Apple's Irish tax bill close to finalization, "in the ballpark" of $16 billion

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The head of Ireland's Revenue Commission has advised the calculations of Apple's unpaid tax bill are almost complete, with the final total the iPhone producer will be expected to pay the government thought to be around 13 billion euro ($16 billion), close to initial estimates for the European Commission-mandated payment.




Speaking to an Irish parliamentary committee about the tax bill on Thursday, Reuters reports Revenue Commissioner's chairman Niall Cody was asked if his office is obliged to check if the final amount of tax payable by Apple will be in line with estimates from the European Parliament. The country's head tax collector confirmed "It's in that ballpark," indicating the figure will be close to the original amount ordered by the European Commission in 2016.

The government body has yet to finish the task of calculating the owed tax, Cody confirmed, claiming "over 95 percent of the calculations are completed." The final total will be confirmed in the next few months, as Cody advised the government had "agreed with the Commission that all our calculations will be with them before the end of April."

The back tax payment demand was issued after the European Commission declared Irish tax rates on Apple's European profits were illegally low, down to 0.005 percent in 2014 and as low as 1 percent in 2003. The Commission called these cuts "illegal tax benefits," which effectively allowed Apple to pay substantially less tax than other businesses over many years.

It was also ruled that the tax arrangement between Apple and Ireland was "reverse engineered" on the fly to guarantee the smallest possible tax bill.

Ireland has so far made slow process in acquiring the taxes from Apple, with the government establishing an escrow fund to hold tax payments until appeals from both the Irish government and Apple are exhausted. Progress has been so slow that the European Commission warned in October that it would bring Ireland to the European Court of Justice over the delays.

In January, Irish Prime Minister Leo Varadkar advised to EU lawmakers that initial payments from Apple could commence in the second quarter of 2018, continuing through to the third quarter. This is later than the original plan detailed by the government in December last year, when finance minister Paschal Donohoe advised the first payments will take place in the first quarter.
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Comments

  • Reply 1 of 27
    Would be cheaper to buy Ireland and withdraw it from the EU. 
    SpamSandwichwatto_cobrarob53bshankrandominternetpersonjony0tallest skil
  • Reply 2 of 27
    That's like one days worth of dongle sales... /s
    watto_cobrarandominternetperson
  • Reply 3 of 27
    I am guessing this could mean a real earnings hit for Apple. Under the prior system of worldwide taxation of US corporations, Apple would have simply transferred the $16B from what it would owe the US Treasury for $$ repatriated from abroad*, in the process of paying Ireland. In other words, it could have led to a fight between the the two Treasuries over who should get the $$.

    Under the new, post-Trump, territorial taxation system -- wherein any tax paid abroad is considered "fully paid" -- the US Treasury doesn't care any more.

    *...if/when repatriated from abroad.
    edited February 2018 randominternetperson
  • Reply 4 of 27
    Apple should tell ‘em they’ll pay half that or they’ll walk.
    bshank
  • Reply 5 of 27
    lkrupplkrupp Posts: 7,433member
    I am guessing this could mean a real earnings hit for Apple. Under the prior system of worldwide taxation of US corporations, Apple would have simply transferred the $16B from what it would owe the US Treasury for $$ repatriated from abroad*, in the process of paying Ireland. In other words, it could have led to a fight between the the two Treasuries over who should get the $$.

    Under the new, post-Trump, territorial taxation system -- wherein any tax paid abroad is considered "fully paid" -- the US Treasury doesn't care any more.

    *...if/when repatriated from abroad.
    As I understand it, though, this money is going into an escrow account until Ireland’s appeal is ruled on by the EU. So if the ruling eventually goes in Apple’s favor then that money will be returned to Apple. Everybody is assuming this is a done deal when it is not. Or is the fix in against Apple? And as for a “real earnings hit” I don’t understand why. This is cash Apple has already has on hand.
    edited February 2018 lolliver
  • Reply 6 of 27
    lkrupp said:
    I am guessing this could mean a real earnings hit for Apple. Under the prior system of worldwide taxation of US corporations, Apple would have simply transferred the $16B from what it would owe the US Treasury for $$ repatriated from abroad*, in the process of paying Ireland. In other words, it could have led to a fight between the the two Treasuries over who should get the $$.

