VAT is cost neutral to the company. It is the consumer who pays the VAT. The companies in EU are paying tax based on their profit. But due to advanced tax planning many major companies are avoiding taxes that the law makers intended them to pay. The law makers are working on closing all these gaps. And guess what, advanced tax planning is not anything the US government likes either.
Someone said that Ireland should leave EU. What you don't understand then is two things:
1. By leaving EU, Ireland would not be part of the common European market, meaning that more or less all trade to EU-countries would be taxed. The whole idea of US companies establishing Ireland is that they then get access to the whole EU common market.
2. Ireland has always got more money from EU tan they pay to EU. Other EU companies are funding Ireland since they can not raise all money internally to keep the country going. That money stream would then be cut off and then raising the taxes would probably be the only thing they could do.
Ireland has vowed to fight any EU ruling against its tax policies
That's ok, they can stop using the Euro as their currency and get booted out of the EU entirely in which case their tax setup would fail because they can be blocked from transfer pricing from other EU countries.
Well, levy the 12.5% on European consumers. They love their nanny state so much, let them pay for it.
It's possible to do, the rates are small here so the difference shouldn't result in a drop in units. If you have $1b revenue by selling 1m products at $1000 with $250m profit and the $250m is taxed at 2%, the tax paid would be $5m. Raise it to 12.5% and the tax paid is $31m so to get the extra $26m, you can't just apply $26 extra to each of the 1m products, you have to allow for the same higher percentage coming off the higher profit. You have to increase prices so that profit x 0.875 = $250m-$5m or profit = $280m. This is just $30 on each product.
$1030 per unit x 1m units = $1.03b with profit $280m, tax = $35m, profit after tax is $245m same as with the 2% rate.
Perhaps they've already done this in the US where they pay more than double the expected Irish rates. If not, those prices should be increased to offset the higher tax burden and maximize shareholder returns.
Do these numbers mean that something like 80% of their profit runs through Ireland?
It's a significant amount. Their SEC filings break down revenue by region and they say that 35% of their revenue is from the US. Given that they pay far more tax in the US, that leaves much more profit going through Ireland but pre-tax profit shouldn't be more than 65%. They do charge more on products outside the US though so it's possible.
EU become greedy when they see Apple's pile of cash.
The expected rate is almost 1/3 of the US rate. Apple pays at least double the expected amount to the US already (10x the actual amount). You're saying the US is 2-3x as greedy as the EU? If that's the case, they should move their entire operation to Ireland.
I might be native here but I don't really understand why Apple should be made to pay back these taxes. They didn't "choose" not to pay, they got an agreement with the government and they complied with it.
The government wasn't allowed to offer that deal and therefore Apple is the beneficiary of an illegal arrangement. No credible jurisdiction in the world allows that; if you receive stolen property then you have to return it, if you benefit from a fraudulent contract, then you are liable for that fraud.
Pretty simple. Ignorance, even in good faith, is not an excuse for law breaking.
Except Apple PAID the EU it's taxes.. No one ever adds in the VAT taxes and local taxes to what Apple is paying in tax.. For some reason it gets conveniently left out. What is at question is what taxes Apple owes Ireland itself.. NOT the EU..
The EU is being presumptuous in assuming they can dictate Irish tax law.. The EU wants to 'encourage' Apple and other businesses to leave Ireland. Thats what this is REALLY about. Well, bully them really.
Now, Ireland had almost left the EU completely once.. and this impacts all of Ireland's agreements, not just with Apple.. I could see the question of Ireland leaving being real yet again w/EU throwing it's weight around retroactively..
The 'irony' of this is.. Ireland CLOSED that loophole, so, after 2017, Apple and other businesses cannot take advantage of the tax break ANYWAY.
This is just EU being a bully. Literally.
There is no way that Ireland is going in any direction but down if it leaves the EU. No way that will happen.
The EU a totally unelected body and waste of space ...what's the point of national election's when a unelected body sets the rules of country without approval of the people.
The expected rate is almost 1/3 of the US rate. Apple pays at least double the expected amount to the US already (10x the actual amount). You're saying the US is 2-3x as greedy as the EU? If that's the case, they should move their entire operation to Ireland.
