European Union regulators have announced in a preliminary ruling that the tax deals brokered between Apple and the Irish government may be constituted as illegal state aid, which would result in hefty fines in back taxes for the Cupertino giant. The deals in question were agreed upon in 1991 and 2007, and the EU Commission believes that these deals allow Apple to pay a much lower tax rate than normal.
The commission's preliminary view is that the tax ruling of 1991 and of 2007 in favour of the Apple group constitute state aid. That advantage is obtained every year and ongoing. Accordingly, the commission is of the opinion that through those rulings the Irish authorities confer an advantage on Apple. At this stage, the commission has no indication that the contested measure can be considered compatible with the internal market.
The EU commission has requested the Irish government for more information regarding its tax arrangements with Apple, and should the commission conclude that the deal is illegal, it can fine Ireland up to €1 billion ($1.26 billion). Apple, meanwhile, may be liable for back taxes from 2003 onwards.
Apple for its part has mentioned that it does not benefit unfairly from its deal with the Irish government. Here's the full statement as provided to Business Insider.
Apple is proud of its long history in Ireland and the 4,000 people we employ in Cork. They serve our customers through manufacturing, tech support and other important functions. Our success in Europe and around the world is the result of hard work and innovation by our employees, not any special arrangements with the government. Apple has received no selective treatment from Irish officials over the years. We're subject to the same tax laws as the countless other companies who do business in Ireland.
Since the iPhone launched in 2007, our tax payments in Ireland and around the world have increased tenfold. To continue that growth and the benefits it brings to the communities where we work and live, we believe comprehensive corporate tax reform is badly needed.
Along with Apple, the EU commission is also looking into the dealings between car manufacturer Fiat and the country of Luxembourg, as well as tax agreements between coffee chain Starbucks and Netherlands.
Source: EU commission; Via: Wall Street Journal
Reader comments
No Irish luck for Apple as EU commission deems tax deal illegal
Can iMore get someone who actually understands this stuff to write about it?
Should Ireland be really found guilty of offering illegal state aid to Apple - and remember this letter is just a preliminary decision - there are no fines to be levied on Apple beyond recovery of the amount of the state aid that will be determined to have happened.
Try this link.. Forbes did an in-depth look at it yesterday already. Basically, even if the EU says it's illegal, Ireland never agreed to join particular trade group that the EU is referencing and that particular bill wasn't in place in the EU until 2010..
So trying to go back to 2003 is a laughable stitch.. and Ireland see's its trade with corporate tax like the USA see's its Oil.. they'd likely leave the EU first. Mostly this commission is largely seen as a push from France and Germany trying to gain control of tax/trade leverage to get businesses to move into their countries.
Basically, it won't end well.. Apple is just a convenient big, red bullseye target they can push and pull and play tug of war with.
http://www.forbes.com/sites/timworstall/2014/09/29/the-european-commissi...
But 2003 was when AAPL profits seem to have really taken off, so it seems like as good a point in time as any.
Never mind no luck for Apple, this is fantastic news for EU member states which have lost many millions in corporation tax due to Apple's extreme levels of tax evasion. Of course others are guilty too - Amazon in particular, but Apple started this trend, and so they need to be made an example of. I hope the EU hits Apple with record fines, really do something spectacular, make them hurt.
While it may be just barely legal to avoid tax in this way, in doing so you deny huge sums of money to member states which could have been spent on hospitals, education, and many other things vastly more important than the profits of giant corporations. Tim Cook likes to portray Apple as a moral company, but its actions, from tax evasion to near slave labour in China, and of course to choosing to trade in countries with medieval human rights records, Apple is far from moral.
Nice phones though.
The EU can't hit Apple with any fine since everything Apple did was accept a legal agreement with Ireland. It's not like Apple forced Ireland so sign anything, it was all done within Irish law.
If your supermarket makes a legal offer to you, e.g. free milk if you do all your groceries there, no one can come later and fine you for accepting that deal... that's ridiculous.
Also if you believe any tax will go into hospitals and education I have a few bridges to nowhere to sell you...
EU can force Apple to return the illegal aids.
And if no tax goes to hospit6al and education, can you explain how it is paid?