    Under the new, post-Trump, territorial taxation system -- wherein any tax paid abroad is considered "fully paid" -- the US Treasury doesn't care any more.

    *...if/when repatriated from abroad.
    As I understand it, though, this money is going into an escrow account until Ireland’s appeal is ruled on by the EU. So if the ruling eventually goes in Apple’s favor then that money will be returned to Apple. Everybody is assuming this is a done deal when it is not. Or is the fix in against Apple? And as for a “real earnings hit” I don’t understand why. This is cash Apple has already has on hand.
    If it goes in Apple’s favor, sure, it’s a non-issue. It’s not obvious which way it will go. 

    My main point was that, under the scenario of the worldwide taxation system and a fight between the US and the EU, it would be more likely that the EU backed off. Not so anymore. 
  • Reply 7 of 27
    rob53rob53 Posts: 2,100member
    I am guessing this could mean a real earnings hit for Apple. Under the prior system of worldwide taxation of US corporations, Apple would have simply transferred the $16B from what it would owe the US Treasury for $$ repatriated from abroad*, in the process of paying Ireland. In other words, it could have led to a fight between the the two Treasuries over who should get the $$.

    Under the new, post-Trump, territorial taxation system -- wherein any tax paid abroad is considered "fully paid" -- the US Treasury doesn't care any more.

    *...if/when repatriated from abroad.
    I seem to remember reading that this money was already factored into Apple's stock price so if they have to pay it, it isn't supposed to bother them one bit. As others have said, they have the cash to pay it and I would bet Apple is already paying new taxes based on the corrupt EU requirements.
    SpamSandwichchasm
  • Reply 8 of 27
    SoliSoli Posts: 9,331member
    Would be cheaper to buy Ireland and withdraw it from the EU. 
     And just rename it iReland? (Are we still doing lower-case 'i' jokes in 2018? There's probably a Mick/Mac joke, but I think that may be an offensive term.)
    edited February 2018 gatorguy
  • Reply 9 of 27
    Would be cheaper to buy Ireland and withdraw it from the EU. 
    Ireland's GDP is over $300 billion, so it wouldn't be cheaper and let's assume Apple/ireland lost the case and any appeals the demand for back collection would still stand due to treaty obligations.
    [Deleted User]
  • Reply 10 of 27
    I am guessing this could mean a real earnings hit for Apple. Under the prior system of worldwide taxation of US corporations, Apple would have simply transferred the $16B from what it would owe the US Treasury for $$ repatriated from abroad*, in the process of paying Ireland. In other words, it could have led to a fight between the the two Treasuries over who should get the $$.

    Under the new, post-Trump, territorial taxation system -- wherein any tax paid abroad is considered "fully paid" -- the US Treasury doesn't care any more.

    *...if/when repatriated from abroad.
    It's not the same money tho - the taxes that weren't paid in EU wouldn't have been paid to the US instead. Likewise, when/if apple pays the taxes, it's not discounted from the repatriation tax as that's a totally separate thing.

    That "trump territorial taxation system" you mention, has no effect on Apple's tax obligations to counties outwith the US - they are still owed to wherever they operate - it only stops the crazy double taxation on sales that the US imposes on it's homegrown companies for whatever reason.
  • Reply 11 of 27
    Would be cheaper to buy Ireland and withdraw it from the EU. 
    Excellent idea!!!
    SpamSandwich
  • Reply 12 of 27
    I am guessing this could mean a real earnings hit for Apple. Under the prior system of worldwide taxation of US corporations, Apple would have simply transferred the $16B from what it would owe the US Treasury for $$ repatriated from abroad*, in the process of paying Ireland. In other words, it could have led to a fight between the the two Treasuries over who should get the $$.