It's not that. Apple agreed on the term of business there and not violated anything. EU see the loophole and impose retro tax is nothing more than "greed". EU can move forward with new tax law, but retro tax is totally BS.
The EU a totally unelected body and waste of space ...what's the point of national election's when a unelected body sets the rules of country without approval of the people.
The EU is not totally unelected at all. It's a mix of directly elected (Parliament), ministerially representative (Council of), head of state representative (Council) and appointed/approved by elected representative (Commission).
The Court of Justice is technically unelected, but made up of justices from the constituent nations, so no more unelected than the justices of the member nations.
The idea that the EU is unelected or undemocratic is a blatant untruth.
VAT is cost neutral to the company. It is the consumer who pays the VAT. The companies in EU are paying tax based on their profit. But due to advanced tax planning many major companies are avoiding taxes that the law makers intended them to pay. The law makers are working on closing all these gaps. And guess what, advanced tax planning is not anything the US government likes either.
Someone said that Ireland should leave EU. What you don't understand then is two things:
1. By leaving EU, Ireland would not be part of the common European market, meaning that more or less all trade to EU-countries would be taxed. The whole idea of US companies establishing Ireland is that they then get access to the whole EU common market.
2. Ireland has always got more money from EU tan they pay to EU. Other EU companies are funding Ireland since they can not raise all money internally to keep the country going. That money stream would then be cut off and then raising the taxes would probably be the only thing they could do.
Oh gosh. Where to begin.... well, let me address a couple of points you raise, to tell you why you're completely off-base (my numbering may be different from yours).
1. If you think "companies pay corporate taxes" and "consumers pay VAT" you're a bit clueless. In the macroeconomy, it's the consumer that pays both. It may vary from industry to industry depending on the factors that drive tax pass-through (and we do not have to get into it here), but suffice it to say that you're living a delusional world if you think that firms are the ones ultimately paying taxes.
2. The EU can't even get its act together with Greece. It's laughable to think that they'd let Ireland go on its own. It'll be pretty much the end of the EU as we know it (and perhaps even the Euro), and that's the reason even the Germans are scared to let even the Greeks go. The threat to walk away from the Union is a huge weapon for the smaller states.
3. Yes, Ireland is a net recipient of EU funds, but: (i) it amounts to 0.5% of Irish GDP; (ii) more importantly, Ireland is almost right in the middle: there are 12 states -- out of 28 states in the EU -- that are larger net recipients in both absolute Euros and as a percentage of GDP than Ireland.
Btw, sitting from your perch in Sweden -- which is neither a member of the EU nor a member of the Euro -- you don't know much more about either than we do here in the US.
Global corporate taxation needs a systematic overhaul. It's not ethical for any company to reap the benefits of operating within an economy only to turn around and create artificial business structures that rob that economy of the revenue needed to support itself. Companies have little choice but to commit these sins in the name of the almighty shareholder. If we can't expect corporations to pay their fair share. We need globally coordinated legislation to close these loopholes and create an environment where everyone can enjoy the prosperity and benefits of good business.
Oh gosh. Where to begin.... well, let me address a couple of points you raise, to tell you why you're completely off-base (my numbering may be different from yours).
1. If you think "companies pay corporate taxes" and "consumers pay VAT" you're a bit clueless. In the macroeconomy, it's the consumer that pays both. It may vary from industry to industry depending on the factors that drive tax pass-through (and we do not have to get into it here), but suffice it to say that you're living a delusional world if you think that firms are the ones ultimately paying taxes.
2. The EU can't even get its act together with Greece. It's laughable to think that they'd let Ireland go on its own. It'll be pretty much the end of the EU as we know it (and perhaps even the Euro), and that's the reason even the Germans are scared to let even the Greeks go. The threat to walk away from the Union is a huge weapon for the smaller states.
3. Yes, Ireland is a net recipient of EU funds, but: (i) it amounts to 0.5% of Irish GDP; (ii) more importantly, Ireland is almost right in the middle: there are 12 states -- out of 28 states in the EU -- that are larger net recipients in both absolute Euros and as a percentage of GDP than Ireland.
Btw, sitting from your perch in Sweden -- which is neither a member of the EU nor a member of the Euro -- you don't know much more about either than we do here in the US.