Don't bother asking someone who spouts those hackneyed platitudes (e.g. "you think taxes actually go to public work? haha...") to actually explain them. It's the number 1 sign that they have no idea what they're talking about.
Ok why don't you explain to us what they do with all those taxes. Seeing according to you you know what you are talking about unlike the rest of us.
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here you go.
http://www.publicpolicy.ie/where-does-your-tax-go/
I used your link. The largest single chunk went to social programs. Congrats I guess?
I can't speak to how EU taxes are spent on infrastructure. I can speak of how it works in the USA. Usually something that already works is torn down to be replaced with something that may or may not work better, but that will definitely cost the taxpayers to build. Then either a buddy system is used to decide on who gets the "winning" bid, or more likely, the company willing to give the biggest kickback or bribe to the officials making the decisions gets the "winning bid." Finally, after several delays, a lot of inconvenience to the public, and plenty of "unforeseen" costs, we get our new construction.
I can give you another example of government graft. In my state we only order Dell computers for government offices because we have a contract. Is this contract with Dell? No, it is with a third party intermediary. So we get a great deal right? No, we could order most computers for 30-50% less if we ordered them directly from Dell. So why does this happen? So that someone can get fat off of the taxpayers. How do I know it happens? Because I am a government employee and see the expenses and invoices.
I'm not against taxes. I realize that the government does do some beneficial things. I also realize that these things have to be funded. However, I hate seeing my tax dollars wasted, not even on things that I don't care about. No, wasted by overpaying for things most people do care about.
I'm actually American myself, and I agree with most of what you're saying. I'm a liberal that does indeed agree with broad stroke tax reform. The current system allows for too much manipulation, as you have pointed out.
On the other hand, its foolish to imply that tax money isn't spent--at least in some portion--to benefit the taxpayers themselves. It's a shallow argument, and its often indicative of the amount of actual time the individual has taken to research the subject. I was able to find that link about gov't spending in Ireland in about 30 seconds on Google.
The EU won't see a penny, all that will happen is Ireland will charge Apple back-taxes, none of that goes to the EU..
The EU (France and Germany) are trying to make it less profitable in Ireleand for companies like Apple to try to 'coax' them to their countries..
Make no mistake.. This isn't about doing whats 'Right or Just' This is about getting big business into France and Germany and other larger countries..
They are effectively playing tug-o-war with multinationals like Apple.. This isn't about getting money as much as it is jobs and businesses to move to their countries.. They really don't have anyone's interests at heart but their own..
And all this has NOOO impact on Apple in the USA.. Apple already pays 26% in US for all it's USA based sales/business. That money stays here too.. All this really impacts is how Apple does business OUTSIDE the US..
And it won't make Apple bring the money back here either because we have such a stupid high repatriation fee of 35%, which is stupid high.. Candida is in low teens.. US is waaay behind the times and penalizes Multi-nationals for bringing cash home.. it should be mid-low 20's or LESS.. thats jobs, capital for more business here..
The whole thing is the politicians fault.. businesses will naturally go where they can save the most on taxes.. which is what a responsible business CEO is SUPPOSED to do..
Yeah which story book world do you live in. You really think the 'vast' amounts of money the EU collects from corporations going to really benefit its citizens? And you really think that the tax system we struggle under that squeezes corporations and steals from citizens is moral. Your naïveté is palpable.
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I really bet that those things are just to start flame blaits.
nos ane person can write such nonsense seriously.
Can tou explain who the fuck pays for education, healthcare, infresatructure, etc in the EU.
And, by the way, the EU don't collect a shit.
I don't see what the problem is. Can't an independent country choose it's own tax rates? I don't know much about EU law but that seems ridiculous.
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"Can't an independent country choose it's own tax rates?"
No, they have to follow EU rules
Simply not true. Countries set their own tax rates - personal, corporate, sales or otherwise. Thats why the EU is focusing on State Aid instead. They've been targeting Ireland's corporate tax rate for decades - unsuccessfully. What the EU forgets to point out is that CAP is state aid to farmers, 'BondAID' is state aid to EU banking institutions, and The Euro itself is state aid to the larger economies exporters.
