Apple appeals EU tax ruling, claims Commission 'retroactively changed the rules'

Posted:
in General Discussion edited December 2016
Fulfilling a promise, Apple on Monday formally appealed a tax ruling by the European Commission ordering Ireland to collect at least $13.6 billion in back taxes.




The European Union "took unilateral action and retroactively changed the rules, disregarding decades of Irish tax law, U.S. tax law, as well as global consensus on tax policy, that everyone has relied on," Apple claimed in a statement to Bloomberg. The company has made similar statements in the past, insisting that it follows the law and pays everything it owes.

In a filing of its own, however, the Commission published more details of its two-year investigation, reiterating its stance that Ireland offered preferential tax treatment to Apple, something illegal under E.U. law. The Commission elaborated that Irish tax practices were "too inconsistent" to establish solid rules for profit allocation, and that the means used to produce taxable profit for Apple units didn't follow the arms-length principle for transfers between different parts of a company.

The Commission also defended itself against accusations leveled by Apple and Ireland, insisting that it respected both parties' procedural rights, and gave Ireland "ample opportunity" to make its positions known -- something that happened "on multiple occasions." Apple was only able to offer observations, but took advantage of that several times. The investigation never took its focus off of profit allocation methods, the Commission continued.

Apple's appeal joins an earlier one filed by Ireland, which nevertheless put out a new statement on Monday, attacking the E.U.'s charge that Apple shifted nearly all of its European profits to two "head offices" in Ireland -- Apple Sales International, and Apple Operations Europe -- so they couldn't be taxed.

"These branches carried out routine functions, but all important decisions within ASI and AOE were made in the U.S., and the profits deriving from these decisions were not properly attributable to the Irish branches of ASI and AOE," the Irish finance ministry said.

Apple has claimed that those units were never fully exempt from taxes, and are in fact subject to deferred U.S. taxation, though that would only apply if the company decided to repatriate the money -- something it has refused to do unless U.S. politicians grant it a tax holiday.

Officially Apple will have to pay the back taxes within a matter of weeks, Bloomberg said. That money will be held in escrow however, and the appeals process could take several years to resolve.
«1

Comments

  • Reply 1 of 30
    I believe Apple and Ireland will win this one. 

    OTOH, even if it were to lose, Apple will will merely set it off against taxes owed in the US, so it'll be the US taxpayers who lose. Ireland could pay a significant price in the long run by having become a less attractive place to do business. 
    SpamSandwichviclauyyc
  • Reply 2 of 30
    croprcropr Posts: 914member
    I believe Apple and Ireland will win this one. 

    OTOH, even if it were to lose, Apple will will merely set it off against taxes owed in the US, so it'll be the US taxpayers who lose. Ireland could pay a significant price in the long run by having become a less attractive place to do business. 
    Ireland would not be impacted.  The fact is that Apple, like any other multinational, needs a European HQ, and there is no reason to change the HQ from Ireland to another European country (unless Ireland decides to leave the EU, which it won't).

    I believe that Apple will lose it, even worse I believe it does not have a fighting chance. The Eurpoean commission has never lost an anti competition case before the European court. Remember the European commission does perceive the non paid tax as an anti competitve and thus illegal state aid from Ireland to Apple. 

    Damage control is the best Apple can go for.
    edited December 2016
  • Reply 3 of 30
    blastdoorblastdoor Posts: 1,894member
    Regardless of how this plays out, one thing is clear -- the world is becoming a lot more complicated for multinational corporations like Apple. You can't count on the laws being enforced as written any more. I suspect it's going to get a lot worse before it gets better. 
    SpamSandwich
  • Reply 4 of 30
    steven n.steven n. Posts: 1,108member
    The EC is out of control. No other way to say it. The concept started out as great but from retroactive laws to their ruling to allow people to globally white wash history, the EC needs to be reigned in.
    elijahgsingularityviclauyyc
  • Reply 5 of 30
    rob53rob53 Posts: 2,007member
    It's interesting how so many more court cases are being tried in the court of public opinion instead of in court where all evidence is supposed to be presented and logged into court records. I assume these filings were appropriately filed into the court records but why are they being released as "public" records before the case is even tried? Apple, Ireland and the EU Commission are already trying the case without a judge(s), which means nothing is final. Can we just wait until the court actually starts proceedings before we try this case????
  • Reply 6 of 30
    blastdoorblastdoor Posts: 1,894member
    cropr said:
    I believe Apple and Ireland will win this one. 

