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Ireland looks to close loophole Apple uses to avoid high U.S. taxes

post #1 of 42
Thread Starter 
Ireland's Finance Minister Michael Noonan said on Tuesday that he plans to push legislation to close a loophole in the country's corporate tax laws that allows companies like Apple, Google and Microsoft to avoid paying billions of dollars in taxes.

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


Noonan's promise to amend Ireland's tax code comes after calls for reform from U.S. Senators John McCain and Carl Levin, who in March said Ireland was a "tax haven" for multinational companies like Apple, reports Bloomberg.

"I will be bringing forward a change to ensure that Irish registered companies cannot be 'stateless' in terms of their place of tax residency," Noonan said. "Ireland wants to be part of the solution to this global tax challenge, not part of the problem."

The statement marks a change in course from a decision passed by the Irish parliament's finance committee in July, which voted to not question Apple and Google over their use of the country's tax code.

Apple's tax strategy leverages an Irish law that holds a company as a tax resident of the country from which it is managed, not incorporated. This means the usual 12.5 percent Irish tax rate is not applied to profit funneled to Apple's headquarters in Cork, which has long been the company's base of operations for the growing EMEA and Asia/Pacific regions. By the same token, the Irish subsidiary is well out of U.S. jurisdiction, meaning Apple is holding tens of billions of dollars in international earnings tax free.

What Noonan did not comment on is a tax avoidance strategy famously dubbed the "Double Irish with a Dutch Sandwich," which has been successfully employed by multiple domestic corporations to shelter income from high U.S. rates.

The process involves setting up an Irish subsidiary, such as Apple's headquarters in Cork, which is paid profits on products sold in the U.S. as royalties on patents owned by the company. These patents are assigned to an offshore entity located in a no-tax country, like the Caribbean, meaning Irish tax is not applicable to said income.

International profits are directed to a second subsidiary in Ireland, which takes advantage of Irish treaties with other European countries that lets companies pass money across borders tax free. The Netherlands is a state that participates in this arrangement and is a popular transit point, thus adding the "Dutch Sandwich" to the nickname. Once routed through the Netherlands, the money is sent back to the main subsidiary, where it can be freely moved to the Caribbean or Cayman Islands.

"We pay all the taxes we owe" - Apple CEO Tim CookIn testimony given to the U.S. Senate Permanent Subcommittee on Investigations in May, Apple CEO Tim Cook made clear that his company uses no "tax gimmicks" to dodge federal bills, including strategies like the "Double Irish."

"Apple has real operations in real places with Apple employees selling real products to real customers," Cook said. "We pay all of the taxes we owe -- every single dollar. We not only comply with the laws, but we comply with the spirit of the laws."

Because of the massive profits it generated over the past few years, Apple is perhaps the most visible corporation to hold an offshore cash pile. Congress claimed Apple cut some $74 billion off its tax bill between 2009 and 2012, but that money is simply, and legally, sitting in Ireland.

For its part, the SEC recently concluded an investigation of Apple's domestic and international tax practices, deciding only to suggest the company clarify that its "foreign" cash holdings are located in Ireland. No further action is planned.
post #2 of 42

Yeah - repatriate some of that money and help keep the Yanks away from THE CLIFF :smokey:


Edited by hentaiboy - 10/15/13 at 3:51pm
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post #3 of 42

Sounds like a great way to increase unemployment and decrease payroll taxes in Ireland!

post #4 of 42

No wonder Ireland needed to be bailed out when its economy was based on multinationals paying zero tax.

post #5 of 42

Yes, Irish politicians are just as corrupt as American ones.

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post #6 of 42
Quote:
Originally Posted by RichL View Post
 

No wonder Ireland needed to be bailed out when its economy was based on multinationals paying zero tax.

 

Every employee of those companies pays tax, though. So it's not an amazing point. Ireland fucked itself with the property and housing crisis. It was a tower of playing cards, a ticking bomb, with only time as the fuse.

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post #7 of 42

The Cayman Islands and the Bahamas fully endorse this move by Ireland

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post #8 of 42
Quote:
Originally Posted by iCarbon View Post
 

Sounds like a great way to increase unemployment and decrease payroll taxes in Ireland!

 

Apple employs about 4000 people in Ireland.  It's going to look really cool if Apple says 'stuff that, we like our tax rorts', fires everyone and goes looking for another tax lurk elsewhere.

 

Quote:
Originally Posted by RichL View Post
 

No wonder Ireland needed to be bailed out when its economy was based on multinationals paying zero tax.

