The long-running investigation into the legality of Apple’s tax arrangements in Ireland has been expanded, with the European Commission now seeking additional information from the Irish government, reports the FT. This means that the investigation is likely to be extended well into next year. A ruling had originally been expected before the end of the year.
While Irish authorities had expected the case to be concluded soon, they have instead been sent bulky sets of supplementary questions, meaning it will be difficult to reach a final verdict until after the 2016 election, which is expected as early as February […]
The Irish finance ministry confirmed that the government was supplying the requested additional information to the commission. “We do not expect any decision until after the new year,” said a spokesman.
If the ruling goes against Apple, it could face a bill for billions of Euros in underpaid tax …
Ireland was keen to encourage Apple to base its European operations in the country, and offered a special deal to the company. Instead of paying the normal 12.5% corporation tax, Apple would pay just 2.5%.
It should be noted that if the arrangements were found to be illegal, it would be the Irish government, and not Apple, found to have broken the law – by offering illegal state support to a business. Apple would, however, have to pay the back taxes accrued over up to ten years. The company warned shareholders of this fact back in April.
Similar arrangements with Starbucks and Fiat in Luxembourg and the Netherlands have already been ruled illegal.
Some had wondered whether Apple would maintain its presence in Ireland if the ruling went against it, but it was announced during a recent visit by Tim Cook (where a slip of the tongue caused some controversy) that Apple would be adding a further 1,000 jobs by mid-2017.
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AAPL taking a couple hits this morning. First the Morgan Stanley downgrade. Now an extended probe into Apple’s tax-shelter in Ireland.
What’s next?
Next, you buy AAPL stock. Duh. Watch rise, sell, rinse, wash, repeat.
But Carl Icahn is on Apple’s side.
He wrote this article in today’s New York Times. It would be great if he can get the job done.
http://www.nytimes.com/2015/12/14/opinion/how-to-stop-turning-us-corporations-into-tax-exiles.html?ref=opinion&_r=1
This appears to be a blackmail.
> it would be the Irish government, and not Apple, found to have broken the law – by offering illegal state support to a business. Apple would, however, have to pay the back taxes accrued over up to ten years
How the hell is this even legal in the first place? You cannot find a company for not breaking the law and for doing what was allowed by the government. That’s insanity to force the company to pay back because the government broke the law. Make the government pay the fine, so that they wouldn’t be tempted to lose more money again in the future.
Find > Fine.
That’s like saying your buddy that works at Best Buy sold you thousands of dollars of merchandise for $10 and you’re arguing you should be able to keep everything because it was HIM that broke the law, not you. Guess what, you still have to pay back everything!
The difference here is that Apple has not broken a law, or done anything illegal. They have paid every penny they legally had to. If the laws are incorrect, or need to be changed? Then you would start paying the new rate. Not 10 years worth.
This cries of “Well, we are the government, we have zero competition, and we can’t find a way to bring more money in, so? Sue Apple. They have plenty of cash”
But I PAID $10 for it. I didn’t steal anything. Not my fault he undercharged. HE’S the criminal.
If Apple knowingly accepted a lower tax rate knowing it was against EU regulations, then they are liable. No two ways about it. They’re responsible for following Ireland’s tax rules as well as the EU that Ireland is a part of.
Only it wasn’t illegal. In 2016 the EU will decide if it is illegal. Even as of this moment it is not illegal. Only now is the EU reevaluating the deal Ireland made to see if it might be. That is why the idea of Apple paying the last ten years of “back” taxes is so offensive.
The comparison with my buddy at Best Buy is flawed. It’s more akin to me buying something at Best Buy with no Sales Tax. Then a few years later the government establishing a Sales Tax and applying it to all sales over the previous decade.
That is so flawed, it is not even funny. I don’t even know how you think it is the same thing.
The buddy would not have the permission of Best Buy to sell these stuff for 10$, it’ll be criminal theft and yes, HE would have to pay for recovery costs on the losses. If the store intentionally sold it for 10$, then they cannot force you to pay back something they sold for 10$.
In addition, no, you would not be forced to pay back if you didn’t know reasonably that it was stolen. However, there is the keyword, REASONABLY. If you knowingly bought these thing knowing that it should be far more expensive, then yes, you can be charged with receiving stolen items but you would not be charged for paying everything back, you would have to return it.
Apple have to provide evidence that it did not know Ireland was breaking the law and Ireland has to provide evidence that what agreement it has with Apple was compliance with the laws.
EU is saying Ireland did not comply with its EU laws by giving Apple’s special aids by reducing the tax rate and Apple knowingly agreed to it. If Apple did not know that that such tax reduction was illegal, they do not have to pay back. If they did, then yes. That’s why EU is investigating to find the smoking gun.
Apple was cleared in a separate investigation was related to this, they were not ordered to pay back the previous 2-3 years worth of tax revenues in that case.
