Apple, Google & others to face European Parliament hearing on tax deals

AppleInsider · March 14, 2016 7:38PM

Apple, Google, IKEA, and McDonald's will together face a European Parliament hearing on Wednesday, called amid European Commission investigations into whether such multinationals were given preferential tax deals by some nations.

The Parliament's tax committee won't have the authority to order any changes at the hearing, according to Reuters. Starbucks and Fiat Chrysler have in fact declined to appear, each citing the fact that they're appealing earlier Commission rulings ordering them to pay back taxes. Those rulings enjoined the Netherlands and Luxembourg to collect the money, respectively.

All of the companies presenting on Wednesday have insisted that they follow European tax laws. Apple, accused of benefiting from Irish tax breaks, has been especially vocal -- CFO Luca Maestri recently claimed that a "fair outcome" of the investigation would mean "zero" owed in back taxes.

Under European Union regulations, extending tax breaks to one company but not others is considered illegal state aid. Some governments may have been willing to break the rules, however, to attract more jobs and revenue, particular given the tough economic climate Europe has weathered in the past several years.

Apple is still awaiting a Commission ruling, which has been delayed multiple times. In January Apple CEO Tim Cook met with the Commission's competition head, Margrethe Vestager, presumably in an attempt to influence her organization's decision.

tallest skil · March 14, 2016 7:48PM

It’s entirely possible the European Parliament will no longer exist before this case is finished.

entropys · March 14, 2016 8:10PM

Under European Union regulations, extending tax breaks to one company but not others is considered illegal state aid.

In in other words, all your money belongs to the state, and anything the state chooses to let you keep is its gift to you.

Also on the specific, how do they know that the concessional tax rate wasn't available to others? How about it isn't really about the tax rate offered to the companies, but that the tax rate was lower than in other EU countries the aspect they don't like? If there is one thing Eurocrats hate, it's competitive federalism. Centralised control is clearly the goal. You know, the kind of thing the 20th century spent millions of lives working out didn't work.

if I was a Pom I know how I would be voting in the Brexit referendum.

jbdragon · March 14, 2016 9:59PM

I don't see any of these company's doing anything wrong! They were given tax breaks. Guess what, we do that here in the U.S. all the time having states giving Tax breaks to large company's to come build and do their business there. I don't see anything wrong with it. They're bring jobs into that state. All those new Jobs are Taxpayers!!! In the end bringing more money into the state. Apple and the others didn't create these laws. The Politicians did, and now they don't like their own handiwork!!! They see all this money they're not getting and now saying. wait, we want a cut of that big pie also to spend on more government crap!!! Now if the state or country did something wrong, THEY have to pay up, not the company that was following all the rules. It's their job, just like it's your job when you're doing your taxes to pay as little as you can. Take all the Deductions you can, etc. Who willing goes, Ya, I'll pay my fair share and pay it all and extra just in case. Not take any deductions.

adamc · March 15, 2016 3:23AM

tallest skil said:

It’s entirely possible the European Parliament will no longer exist before this case is finished.

I believe you are right there. "Under European Union regulations, extending tax breaks to one company but not others is considered illegal state aid." Yes how do you know that it is not extended to others Roger? "presumably in an attempt to influence her organization's decision." Another attempt by roger to ASS U ME... pathetic and sad roger.

copeland · March 15, 2016 7:07AM

entropys said:

Under European Union regulations, extending tax breaks to one company but not others is considered illegal state aid.

In in other words, all your money belongs to the state, and anything the state chooses to let you keep is its gift to you.

Also on the specific, how do they know that the concessional tax rate wasn't available to others? How about it isn't really about the tax rate offered to the companies, but that the tax rate was lower than in other EU countries the aspect they don't like? If there is one thing Eurocrats hate, it's competitive federalism. Centralised control is clearly the goal. You know, the kind of thing the 20th century spent millions of lives working out didn't work.

if I was a Pom I know how I would be voting in the Brexit referendum.

You are just ranting because your beloved company is under legal pressure and you don't try to take a deeper look.