 

Ireland needing to be bailed out had next to nothing to do with the corporate tax rate.  It came about because some politicians panicked over bank debts and promised to guarantee all creditors before finding out the scale and nature of the problem first and having a look under the carpet.

 

Government debt was perfectly managable.  Turning private debt into national debt was the problem and the arch stupidity.

post #9 of 42
Quote:
Originally Posted by GadgetCanadaV2 View Post
 

The Cayman Islands and the Bahamas fully endorse this move by Ireland

Obviously you don't know anything about the Double Irish With a Dutch Sandwich

post #10 of 42
Quote:
Originally Posted by smalM View Post
 

Obviously you don't know anything about the Double Irish With a Dutch Sandwich

"There are equivalent Luxembourgish and Swiss sandwiches". Mmmm tasty :)

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post #11 of 42

So instead of fixing the horrible tax code in the U.S., let's beg other countries to change their policies? How stupid and blind! 

post #12 of 42
As clear as mud. Apple owes USGovt $74Bs? Do we need a second capital?

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post #13 of 42

Perhaps Apple can switch to a Double Dutch Bus.

 

http://www.youtube.com/watch?v=fK9hK82r-AM

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post #14 of 42
By describing a technique that is well known but not actually used by apple you are confusing the situation

1. apple does not employ shifting funds through the Cayman Islands or Caribbean islands
2. Apple does not shift revenues paid in the usa to Ireland
3. Funds "stored" in Ireland can either be used offshore (e.g. Build an apple store), or they sit there waiting to be repatriated. They will be brought back to the us if rates are lowered or a tax holiday is created.
post #15 of 42

If I were Ireland, I would take some small percentage of taxes. Paying 12% tax there is better than the 40% tax in the U.S.. 

post #16 of 42

So just before the loophole is closed we see Apple, Google, Microsoft, etc. pulling their cash out of Ireland and moving it elsewhere. Where does that leave Ireland? In the shitter?

post #17 of 42
Quote:
Originally Posted by AppleInsider View Post

Ireland's Finance Minister Michael Noonan said on Tuesday that he plans to push legislation to close a loophole in the country's corporate tax laws that allows companies like Apple, Google and Microsoft to avoid paying billions of dollars in taxes.

 


and Ireland wants Apple to pay higher U.S. taxes because?
post #18 of 42
Quote:
Originally Posted by mhikl View Post

As clear as mud. Apple owes USGovt $74Bs?

 


For what?
Money it made overseas and has already paid foreign taxes on?
"the SEC recently concluded an investigation of Apple's domestic and international tax practices, deciding only to suggest the company clarify that its "foreign" cash holdings are located in Ireland. No further action is planned."
post #19 of 42
Quote:
Originally Posted by Richard Getz View Post
 

If I were Ireland, I would take some small percentage of taxes. Paying 12% tax there is better than the 40% tax in the U.S.. 

Not to put too fine a point on it...although The U.S. corporate tax rate is 35% (39.2% when states rates are included) the average tax paid by major corporations is 12.6% (2010-GAO)

 

For example, Verizon paid zero tax, Carnival Cruise Line paid zero tax and GE got 3 billion dollar rebate.

 

The problem isn't the tax rate, it's the convoluted tax code. With loopholes written by members of congress to help their "friends!" There are no Republicans and Democrats anymore. They are just concierges for major corporations.


Edited by christopher126 - 10/15/13 at 5:45pm
post #20 of 42

No matter how much is stolen, how many people are put in poverty by their policies the left always cries out for more and more.

 

What a bunch of greedy heartless jerks. 

 

Also, it's not a loophole when a government decides to not steal as much as other governments do.

 

Taxes are theft.  Those who want more taxes are evil.

 

More taxes = More poverty. 

post #21 of 42

Notice only politicians use the word "loophole"? You know, those same politicians that created the laws that people and companies legally follow?

 

It's just political speak for "We screwed up, but hell if we will take accountability for our actions"

post #22 of 42
Quote:
Originally Posted by christopher126 View Post
 

Not to put too fine a point on it...although The U.S. corporate tax rate is 35% (39.2% when states rates are included) the average tax paid by major corporations is 12.6% (2010-GAO)

 

For example, Verizon paid zero tax, Carnival Cruise Line paid zero tax and GE got 3 billion dollar rebate.

 

The problem isn't the tax rate, it's the convoluted tax code. With loopholes written by members of congress to help their "friends!" There are no Republicans and Democrats anymore. They are just concierges for major corporations.