I agree completely but it’s not without precedent. The IRS has done this. I also seem to remember a case back in the ’80s when a shipping company was found to have illegally undercut their competitions prices, but once the case was settled, the customers were sent a bill for the difference.
But yes there are few things government does that I find more offensive than retroactively changing the rules and then penalizing people/companies for the “violation”.
If you can recall the name of the shipping company or this case, I’d love to read it. I’ve already read the other one below by Grayson Mixon and it was clear the other regulated public power company broke the laws as well as the state but the company was not charged to pay back but rather the state must refund the money that they took from the company’s ratepayers that was not authorized.
I wish I could but a search in Google hasn’t turned up anything. I remember a lot of talk about it on the financial radio shows when, and shortly after I was in college . Bruce Williams on NBC Talknet talked about it a number of times. I seem to remember (of course we’re talking like 30 years ago now) that the company had not been charging regulated fees and taxes. The customers didn’t know this and just booked with them to haul packages because they were cheap. The government then investigated, but the freight company declared bankruptcy and closed. Left with no entity to sue for what they were owed, the Government (Interstate Commerce Commission ??) went after the customers saying they should have known that’s why the fees were less than the other companies. Most of the companies were small operators who paid the fines rather than fighting simply because they could not afford to hire a lawyer. In any event fighting would have been more expensive than what was owed in most cases anyway.
Apple wouldn’t be fined, it would simply have to pay the difference between the tax it actually paid and the rate everyone else pays.
This is happening in the US right now. The Mississippi Supreme Court ruled that the Mississippi Public Service Commission violated the law. So, Southern Company has to pay back money. The logic is that if the PSC had not violated the law, Southern Company would never have collected the money in the first place. So, they are just putting right what once went wrong.
Same thing in this case. If Ireland had followed EU law, Apple would have paid higher taxes all along. They aren’t paying any more than they would have. They are just paying it all in one lump sum instead of spreading it out over the past 10 years. Although, it could be argued that spreading out the payments over 10 years is better than having to pay a large lump sum.
You’re talking about this one: http://caselaw.findlaw.com/ms-supreme-court/1705346.html
That’s the latest court finding I found but if you see a new one that changes everything, let me know.
Based on that court ruling, both PSC and Southern Company did not follow the laws, they both broke it and illegal took money from its ratepayers. Also, this was not tax related but rather overcharging customers with an increased rate that was not authorized for both companies. In addition, Southern company was regulated by the state as it is a power company. Apple isn’t.
In addition, Southern Company was not ordered by the court to pay back. They ordered PSC to do so. The PSC can order the company to charge less or whatever to refund the money in different ways.
Here’s what the Supreme Court said:
Where the PSC violated:
> Absent compliance with the Act, no legal authority existed to increase the rates. See Miss.Code Ann. § 77–3–105(1)(a) (Rev.2009). Ratepayers should not be bound by decisions made by the Commission which do not comport with the laws of our State. This Court will not condone the forced payments for rate increases not authorized by the Act or existing law. On remand, the Commission is hereby instructed to (1) fix by order the rates in existence prior to its order of March 5, 2013; (2) fix no rate increases until the Commission is in compliance with this Court’s opinion; and (3) enter an order refunding the monies attributable to the rate increases allowed by the March 5, 2013, Order. The Commission is further instructed to meet its obligations as set forth in the Act regarding all future proceedings. The decision of this Court does not foreclose MPC from seeking recovery of its financing costs through a rate increase, as long as the laws of our state are adhered to by the Commission. At the same time, as the Commission states in its briefs, the Act does not provide MPC an “entitlement” to CWIP recovery. If MPC never recovers CWIP, it still may seek to recover construction financing costs included in MPC’s AFUDC accounts, as traditionally has been done.
Where MPC violated:
> Ratepayers first received notice of MPC’s intent to increase rates after entry of the April 24, 2012, Order, when an increase in rates was a fait accompli. “[A]s a practical matter,” ratepayers should have been provided notice in the initial proceedings in order to protect their “substantial interest ․ [in the] outcome of the proceeding,” and if a ratepayer, after receiving such notice, desired to protect his/her interests, the ratepayer could do so by intervening in the proceedings. See Public Utilities Rules of Practice and Procedure 6.121. Yet ratepayers were not afforded procedural due process via notice.
> MPC not only sought rate increases but separately requested that the long-range rate-impact information furnished to the Commission be kept confidential, a direct violation of Section 77–3–37, which requires that information regarding changes in rates be “kept open to public inspection.”
Where both violated:
> The Commission improperly determined rate-impact information to be confidential, concealing from the ratepayers the amount of the projected increases. The Commission improperly sealed information to which the public was entitled.16 The Commission and MPC claim that, since a specific rate increase was not requested in the initial petition, it was proper to seal that information. That argument must fail, because the public has a right to know when and how much its rates will be increased at all stages of a proceeding. The Commission’s decision to govern in a cloak of secrecy and grant confidentiality to rate-impact information was arbitrary and capricious.