Go ask the small and middle size companies in Ireland if they get the same tax breaks as Apple gets. They don't.
If these tax breaks are offered to all companies, why does the law say different? Why do they have to sign secret contracts, hidden from the European commission.
The EU has no problem with different tax rates in different countries, but with different tax rates for different companies in the same country
Ireland has a much lower tax rate than the US. The regular tax rate in Ireland is 12%, but Apple (and many other multi nationals) got off with less than 2%
If a company has to sign a secret tax agreement you can't tell me that the lawyers and management don't know that it is on shaky legal grounds
and if we want to meet at strictly political ground with "centralized control" take a look at what fbi and doj are doing in the us

copeland · March 15, 2016 7:14AM

jbdragon said:

I don't see any of these company's doing anything wrong! They were given tax breaks. Guess what, we do that here in the U.S. all the time having states giving Tax breaks to large company's to come build and do their business there. I don't see anything wrong with it. They're bring jobs into that state. All those new Jobs are Taxpayers!!! In the end bringing more money into the state. Apple and the others didn't create these laws. The Politicians did, and now they don't like their own handiwork!!! They see all this money they're not getting and now saying. wait, we want a cut of that big pie also to spend on more government crap!!! Now if the state or country did something wrong, THEY have to pay up, not the company that was following all the rules. It's their job, just like it's your job when you're doing your taxes to pay as little as you can. Take all the Deductions you can, etc. Who willing goes, Ya, I'll pay my fair share and pay it all and extra just in case. Not take any deductions.

See my post before.
Just because it is legal to give different tax breaks to different companies in the US doesn't mean it is legal all over the world.
The companies knew they were standing on shaky legal ground. If you buy stolen goods (even if you don't know they are stolen) and police finds these goods in your possession they will take the goods and bring it bake to the original owner. And if you signed a contract that showed something is fishy you won't get your money back either.

tenly · March 15, 2016 9:58AM

copeland said:

jbdragon said:

I don't see any of these company's doing anything wrong! They were given tax breaks. Guess what, we do that here in the U.S. all the time having states giving Tax breaks to large company's to come build and do their business there. I don't see anything wrong with it. They're bring jobs into that state. All those new Jobs are Taxpayers!!! In the end bringing more money into the state. Apple and the others didn't create these laws. The Politicians did, and now they don't like their own handiwork!!! They see all this money they're not getting and now saying. wait, we want a cut of that big pie also to spend on more government crap!!! Now if the state or country did something wrong, THEY have to pay up, not the company that was following all the rules. It's their job, just like it's your job when you're doing your taxes to pay as little as you can. Take all the Deductions you can, etc. Who willing goes, Ya, I'll pay my fair share and pay it all and extra just in case. Not take any deductions.

See my post before.
Just because it is legal to give different tax breaks to different companies in the US doesn't mean it is legal all over the world.
The companies knew they were standing on shaky legal ground. If you buy stolen goods (even if you don't know they are stolen) and police finds these goods in your possession they will take the goods and bring it bake to the original owner. And if you signed a contract that showed something is fishy you won't get your money back either.

Your first paragraph is right - just because it's legal in one place doesn't mean that it's legal everywhere - and in the EU, we know that special tax rates can be illegal.

Your analogy doesn't work though. Yes, if you were found to be in possession of stolen property, the police will seize it. But if you have a contract (or let's say a receipt) from the person or company that sold it to you - you absolutely have recourse available against that person. You can take them to court and sue them to attempt to recover your money. That is not an option in this case. If Apple is ordered to pay back taxes, they do not have the option of taking Ireland to court to recover any or all of the $.

crowley · March 15, 2016 10:03AM

entropys said:

Under European Union regulations, extending tax breaks to one company but not others is considered illegal state aid.

In in other words, all your money belongs to the state, and anything the state chooses to let you keep is its gift to you.

Also on the specific, how do they know that the concessional tax rate wasn't available to others? How about it isn't really about the tax rate offered to the companies, but that the tax rate was lower than in other EU countries the aspect they don't like? If there is one thing Eurocrats hate, it's competitive federalism. Centralised control is clearly the goal. You know, the kind of thing the 20th century spent millions of lives working out didn't work.

if I was a Pom I know how I would be voting in the Brexit referendum.

Your conclusions don't even slightly match the premise.

How would you feel if your billionaire neighbor negotiated a 2% rate of income tax with the government?

tenly · March 15, 2016 11:05AM

This article states:

Under European Union regulations, extending tax breaks to one company but not others is considered illegal state aid.

Is that the actual wording of the law too - or just the author of the article paraphrasing? I ask becuase the wording doesn't say that it has to be offered to "everyone" - just "others". So how many "others" have to be offered the same deal to satisfy this criteria? 3? 10? 100?

Another angle that I think should be looked at and considered is whether this is truly a tax break or if it is a business deal/contract. It would clearly be a tax break if Ireland said "Hey Apple - set up your business in our country and we'll give you an x% tax rate!".