 

Sorry, I was getting data from here: http://www.kpmg.com/Global/en/services/Tax/tax-tools-and-resources/Pages/corporate-tax-rates-table.aspx 

 

Yes, as my first post stated, it is stupid and blind to call out others instead of fixing our own tax system. Personally, I favor a flat national sales tax + 10% corporate tax (until debt is paid) with no other federal taxes. But that will never happen as that takes power (IRS) away from the federal government to punish and reward. 

 

Quote:
 They are just concierges for major corporations.

 

I love that analogy. Stealing it! :) 

post #23 of 42
Quote:
Originally Posted by Richard Getz View Post
 

Sorry, I was getting data from here: http://www.kpmg.com/Global/en/services/Tax/tax-tools-and-resources/Pages/corporate-tax-rates-table.aspx 

 

Yes, as my first post stated, it is stupid and blind to call out others instead of fixing our own tax system. Personally, I favor a flat national sales tax + 10% corporate tax (until debt is paid) with no other federal taxes. But that will never happen as that takes power (IRS) away from the federal government to punish and reward. 

 

I agree, Richard.

 

I like this too "flat national sales tax + 10% corporate tax (until debt is paid)"

 

 

In some ways, both the Republicans and Democrats have won! 

 

Republicans have the lowest tax rates in 50 years and the Democrats have a huge government and lots of services...

 

...the result is the "debt!" :)

 

Best

post #24 of 42
Typical America, bullying the little guy to benefit them.

Still, without Ireland America wouldn't be where it is today would it? ;-)
post #25 of 42
So what will happen to Ireland when hundreds of Billions in capital are pulled out and moved somewhere else?

Any politician who pays this scheme by meddling Americans any more than passing lip service has rocks in their head.
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post #26 of 42

Okay, so every giant company that does this will move to the next best tax country. Bye Ireland.

post #27 of 42
Quote:
Originally Posted by TedCranmore View Post

By describing a technique that is well known but not actually used by apple you are confusing the situation

1. apple does not employ shifting funds through the Cayman Islands or Caribbean islands
2. Apple does not shift revenues paid in the usa to Ireland
3. Funds "stored" in Ireland can either be used offshore (e.g. Build an apple store), or they sit there waiting to be repatriated. They will be brought back to the us if rates are lowered or a tax holiday is created.

For #2, you are not correct.  Apple's Ireland subsidiary owns patents and other US investments, so thus, US revenues are send to Ireland and avoids US taxes.

Apple justifies this because Ireland's subsidiary invests in US R&D, so basically, some of the revenues that the Ireland subsidiary gets from international sales are being repatriated to US in the form of investment into Apple's US R&D.

post #28 of 42
Quote:
Originally Posted by AppleInsider View Post

"I will be bringing forward a change to ensure that Irish registered companies cannot be 'stateless' in terms of their place of tax residency," Noonan said. "Ireland wants to be part of the solution to this global tax challenge, not part of the problem."

It's good that they are starting to make changes internationally as it's the only way they will resolve the problem. The tax amount required is really small anyway. For a company that makes $40b profit a year, 12.5% tax is $5b, leaving them with $35b, which is just going to sit in some US bank account under the the ownership of a foreign subsidiary anyway. Tax on profits doesn't really affect business expenses as it comes off after expenses. It doesn't even hamper growth really because if it's spent then it's not taxed.

All the other tax havens just need to follow suit and it seems they are moving this way:

http://thinkprogress.org/economy/2013/08/21/2505301/the-cayman-islands-agree-to-help-the-us-hunt-down-tax-cheats/

All the companies will still move to the best rates but in the end, these tax havens are not helping the small business owners and the ones who need tax breaks more. There's a study here showing the effective tax rates of larger businesses and smaller ones:

http://www.accountingweb.com/article/s-corporations-pay-highest-effective-tax-rates/222233

The rates should lower as the income lowers in order to help small businesses grow, not get lower for the largest businesses so that they can undercut all the small businesses and we all just end up buying everything from Amazon.

Once the larger companies start having to pay the same rates for the infrastructure they use from their profits, the more that will take the weight off from average tax payers. If it's lower taxes for lower earners vs lower taxes for the wealthiest companies in the world that are mostly just hoarding profits, the former is better for productive growth as it increases consumer spending and demand and it raises the quality of life for larger numbers of people, which is ultimately the whole point.
post #29 of 42
Quote:
Originally Posted by dev200 View Post
 

Okay, so every giant company that does this will move to the next best tax country. Bye Ireland.


