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Ireland says it's not responsible for Apple's low international tax rate

post #1 of 45
Thread Starter 
With Apple under fire for its low international tax rate thanks to corporate subsidiaries housed in Ireland, the Irish government has spoken out on the matter, saying its laws are not to blame.

Cork
Apple's headquarters in Cork, Ireland, via Flickr user Sigalakos.


Ireland's Deputy Prime Minister Eamon Gilmore issued a statement to broadcaster RTE on Tuesday, defending his country from accusations that it has functioned as a tax haven for Apple. The Irish government is not responsible if Apple's tax rate is too low, he said, according to Reuters.

"They are issues that arise from the taxation systems in other jurisdictions, and that is an issue that has to be addressed first of all in those jurisdictions," Gilmore said.

Apple's presence in Ireland has been scrutinized by a report from the U.S. Senate Permanent Subcommittee on Investigations, which found that subsidiaries owned by Apple were used to purposefully avoid paying billions of dollars in domestic taxes. The report alleges that Apple moved billions of dollars in profits to affiliate corporations such as Apple Operations International in Ireland,w here the effective tax rate is less than 2 percent.

For its part, Apple has argued that it pays the appropriate taxes on every product it sells within the U.S. In a testimony published on Monday, the company said its substantial amount of foreign cash, which now exceeds $100 billion, exists because the majority of the company's products are sold outside of America.

While its international tax practices face scrutiny, Apple has pushed for legislators to consider comprehensive tax reform in ways that might allow the company to return some of its $102 billion in international cash to the U.S. at a reasonable tax rate. The company has argued that the current tax code was written for the "industrial era," and that it is actually harmful to businesses in the modern "digital economy."

Of course, Apple is not the only company that has set up operations in Ireland for its favorable tax laws. Other major U.S. corporations with a presence there include Google, Microsoft, Facebook, and Amazon.

Many of those companies were also under fire last year in the U.K., when a report alleged that Apple paid ?10 million in corporate tax on estimated sales of ?6 billion. Apple and others have a presence in the town of Cork, Ireland, where the local tax rate just 12.5 percent, or about half the 24 percent corporate rate in the U.K.

One analysis of 60 large U.S. corporations conducted earlier this year by The Wall Street Journal found that together they held $166 billion in earnings offshore in 2012. Apple alone accounted for just under a sixth of the analyzed group's total, and that cash sum has only grown in the months since.
post #2 of 45

Quote: "They are issues that arise from the taxation systems in other jurisdictions, and that is an issue that has to be addressed first of all in those jurisdictions," Deputy Prime Minister Gilmore said.

 

Or as the late, great Irish comedian Frank Carson used to say... "It's the way I tell 'em!"
 


Edited by Fotoformat - 5/21/13 at 8:13am
post #3 of 45

They're just following Rick Perry's example!

post #4 of 45

I expected Cook's push for corporate tax reform would be well received by at least some senators. The senate's preemptive strike against Apple indicates the ring masters were not sufficiently paid off for Tim's performance at the circus.

post #5 of 45

I doubt Samsung lobbying here.


Edited by Chandra69 - 5/21/13 at 6:02am
post #6 of 45
Apple is smart
post #7 of 45
Quote:
Originally Posted by Chandra69 View Post

Move entire Apple base from US to Ireland. 1cool.gif

I presume this is what they call tongue in cheek humor? Because the US is well served with its 50,000 employees, paying taxes from their / on their income, paid by Apple.
Quote:
Designed in Ireland. Made in China.

Copied in Korea.
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post #8 of 45

This whole thing is getting ridiculous.

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post #9 of 45

Each government sets its own tax rates to meet its own needs. Ireland's government is apparently frugal with the money it takes in. Why should they raise their rates—and thus, lose a competitive jobs advantage for their country—just because spendthrift governments aren't willing to control their spending? And why should an international company limit themselves to only those countries with exorbitant or even punitive tax rates?

post #10 of 45
Quote:
Originally Posted by Apple Insider 
The company has argued that the current tax code was written for the "industrial era," and that it is actually harmful to businesses in the modern "digital economy."

I agree with this. There simply is no reason for an American company to bring earnings it made overseas back to the US if it's going to get a 35% hit. If the US government wants a piece of that growing pie they'll need to make it attractive to bring that cash back to the US.