    Under the new, post-Trump, territorial taxation system -- wherein any tax paid abroad is considered "fully paid" -- the US Treasury doesn't care any more.

    *...if/when repatriated from abroad.
    This payment (if it ever happens, rather than just going into escrow) would represent (foreign) income taxes paid for prior tax years. So it would affect what Apple pays the U.S. in accordance with the new deemed-repatriated rules. Those rules require Apple to pay U.S. income taxes on as-yet unremitted foreign earnings (whether those earnings are repatriated or not), but allow Apple a prorated credit for foreign income taxes paid on those earnings. An additional payment of $10 billion in foreign income taxes (on prior foreign earnings) wouldn't result in Apple paying $10 billion less to the U.S., but it would result in Apple paying substantially less to the U.S. - maybe $4 billion or so.

    Even going forward foreign income taxes paid can affect what U.S. companies pay in U.S. income taxes. We aren't going to a strict territorial taxation system. We're going to a territorial-ish taxation system. For instance, there's a new GILTI (global intangible low-taxed income) tax which in effect sets a minimum taxation level for a lot of the foreign earnings of U.S. companies. If they pay very little in foreign income taxes on those earnings, they have to pay some U.S. income taxes on them. 
    randominternetperson
  • Reply 13 of 27

    rob53 said:
    I am guessing this could mean a real earnings hit for Apple. Under the prior system of worldwide taxation of US corporations, Apple would have simply transferred the $16B from what it would owe the US Treasury for $$ repatriated from abroad*, in the process of paying Ireland. In other words, it could have led to a fight between the the two Treasuries over who should get the $$.

    Under the new, post-Trump, territorial taxation system -- wherein any tax paid abroad is considered "fully paid" -- the US Treasury doesn't care any more.

    *...if/when repatriated from abroad.
    I seem to remember reading that this money was already factored into Apple's stock price so if they have to pay it, it isn't supposed to bother them one bit. As others have said, they have the cash to pay it and I would bet Apple is already paying new taxes based on the corrupt EU requirements.
    Yeah, to the extent markets think it's likely that Apple will eventually have to, effectively, pay this money, that possibility should already be priced into the stock. It is something that is known about.
  • Reply 14 of 27

    adm1 said:
    I am guessing this could mean a real earnings hit for Apple. Under the prior system of worldwide taxation of US corporations, Apple would have simply transferred the $16B from what it would owe the US Treasury for $$ repatriated from abroad*, in the process of paying Ireland. In other words, it could have led to a fight between the the two Treasuries over who should get the $$.

    Under the new, post-Trump, territorial taxation system -- wherein any tax paid abroad is considered "fully paid" -- the US Treasury doesn't care any more.

    *...if/when repatriated from abroad.
    It's not the same money tho - the taxes that weren't paid in EU wouldn't have been paid to the US instead. Likewise, when/if apple pays the taxes, it's not discounted from the repatriation tax as that's a totally separate thing.

    That "trump territorial taxation system" you mention, has no effect on Apple's tax obligations to counties outwith the US - they are still owed to wherever they operate - it only stops the crazy double taxation on sales that the US imposes on it's homegrown companies for whatever reason.
    Under the old U.S. tax rules this money paid as foreign income taxes (i.e. pursuant to the European Commission's decision) would have affected what Apple paid in U.S. income taxes if it repatriated the foreign earnings which those foreign income taxes were paid on.

    Under the new U.S. tax rules this money paid on foreign income taxes would affect what Apple pays in U.S. income taxes, even if it didn't repatriate the foreign earnings in question (i.e. as-yet unremitted foreign earnings). It might also affect previously reported (and paid) U.S. income tax liability on smaller amounts of foreign earnings which were previously repatriated. For previous tax years Apple gets a credit against so-called repatriation taxes for foreign income taxes paid. Even with the new deemed-repatriated tax rules, Apple gets a prorated credit for foreign income taxes paid.
  • Reply 15 of 27
    I'm SO disappointed!
    I read these comments hoping to get a chuckle from anti-tax crazies screaming and protesting...
    ...  But it has been an intelligent, reasonable discussion (at least so far!)