Simply true, state members have to follow EU directives, EU Treaty Articles and EU Regulations
Maybe there wil be a joint IMF-Apple bailout.
I said in the other thread, what Apple is doing may be slimy, but it does not seem to be illegal. The EU's nearly impenetrable document does at least call that into question. Essentially, Apple is moving resources around internally from one jurisdiction to another, as most multinational companies do, to try and get the most money in favorable tax regions as possible. The EU has found that Apple has made significant transfers without there being any corresponding justification in reality. That would seem to tiptoe right up to fraud, if not be fraud. (This part begins at section 2.3)
I suppose the "illegal state aid" part would be that Ireland willingly went along with these schemes, but, in that case, it would not seem to be illegal by definition, since the government in question rubber-stamped it. Granted, as a member of the EU Ireland has to comport with EU obligations, but it seems...odd that the EU would hold Apple liable to pay Ireland retroactively for Ireland failing to live up to EU standards. You would think that, at best, the EU would tell Ireland to enforce those standards going forward, with the "lost" tax revenue as punishment, rather than levy fines to allow Ireland to collect what they were perfectly willing not to collect.
That would seem to give the wrong incentives, not just to Apple, but to EU member nations -- why wouldn't a country go along with whatever scheme a multinational proposes, and land some jobs for a few years, if, once exposed down the road, the EU will help you "recover" what you agreed to give up in the first place?
But I'm neither an accountant nor a lawyer, so this makes my brain hurt.
This is becoming increasingly used by the EU, and not just in Ireland. There are similar deals being examined in many EU economies, including sports. Clubs such as Real Madrid, Barcelona, PSV Eindhoven and Celtic FC are being investigated for state aid, and could be subject to fines by the EU and possible sanctions by UEFA and their national associations.
It will continue to be subject of investigation until tax laws are fully reviewed at Brussels.
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Tax evasion is a huge topic right now, and politicians know all too well that they can score bonus points here. Of course, the whole thing is totally bigoted, as all countries try to steal businesses from others; corporate tax rates, VAT, labour rights etc ad inf are all over the place throughout the EU.
Ireland offered great tax laws starting in the late 1980s, at this time there were no EU/EC regulations, to increase employment and stop young people from leaving the country in droves. Within a few years all big players at that time (MS, Dell, Gateway, Apple etc.) opened businesses in Ireland.
So, the whole topic is rather difficult. Some 'deals' may precede EU regulations altogether, some may precede applicable EU regulations at the time deals were made, and even for deals made when there was regulation, the question remains if they really are 'deals', or just a continuation of existing agreements. Yes, the current handling of tax matters may well violate EU regulations, but proofing actual guilt is another question.
Most observers do not expect any fines to be raised. Paying 'outstanding' taxes is also a difficult issue, as there is also the issue of government tenacity. Would Apple (and others) have stayed in Ireland if tax laws would have been different? Can you offer favorable terms and withdraw them later? How many expenses and investments throughout the EU have not been written off taxes just because there was no need to?
This will drag on for years, and, most likely, little will come out. There are enough places on earth that will happily host Apple's international operations, and there simply is no international law governing the allocation of profits (e.g. how much of the profit belongs to the US, as everything has been designed there, how much belongs to China where the device was built, etc; where can cost for R&D, support, iCloud services etc be accounted for). Chances are that we will not see a reasonable answer for all these things in our lifetime.
Most of the comments are pretty accurate. Other EU states want what ireland has. Paypal, EBay, Google, Microsoft, dell, dropbox, yahoo, Intel, apple..... ( and countless others I can't think of, not just tech companies but all the big pharmaceutical companies too) ireland has a low corporate tax rate which all these companies exploit ( which is not illegal) but they employ thousands and thousands of people in ireland who pay income taxes. That's what the other eu countries want, the workers tax money and the jobs not the company's tax money.
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Maybe they could, I don't know, be less ridiculous with their tax rates then? The U.S. is a prime example with the cost of repatriation of money. Why the hell would Apple ever bring that money back to the U.S.?
I feel sorry for everyone that has a VAT tax to deal with.