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post #11 of 45
Quote:
Designed in Ireland. Made in China.

 

Back in the early 80's it was "Designed in America. Made in Ireland by Apple."

 

Why should Apple leave a country they've had a presence in for more than 30 years just because our government is greedy?

post #12 of 45
Quote:
Originally Posted by EWTHeckman View Post

Each government sets its own tax rates to meet its own needs. Ireland's government is apparently frugal with the money it takes in. Why should they raise their rates—and thus, lose a competitive jobs advantage for their country—just because spendthrift governments aren't willing to control their spending? And why should an international company limit themselves to only those countries with exorbitant or even punitive tax rates?

Its not that though. Ireland has a double taxation agreement with Bermuda - which it is forced to do by international agreement - and Bermuda is a tax haven. That is, unlike Ireland, where Apple have had a significant industrial presence since before the Mac was even built and has built the European products until recently - when FoxConn took over - and where it is still the entry point for Apple's products to Europe; Bermuda has no Apple employees, and just a post box. Bermuda is also a non-transparant country in terms of it's laws, and accounting practices.

 

 So if anybody is being screwed it is Ireland in terms of European profits.

 

However Bermuda is a UK dependency and they can control it. 

 

The way that Apple avoid tax in Ireland is by transferring the IP to Bermuda, and then Apple Bermuda charge for the IP per device built. 

This is legit. Most of the value added in a Mac, or an iPhone is the brand, the software, and the design. All IP.

 

The US could argue, and make international agreements, that IP should be non-transferable to any country except

 

1) The founding country of the company with the IP, regardless of where the IP is created.

2) Any country where IP is created can keep it, or transfer it back to HQ.

 

This would probably make all American companies pay more tax in the USA. If they all do, then it becomes moot. Unless the US reduces it's tax though, it would give Samsung et al. a huge advantage.

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post #13 of 45
The cause of the US problem lies with the US, and it's entirely up to the stupid Congress to fix it (although, Obama is also showing utter lack of leadership on the issue).
post #14 of 45
Quote:
Originally Posted by EWTHeckman View Post

Why should Apple leave a country they've had a presence in for more than 30 years just because our government is greedy?

I would say they aren't being greedy, per say, but merely unreasonable. I'd think the more greedy move would be to maximized the actual taxation. With the current tax laws that means they get 35% of $0 from moving the funds back to the US, as well as $0 from whatever taxation would happen as those funds are then used in the US. To me, the more reasonable move would be to actually be greedy by reducing the tax rate to the highest possible point that will get the maximum amount of funds coming back to the US.
Edited by SolipsismX - 5/21/13 at 7:21am

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post #15 of 45
Quote:
Originally Posted by JollyPaul View Post

I expected Cook's push for corporate tax reform would be well received by at least some senators. The senate's preemptive strike against Apple indicates the ring masters were not sufficiently paid off for Tim's performance at the circus.

 

Or the ringmasters on wall street are truly mastering the ring... to avoid more reforms on banks and financials (who don't make stuff), they are pointing to a company that until a month ago didn't borrow money (the payoff to the ringmasters) yet made money by actually selling something that consumers and business want.

 

The senators are puppets, waiting for their deferred compensation by corporate/financial leaders here and abroad.

 

As for Ireland... the fact they allow 'flagless' corporations to exist is a loophole a mile wide, and the 'double irish with a dutch sandwich' usually with a carribbean  bank as the transfer agent has existed because Ireland was reeling on insolvency and was inventive in it's corporate tax code to bring in new business in the 80's  (this 'scheme' evolved almost 30 years ago, and Apple back then was one of the first to use it, but so were most pharma companies, GE, Microsoft do it as well)

 

So to that end, JollyPaul is right... Apple didn't pay off the ringmasters, like Google, Microsoft, GE, the Banks, Big Pharma, even Starbucks.  Its brutal independence from wall street, from Main stream media has made it the target to distract us from what would really reform tax, banking, and securities policy.  But for Senators, who 'next' job is one of 2 things:  National Office or Lobbyist, and there are only about 4 'real promotion' jobs every 4 years for the 1st, so, every major hearing is a job interview for a lobbyist position.

post #16 of 45
Irish laws are "not to blame". Blame for what? What *exactly* is the issue?