However, wouldn't it be more like a business agreement/contract if there were binding conditions and/or deliverables on both sides? For example: "In exchange for the x% rate, you must satisfy the following conditions: 1) Employ at least x number of people in Ireland, 2) Lease or buy at least x number of offices/factories/etc, 3) Third condition, 4) Another condition, etc, etc...

If it was a contract - signed by both parties - and if the contract spelled out clear deliverables - then it's not really a "tax break". Ireland just chose to fund their side of the agreement via a tax reduction instead of from a different account/budget. Certainly, Ireland had their accountants review the contract and determine that it was a GOOD deal for the people of Ireland. The federal tax collected from Apple might be a little llower - but it would be offset by 1) the income tax collected from all of the new jobs Apple would create, 2) the property tax on the facilities Apple purchased/rented/leased and 3) the VAT collected on each and every item the new employees purchased with their satellites. Ireland may not have lost out on any tax revenue at all - a portion of it was just shifted from Apple to all of the new Apple employees.

In any case - whether it was a good deal or a bad deal overall for Ireland is irrelevant. The point that should be considered is whether the rate that Apple pays can be considered a "tax break" if a contract was signed and executed that contained clear and specific responsibilities/deliverables on Apples side?

If it were a contract - and Ireland was forced to back out of it becuase they were not allowed to fund it via a tax discount - I would think that Apple *should* be able to demand that Ireland find another way to compensate Apple.

If I entered into a contract with someone and they paid me by a personal check that bounced - they would still be required to pay me via another method! Cash, Credit card or even another check! The government of Ireland should be required to play by the same rules.

It would be grossly unfair if Apple - or any of the other companies with similar deals are ordered to pay "back taxes" without any credit or compensation for the deliverables they have provided during the past 5+ years.

Heres how it boils down to its simplest form with an easy to understand analogy:

Ireland: Hey Apple - we need 10,000 MacBook Pro's!

Apple: Sure - that will be 30 million dollars please!

Ireland: Instead of giving you 30 million in cash, why don't we just give you a 40 million dollar discount on your taxes next year?

Apple: Sure - that sounds good! Let do the paperwork and make it official!

Ireland: Awesome! Thanks!

(Paperwork signed. Computers delivered. Apple pays 40 million less in tax. 5 years pass...)

EU: Hey Apple! It was illegal for Ireland to give you a 40 million dollar discount on your tax bill! You have to pay them back!

Apple: Wait. What? But we gave them 30 million dollars worth of computers!!!

EU: That's none of our busoness. It was an illegal deal. You owe Ireland 40 million dollars. Oh yeah - plus interest.

Apple: Hey Ireland - the EU says we have to give you back the 40 million dollar "tax break" you gave us to pay for the computers your ordered...

Ireland: Wow. That sucks. We don't think that's right! When will you be sending the money?

Apple: (sigh). Soon I guess. How will you be reimbursing us for the 30 million dollars in computers?

Ireland: Wait. What? We took care of that 5 years ago! We're not even using them anymore!

Apple: But that came out of the tax break!

Ireland: Sorry. Didn't you hear? The tax break was illegal!

Apple: So - you owe us 30 milllion dollars!

Ireland: No. The whole deal was illegal. We're not allowed to pay you. Sorry.

Apple: WTF??? Isn't that theft?

Ireland: No. It's EU law. You should have been more careful.

The only difference I see between my example and what is really happenimg is that in my example, I used a real, tangible item (the MacBook) as opposed to the intangible benefits that Apple provided in real life by creating jobs, leading property, etc... but that shouldn't matter. Tangible or not - Apple signed a deal and fulfilled their commitments (which had value!)

singularity · March 15, 2016 11:20AM

tenly said:

This article states:
Under European Union regulations, extending tax breaks to one company but not others is considered illegal state aid.
Is that the actual wording of the law too - or just the author of the article paraphrasing? I ask becuase the wording doesn't say that it has to be offered to "everyone" - just "others". So how many "others" have to be offered the same deal to satisfy this criteria? 3? 10? 100?
Another angle that I think should be looked at and considered is whether this is truly a tax break or if it is a business deal/contract. It would clearly be a tax break if Ireland said "Hey Apple - set up your business in our country and we'll give you an x% tax rate!".
However, wouldn't it be more like a business agreement/contract if there were binding conditions and/or deliverables on both sides? For example: "In exchange for the x% rate, you must satisfy the following conditions: 1) Employ at least x number of people in Ireland, 2) Lease or buy at least x number of offices/factories/etc, 3) Third condition, 4) Another condition, etc, etc...
If it was a contract - signed by both parties - and if the contract spelled out clear deliverables - then it's not really a "tax break". Ireland just chose to fund their side of the agreement via a tax reduction instead of from a different account/budget. Certainly, Ireland had their accountants review the contract and determine that it was a GOOD deal for the people of Ireland. The federal tax collected from Apple might be a little llower - but it would be offset by 1) the income tax collected from all of the new jobs Apple would create, 2) the property tax on the facilities Apple purchased/rented/leased and 3) the VAT collected on each and every item the new employees purchased with their satellites. Ireland may not have lost out on any tax revenue at all - a portion of it was just shifted from Apple to all of the new Apple employees.
In any case - whether it was a good deal or a bad deal overall for Ireland is irrelevant. The point that should be considered is whether the rate that Apple pays can be considered a "tax break" if a contract was signed and executed that contained clear and specific responsibilities/deliverables on Apples side?
If it were a contract - and Ireland was forced to back out of it becuase they were not allowed to fund it via a tax discount - I would think that Apple *should* be able to demand that Ireland find another way to compensate Apple.
If I entered into a contract with someone and they paid me by a personal check that bounced - they would still be required to pay me via another method! Cash, Credit card or even another check! The government of Ireland should be required to play by the same rules.
It would be grossly unfair if Apple - or any of the other companies with similar deals are ordered to pay "back taxes" without any credit or compensation for the deliverables they have provided during the past 5+ years.
Heres how it boils down to its simplest form with an easy to understand analogy:
Ireland: Hey Apple - we need 10,000 MacBook Pro's!
Apple: Sure - that will be 30 million dollars please!
Ireland: Instead of giving you 30 million in cash, why don't we just give you a 40 million dollar discount on your taxes next year?
Apple: Sure - that sounds good! Let do the paperwork and make it official!
Ireland: Awesome! Thanks!
(Paperwork signed. Computers delivered. Apple pays 40 million less in tax. 5 years pass...)
EU: Hey Apple! It was illegal for Ireland to give you a 40 million dollar discount on your tax bill! You have to pay them back!
Apple: Wait. What? But we gave them 30 million dollars worth of computers!!!
EU: That's none of our busoness. It was an illegal deal. You owe Ireland 40 million dollars. Oh yeah - plus interest.
Apple: Hey Ireland - the EU says we have to give you back the 40 million dollar "tax break" you gave us to pay for the computers your ordered...
Ireland: Wow. That sucks. We don't think that's right! When will you be sending the money?
Apple: (sigh). Soon I guess. How will you be reimbursing us for the 30 million dollars in computers?
Ireland: Wait. What? We took care of that 5 years ago! We're not even using them anymore!
Apple: But that came out of the tax break!
Ireland: Sorry. Didn't you hear? The tax break was illegal!
Apple: So - you owe us 30 milllion dollars!
Ireland: No. The whole deal was illegal. We're not allowed to pay you. Sorry.
Apple: WTF??? Isn't that theft?
Ireland: No. It's EU law. You should have been more careful.

The only difference I see between my example and what is really happenimg is that in my example, I used a real, tangible item (the MacBook) as opposed to the intangible benefits that Apple provided in real life by creating jobs, leading property, etc... but that shouldn't matter. Tangible or not - Apple signed a deal and fulfilled their commitments (which had value!)

Nope. Any tax deal has to be available to all.

crowley · March 15, 2016 12:22PM

tenly said:

This article states:
Under European Union regulations, extending tax breaks to one company but not others is considered illegal state aid.
Is that the actual wording of the law too - or just the author of the article paraphrasing? I ask becuase the wording doesn't say that it has to be offered to "everyone" - just "others". So how many "others" have to be offered the same deal to satisfy this criteria? 3? 10? 100?
Another angle that I think should be looked at and considered is whether this is truly a tax break or if it is a business deal/contract. It would clearly be a tax break if Ireland said "Hey Apple - set up your business in our country and we'll give you an x% tax rate!".
However, wouldn't it be more like a business agreement/contract if there were binding conditions and/or deliverables on both sides? For example: "In exchange for the x% rate, you must satisfy the following conditions: 1) Employ at least x number of people in Ireland, 2) Lease or buy at least x number of offices/factories/etc, 3) Third condition, 4) Another condition, etc, etc...
If it was a contract - signed by both parties - and if the contract spelled out clear deliverables - then it's not really a "tax break". Ireland just chose to fund their side of the agreement via a tax reduction instead of from a different account/budget. Certainly, Ireland had their accountants review the contract and determine that it was a GOOD deal for the people of Ireland. The federal tax collected from Apple might be a little llower - but it would be offset by 1) the income tax collected from all of the new jobs Apple would create, 2) the property tax on the facilities Apple purchased/rented/leased and 3) the VAT collected on each and every item the new employees purchased with their satellites. Ireland may not have lost out on any tax revenue at all - a portion of it was just shifted from Apple to all of the new Apple employees.
In any case - whether it was a good deal or a bad deal overall for Ireland is irrelevant. The point that should be considered is whether the rate that Apple pays can be considered a "tax break" if a contract was signed and executed that contained clear and specific responsibilities/deliverables on Apples side?
If it were a contract - and Ireland was forced to back out of it becuase they were not allowed to fund it via a tax discount - I would think that Apple *should* be able to demand that Ireland find another way to compensate Apple.
If I entered into a contract with someone and they paid me by a personal check that bounced - they would still be required to pay me via another method! Cash, Credit card or even another check! The government of Ireland should be required to play by the same rules.
It would be grossly unfair if Apple - or any of the other companies with similar deals are ordered to pay "back taxes" without any credit or compensation for the deliverables they have provided during the past 5+ years.
Heres how it boils down to its simplest form with an easy to understand analogy:
Ireland: Hey Apple - we need 10,000 MacBook Pro's!
Apple: Sure - that will be 30 million dollars please!
Ireland: Instead of giving you 30 million in cash, why don't we just give you a 40 million dollar discount on your taxes next year?
Apple: Sure - that sounds good! Let do the paperwork and make it official!
Ireland: Awesome! Thanks!
(Paperwork signed. Computers delivered. Apple pays 40 million less in tax. 5 years pass...)
EU: Hey Apple! It was illegal for Ireland to give you a 40 million dollar discount on your tax bill! You have to pay them back!
Apple: Wait. What? But we gave them 30 million dollars worth of computers!!!
EU: That's none of our busoness. It was an illegal deal. You owe Ireland 40 million dollars. Oh yeah - plus interest.
Apple: Hey Ireland - the EU says we have to give you back the 40 million dollar "tax break" you gave us to pay for the computers your ordered...
Ireland: Wow. That sucks. We don't think that's right! When will you be sending the money?
Apple: (sigh). Soon I guess. How will you be reimbursing us for the 30 million dollars in computers?
Ireland: Wait. What? We took care of that 5 years ago! We're not even using them anymore!
Apple: But that came out of the tax break!
Ireland: Sorry. Didn't you hear? The tax break was illegal!
Apple: So - you owe us 30 milllion dollars!
Ireland: No. The whole deal was illegal. We're not allowed to pay you. Sorry.
Apple: WTF??? Isn't that theft?
Ireland: No. It's EU law. You should have been more careful.

The only difference I see between my example and what is really happenimg is that in my example, I used a real, tangible item (the MacBook) as opposed to the intangible benefits that Apple provided in real life by creating jobs, leading property, etc... but that shouldn't matter. Tangible or not - Apple signed a deal and fulfilled their commitments (which had value!)

Thems the breaks. If it was illegal, it was illegal, and any conditions attached to the illegality are surrendered. It may be harsh, but the law often is.

Don't break the law, kids.

gatorguy · March 15, 2016 10:41PM

An excerpt from an exchange earlier today in front of the European Parliament:

“Does this activity embarrass Alphabet or you? Do you feel embarrassed?” Paul Tang, a Dutch member of the Socialists and Democrats alliance, asked a Google executive.

Company representatives shot back that their structures followed current laws and it was up to legislators to change them. “We make use of tax incentives, tax structures that are well known, that are widely accessible and used by most multinationals,” said Adam Cohen, head of economic policy for Google in Europe.

crowley · March 16, 2016 1:16AM

gatorguy said:

An excerpt from an exchange earlier today in front of the European Parliament:

“Does this activity embarrass Alphabet or you? Do you feel embarrassed?” Paul Tang, a Dutch member of the Socialists and Democrats alliance, asked a Google executive.
Company representatives shot back that their structures followed current laws and it was up to legislators to change them. “We make use of tax incentives, tax structures that are well known, that are widely accessible and used by most multinationals,” said Adam Cohen, head of economic policy for Google in Europe.

Nothing new here

http://www.independent.co.uk/news/uk/home-news/google-boss-im-very-proud-of-our-tax-avoidance-scheme-8411974.html

Apple, Google & others to face European Parliament hearing on tax deals

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