Re: The mistake the EU made..
There are two facets to this case, and you have them confused. Not surprising as you seem to be guided mainly by a dislike of Apple. Well, I’m not a fan of Apple either, but I do try to keep to the facts when I argue, and I suspect I know a lot more about the nature of Apple’s presence in Ireland in the 1990s than you do.
The first part of this case concerns the granting of a lower corporate tax rate to Apple. This was not a special deal for Apple; it was a a programme operated by Ireland in the 1990s which Apple and other exporting manufacturers took advantage of. The costing for that was based on company profits growing less quickly than headcount (something that was true in the 1990s), so any corporation tax foregone would be recouped in higher payroll taxes. That scheme was approved by the European Commission, and again the setting of tax rates is the prerogative of member states: so long as a member-state doesn’t intentionally under-run its exchequer, or remove VAT (a share of which is the primary funding mechanism for the EU itself), then that state can tap its revenue sources however it wishes.
The second part of the case is the creation of companies with no legal domicile. That hinges on a ruling sought by Apple from the Irish Revenue Commissioners about the legal status of certain subsidiary companies in Irish tax law. Those companies earned income from Apple’s IP, which was mostly developed in the USA. Under Irish law, the companies were not subject to tax, because they were headquartered in the USA. Now, let me explain the part that gets left out of these discussions: because of a loophole in US company law, the USA did not tax the income of those companies either, because they were incorporated in Ireland. The US tax authorities were aware of this; they were told so by the Irish tax authorities. The European Commission also knew of this arrangement at the time, and one can only suppose that, like their Irish counterparts, they expected the USA to tax the Apple companies (the revenues booked to those companies would be hard to argue as belonging to the European operations anyway, which were largely manufacturing, finance and logistics).
So in 2013, when Tim Cook had to explain why Apple, now a huge money-making business, paid so little tax in the USA, and he described this licencing company, the US government’s first reaction was not to change its laws to close the loophole and then tax the profits of the US-headquartered IP company, but instead to claim that Ireland was a tax haven, and then allow the situation to continue. However, this reawakened a long-running intra-EU argument about corporation taxes, particularly from France (headline tax rate: 33%, effective tax take after schemes and allowances: 8.5%) about the low tax rate in Ireland (headline tax rate:12.5%, effective tax take: 11%), and so the case began.
The Irish Revenue gave the judgement that the Apple subsidiary companies were okay based on the argument that the US would be able to tax the revenues there... it’s not really Ireland’s fault that the US has not acted to tax this kind of structure, and it suggests that there are too many people with too much to lose for the US to do this. Ireland, meanwhile, no longer allows that kind of company structure, but laws don’t apply retrospectively. It’s up to the US to tighten its tax law and claim that money.. why they don’t is a question that Americans can ask their elected representatives.
As for Ireland, its argument has always been that it made its actions clear all along, and that it could only make its risk assessment on the scale of Apple’s profits at the time, not now, and that a precedent that would allow the Commission to retroactively retract permissions whenever it decides that it doesn’t like the result of those permissions is unjust.
But you can imagine a shady conspiracy if you want. (Let me assure you, though, the Irish taxman is anything but lazy: simple rules leave no place to hide)
Biting the hand that feeds IT
