European Union announces tax evasion investigations of Apple, Fiat & Starbucks

Posted:
in General Discussion edited June 2014
The executive body of the European Union formally announced on Wednesday that it is investigating Apple, Fiat and Starbucks for potential tax evasion by the trio of corporations in the continent it polices.

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


The European Commission is looking into whether Apple's Ireland-based corporations are in compliance with European Union rules on state aid. The commission is also investigating Starbucks' presence in the Netherlands, and Fiat Finance and Trade in Luxembourg.

"In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes," said Joaqu?n Almunia, commission vice president in charge of competition policy. "Under the EU's state aid rules, national authorities cannot take measures allowing certain companies to pay less tax than they should if the tax rules of the Member State were applied in a fair and non-discriminatory way."
Apple's tax haven in Ireland has been investigated before with no fault found. The company contends that it pays all of the taxes it owes.
Article 107(1) of the Treaty on the Functioning of the European Union states that state aid which affects trade between states within the union and threatens to distort competition by favoring certain undertakings is in principle incompatible with the "EU Single Market." Selective tax advantages may amount to state aid.

Regarding Apple, the commission will examine the individual rulings issued by Irish tax authorities on the calculation of taxable profit allocated to Irish branches of Apple's Ireland-based companies: Apple Sales International and Apple Operations Europe.

Word first surfaced on Tuesday that the commission was set to announce a formal investigation into Apple. However, the iPhone maker is far from the only international company that relies on the tax laws of Ireland and other countries to avoid paying taxes.

Other investigations previously found that Apple did not break any laws in utilizing Ireland as a tax haven. A U.S. Senate investigation found that Apple paid just 2 percent tax on $74 billion in income made outside America, by moving billions of dollars in profits to affiliate corporations such as Apple Operations International in Ireland, where the effective tax rate is less than 2 percent.

Apple has insisted that the company pays all of its taxes and has broken no laws. The company holds the vast majority of its cash overseas to avoid paying high repatriation tax rates to bring that money back to the U.S.

Other major tech corporations noted for utilizing Ireland to avoid international taxes include Google, Microsoft, Facebook and Amazon.
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Comments

  • Reply 1 of 108
    ochymingochyming Posts: 474member
    Brussels%u2019 suits.
    You allow tax heavens and then cry wolf?
    Right!
  • Reply 2 of 108
    dacloodacloo Posts: 890member
    Paying 2% of taxes while 'normal' companies pay so much more is ridiculous and needs to be addressed as soon as possible. It's morally wrong.
  • Reply 3 of 108
    richlrichl Posts: 2,213member

    Tax evasion rather than tax avoidance? Interesting...

  • Reply 4 of 108
    philboogiephilboogie Posts: 7,419member
    Bit disingenuous to investigate Apple. They are, like many companies, simply routing income through Ireland, The Netherlands & The Bermudas. Perfectly legal, as was found last time. I really can't see a problem with this. In fact, more companies should do this; making the most profit is the common goal of any company.

    Short explanation on how this system works:
    [IMG ALT=""]http://forums.appleinsider.com/content/type/61/id/44444/width/500/height/1000[/IMG]

    Long explanation:
    http://tellmeyourview.wordpress.com/2013/02/03/the-double-irish-the-dutch-sandwich/
  • Reply 5 of 108
    pazuzupazuzu Posts: 1,728member

    Is Ireland getting a payback on these-why would they allow it?  Stupidity?

  • Reply 6 of 108
    adrayvenadrayven Posts: 460member
    Quote:
    Originally Posted by dacloo View Post



    Paying 2% of taxes while 'normal' companies pay so much more is ridiculous and needs to be addressed as soon as possible. It's morally wrong.

     

    Normal companies? If you're talking about local companies, local taxes are still paid.. sales tax, employee income taxes, health, etc. The issue is that ANY international company can pick what country they base funds out of.. and that country gets the taxes..

     

    Issue is. who gets the money? Europe? Germany? huh? What people don't understand, products sold by Apple are already paying local taxes and all we're talking about is the 'profit' repatriation tax... it's not really an easy answer.. because if they just pay everyone.. the mob of meme would tax companies into the ground.. 

     

    It's all about the repatriation taxes.. USA is at 30% .. which is stupid!!! next highest? 15%.. Canada is under 10%.. This is a global economy, you set the rules, Ireland plays by them keeping a low rate(2%), then you bitch about it? pfffff.. The real issue is leveling the playing field with this rate.. 