Quote:
go4d1

2013/05/21 08:50am

They're just following Rick Perry's example!

My apologies for being so dense, but huh? Can you please elaborate?
post #17 of 45
Quote:
Originally Posted by SolipsismX View Post


I agree with this. There simply is no reason for an American company to bring earnings it made overseas back to the US if it's going to get a 35% hit. If the US government wants a piece of that growing pie they'll need to make it attractive to bring that cash back to the US.

For some reason, the U.S. thinks that 35% of nothing is better than 12% of something!

post #18 of 45
What the Feds should do is just tax whatever is brought in at a comfortable 5% and leave them alone. It's still $5 Bil if they brought it all in. And then leave it capped at 5% for everyone, and then stop the WITCH HUNT.

They are wasting tax payer money on these lawsuits, but I guess they have attorneys that need money.
post #19 of 45
Quote:
Originally Posted by EWTHeckman View Post

 

Back in the early 80's it was "Designed in America. Made in Ireland by Apple."

 

Why should Apple leave a country they've had a presence in for more than 30 years just because our government is greedy?

I know they had assembly plants in Ireland, they also had one in Fremont, Elk Grove and a few other places to my knowledge.

post #20 of 45
The greedy politicians see $ signs. If doesn't matter how illogical their argument is. The money Apple has "over seas" was money earned over seas. The products weren't even manufactured in the US, let alone sold there. The American government isn't entitled to one penny of it.
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post #21 of 45

Obama's lack of leadership represents an opportunity for the Republicans. Why are they silent? Could it be they engineered these loop holes?
 

post #22 of 45

Samsung sells products all over the world. When they bring profits from those sales that were already taxed overseas to the US, not only do they not have to pay any taxes on that money, they get tax incentives to invest in selling in america.

Apple sells products all over the world and pays the appropriate taxes all over the world for those sales. If they want to bring that money into the US, they will be slapped with a 35% corporate tax on products manufactured, distributed and sold outside of the US. Apple is in the process of moving full production of a product line to the US. Rather than being able to use their own money as their rival Samsung can do, they have to issue bonds to fund it.

In a global economy, why do American tax laws put American companies ad a disadvantage when competing with foreign companies in America.  And why do they want to extend that disadvantage worldwide?

post #23 of 45
Quote:
Originally Posted by drblank View Post

They are wasting tax payer money on these lawsuits, but I guess they have attorneys that need money.

Congress just like to grandstand. They enjoy hauling citizens before their public tribunals. Those people in the capital are moving further away from being representatives of the people every day, and turning themselves into performers and panderers.

post #24 of 45

I'm sure someone here will educate me , but I don't know why we tax corporations on their profit.  It seems to me that the government already taxes these profits when these profits are passed to the individual - either through dividends paid out or through sale of shares.

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post #25 of 45
Quote:
Originally Posted by EWTHeckman View Post

Each government sets its own tax rates to meet its own needs. Ireland's government is apparently frugal with the money it takes in set its rate too low and brankrupted itself.

 

Fixed for you. Ireland won the race to the bottom and ran out of money. Well done Ireland.

post #26 of 45

post #27 of 45
Apple need answer only one question in this whole affair; did Apple do anything unlawful?

If the answer is "no" the matter should be dismissed..

This is a business issue note a moral issue. Washington, it would seem, is treating the morality of the matter as it might a legal one. Consider they are all wasting our money in federal funds to "investigate" Apples' business practice.

What are they REALLY seeking?
post #28 of 45
Quote:
Originally Posted by Ireland View Post

The greedy politicians see $ signs. If doesn't matter how illogical their argument is. The money Apple has "over seas" was money earned over seas. The products weren't even manufactured in the US, let alone sold there. The American government isn't entitled to one penny of it.