    But, I'll get my popcorn ready just in case!
  • Reply 16 of 27
    asdasdasdasd Posts: 5,330member
    Apple should tell ‘em they’ll pay half that or they’ll walk.
    you continually fail to understand what is going on in this case, no matter how simply explained. 
    singularity
  • Reply 17 of 27
    asdasdasdasd Posts: 5,330member

    carnegie said:
    I am guessing this could mean a real earnings hit for Apple. Under the prior system of worldwide taxation of US corporations, Apple would have simply transferred the $16B from what it would owe the US Treasury for $$ repatriated from abroad*, in the process of paying Ireland. In other words, it could have led to a fight between the the two Treasuries over who should get the $$.

    Under the new, post-Trump, territorial taxation system -- wherein any tax paid abroad is considered "fully paid" -- the US Treasury doesn't care any more.

    *...if/when repatriated from abroad.
    This payment (if it ever happens, rather than just going into escrow) would represent (foreign) income taxes paid for prior tax years. So it would affect what Apple pays the U.S. in accordance with the new deemed-repatriated rules. Those rules require Apple to pay U.S. income taxes on as-yet unremitted foreign earnings (whether those earnings are repatriated or not), but allow Apple a prorated credit for foreign income taxes paid on those earnings. An additional payment of $10 billion in foreign income taxes (on prior foreign earnings) wouldn't result in Apple paying $10 billion less to the U.S., but it would result in Apple paying substantially less to the U.S. - maybe $4 billion or so.

    Even going forward foreign income taxes paid can affect what U.S. companies pay in U.S. income taxes. We aren't going to a strict territorial taxation system. We're going to a territorial-ish taxation system. For instance, there's a new GILTI (global intangible low-taxed income) tax which in effect sets a minimum taxation level for a lot of the foreign earnings of U.S. companies. If they pay very little in foreign income taxes on those earnings, they have to pay some U.S. income taxes on them. 
    The last bit is a good idea. 

    Is it true that Apple has paid the US what it would have owed without this ruling?
  • Reply 18 of 27
    adm1 said:
    I am guessing this could mean a real earnings hit for Apple. Under the prior system of worldwide taxation of US corporations, Apple would have simply transferred the $16B from what it would owe the US Treasury for $$ repatriated from abroad*, in the process of paying Ireland. In other words, it could have led to a fight between the the two Treasuries over who should get the $$.

    Under the new, post-Trump, territorial taxation system -- wherein any tax paid abroad is considered "fully paid" -- the US Treasury doesn't care any more.

    *...if/when repatriated from abroad.
    It's not the same money tho - the taxes that weren't paid in EU wouldn't have been paid to the US instead. Likewise, when/if apple pays the taxes, it's not discounted from the repatriation tax as that's a totally separate thing.

    That "trump territorial taxation system" you mention, has no effect on Apple's tax obligations to counties outwith the US - they are still owed to wherever they operate - it only stops the crazy double taxation on sales that the US imposes on it's homegrown companies for whatever reason.
    You're missing the point. And perhaps not understanding what the 'worldwide' taxation system means. Whether "..taxes weren't paid in the EU..." or not is irrelevant if/when the profits were repatriated under the worldwide system. Apple would have owed 35% of those profits as taxes to the US Treasury under the worldwide system. 