     

    And yet I can see the EU punishing Apple and other companies for following the LAW.. Don't like it, change it.. and yet, they can't.. because they cannot AGREE on enforcing rates on other sovereign nations, killing their right to control their own rates. hahaha! So, here we are, targeting companies and blaming them for political stupidity! 

     

    Personally, I think USA should set it to about 10% or less.. but getting congress to do anything these days that makes sense is nearly impossible. We compete against these countries, yet we're at an ego-blown 30%

  • Reply 7 of 108
    dugbugdugbug Posts: 283member

    Originally Posted by dacloo View Post



    Paying 2% of taxes while 'normal' companies pay so much more is ridiculous and needs to be addressed as soon as possible. It's morally wrong.

     

    "normal" companies can do the same thing.  If ireland wants to set that rate to attract multinats, they are free to do so correct?  If a multinat wants to set up shop there for that benefit can they not?

  • Reply 8 of 108
    anantksundaramanantksundaram Posts: 18,736member
    Nothing much will likely come out of this, except some bogus 'fine' so that they can declare a moral victory.

    Waste of time.
  • Reply 9 of 108
    iaeeniaeen Posts: 588member
    philboogie wrote: »
    Bit disingenuous to investigate Apple. They are, like many companies, simply routing income through Ireland, The Netherlands & The Bermudas. Perfectly legal, as was found last time. I really can't see a problem with this. In fact, more companies should do this; making the most profit is the common goal of any company.

    This. If they think the tax laws are at odds with EU laws, they should be investigating the tax commissions that created those laws rather than the companies that follow them.

    That is assuming this isn't really just a money grab...
  • Reply 10 of 108
    philboogiephilboogie Posts: 7,419member
    pazuzu wrote: »
    Is Ireland getting a payback on these-why would they allow it?  Stupidity?

    Can you elaborate on your 'payback' view please?
  • Reply 11 of 108
    crowleycrowley Posts: 5,560member
    Quote:

    Originally Posted by PhilBoogie View Post



    Bit disingenuous to investigate Apple. They are, like many companies, simply routing income through Ireland, The Netherlands & The Bermudas. Perfectly legal, as was found last time. I really can't see a problem with this.

    If they're being investigated for tax evasion then that implies the EU thinks there is something illegal going on.

     

    Or maybe the investigation is simply fact finding in advance of proposals to reform tax laws across national borders in the EU group.

  • Reply 12 of 108
    crowleycrowley Posts: 5,560member
    Quote:

    Originally Posted by Adrayven View Post

     

    It's all about the repatriation taxes.. USA is at 30% .. which is stupid!!! next highest? 15%.. Canada is under 10%.. This is a global economy, you set the rules, Ireland plays by them keeping a low rate(2%), then you bitch about it? pfffff.. The real issue is leveling the playing field with this rate.. 

     

    And yet I can see the EU punishing Apple and other companies for following the LAW.. Don't like it, change it.. and yet, they can't.. because they cannot AGREE on enforcing rates on other sovereign right to control their own rates. hahaha! So, here we are, targeting companies and blaming them for political stupidity! 

     

    Personally, I think USA should set it to about 10% or less.. but getting congress to do anything these days that makes sense is nearly impossible. We compete against these countries, yet we're at an ego-blown 30%


    Disagree with the race-to-the-bottom mentality, unitary reporting and taxation of corporations makes much more sense.  Don't make "repatriation" an option; if profit is being registered within the Apple group, then Apple should pay corporation tax in its headquarters of note.

     

    Corporation tax in the US is not 10%, so why should US companies get beneficial tax treatment from conducting business outside of the US?

  • Reply 13 of 108
    herbapouherbapou Posts: 2,212member
    regarding sales taxes, I am assuming Apple gives back the sales taxes it collects to the appropriate gov.

    Regarding corporate income tax:

    For hardware, the way I understand it Apple pays its income tax in every EU countries then send the money into Ireland. So its a cash placeholder and it affects US Tax not EU tax. Ireland is a good place to hold cash because Apple can invest its cash and only pay 2% in tax to Ireland on the interest it makes.

    For software and services, its another story, it looks like Apple is dodging EU taxes for everything itunes related. It does collect and pay back sales taxes, but from my understanding "profits" of those sales are all in iceland, which means they are dodging income taxes.