 

And if it's limited to that, I completely agree. I think the implied accusation is (although I don't know if anyone has actual evidence of it) that Apple is funneling profits from US sales offshore in order to avoid paying US taxes on it. One supposed method would be to transfer [some nebulous] intellectual property from Apple US to Apple Ireland. They could do this for free or at a bargain basement price...Apple Ireland pays Apple US some token fee for the IP. Then Apple Ireland "licenses" the IP back to Apple US, for example $100 per Mac for whatever the IP covers. Apple US can then claim that as a business expense and deduct it from their revenue. So they pay no US taxes on that $100 and Apple Ireland pays the lower Irish tax on the $100 instead. I'm not saying Apple is doing this. I haven't read enough supposed evidence to make any judgements. And if Congress is suggesting that Apple owes US taxes on overseas sales of actual products, then I completely agree with the above that US should keep it's hands off. But if there is an IP shell game going on, then perhaps it needs to be addressed with new regulations (but I haven't the faintest idea what that might look like). And this is hardly a new thing and certainly not limited to corporations. How many parent's have transferred ownership of a $10,000 car to their kid for some ridiculously low price like $500 in order to avoid paying the transfer/sales taxes to their state?
post #29 of 45
Quote:
Originally Posted by SolipsismX View Post

I agree with this. There simply is no reason for an American company to bring earnings it made overseas back to the US if it's going to get a 35% hit. If the US government wants a piece of that growing pie they'll need to make it attractive to bring that cash back to the US.

But even an 'attractive' amount is double taxation ... given the income was already taxed in the country it resides, wouldn't taxing it again here seem a bit un American, kind of 'Taxation upon Repatriation' or some such catchy phrase?
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post #30 of 45
Quote:
Originally Posted by Wiggin View Post

And if it's limited to that, I completely agree. I think the implied accusation is (although I don't know if anyone has actual evidence of it) that Apple is funneling profits from US sales offshore in order to avoid paying US taxes on it. One supposed method would be to transfer [some nebulous] intellectual property from Apple US to Apple Ireland. They could do this for free or at a bargain basement price...Apple Ireland pays Apple US some token fee for the IP.Then Apple Ireland "licenses" the IP back to Apple US, for example $100 per Mac for whatever the IP covers. Apple US can then claim that as a business expense and deduct it from their revenue. So they pay no US taxes on that $100 and Apple Ireland pays the lower Irish tax on the $100 instead.I'm not saying Apple is doing this. I haven't read enough supposed evidence to make any judgements. And if Congress is suggesting that Apple owes US taxes on overseas sales of actual products, then I completely agree with the above that US should keep it's hands off. But if there is an IP shell game going on, then perhaps it needs to be addressed with new regulations (but I haven't the faintest idea what that might look like).And this is hardly a new thing and certainly not limited to corporations. How many parent's have transferred ownership of a $10,000 car to their kid for some ridiculously low price like $500 in order to avoid paying the transfer/sales taxes to their state?

Taking your last sentence ... or how many members of the US Government have sold a house or a boat to a relative at a fraction of the worth?

Meanwhile I am interested to see if there is any proof Apple moved funds off shore which is almost evasion I'd have thought. I was, perhaps naively, assuming that wasn't the case.
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post #31 of 45
I don't think that's naive, it's what I understand from all these proceedings. And I agree with Sol as well, Apple shouldn't have to be taxed again if they already paid their tax in the countries where they made a sell.

Besides, if they invest in B&M Stores, I'd assume they pay that from their local banks in that country and not have the money first brought back to the US and then pay it from an American bank account.
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post #32 of 45
I am sorry, but it seems to me that the committee is trying to overstep double taxation laws in addition to violating or just outright stomping on tax treaties that have been established.

I also find the attitude of some of the committee members to be hostile and far removed from productive.
post #33 of 45
Quote:
Originally Posted by iPilya View Post

I also find the attitude of some of the committee members to be hostile and far removed from productive.

 

Isn't that the point of Congress?

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post #34 of 45
Quote:
Originally Posted by digitalclips View Post


But even an 'attractive' amount is double taxation ... given the income was already taxed in the country it resides, wouldn't taxing it again here seem a bit un American, kind of 'Taxation upon Repatriation' or some such catchy phrase?

 

On the question of double taxation...well, it depends on how they did it I think. Consider the sales tax US states charge. If I live in a state with 7% sales tax and buy something in another state that only charges 5%, in many (most?) states I'd be legally required to report that and pay my home state the additional 2% sales tax. Many people are aware of the push by states to collect sales tax on non-taxed online purchase, but "undertaxed" sales are also subject to the same laws. (Of course, if I buy something in a state that charges 9%, I can't claim a refund!)