    Here's a simple example. Suppose taxes in Ireland were 1%, US 35%, and Apple made $100 in pre-tax profits in Ireland. Apple would have paid $1 in taxes in Ireland. Under the territorial system, if/when Apple repatriated the $99 to the US (100 – 1), Apple would have owed the US Treasury 99*0.35 = $34.65 in taxes. Now, suppose the EU came along and said, "Ireland, make sure Apple pays 20%, not 1%, in taxes." The numbers above would become $80, and $28. In other words, because the EU insisted Ireland collect its "fair share", the US Treasury would end up with $6.65 less than it would have got under the Irish tax regime. (Would Apple care, in that setting? No! Because it would simply pay then EU what it would have owed the US.) The US government would have every incentive to fight the EU for that $6.65. The US would argue that Ireland taxed the this US company already, those taxes were paid, and the EU is taking away $$ that should legitimately belong to US taxpayers.

    Now, the US Treasury doesn't care since it has moved to a territorial regime. (Yes, there are some additional wrinkles in the law on tax credits and such, as a couple of others have pointed out above; but my larger point, that Apple will not have the US government as a potential ally in this fight, remains).
    edited February 2018 gatorguy
  • Reply 19 of 27
    asdasd said:

    carnegie said:
    I am guessing this could mean a real earnings hit for Apple. Under the prior system of worldwide taxation of US corporations, Apple would have simply transferred the $16B from what it would owe the US Treasury for $$ repatriated from abroad*, in the process of paying Ireland. In other words, it could have led to a fight between the the two Treasuries over who should get the $$.

    Under the new, post-Trump, territorial taxation system -- wherein any tax paid abroad is considered "fully paid" -- the US Treasury doesn't care any more.

    *...if/when repatriated from abroad.
    This payment (if it ever happens, rather than just going into escrow) would represent (foreign) income taxes paid for prior tax years. So it would affect what Apple pays the U.S. in accordance with the new deemed-repatriated rules. Those rules require Apple to pay U.S. income taxes on as-yet unremitted foreign earnings (whether those earnings are repatriated or not), but allow Apple a prorated credit for foreign income taxes paid on those earnings. An additional payment of $10 billion in foreign income taxes (on prior foreign earnings) wouldn't result in Apple paying $10 billion less to the U.S., but it would result in Apple paying substantially less to the U.S. - maybe $4 billion or so.

    Even going forward foreign income taxes paid can affect what U.S. companies pay in U.S. income taxes. We aren't going to a strict territorial taxation system. We're going to a territorial-ish taxation system. For instance, there's a new GILTI (global intangible low-taxed income) tax which in effect sets a minimum taxation level for a lot of the foreign earnings of U.S. companies. If they pay very little in foreign income taxes on those earnings, they have to pay some U.S. income taxes on them. 
    The last bit is a good idea. 

    Is it true that Apple has paid the US what it would have owed without this ruling?
    There are two parts to the answer to that question.

    The first is... Apple hasn't repatriated most of the earnings which these new taxes owed to Ireland (i.e. based on the European Commission decision) would be based on. So Apple hasn't paid the U.S. what it would owe on those earnings in the absence of that decision and if it had previously repatriated those earnings. But under the new deemed-repatriated tax, it will have to pay U.S. taxes on those as-yet unremitted foreign earnings. It can, other considerations aside, do that over an 8 year period.

    How will it account for the possibility that it ends up having to pay additional Irish taxes, in accordance with the Commission's decision, when calculating its deemed-repatriated U.S. tax liability? I don't know. My guess would be that initially it will consider it unlikely that it ends up having to pay those Irish taxes and so will calculate U.S. tax liability based on the expectation that it won't have to. But that could change at some point. And Apple likely won't pay all of (or even most of) its new U.S. deemed-repatriated tax liability any time soon. So there's time for the Irish tax situation to play out further and for Apple to have a better idea what the ultimate resolution of it will be.