    OTOH, even if it were to lose, Apple will will merely set it off against taxes owed in the US, so it'll be the US taxpayers who lose. Ireland could pay a significant price in the long run by having become a less attractive place to do business. 
    Ireland would not be impacted.  The fact is that Apple, like any other multinational, needs a European HQ, and there is no reason to change the HQ from Ireland to another European country (unless Ireland decides to leave the EU, which it won't).

    I believe that Apple will lose it, even worse I believe it does not have a fighting chance. The Eurpoean commission has never lost an anti competition case before the European court. Remember the European commission does perceive the non paid tax as an anti competitve and thus illegal state aid from Ireland to Apple. 

    Damage control is the best Apple can go for.
    Without the tax incentives, Ireland would not be a natural choice for a European HQ. France or Germany make much more sense. (or the UK, except for Brexit). But now that Apple (and many other companies) have been in Ireland for a long time, it might be too costly to leave. Also, the continental European countries aren't exactly a model of political stability right now. So yeah... Ireland probably won't lose its HQ status in the short run. 
  • Reply 7 of 30
    And Google, Microsoft, etc?  They all got the same arrangement. No talk of taking their money too?  The EU has become warlords. They ran out of their money. Ran out of other people's money. Now they're going after money by simply changing the rules?  It's Ireland they should be going after. Not these companies.

    So if I rent an apartment and the landlord and I agree on a price. And that city (JUST LIKE SAN FRANCISCO) has rent control... I live there for 15 years. The state that city is in (CALIFORNIA) starts running out of money to pay for all the freebies it promised - so legislature in Sacramento decides that rent control is not fair so they go after me even though I've done nothing wrong. I've been paying my rent agreed upon and both I and the landlord (who is very happy because I always pay on time) are told collect the money retroactively on my rent control apartment and that's ok?

    And how come the other 100,000 that live in SF who also get rent control are not having to pay retroactively?  So just because legislators found out I got a great job that pays well I am singled out over the other 99,999 people because they are barely getting by?

    oh AND I'm paying the money NOT to the landlord  who would be collecting it retroactively, but directly to the legislators in Sacramento instead??  And this is somehow fair?

    So if our government decides the taxes weren't high enough for all of us. 10 years ago we should have started paying more. Every citizen working NOW is expected to pay that percentage more times the last 10 years (we won't charge unemployed people who lost their jobs due to badly written laws or over regulating) oh and its due in 2 weeks. Yeah I think that's completely fair. 

    Welcome to Venezuela and the "shake-down"!

    edited December 2016 SpamSandwichwatto_cobra
  • Reply 8 of 30


    (Patrick Pelata's tweet)
    edited December 2016
  • Reply 9 of 30
    cropr said:
    I believe Apple and Ireland will win this one. 

    OTOH, even if it were to lose, Apple will will merely set it off against taxes owed in the US, so it'll be the US taxpayers who lose. Ireland could pay a significant price in the long run by having become a less attractive place to do business. 
    Ireland would not be impacted.  The fact is that Apple, like any other multinational, needs a European HQ, and there is no reason to change the HQ from Ireland to another European country (unless Ireland decides to leave the EU, which it won't).

    I believe that Apple will lose it, even worse I believe it does not have a fighting chance. The Eurpoean commission has never lost an anti competition case before the European court. Remember the European commission does perceive the non paid tax as an anti competitve and thus illegal state aid from Ireland to Apple. 

    Damage control is the best Apple can go for.
    Apple has a fighting chance. I believe they will win during appeals. The top court in Europe has ruled in favor of European Commission's decisions but not illegal state aid cases pertaining to taxes. The burden of proof is huge. The commission has to prove the tax arrangements in Ireland for Apple breach EU rules regarding state aid. They have to prove the arrangement was unfair to other companies. What is going to be hard is proving Ireland's treatment was only for Apple and not available to other companies.That is a tough one because we all know Ireland is a tax haven for big corporations so others get tax breaks as well. Ireland maintains they don't offer tax deals to specific companies. If that's true, the European Commission has a tough case to win. 
  • Reply 10 of 30
    sdw2001sdw2001 Posts: 16,937member
    I know this is silly, but I honestly wonder what would happen if Apple just ignored the ruling, or if it even publicly stated it wasnt paying.  What are they going to do...go in with guns and raid the offices?  
  • Reply 11 of 30
    gatorguygatorguy Posts: 20,288member
    I believe Apple and Ireland will win this one. 