Not necessarily.  Apple will still need an operational base inside the EU.  People who are suggesting  the Cayman islands, Bahamas, and such like, don't understand the basics.  Ireland's attractiveness was as base of operations within the EU that had a low corporate tax rate.  if they were outside the EU they wouldn't have use of the basic loopholes they were exploiting, which were free trade within the EU and only being obliged to pay tax in the EU member state in which they were based.

post #30 of 42
Quote:
Originally Posted by Jessi View Post
 

No matter how much is stolen, how many people are put in poverty by their policies the left always cries out for more and more.

 

What a bunch of greedy heartless jerks. 

 

Also, it's not a loophole when a government decides to not steal as much as other governments do.

 

Taxes are theft.  Those who want more taxes are evil.

 

More taxes = More poverty. 

Interesting assertion. Care to elaborate?

post #31 of 42

Closing the loophole is not about US taxes. It's about paying taxes in the EU for profits made in the EU. 

 

Quote:

Originally Posted by dev200 View Post
 

Okay, so every giant company that does this will move to the next best tax country. Bye Ireland.

 

You really don't get it. 

Right now those giant companies are paying nothing.

And even after closing the loophole Ireland is still the best tax country in the EU.

So where is the risc for Ireland?

post #32 of 42
Quote:

Originally Posted by Jessi View Post
 

Taxes are theft.  Those who want more taxes are evil.

 

More taxes = More poverty. 

 

There's far more poverty is the US than there is in high tax countries such as Norway, Denmark and the Netherlands.

post #33 of 42
Quote:
Originally Posted by Darryn Lowe View Post

Typical America, bullying the little guy to benefit them.

Still, without Ireland America wouldn't be where it is today would it? ;-)

How would it benefit the US? Ireland can raise their rates and still be among the lowest, a rate that nets them more money but not so high it causes these companies to bolt. We are talking a lot of money here. Say 10% increase. A ten percent increase of millions/billions is far better than 34.5% of zero
post #34 of 42
Quote:
Originally Posted by TedCranmore View Post

By describing a technique that is well known but not actually used by apple you are confusing the situation

1. apple does not employ shifting funds through the Cayman Islands or Caribbean islands
2. Apple does not shift revenues paid in the usa to Ireland
3. Funds "stored" in Ireland can either be used offshore (e.g. Build an apple store), or they sit there waiting to be repatriated. They will be brought back to the us if rates are lowered or a tax holiday is created.

 

Quote:
Originally Posted by ProApple View Post
 

For #2, you are not correct.  Apple's Ireland subsidiary owns patents and other US investments, so thus, US revenues are send to Ireland and avoids US taxes.

Apple justifies this because Ireland's subsidiary invests in US R&D, so basically, some of the revenues that the Ireland subsidiary gets from international sales are being repatriated to US in the form of investment into Apple's US R&D.

 

He is right on all 3 points, and Apple stressed all of these points very deliberately during the congressional dog & pony show.  Tim Cook also got the sound bite in that Apple paid every dollar owed in the US.  Also a true statement.

 

If you look at them:

1. apple does not employ shifting funds through the Cayman Islands or Caribbean islands

 

True statement.  Apple does not need to use the Cayman Islands or Caribbean because they 'innovated' a new means.  They created an Irish subsidiary that has *no tax residency anywhere*  F'n brilliant!!!!!  They don't need the Cayman or Caribbean islands, they are storing their money in 0 tax rate limbo!!!  The 'no Cayman island' was a terrific soundbite and the Apple fans are relieved that "their" company is better than the rest by not using Cayman islands.  Because offshoring is okay as long as you don't use the Cayman islands, am I right?  This is actually the 'loophole' Ireland is looking to close.  They are *not* (yet) closing the real loophole, but at least they are insisting corporate money has to go 'somewhere'  Apple may very well soon start sending their offshored cash to the Caymans (no, they'll use somewhere else just to avoid the headlines I'm sure).

 

Note that I do not fault or criticize Apple for this.  They are legally minimizing their US taxes.  They are doing it a little differently than most other corporations and their talking points were frankly brilliant.

 

2. Apple does not shift revenues paid in the usa to Ireland

True statement.  Yes ProApple we know you are right and Apple really develops most of its IP in the US.  However claiming that and shifting revenues to Ireland would be *illegal*-  so they don't do that.  So instead they claim all of the IP is developed in Ireland.  There is no 'shifting.'  All their ideas actually come from Ireland.  No, really.  They even employ quite a few people in Ireland.  Good luck trying to 'prove' where things are thought up.  Since they claim all their geniuses are in Ireland, that's where they are developing their IP, and thats where they choose to be taxed.  