This is all bluster to make some noises that make it look/sound good for the EU. The consequence of adopting something like this will be devastating for the Irish economy. U.S. businesses will leave in droves. Ireland would sooner quit the EU than allow something like this to come to pass.
Bottom line: I predict it won't happen (well, maybe a couple of percentage points is possible as a sop....)
First it is not so easy to get out of the EU. I even don't know if they have any regulations in place that define such a process.
Second the system only works because Luxembourg and Ireland are in the EU. It breaks if either of the countries leaves the EU.
Btw, sitting from your perch in Sweden -- which is neither a member of the EU nor a member of the Euro -- you don't know much more about either than we do here in the US.
What? Sweden has been part of the EU for the last 20 years (since January 1st 1995).
As for this tax issue, Apple (like other large corporations, not only US) is funneling income from the EU and the US to Ireland where they only pay 2% taxes on profits. Do I like their products? Oh yes, and since a while now! Do I applaud this kind of tax evasion sham? Hell no!
"Reports submitted by a subcommittee of the US Congress revealed that Apple's Ireland-based subsidiary earned $22 billion in revenue in 2011 alone, but paid just $10 million in taxes." - CNET
It's not that. Apple agreed on the term of business there and not violated anything. EU see the loophole and impose retro tax is nothing more than "greed". EU can move forward with new tax law, but retro tax is totally BS.
The agreement in Ireland is that if you have an incorporated company there that is managed elsewhere, you pay tax elsewhere. The US agreement is that if you have a company incorporated elsewhere you pay tax elsewhere. In using those two rules against each other, Apple managed to form companies with tax residency nowhere. Each country can't dictate the laws of the other.
Ireland itself is partly to blame in agreeing some of the terms for the Irish resident companies and they can be fined too, what they did was outlined in the following document:
An EU member state violating trade agreements in favor of a company doesn't make it ok. There's nothing greedy about expecting companies to pay rates that they were always fully aware of. The IRS went after back taxes years ago:
Sweden is a member of the EU and has been for several decades. It is not a member of the Euro Zone like UK, Denmark etc.
VAT is a tax on Consumption. VAT stands for Value Added Tax.
If I (as a company) buy a widget for $100 (inc VAT) and add something to it before selling it for $200 then I pay VAT on the ADDED value i.e. $100. I can reclaim/offset the TAX if the amount of VAT collected by my company is less than the amount Paid.
VAT rates are set by indvidual countries (like US states with their taxes).
Everything is subject to VAT but in some countries the rate is Zero. In the UK, Basic Food, Childrens Clothes and Books (dead tree type) are taxed at 0%.
I ran my own Software Consultancy for more than 10 years in the UK so quartetly VAT returns are nothing new to me.
It's not that. Apple agreed on the term of business there and not violated anything. EU see the loophole and impose retro tax is nothing more than "greed". EU can move forward with new tax law, but retro tax is totally BS.
Unless the agreement is found to be void ab initio meaning there was never any agreement at all.
Oh gosh. Where to begin.... well, let me address a couple of points you raise, to tell you why you're completely off-base (my numbering may be different from yours).
1. If you think "companies pay corporate taxes" and "consumers pay VAT" you're a bit clueless. In the macroeconomy, it's the consumer that pays both. It may vary from industry to industry depending on the factors that drive tax pass-through (and we do not have to get into it here), but suffice it to say that you're living a delusional world if you think that firms are the ones ultimately paying taxes.
2. The EU can't even get its act together with Greece. It's laughable to think that they'd let Ireland go on its own. It'll be pretty much the end of the EU as we know it (and perhaps even the Euro), and that's the reason even the Germans are scared to let even the Greeks go. The threat to walk away from the Union is a huge weapon for the smaller states.
3. Yes, Ireland is a net recipient of EU funds, but: (i) it amounts to 0.5% of Irish GDP; (ii) more importantly, Ireland is almost right in the middle: there are 12 states -- out of 28 states in the EU -- that are larger net recipients in both absolute Euros and as a percentage of GDP than Ireland.
Btw, sitting from your perch in Sweden -- which is neither a member of the EU nor a member of the Euro -- you don't know much more about either than we do here in the US.
Good to know that you are convinced that Sweden just left the EU. This explains it all.