    OTOH, even if it were to lose, Apple will will merely set it off against taxes owed in the US, so it'll be the US taxpayers who lose. Ireland could pay a significant price in the long run by having become a less attractive place to do business. 
    I personally believe Apple will eventually lose this argument, but my guess is no better than yours since neither of us are informed enough (who is outside of the players?)

    As for whether US taxpayers "lose" that would depend on whether Apple ever brings home all the profits held in foreign-controlled accounts. I don't believe they plan on doing so even if Mr. Trump extends a one-time tax holiday of 10-15%, and even that is not assured. Certainly they would repatriate at least a portion of their profits under the right circumstances, as shown by their identification of deferred taxes on a large amount of it, but Apple has never fully recognized and set aside taxes for the entire amount of profits they've realized, which they would not have to if they never had an intent of repatriating some amount of it in the foreseeable future. In the most recent mention from Apple that I've read the amount of profits for which Apple had no plans whatsoever and under any circumstance to bring back to the US amounted to around $100B in round figures. 

    Of course if Ireland is going to be awarded taxes anyway Apple could change their plans and make it taxable in the US instead, but they would still have to set aside additional taxes (on paper) over and above their current deferrals which to this point they have not AFAIK. 
    edited December 2016
  • Reply 12 of 30
    sphericspheric Posts: 1,730member
    sdw2001 said:
    I know this is silly, but I honestly wonder what would happen if Apple just ignored the ruling, or if it even publicly stated it wasnt paying.  What are they going to do...go in with guns and raid the offices?  
    You realise that each and every product Apple manufactures in China and sells in the EU has to go through customs, yes? 

    The EU can *easily* halt all Apple sales within its borders within a relatively short time, costing Apple billions. 

    It won't come to that.
  • Reply 13 of 30
    gatorguygatorguy Posts: 20,288member
    blastdoor said:
    cropr said:
    I believe Apple and Ireland will win this one. 

    OTOH, even if it were to lose, Apple will will merely set it off against taxes owed in the US, so it'll be the US taxpayers who lose. Ireland could pay a significant price in the long run by having become a less attractive place to do business. 
    Ireland would not be impacted.  The fact is that Apple, like any other multinational, needs a European HQ, and there is no reason to change the HQ from Ireland to another European country (unless Ireland decides to leave the EU, which it won't).

    I believe that Apple will lose it, even worse I believe it does not have a fighting chance. The Eurpoean commission has never lost an anti competition case before the European court. Remember the European commission does perceive the non paid tax as an anti competitve and thus illegal state aid from Ireland to Apple. 

    Damage control is the best Apple can go for.
    Without the tax incentives, Ireland would not be a natural choice for a European HQ. France or Germany make much more sense. (or the UK, except for Brexit). But now that Apple (and many other companies) have been in Ireland for a long time, it might be too costly to leave. Also, the continental European countries aren't exactly a model of political stability right now. So yeah... Ireland probably won't lose its HQ status in the short run. 
    Ireland's base corporate tax rate of 12.5%  is among the lowest in all of the EU, which is great incentive to base there, a natural choice then so to speak, even if they do have to pay some higher amount of taxes than they may have been up to now. On a tax/profits basis Germany and France would cost them a whole lot more.

    EDIT: Checking it looks like only Bulgaria has a lower corporate tax rate than Ireland among the EU member countries. Theirs is 10% vs. Ireland's 12.5%. Most others are considerably higher, a good reason for Apple' activities in a country like Germany showing a paper loss with revenues shifted to low-tax Ireland. 
    edited December 2016
  • Reply 14 of 30
    nhtnht Posts: 4,429member
    cropr said:
    I believe Apple and Ireland will win this one. 

    OTOH, even if it were to lose, Apple will will merely set it off against taxes owed in the US, so it'll be the US taxpayers who lose. Ireland could pay a significant price in the long run by having become a less attractive place to do business. 
    Ireland would not be impacted.  The fact is that Apple, like any other multinational, needs a European HQ, and there is no reason to change the HQ from Ireland to another European country (unless Ireland decides to leave the EU, which it won't).

    I believe that Apple will lose it, even worse I believe it does not have a fighting chance. The Eurpoean commission has never lost an anti competition case before the European court. Remember the European commission does perceive the non paid tax as an anti competitve and thus illegal state aid from Ireland to Apple. 