> ¶ 25. The Agreement also provided that the customers (ratepayers), who ultimately bear the majority of the risks of the project, would be credited with ten percent of any royalties derived from the sale of “TRIG ™ technology in the commercial electric power generation market,” although the Agreement fails to explain the allocation of the remaining ninety percent. The Settlement Agreement was the first public disclosure of that separate agreement.
> ¶ 26. No authority exists for the Commission to conduct public business in private. Pursuant to Section 77–2–13(4)(a), the Commission is forbidden from all ex parte communication regarding a “contested proceeding.” The argument that the case was on appeal is without merit. The private meetings clearly violate the statutes governing the Commission. The public has a right to see and hear its business being conducted. The rate increase resulting from the private agreement to dismiss MPC’s appeal and facilitate a refiling resulted in the increases being contested today. Because the Commission lacked authority to enter into a private settlement agreement, the agreement is unenforceable.
> Therefore, we reverse the March 5, 2013, Order granting the rate increases and order the Commission to enter an order confestim directing that the funds be refunded to the ratepayers. The Commission is instructed further to provide notice to the ratepayers in future proceedings related to rate base, rates, rate of return, and prudency hearings. We otherwise remand this case to the Commission for proceedings consistent with this opinion.
There’s also this:
> Based on principles of English common law, government has the right to regulate businesses charged with a public interest, for reasons discussed by the United States Supreme Court in Munn v. Illinois, 94 U.S. 113, 134, 24 L.Ed. 77 (1876), the case which marked the beginning of the constitutional price-regulation doctrine in this country, with its holding that Illinois had the power to fix the prices charged by grainelevator operators.20
The Irish Government has insisted that Apple did not get any “special deal”, and the Department of Finance has said that, “Apple has never received any special treatment from Irish tax authorities”. The European Commission may argue otherwise, but it’ll be up to the ECJ to rule on the matter.
https://www.irishtimes.com/business/economy/apple-case-will-stand-or-fall-on-backing-up-claim-of-no-special-deal-1.1829039
Ireland has more creative talent per head of population that any other nation on the planet, and it’s represented by many success’s, james joyce, wb yeats, oscar wilde, and many many more, why wouldn’t a smart company like apples not want to have a strong presence in such a country when creativity is the capital for all future success, it’s more than money, as oscar wilde said all those years ago, “they know the price of everything and the value of nothing!”, i wonder why….
“james joyce, wb yeats, oscar wilde, and many many more”
Hahahahaha that’s hilarious. Those people sound like they could really contribute to Apple’s operations…
what is creativity ben, what does new tech mean, what is people capital, what is progress, there is a lot to learn, happy xmas ben,
Who’s greedy now?
I really don’t understand these tax loopholes and why they are even allowed to exist. When “special deals” like this are granted, and I don’t care WHO they are granted to, it is completely unfair to everyone ELSE who pays the standard rate!
The voice of reason.
Unfortunately, you know as well as I do that most on most on here will disagree with you because the thought of Apple having to dip into their substantial profits and pay what they should of been paying (if it is ruled that that is what happened) is tantamount to those people having to dip into their own pockets.
It’s sad but people really do take things like this personally.
Ireland is acting rationally, and Apple is acting rationally.
2.5% of a giant pile of money is more than 12.5% of nothing. So, Ireland’s revenues are higher by cutting a special deal. Therefore, they are acting rationally.
The people in Ireland benefit because their government gets money from Apple that average people would have to pay if Apple wasn’t there. Therefore, they are acting rationally by electing government officials that cut these kinds of deals.
Apple pays less in taxes. Therefore, they are acting rationally.
The only people who lose money are other countries that would be able to tax that money if Apple kept it there. The thing is, all things being equal, the money would come to the US. So, no one else in Europe would be able to get it either.
So, the EU is the only party acting irrationally in this circumstance. If they create rules so that Apple can’t easily shop tax rates, then the money will just come back to the US, and the EU won’t get any part of it at all. It’s like they’re saying, “Leave, and take all your money with you.”
The EU isn’t a country? Corporation tax from Ireland does not go to the EU, therefore, your argument is invalid. The EU is acting rationally.
The EU is made of up of countries in Europe, and no country in Europe benefits from doing this. The only party that benefits is the US where the money will go from now on, all other things being equal.
For all of you saying it’s only right that they go back and collect 10 years of back taxes because the law in place they changed, or what have you, imagine that the government decides that the pre-tax deduction for 401k is no longer valid, and should never have been, so they are going to tax you this year for the past deductions they allowed you to take over the past 10-20 years, how would you feel then? The fact that Apple has so much money in the bank should have zero effect on the need to pay for the past.