Consortium could not have achieved to become global market share leader in the LCA industry. Its American counterpart was obviously not pleased with Airbus’ increasing competitive pressure and started proceedings before the WTO’s dispute settlement body in 2004, claiming that Airbus had received illegal subsidies.
In how far is Boeing actually right with its claim? From an industrial policy perspective, it seems rather legitimate for the EU to aim at industrial competitiveness, growth and job creation."
In short, State Aids for Airbus promoted competition in the world aircraft industry and boosted the EU economy, rather than giving a profit boost to a US company. Airbus is an enormous European success story. Is that why you don't like it?
Well if we're going to get the house in order, lets do it right!
City of London on the chopping board for a start.
The French car industry and aerospace industry.
Full audit of everyone's effective corporation tax, including Germany on its own businesses.
Very few countries can really be too heavily critical.
I think what Apple and others are doing is quite frankly taking the %%%% however Ireland's #actual# low corporation tax rate is fair enough.
It's still an attractive location : English speaking, full Euro member, similar business culture and legal structure to the US and UK, access to huge pool of talent via local graduates and business friendly visa system and one of the most flexible and productive workforces in the EU.
Let's face it, you'd want to be bonkers to locate in certain EU countries due to incredibly inflexible labour laws etc
Apple and others are exploiting a loophole in both Irish and US tax law and declaring income elsewhere entirely.
The EU really doesn't have a mandate to harmonise tax rates. If it does enter that territory it would need total restructuring to make it fully democratically accountable which would need the European Commission replaced with some kind of Euro Senate and the parliament given a lot more power.
Without that, they're really straying into areas outside the treaties.
Also to say the Irish or other small countries don't have power in the EU is really not true.
Many further treaties can only be passed with agreement of the Irish people by referendum. If they think Brussels has screwed them over, nothing will pass ever again. That's a VERY big stick
This is a problem anytime you have different governmental bodies competing for tax revenue. It becomes a race to the bottom as undercutting what the "other guys" charge is worth it if you can get enough extra to make up what you lose from who you already have.
You even see this down to the local level. Not long ago where I live a large department store was induced to move from the mall in the town where I live to a new development in a suburb. It moved about 5 miles and got $15 million in property tax breaks to do so. It was worth it for the suburb, as even with the tax break they're getting a lot of tax revenue they wouldn't otherwise. Of course, next time my town might give a tax break to get someone to move from the suburb, and if it continues this behavior will destroy the large commercial tax base in both places and put more of the burden on residential property taxes - I'm certainly not seeing any offers for tax breaks if I build a house in the suburb and move there!
That's the problem with this - only the big boys can play. A small business, if even able to take advantage of the tax break Apple/Google/Microsoft/Intel/etc. do in Ireland, couldn't afford the overhead of accounting and legal expenses to make sure they're moving all the money around in the right ways and complying with any little changes in the law in Ireland or other EU countries.
The only solution is a government larger than the competing governments stepping in to prevent this. If my state government made a law banning this type of inducement, there won't be a war of attrition that reduces the commercial tax break and favors larger businesses over smaller ones that won't receive such inducements. If the EU banned the type of arrangement Apple et al have they'd prevent the possibility of another country coming along and undercutting Ireland's deal by providing them even lower taxes elsewhere.
On a nation versus nation standpoint, where there is no larger government, such as for instance USA vs Japan vs China, you have to hope market forces work because that's all you have to rely on. Where the market fails (and while Randians refuse to acknowledge the possibility, markets do indeed fail where there is not a truly level playing field, which is more often than not the case) you have to hope the outcome isn't too suboptimal.
"It becomes a race to the bottom as undercutting what the "other guys" charge is worth it if you can get enough extra to make up what you lose from who you already have."
That doesn't sound like a bad thing, or any different from other areas of competition: if, say, O2 offer me a cheaper mobile tariff, I'll jump - or get Three to match it as a retentions deal. There's a limit to how low either telco will go since they don't want to take a bath on it, but the end result is that we reach a price where neither of us is getting ripped off. Not a race to "the bottom" - just a race to the best price for both sides.
Even as regular individuals it happens now to some extent, particularly on a local level with council tax levels - just as it should: we can each make our own choices about levels of tax and spending.
It is a bad thing when it transfers commercial property taxes to residential, and large businesses transfer property taxes to small businesses.
When O2 offers you a cheaper mobile tariff, the money they lose giving you a discount doesn't have to be involuntarily made up by someone else. So no, it isn't the same thing at all.
b'lox?
All that the residents of a nation may wish and hope for is that their nation has reasonable tax system(s)?
It must - as in M-U-S-T - be screamingly obvious that every person in that nation is likely to agree to a minuscule increase in taxation just to keep me well paid and unjustifiably rewarded?
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