    Damage control is the best Apple can go for.
    President Obama warned this action would be construed as an attack on US tax revenue by the EU.  I doubt President Trump would be any more obliging of what is a naked grab for money owed to the US.

    http://money.cnn.com/2016/08/25/technology/us-eu-apple-tax/

  • Reply 15 of 30
    nhtnht Posts: 4,429member
    spheric said:
    sdw2001 said:
    I know this is silly, but I honestly wonder what would happen if Apple just ignored the ruling, or if it even publicly stated it wasnt paying.  What are they going to do...go in with guns and raid the offices?  
    You realise that each and every product Apple manufactures in China and sells in the EU has to go through customs, yes? 

    The EU can *easily* halt all Apple sales within its borders within a relatively short time, costing Apple billions. 

    It won't come to that.
    The US can respond equally to a trade war.  China and Russia will profit.  Amusingly if there 

    The EU has no right to Apple worldwide profits.  The taxes are based on Apple sales outside the US, not Apple sales inside the EU.  They can go pound sand.
    edited December 2016
  • Reply 16 of 30
    hydrogen said:


    (Patrick Pelata's tweet)
    I am thoroughly confused by this graph. Two questions: (i) What does the curved line represent? The 'best fit' of the scatter plot? If so, what the heck is an R^2 doing there in the graph, as that is only a measure of linear association?! (ii) What is the "income" based on which the Gini coefficient is measured and defined? For example, does it include transfers, in-kind distributions (e.g., food stamps), is it pre-tax/post-tax, measured at the household or the individual level?
  • Reply 17 of 30
    gatorguygatorguy Posts: 20,288member
    nht said:
    spheric said:
    sdw2001 said:
    I know this is silly, but I honestly wonder what would happen if Apple just ignored the ruling, or if it even publicly stated it wasnt paying.  What are they going to do...go in with guns and raid the offices?  
    You realise that each and every product Apple manufactures in China and sells in the EU has to go through customs, yes? 

    The EU can *easily* halt all Apple sales within its borders within a relatively short time, costing Apple billions. 

    It won't come to that.
    The US can respond equally to a trade war.  China and Russia will profit.  Amusingly if there 

    The EU has no right to Apple worldwide profits.  The taxes are based on Apple sales outside the US, not Apple sales inside the EU.  They can go pound sand.
    I don't think the EU is trying to claim taxes on Apple's worldwide profits. But with that said the EU has asserted the right to base anti-competition penalties on a company's world-wide revenues in a few instances so far, and apparently legally upheld. Microsoft immediately comes to mind, and Google may be next. Does the EU have a right to world-wide profits as a basis? Maybe and so far they have in a couple of high profile cases. So much for pounding sand, tho this Apple tax case would not be applicable. 
  • Reply 18 of 30
    crowleycrowley Posts: 5,779member
    nht said:
    spheric said:
    sdw2001 said:
    I know this is silly, but I honestly wonder what would happen if Apple just ignored the ruling, or if it even publicly stated it wasnt paying.  What are they going to do...go in with guns and raid the offices?  
    You realise that each and every product Apple manufactures in China and sells in the EU has to go through customs, yes? 

    The EU can *easily* halt all Apple sales within its borders within a relatively short time, costing Apple billions. 

    It won't come to that.
    The US can respond equally to a trade war.  China and Russia will profit.  Amusingly if there 

    The EU has no right to Apple worldwide profits.  The taxes are based on Apple sales outside the US, not Apple sales inside the EU.  They can go pound sand.
    If Apple get found guilty, refuse to pay, and have their property seized as a consequence, that isn't a trade war, that's the law in action.  The law at a very competitive 12.5% corporation tax, which some people are somehow equating with extortion.
    singularity
  • Reply 19 of 30
    nhtnht Posts: 4,429member
    gatorguy said:
    nht said:
    spheric said:
    sdw2001 said:
    I know this is silly, but I honestly wonder what would happen if Apple just ignored the ruling, or if it even publicly stated it wasnt paying.  What are they going to do...go in with guns and raid the offices?  
    You realise that each and every product Apple manufactures in China and sells in the EU has to go through customs, yes? 

    The EU can *easily* halt all Apple sales within its borders within a relatively short time, costing Apple billions. 