Btw, companies do pay the corporate tax. There is never a direct link between a product selling price and and the corporate tax level a company pays, so the consumer does not pay the corporate tax. Of course the buyer of a productis contributing to the profits of the selling company, but the taxes on the profits are too much dependent on other factors: profit/loss of other products, acquisitions, write-offs, ... A company can never anticipate the tax on profits by increasing the selling price of its products. It just does not know how much profit it will make, and there is also competitive pressure to keep the selling price as it is.
Comments
VAT is cost neutral to the company. It is the consumer who pays the VAT. The companies in EU are paying tax based on their profit. But due to advanced tax planning many major companies are avoiding taxes that the law makers intended them to pay. The law makers are working on closing all these gaps. And guess what, advanced tax planning is not anything the US government likes either.
Someone said that Ireland should leave EU. What you don't understand then is two things:
1. By leaving EU, Ireland would not be part of the common European market, meaning that more or less all trade to EU-countries would be taxed. The whole idea of US companies establishing Ireland is that they then get access to the whole EU common market.
2. Ireland has always got more money from EU tan they pay to EU. Other EU companies are funding Ireland since they can not raise all money internally to keep the country going. That money stream would then be cut off and then raising the taxes would probably be the only thing they could do.
Check out the link on wikipedia explaining what Apple, Starbucks, Google etc are doing: http://en.wikipedia.org/wiki/Double_Irish_arrangement
What do you mean with "receiving this income"?
That's ok, they can stop using the Euro as their currency and get booted out of the EU entirely in which case their tax setup would fail because they can be blocked from transfer pricing from other EU countries.
It's possible to do, the rates are small here so the difference shouldn't result in a drop in units. If you have $1b revenue by selling 1m products at $1000 with $250m profit and the $250m is taxed at 2%, the tax paid would be $5m. Raise it to 12.5% and the tax paid is $31m so to get the extra $26m, you can't just apply $26 extra to each of the 1m products, you have to allow for the same higher percentage coming off the higher profit. You have to increase prices so that profit x 0.875 = $250m-$5m or profit = $280m. This is just $30 on each product.
$1030 per unit x 1m units = $1.03b with profit $280m, tax = $35m, profit after tax is $245m same as with the 2% rate.
Perhaps they've already done this in the US where they pay more than double the expected Irish rates. If not, those prices should be increased to offset the higher tax burden and maximize shareholder returns.
It's a significant amount. Their SEC filings break down revenue by region and they say that 35% of their revenue is from the US. Given that they pay far more tax in the US, that leaves much more profit going through Ireland but pre-tax profit shouldn't be more than 65%. They do charge more on products outside the US though so it's possible.
The expected rate is almost 1/3 of the US rate. Apple pays at least double the expected amount to the US already (10x the actual amount). You're saying the US is 2-3x as greedy as the EU? If that's the case, they should move their entire operation to Ireland.
I might be native here but I don't really understand why Apple should be made to pay back these taxes. They didn't "choose" not to pay, they got an agreement with the government and they complied with it.
The government wasn't allowed to offer that deal and therefore Apple is the beneficiary of an illegal arrangement. No credible jurisdiction in the world allows that; if you receive stolen property then you have to return it, if you benefit from a fraudulent contract, then you are liable for that fraud.
Pretty simple. Ignorance, even in good faith, is not an excuse for law breaking.
Except Apple PAID the EU it's taxes.. No one ever adds in the VAT taxes and local taxes to what Apple is paying in tax.. For some reason it gets conveniently left out. What is at question is what taxes Apple owes Ireland itself.. NOT the EU..
The EU is being presumptuous in assuming they can dictate Irish tax law.. The EU wants to 'encourage' Apple and other businesses to leave Ireland. Thats what this is REALLY about. Well, bully them really.
Now, Ireland had almost left the EU completely once.. and this impacts all of Ireland's agreements, not just with Apple.. I could see the question of Ireland leaving being real yet again w/EU throwing it's weight around retroactively..
The 'irony' of this is.. Ireland CLOSED that loophole, so, after 2017, Apple and other businesses cannot take advantage of the tax break ANYWAY.
This is just EU being a bully. Literally.
