Apple makes first payment of $15.3B disputed Irish tax bill to escrow account
Apple has started to pay off its $15.3 billion tax bill to Ireland, the country's Finance Minister has confirmed, transferring the first $1.76 billion payment to an escrow account.
Finance Minister Paschal Donohoe informed Reuters on Friday the first payment has made its way into the escrow account. While the amount of 1.5 billion euros ($1.76 billion) was confirmed by the minister, it is unclear exactly when Apple made the payment to the account, nor when the remainder of the due taxes will be similarly paid.
Bloomberg reports the European Commission is considering dropping its legal action against the Irish government for failing to collect the back taxes, due to the first payment. In March, the Commission advised it would be willing to withdraw from the case, originally launched due to the slow progress in recovering the taxes, but only if the full amount was paid.
"We continue to be in close contact with the Irish authorities and hope that recovery of the illegal aid is completed in full as soon as possible," the European Union advised. "That would also allow us to close the ongoing procedure before the EU Court of Justice against Ireland for not having implemented the Commission decision of August 2016."
The decision in question was an order to Ireland to collect 13 billion euros in back taxes, following an investigation into Apple's tax affairs. The Commission argued Apple had received preferential tax treatment from Ireland, constituting illegal state aid.
Apple funned large sums of revenue through Ireland, using assorted loopholes in order to pay the minimal amount of tax due. The Commission's investigation found Apple paid 1 percent on profits in 2003, and as little as 0.005 percent in 2014. The Irish government was accused of reverse-engineering tax deals it made with Apple on the fly, to ensure favorable rates.
Both Apple and Ireland have denied any wrongdoing, and are appealing the decision. On Thursday, the European Union Court of Justice blocked efforts by the U.S. government to help Apple, despite the U.S. claiming it has a vested interest in the affair, as Apple could potentially claim tax credits over the Irish funds.
The appeal for the case is likely to be heard in the fall, Donohoe suggested in April, but an exact date is unknown. As part of the ongoing legal action, the unpaid taxes are to be held in escrow by the Bank of New York Mellon, with the full amount expected to be paid by the end of the third quarter of 2018.
Outside of the courtroom, critics have accused Apple of violating the spirit of tax law, and depriving government services of badly-needed funds. In France, Apple has been met with repeated protests proclaiming a similar message.
Since the investigation, the European Commission has proposed changes to tax law that would require digital media companies to pay based on where revenue is generated, not where the company chooses to locate its European headquarters.
Finance Minister Paschal Donohoe informed Reuters on Friday the first payment has made its way into the escrow account. While the amount of 1.5 billion euros ($1.76 billion) was confirmed by the minister, it is unclear exactly when Apple made the payment to the account, nor when the remainder of the due taxes will be similarly paid.
Bloomberg reports the European Commission is considering dropping its legal action against the Irish government for failing to collect the back taxes, due to the first payment. In March, the Commission advised it would be willing to withdraw from the case, originally launched due to the slow progress in recovering the taxes, but only if the full amount was paid.
"We continue to be in close contact with the Irish authorities and hope that recovery of the illegal aid is completed in full as soon as possible," the European Union advised. "That would also allow us to close the ongoing procedure before the EU Court of Justice against Ireland for not having implemented the Commission decision of August 2016."
The decision in question was an order to Ireland to collect 13 billion euros in back taxes, following an investigation into Apple's tax affairs. The Commission argued Apple had received preferential tax treatment from Ireland, constituting illegal state aid.
Apple funned large sums of revenue through Ireland, using assorted loopholes in order to pay the minimal amount of tax due. The Commission's investigation found Apple paid 1 percent on profits in 2003, and as little as 0.005 percent in 2014. The Irish government was accused of reverse-engineering tax deals it made with Apple on the fly, to ensure favorable rates.
Both Apple and Ireland have denied any wrongdoing, and are appealing the decision. On Thursday, the European Union Court of Justice blocked efforts by the U.S. government to help Apple, despite the U.S. claiming it has a vested interest in the affair, as Apple could potentially claim tax credits over the Irish funds.
The appeal for the case is likely to be heard in the fall, Donohoe suggested in April, but an exact date is unknown. As part of the ongoing legal action, the unpaid taxes are to be held in escrow by the Bank of New York Mellon, with the full amount expected to be paid by the end of the third quarter of 2018.
Outside of the courtroom, critics have accused Apple of violating the spirit of tax law, and depriving government services of badly-needed funds. In France, Apple has been met with repeated protests proclaiming a similar message.
Since the investigation, the European Commission has proposed changes to tax law that would require digital media companies to pay based on where revenue is generated, not where the company chooses to locate its European headquarters.
Comments
They paid the amount they were legally obligated to per Ireland.
And they had "funned" doing so!
To be clear I am not personally judging that the special exception made for a very wealthy international corporation was ILLEGAL tho. One of the few entities whose opinion matters made that judgement.
Most of you know the mantra. Say it with me. “Companies don’t pay taxes. People pay taxes.” ‘Cause ya know, when your company pays taxes it ultimately comes out of your pocket as an employee or out of the collective pocket of your company’s customers.
To help you understand why the money will come from the taxpayer (Apple or Amazon or whoever) should be easy. The EU is not levying a fine on anyone. What they've determined is that making a special tax arrangement was not permissible in the first place. Just like other taxpayers Apple (and Amazon) must pay the statutory corporate tax-rate. No fine. It's taxes due the Irish or Luxembourg government as representatives of their people.
If Ireland and Apple win their appeal(s), the money will need to be returned to Apple. In the meantime, Ireland doesn't want to be in a situation where there might be losses on the funds held in escrow (or, if not losses, insufficient gains) such that Ireland would have to make up the difference if and when the money was returned to Apple. So it needed Apple to agree on how the funds would be managed in escrow and agree to accept whatever funds were there if and when they won their appeal(s). So Apple had significant leverage when it came to negotiating the terms of payments and how the funds would be managed.
What was Apple allowed to do that other similarly situated entities were told they couldn't do? Or that other entities weren't allowed to do? Or that was contrary to Irish tax law and policy?
The issue isn't that Apple didn't pay the generally applicable tax rate. It isn't claimed (i.e. by the European Commission) that Apple didn't pay the proper rate. The issue is how is the taxable base to which that rate is applied determined? On that front, what that Apple was allowed to do was inconsistent with more generally-applicable Irish tax policy? Was it that profits attributed to foreign branches of Irish corporations weren't taxable (as income) by Ireland? Was it using a percentage-of-expenses method to determine the profits which should be allocated to the domestic branch of an Irish corporation?
I'm asking sincerely. What is it that you believe Apple was allowed to do, in determining how much income was taxable in Ireland, which conflicted with Irish tax law or policy?