 

3. Is a true statement for all off-shored money... Let there never be a 'tax holiday' to reward these corporations for their crafty tax avoidance.  I think a capital reinvestment discount would be a real possibility because all that money coming back to the US and actually being put to use would be good.  Coming back to pay dividends and exec bonuses would be horrible, but sure would be one hell of a 'holiday' for them.  I could live with that because had they made the capital investments in the first place, the money would not have been taxed.

 

 

Apple legally employed means to minimize its US tax bill, and after employing those means Tim's statement that they paid every cent they owed in the US is also a true one.

post #35 of 42
These loopholes need to be closed as soon as possible as it's unfair to companies who can't afford (or have the knowledge) to set up this 'hack'.

The whole idea is conceptually brilliant and technically legal. But, everyone knows right from wrong, and this is certainly the latter.
post #36 of 42
Quote:
Originally Posted by Richard Getz View Post
 

So instead of fixing the horrible tax code in the U.S., let's beg other countries to change their policies? How stupid and blind! 

Why assume the influence originated here? They have taken flack in Europe, as have other countries (starbucks and google come to mind). A year or so ago the complaint was that they avoided VAT by conducting itunes sales through Luxemburg. Obviously consumers pay VAT directly, but it did provide a more competitive edge on pricing. I'm not looking to argue whether that was good or bad, just that it's unlikely that the pressure was unilateral here.

 

Quote:
Originally Posted by Jessi View Post
 

No matter how much is stolen, how many people are put in poverty by their policies the left always cries out for more and more.

 

What a bunch of greedy heartless jerks. 

 

Also, it's not a loophole when a government decides to not steal as much as other governments do.

 

Taxes are theft.  Those who want more taxes are evil.

 

More taxes = More poverty. 


No matter how many people up-rate your post, you'll never come with a remotely cogent statement as to why it made sense for any company to be capable of declaring themselves a non-resident. You should have just started with the laws surrounding taxed residents, both in terms of people and pieces of paper which endow ownership of the aforementioned companies. Right now you are only arguing in favor of preferential treatment.

post #37 of 42
Quote:
Originally Posted by hmm View Post
 

Why assume the influence originated here? They have taken flack in Europe, as have other countries (starbucks and google come to mind). A year or so ago the complaint was that they avoided VAT by conducting itunes sales through Luxemburg. Obviously consumers pay VAT directly, but it did provide a more competitive edge on pricing. I'm not looking to argue whether that was good or bad, just that it's unlikely that the pressure was unilateral here.

 

 

First paragraph

 

Quote:
 Noonan's promise to amend Ireland's tax code comes after calls for reform from U.S. Senators John McCain and Carl Levin, who in March said Ireland was a "tax haven" for multinational companies like Apple, reports Bloomberg.
post #38 of 42
Quote:
Originally Posted by Richard Getz View Post
 

 

First paragraph

 


Ah I'm not sure how I overlooked that. I usually read articles in their entirety.  This subject is just all over the place right now (although I don't. I thought the pressure would have come from European countries, given concerns over tax status that have come up over the past couple years for more than just Apple.

post #39 of 42
Quote:
Originally Posted by hmm View Post
 


Ah I'm not sure how I overlooked that. I usually read articles in their entirety.  This subject is just all over the place right now (although I don't. I thought the pressure would have come from European countries, given concerns over tax status that have come up over the past couple years for more than just Apple.

 

Exactly my point. Why pressure from the U.S., we should fix our own tax code first. The pressure should be coming from the citizens of Ireland asking why Apple gets to squat without paying taxes. I'm not suggesting the 35-40% hit you have in the U.S. but why not 10%? 

 

But again, if the politicians fixed the tax code here, this would be a non issue. 

post #40 of 42
Quote:
Originally Posted by Richard Getz View Post
 

 

Exactly my point. Why pressure from the U.S., we should fix our own tax code first. The pressure should be coming from the citizens of Ireland asking why Apple gets to squat without paying taxes. I'm not suggesting the 35-40% hit you have in the U.S. but why not 10%? 

 

But again, if the politicians fixed the tax code here, this would be a non issue. 

 

If Ireland cedes to US demands, then Apple can join Amazon in Luxembourg and take their money with them, then there are other countries like Liechtenstein, the Channel Islands and others who would be glad to rake off a slight percentage of tens of billions for doing nothing but provide an office with a letter box.

 

This will get nowhere, Irish politicians like politicians everywhere will look after number one when it comes to the crunch.

 

They'll say one thing in a long winded way then let it go nowhere until it slowly fades away.

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