There is no way that Ireland is going in any direction but down if it leaves the EU. No way that will happen.
does this mean the people of ireland would be receiving this income ?
Given how much Ireland owes the EU, I think it'll be taken as an automatic repayment.
The EU a totally unelected body and waste of space ...what's the point of national election's when a unelected body sets the rules of country without approval of the people.
The expected rate is almost 1/3 of the US rate. Apple pays at least double the expected amount to the US already (10x the actual amount). You're saying the US is 2-3x as greedy as the EU? If that's the case, they should move their entire operation to Ireland.
It's not that. Apple agreed on the term of business there and not violated anything. EU see the loophole and impose retro tax is nothing more than "greed". EU can move forward with new tax law, but retro tax is totally BS.
The EU a totally unelected body and waste of space ...what's the point of national election's when a unelected body sets the rules of country without approval of the people.
The EU is not totally unelected at all. It's a mix of directly elected (Parliament), ministerially representative (Council of), head of state representative (Council) and appointed/approved by elected representative (Commission).
The idea that the EU is unelected or undemocratic is a blatant untruth.
VAT is cost neutral to the company. It is the consumer who pays the VAT. The companies in EU are paying tax based on their profit. But due to advanced tax planning many major companies are avoiding taxes that the law makers intended them to pay. The law makers are working on closing all these gaps. And guess what, advanced tax planning is not anything the US government likes either.
Someone said that Ireland should leave EU. What you don't understand then is two things:
1. By leaving EU, Ireland would not be part of the common European market, meaning that more or less all trade to EU-countries would be taxed. The whole idea of US companies establishing Ireland is that they then get access to the whole EU common market.
2. Ireland has always got more money from EU tan they pay to EU. Other EU companies are funding Ireland since they can not raise all money internally to keep the country going. That money stream would then be cut off and then raising the taxes would probably be the only thing they could do.
Check out the link on wikipedia explaining what Apple, Starbucks, Google etc are doing: http://en.wikipedia.org/wiki/Double_Irish_arrangement
Oh gosh. Where to begin.... well, let me address a couple of points you raise, to tell you why you're completely off-base (my numbering may be different from yours).
1. If you think "companies pay corporate taxes" and "consumers pay VAT" you're a bit clueless. In the macroeconomy, it's the consumer that pays both. It may vary from industry to industry depending on the factors that drive tax pass-through (and we do not have to get into it here), but suffice it to say that you're living a delusional world if you think that firms are the ones ultimately paying taxes.
2. The EU can't even get its act together with Greece. It's laughable to think that they'd let Ireland go on its own. It'll be pretty much the end of the EU as we know it (and perhaps even the Euro), and that's the reason even the Germans are scared to let even the Greeks go. The threat to walk away from the Union is a huge weapon for the smaller states.
3. Yes, Ireland is a net recipient of EU funds, but: (i) it amounts to 0.5% of Irish GDP; (ii) more importantly, Ireland is almost right in the middle: there are 12 states -- out of 28 states in the EU -- that are larger net recipients in both absolute Euros and as a percentage of GDP than Ireland.
Btw, sitting from your perch in Sweden -- which is neither a member of the EU nor a member of the Euro -- you don't know much more about either than we do here in the US.
Global corporate taxation needs a systematic overhaul. It's not ethical for any company to reap the benefits of operating within an economy only to turn around and create artificial business structures that rob that economy of the revenue needed to support itself. Companies have little choice but to commit these sins in the name of the almighty shareholder. If we can't expect corporations to pay their fair share. We need globally coordinated legislation to close these loopholes and create an environment where everyone can enjoy the prosperity and benefits of good business.
I heard a lot of the youth already has to leave Ireland to find work
This is all bluster to make some noises that make it look/sound good for the EU. The consequence of adopting something like this will be devastating for the Irish economy. U.S. businesses will leave in droves. Ireland would sooner quit the EU than allow something like this to come to pass.
Bottom line: I predict it won't happen (well, maybe a couple of percentage points is possible as a sop....)
First it is not so easy to get out of the EU. I even don't know if they have any regulations in place that define such a process.
Second the system only works because Luxembourg and Ireland are in the EU. It breaks if either of the countries leaves the EU.
So this is not an alternative for Ireland.