    It won't come to that.
    The US can respond equally to a trade war.  China and Russia will profit.  Amusingly if there 

    The EU has no right to Apple worldwide profits.  The taxes are based on Apple sales outside the US, not Apple sales inside the EU.  They can go pound sand.
    I don't think the EU is trying to claim taxes on Apple's worldwide profits. But with that said the EU has asserted the right to base anti-competition penalties on a company's world-wide revenues in a few instances so far, and apparently legally upheld. Microsoft immediately comes to mind, and Google may be next. Does the EU have a right to world-wide profits as a basis? Maybe and so far they have in a couple of high profile cases. So much for pounding sand, tho this Apple tax case would not be applicable. 
    If Trump doesn't stand up to the EU over this the folks that voted for him will likely be unamused.  The anti-competition penalties are an end run around taxation of US multinationals and theft against the US treasury.  It would likely mean that President Trump would have to play nice with China in order to pound the EU INTO the sand but if necessary we should do it.  There should be friendly rivalry between the US and EU but this is ruling is punitive and we don't have to nor should we play nice.  That they have gone after Microsoft, Google and Apple is an indicator that US companies are targeted for enforcement and frankly protectionist.  The US treasury under a democratic president has indicated that it believes the EU actions to be outside the bounds of normal civilized play.  If they wish to play that way then there's all sorts of games we can play under a republican president friendly to Russia in the context of helping the UK and beating the absolute crap out of the EU.  We can ship LNG exclusively to the UK and let the rest of Europe pay Gazprom prices.  That should do wonders for their economies.  

    Or only ship LNG to NATO countries that actually puts 2% of GDP into their military.  That would be Poland, UK, Greece and Estonia.  That would likely fit President Trump's agenda quite nicely.

    If Apple has to bring some jobs back to the US to appease President Trump it'll be worth the supply chain disruption to make this goes away as it should go away.

    I didn't vote for The Donald but if the Europeans think that this is a good time hit US companies with big fines they are complete idiots.
  • Reply 20 of 30
    nht said:
    gatorguy said:
    nht said:
    spheric said:
    sdw2001 said:
    I know this is silly, but I honestly wonder what would happen if Apple just ignored the ruling, or if it even publicly stated it wasnt paying.  What are they going to do...go in with guns and raid the offices?  
    You realise that each and every product Apple manufactures in China and sells in the EU has to go through customs, yes? 

    The EU can *easily* halt all Apple sales within its borders within a relatively short time, costing Apple billions. 

    It won't come to that.
    The US can respond equally to a trade war.  China and Russia will profit.  Amusingly if there 

    The EU has no right to Apple worldwide profits.  The taxes are based on Apple sales outside the US, not Apple sales inside the EU.  They can go pound sand.
    I don't think the EU is trying to claim taxes on Apple's worldwide profits. But with that said the EU has asserted the right to base anti-competition penalties on a company's world-wide revenues in a few instances so far, and apparently legally upheld. Microsoft immediately comes to mind, and Google may be next. Does the EU have a right to world-wide profits as a basis? Maybe and so far they have in a couple of high profile cases. So much for pounding sand, tho this Apple tax case would not be applicable. 
    If Trump doesn't stand up to the EU over this the folks that voted for him will likely be unamused.  The anti-competition penalties are an end run around taxation of US multinationals and theft against the US treasury.  It would likely mean that President Trump would have to play nice with China in order to pound the EU INTO the sand but if necessary we should do it.  There should be friendly rivalry between the US and EU but this is ruling is punitive and we don't have to nor should we play nice.  That they have gone after Microsoft, Google and Apple is an indicator that US companies are targeted for enforcement and frankly protectionist.  The US treasury under a democratic president has indicated that it believes the EU actions to be outside the bounds of normal civilized play.  If they wish to play that way then there's all sorts of games we can play under a republican president friendly to Russia in the context of helping the UK and beating the absolute crap out of the EU.  We can ship LNG exclusively to the UK and let the rest of Europe pay Gazprom prices.  That should do wonders for their economies.  

    Or only ship LNG to NATO countries that actually puts 2% of GDP into their military.  That would be Poland, UK, Greece and Estonia.  That would likely fit President Trump's agenda quite nicely.

    If Apple has to bring some jobs back to the US to appease President Trump it'll be worth the supply chain disruption to make this goes away as it should go away.

    I didn't vote for The Donald but if the Europeans think that this is a good time hit US companies with big fines they are complete idiots.

    gatorguy
    bnp.jpeg 140.8K
Sign In or Register to comment.