I believe, but not sure, that similar rules apply for US individuals who earn money overseas. You have to pay US income tax, but you get a credit for taxes you may have paid to the country where you earned the money.
post #35 of 45
Quote:
Originally Posted by Wiggin View Post

 

One supposed method would be to transfer [some nebulous] intellectual property from Apple US to Apple Ireland.

 

According to Tim Cook's statement, Apple does not do that.

post #36 of 45

Impressive performance by Tim Cook.

 

Just one question.  Apple is an American tax resident company.  All the profit Apply made through it's subsidiary companies around the world belongs to Apple.  Would Apple be required to pay American corporate tax on all profit Apple made (of course after deducting corporate tax paid overseas)?  

post #37 of 45
Quote:
Originally Posted by hjb View Post

Impressive performance by Tim Cook.

 

Just one question.  Apple is an American tax resident company.  All the profit Apply made through it's subsidiary companies around the world belongs to Apple.  Would Apple be required to pay American corporate tax on all profit Apple made (of course after deducting corporate tax paid overseas)?  

No that isn't how it works. Each subsidiary company, although owned by Apple inc is a separate legal entity and subject to taxation on any profits that it makes. That taxation is usually due within the jurisdiction that the subsidiary is based. The subsidiary may use IP, services or products from any of the other Apple companies and is obliged to pay the price for them. This generates cash flow back to the company providing the IP, services or products and hopefully a profit.

 

Most countries have fairly tight legislation about transferring assets such as IP between different companies/jurisdictions meaning that any transfers have to be paid for at a reasonable rate.This is meant to avoid companies just moving assets into a more favourable tax regime whenever they feel liken it to save a bit of tax.   

post #38 of 45
Quote:
Originally Posted by festerfeet View Post

No that isn't how it works. Each subsidiary company, although owned by Apple inc is a separate legal entity and subject to taxation on any profits that it makes. That taxation is usually due within the jurisdiction that the subsidiary is based. The subsidiary may use IP, services or products from any of the other Apple companies and is obliged to pay the price for them. This generates cash flow back to the company providing the IP, services or products and hopefully a profit.

 

Most countries have fairly tight legislation about transferring assets such as IP between different companies/jurisdictions meaning that any transfers have to be paid for at a reasonable rate.This is meant to avoid companies just moving assets into a more favourable tax regime whenever they feel liken it to save a bit of tax.   

 

Thanks, but your reply does not answer my question.  

post #39 of 45
Quote:
Originally Posted by hjb View Post

 

Thanks, but your reply does not answer my question.  

Sorry if it is not clear, but the answer to your question is no.

 

Apple is not required to bring profits from overseas subsidiaries into the US.

It also does not have to pay tax in the US on monies earned by these subsidiaries and held offshore.

Apple Inc does not get an offset in it's tax rate on money brought back to the US even if tax has already been paid on these profits in the juridiction that it was generated.

Unlike a lot (most countries) the US charges corporate tax at the full rate currently 35% so a number companies object to bringing money back to the US parent company if they can use it elsewhere as they are effectively being charged twice. 

post #40 of 45
Quote:
Originally Posted by festerfeet View Post

Sorry if it is not clear, but the answer to your question is no.

 

Apple is not required to bring profits from overseas subsidiaries into the US.

It also does not have to pay tax in the US on monies earned by these subsidiaries and held offshore.

Apple Inc does not get an offset in it's tax rate on money brought back to the US even if tax has already been paid on these profits in the juridiction that it was generated.

Unlike a lot (most countries) the US charges corporate tax at the full rate currently 35% so a number companies object to bringing money back to the US parent company if they can use it elsewhere as they are effectively being charged twice. 

 

Thanks for your info.

 

IMHO, American tax resident companies should include all worldwide business & investment activities, regardless of how they structure overseas operation, in their USA company tax return and pay USA corporate tax on worldwide income.  And it is the Government's responsibility to make sure that principle should be kept.

 

One more question from me.  I think that, if American companies include income generated from its subsidiaries in countries where USA has double tax agreement with, they could get credits in its USA corporate tax liability for the corporate tax paid overseas.  Am I misunderstood here?

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