    There are a lot of "loopholes" with internet sales of digital content. One example I can give is in the province of Quebec (Canada), it is illegal to sell a blueray or DvD with an english only soundtrack if the french track is available. Apple is not respecting that law with its itunes sales.
  • Reply 14 of 108
    herbapouherbapou Posts: 2,212member
    Quote:
    Originally Posted by Crowley View Post

    Disagree with the race-to-the-bottom mentality, unitary reporting and taxation of corporations makes much more sense.  Don't make "repatriation" an option; if profit is being registered within the Apple group, then Apple should pay corporation tax in its headquarters of note.

     

    Corporation tax in the US is not 10%, so why should US companies get beneficial tax treatment from conducting business outside of the US?

     

    that would be impossible to monitor. for many reasons, companies can leave cash outside of there headquater country.
  • Reply 15 of 108
    steven n.steven n. Posts: 1,067member
    ochyming wrote: »
    Brussels%u2019 suits.
    You allow tax heavens and then cry wolf?
    Right!

    It is 100% legally right and not at all morally wrong or ambiguous. If the EU does not like the laws THEY have created, they need to grow a pair and fix them.
  • Reply 16 of 108
    herbapouherbapou Posts: 2,212member
    Quote:
    Originally Posted by Steven N. View Post



    It is 100% legally right and not at all morally wrong or ambiguous. If the EU does not like the laws THEY have created, they need to grow a pair and fix them.

     

    indeed.
  • Reply 17 of 108
    richlrichl Posts: 2,213member
    Quote:

    Originally Posted by Steven N. View Post





    It is 100% legally right and not at all morally wrong or ambiguous. If the EU does not like the laws THEY have created, they need to grow a pair and fix them.

     

    As previously mentioned in this thread, Apple are being investigated for tax evasion. That means that the EU believes, rightly or wrongly, that Apple hasn't followed the law.

  • Reply 18 of 108
    adrayvenadrayven Posts: 460member
    Quote:

    Originally Posted by herbapou View Post

     
    Quote:

    Originally Posted by Crowley View Post

     

    Disagree with the race-to-the-bottom mentality, unitary reporting and taxation of corporations makes much more sense.  Don't make "repatriation" an option; if profit is being registered within the Apple group, then Apple should pay corporation tax in its headquarters of note.

     

    Corporation tax in the US is not 10%, so why should US companies get beneficial tax treatment from conducting business outside of the US?


     




    that would be impossible to monitor. for many reasons, companies can leave cash outside of there headquater country.

     

    Exactly. At issue is where does the money sit.. right now, it's country that has the lowest taxes .. I'm not understanding why that would be hard to understand..  Who wouldn't do that? Any CFO would be fired for not taking advantage of legal tax law and working to benefit the company financially.. hell, if it didn't he'd be considered incompetent.. 

     

    If the USA made it more advantageous to sit in the states, you can be certain that US based international companies would do exactly that. The answer is not simple, it's political.. So the EU is doing a witch hunt for cash.. 

  • Reply 19 of 108
    sdw2001sdw2001 Posts: 16,903member
    Quote:

    Originally Posted by Ochyming View Post



    Brussels%u2019 suits.

    You allow tax heavens and then cry wolf?

    Right!

     

    Exactly.  Ireland has certain laws that are beneficial.  It's not at all surprising that corporations choose to do business there.  It would be no different than if Pennsylvania said it was eliminating all corporate taxes for 10 years.  Businesses would flock to the state.  

  • Reply 20 of 108
    sdw2001sdw2001 Posts: 16,903member
    Quote:

    Originally Posted by Crowley View Post

     

    Disagree with the race-to-the-bottom mentality, unitary reporting and taxation of corporations makes much more sense.  Don't make "repatriation" an option; if profit is being registered within the Apple group, then Apple should pay corporation tax in its headquarters of note.

     

    Corporation tax in the US is not 10%, so why should US companies get beneficial tax treatment from conducting business outside of the US?


     

    Totally unrealistic and counter to the principles of the free market.  Capital flows along the path of least resistance.  If you want Apple to bring more money back into the U.S., you have to remove some of the obstacles.  Secondly, they get beneficial tax treatment because that's the law. The complexity of international tax law is way beyond what any of us laymen understand.  You can't just wave a wand and say "you have to pay U.S. tax rates now!"  

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