Btw, sitting from your perch in Sweden -- which is neither a member of the EU nor a member of the Euro -- you don't know much more about either than we do here in the US.
What? Sweden has been part of the EU for the last 20 years (since January 1st 1995).
As for this tax issue, Apple (like other large corporations, not only US) is funneling income from the EU and the US to Ireland where they only pay 2% taxes on profits. Do I like their products? Oh yes, and since a while now! Do I applaud this kind of tax evasion sham? Hell no!
"Reports submitted by a subcommittee of the US Congress revealed that Apple's Ireland-based subsidiary earned $22 billion in revenue in 2011 alone, but paid just $10 million in taxes." - CNET
Lawmakers lambaste Apple's tax strategy as 'an absurdity' - CNET May 21, 2013
Apple's Irish tax strategy gets EU scrutiny, report says - CNET June 11, 2014
The agreement in Ireland is that if you have an incorporated company there that is managed elsewhere, you pay tax elsewhere. The US agreement is that if you have a company incorporated elsewhere you pay tax elsewhere. In using those two rules against each other, Apple managed to form companies with tax residency nowhere. Each country can't dictate the laws of the other.
Ireland itself is partly to blame in agreeing some of the terms for the Irish resident companies and they can be fined too, what they did was outlined in the following document:
http://ec.europa.eu/competition/state_aid/cases/253200/253200_1582634_87_2.pdf
An EU member state violating trade agreements in favor of a company doesn't make it ok. There's nothing greedy about expecting companies to pay rates that they were always fully aware of. The IRS went after back taxes years ago:
http://www.zdnet.com/article/apples-long-irs-irish-history/
If any tax authority determines that tax has been wrongfully avoided then they have every right to ask for it to be paid.
Oh dear....
Sweden is a member of the EU and has been for several decades. It is not a member of the Euro Zone like UK, Denmark etc.
VAT is a tax on Consumption. VAT stands for Value Added Tax.
If I (as a company) buy a widget for $100 (inc VAT) and add something to it before selling it for $200 then I pay VAT on the ADDED value i.e. $100. I can reclaim/offset the TAX if the amount of VAT collected by my company is less than the amount Paid.
VAT rates are set by indvidual countries (like US states with their taxes).
Everything is subject to VAT but in some countries the rate is Zero. In the UK, Basic Food, Childrens Clothes and Books (dead tree type) are taxed at 0%.
I ran my own Software Consultancy for more than 10 years in the UK so quartetly VAT returns are nothing new to me.
Oh gosh. Where to begin.... well, let me address a couple of points you raise, to tell you why you're completely off-base (my numbering may be different from yours).
1. If you think "companies pay corporate taxes" and "consumers pay VAT" you're a bit clueless. In the macroeconomy, it's the consumer that pays both. It may vary from industry to industry depending on the factors that drive tax pass-through (and we do not have to get into it here), but suffice it to say that you're living a delusional world if you think that firms are the ones ultimately paying taxes.
2. The EU can't even get its act together with Greece. It's laughable to think that they'd let Ireland go on its own. It'll be pretty much the end of the EU as we know it (and perhaps even the Euro), and that's the reason even the Germans are scared to let even the Greeks go. The threat to walk away from the Union is a huge weapon for the smaller states.
3. Yes, Ireland is a net recipient of EU funds, but: (i) it amounts to 0.5% of Irish GDP; (ii) more importantly, Ireland is almost right in the middle: there are 12 states -- out of 28 states in the EU -- that are larger net recipients in both absolute Euros and as a percentage of GDP than Ireland.
Btw, sitting from your perch in Sweden -- which is neither a member of the EU nor a member of the Euro -- you don't know much more about either than we do here in the US.
Good to know that you are convinced that Sweden just left the EU. This explains it all.
Btw, companies do pay the corporate tax. There is never a direct link between a product selling price and and the corporate tax level a company pays, so the consumer does not pay the corporate tax. Of course the buyer of a productis contributing to the profits of the selling company, but the taxes on the profits are too much dependent on other factors: profit/loss of other products, acquisitions, write-offs, ... A company can never anticipate the tax on profits by increasing the selling price of its products. It just does not know how much profit it will make, and there is also competitive pressure to keep the selling price as it is.