    The second is... Apple may have already repatriated a small portion of the earnings which the new taxes owed to Ireland would be based on. If that's the case, Apple likely has paid the U.S. what it owed on those earnings (i.e. those which have been repatriated) in the absence of the Commission's decision. So, if Apple ends up having to pay the new Irish taxes, it will likely need to amend older U.S. returns to reflect a larger credit for foreign income taxes paid and thus a smaller U.S. income tax liability. In other words, it will have to tell the U.S. government that it previously overpaid U.S. income taxes and is entitled to some money back (which would likely be applied against new U.S. income tax liability that it would have).
    edited February 2018 asdasd
  • Reply 20 of 27
    adm1 said:
    I am guessing this could mean a real earnings hit for Apple. Under the prior system of worldwide taxation of US corporations, Apple would have simply transferred the $16B from what it would owe the US Treasury for $$ repatriated from abroad*, in the process of paying Ireland. In other words, it could have led to a fight between the the two Treasuries over who should get the $$.

    Under the new, post-Trump, territorial taxation system -- wherein any tax paid abroad is considered "fully paid" -- the US Treasury doesn't care any more.

    *...if/when repatriated from abroad.
    It's not the same money tho - the taxes that weren't paid in EU wouldn't have been paid to the US instead. Likewise, when/if apple pays the taxes, it's not discounted from the repatriation tax as that's a totally separate thing.

    That "trump territorial taxation system" you mention, has no effect on Apple's tax obligations to counties outwith the US - they are still owed to wherever they operate - it only stops the crazy double taxation on sales that the US imposes on it's homegrown companies for whatever reason.
    You're missing the point. And perhaps not understanding what the 'worldwide' taxation system means. Whether "..taxes weren't paid in the EU..." or not is irrelevant if/when the profits were repatriated under the worldwide system. Apple would have owed 35% of those profits as taxes to the US Treasury under the worldwide system. 

    Here's a simple example. Suppose taxes in Ireland were 1%, US 35%, and Apple made $100 in pre-tax profits in Ireland. Apple would have paid $1 in taxes in Ireland. Under the territorial system, if/when Apple repatriated the $99 to the US (100 – 1), Apple would have owed the US Treasury 99*0.35 = $34.65 in taxes. Now, suppose the EU came along and said, "Ireland, make sure Apple pays 20%, not 1%, in taxes." The numbers above would become $80, and $28. In other words, because the EU insisted Ireland collect its "fair share", the US Treasury would end up with $6.65 less than it would have got under the Irish tax regime. (Would Apple care, in that setting? No! Because it would simply pay then EU what it would have owed the US.) The US government would have every incentive to fight the EU for that $6.65. The US would argue that Ireland taxed the this US company already, those taxes were paid, and the EU is taking away $$ that should legitimately belong to US taxpayers.

    Now, the US Treasury doesn't care since it has moved to a territorial regime. (Yes, there are some additional wrinkles in the law on tax credits and such, as a couple of others have pointed out above; but my larger point, that Apple will not have the US government as a potential ally in this fight, remains).
    That's not how it worked previously. Foreign income taxes paid were counted as credits against U.S. income tax liability, not as deductions from U.S. taxable income. So in your examples, Apple would (with 1% paid to Ireland) have a $1 credit against $35 in U.S. income tax liability such that it owed the U.S. $34 or would (with 20% paid to Ireland) have a $20 credit against $35 in U.S. income tax liability such that it owed the U.S. $15. (And the way you described the situation working, Apple certainly would care because having to pay more to Ireland would mean having to pay more overall as the U.S. taxes wouldn't be reduced by nearly as much as Irish taxes would be increased. But, again, that's not how it actually worked.)

    As for your last parenthetical, why wouldn't the wrinkles described not affect the point you were making about the U.S. government not being a potential ally for Apple in this fight? The situation is much the same (i.e. with the recent corporate tax law changes) in that tax payments made to Ireland as a result of the European Commission's decision would still result in Apple owing substantially less in U.S. income taxes. It wouldn't be a dollar-for-dollar reduction, but neither would it have been under the way you apparently thought it worked previously. If Apple having to pay Ireland a large amount of additional taxes (as a result of the Commission's decision) and thus having to pay the U.S. a lot less taxes would have motivated the U.S. to intervene (or continue to try to intervene) on Apple's behalf, then why would that not still be the case?
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