carnegie

gatorguy said:

carnegie said:

gatorguy said:

@carnegie ;

How does any of this play into your generalized scenario regarding taxable income?
https://www.irishtimes.com/business/apple-s-cash-mountain-how-it-avoids-tax-and-the-irish-link-1.3281734

I'm not sure what you're asking. But Apple used Ireland as a base of operations in Europe for a number of reasons. One of those was the friendly nature of Irish tax policies. Ireland had, quite intentionally, set up its tax policy to be attractive to foreign businesses. As I indicated previously, the rule whereby non-Irish branches of Irish corporations weren't taxed on their earnings by Ireland was an outlier. It was a way by which Ireland competed with other taxing jurisdictions to attract economic activity. It allowed Apple and others to, quite legally, avoid taxation on meaningful portions of its foreign earnings.

The idea that Apple funneled profits through Ireland is just standard international tax policy stuff - nothing at all unusual or improper about that. That has to do with how governments - for a long time and for good reasons - have taxed income, as distinguishing between economic activity which occurs within their countries or as trade coming into and out of their countries. It isn't the result of loopholes, it has to do with that being the sensible way for countries to fairly tax income (as opposed to sales) without each country stepping all over the others when it comes to who gets to tax which economic activity.

The part which allowed Apple to effectively avoid a lot of taxation was Ireland's atypical tax rules and comparably low tax rate, not the fact that Apple used Ireland to 'sell into' rather than 'sell within' much of Europe. That later part is just trade, as distinguished from domestic economic activity.

Then you had a situation where the U.S. was still (quite inexplicably) extra-territorial when it came to income taxation. By that I mean, the U.S. still thought it was okay to tax economic activity that happened elsewhere if it was a U.S. company doing it. Most advanced economies had already abandoned such extra-territorial taxation policies. But even though the U.S. presumed to tax earnings made elsewhere, that taxation was deferred until those earnings were repatriated. So that allowed Apple to avoid (or defer) U.S. taxation of Irish earnings even though the effective rate those earnings had been taxed at by Ireland was quite low. Apple can't do that any more for a number of reasons.

That article isn't solely about the Irish. Did you read it because if you did not of course you don't know what I'm asking. If you did I've no idea why you're confused.

Two of the three Irish subsidiaries originally involved when the EU made it's initial tax inquiries are no longer based in Ireland, and for reasons explained in the article. They are now resident in Jersey off the coast of France. Why? That's in the article too. Why did one remain in Ireland? That's also explained in the article. What does it have to do with Apple and taxes? Everything as far as I can tell but that's why I was looking for your views on it. In your opinion does it serve to shield money held by them from any tax obligations whatsoever both abroad and in the US?  If you're either a tax accountant or lawyer all the better.

I just noticed this post. You apparently edited it after I'd responded to it, so I never saw all the commentary you added. That's unfortunate as it might have saved me the other response because it's now clear to me the point you were trying to make and what you were asking me.

It isn't true that those Irish subsidiaries are no longer based in Ireland. That's one of the things the article gets wrong.

As for your question about serving to shield money from any tax obligations... the answer would be no. I see know where the confusion was. It's why it didn't make sense that you'd post that article in response to what I'd explained. The article talks about things that happened in 2014, after Ireland changed its tax policies but before the Tax Cuts and Jobs Act. As I indicated, with the TCJA those earnings which hadn't be repatriated were deemed repatriated. So it no longer matters whether Apple repatriates those earnings, it will have to pay U.S. taxes on them. That reality isn't reflected in that article because it and what it talks about came prior to the TCJA.

The point of the Jersey move, as I indicated in the other post, wasn't to avoid taxation on future foreign earnings. With the changes to Irish tax laws Apple had to start paying more taxes on the earnings of its Irish subsidiaries, and it has done that. The point of the move to Jersey was so that Apple could continue to pay taxes to the U.S. for the income which it made off of its foreign cash holdings - so called Subpart F income. Even if it didn't repatriate certain foreign earnings, it had to pay U.S. income taxes on the money it made off of holding those earnings - e.g., interest it earned on them. That was an exception in U.S. law to the ability to defer paying U.S. income taxes on foreign earnings which weren't yet repatriated. With the changes Ireland made, Apple's Irish subsidiaries were going to become tax resident in Ireland and thus Apple would have had to pay Ireland taxes on that passive income which came from cash Apple was holding in them. And the taxes Apple paid to Ireland would have reduced what it paid to the U.S. So it moved the (or some of the) foreign cash holdings. That didn't change the taxes Apple paid, it just kept them being paid to the U.S.

But as I've previously suggested, that doesn't matter as much now. Apple could move those holdings to the U.S. parent corporation if it wanted to now (I don't know whether it has, or how much it has). It has to pay so-called repatriation taxes on them now anyway.

gatorguy said:

carnegie said:

gatorguy said:

carnegie said:

gatorguy said:

carnegie said:

gatorguy said:

@carnegie ;

How does any of this play into your generalized scenario regarding taxable income?
https://www.irishtimes.com/business/apple-s-cash-mountain-how-it-avoids-tax-and-the-irish-link-1.3281734

I'm not sure what you're asking. But Apple used Ireland as a base of operations in Europe for a number of reasons. One of those was the friendly nature of Irish tax policies. Ireland had, quite intentionally, set up its tax policy to be attractive to foreign businesses. As I indicated previously, the rule whereby non-Irish branches of Irish corporations weren't taxed on their earnings by Ireland was an outlier. It was a way by which Ireland competed with other taxing jurisdictions to attract economic activity. It allowed Apple and others to, quite legally, avoid taxation on meaningful portions of its foreign earnings.

The idea that Apple funneled profits through Ireland is just standard international tax policy stuff - nothing at all unusual or improper about that. That has to do with how governments - for a long time and for good reasons - have taxed income, as distinguishing between economic activity which occurs within their countries or as trade coming into and out of their countries. It isn't the result of loopholes, it has to do with that being the sensible way for countries to fairly tax income (as opposed to sales) without each country stepping all over the others when it comes to who gets to tax which economic activity.

The part which allowed Apple to effectively avoid a lot of taxation was Ireland's atypical tax rules and comparably low tax rate, not the fact that Apple used Ireland to 'sell into' rather than 'sell within' much of Europe. That later part is just trade, as distinguished from domestic economic activity.

Then you had a situation where the U.S. was still (quite inexplicably) extra-territorial when it came to income taxation. By that I mean, the U.S. still thought it was okay to tax economic activity that happened elsewhere if it was a U.S. company doing it. Most advanced economies had already abandoned such extra-territorial taxation policies. But even though the U.S. presumed to tax earnings made elsewhere, that taxation was deferred until those earnings were repatriated. So that allowed Apple to avoid (or defer) U.S. taxation of Irish earnings even though the effective rate those earnings had been taxed at by Ireland was quite low. Apple can't do that any more for a number of reasons.

That article isn't solely about the Irish. Did you read it?

Not yet. Are you asking me to comment on its accuracy or the fairness of its characterizations?

I will if you want me to. But that doesn't seem all that important to me. What's important to me is the reality of the situation, e.g. how various aspects of tax policy work.

That article has everything to do with Apple's tax policy and the reality of the situation regarding the repatriation of funds and the US taxes due on those profits. Why would you think it unimportant?

I should probably be clear here on what I'm saying and not saying. An article like that is of little use to me, because I have no way of knowing whether something they say is accurate.

It doesn't include any links to source materials

I don't know the author from Adam. 

If they're going to defer to what others have said or what certain documents show, then what they say only has real value to me if they link to such things.

I need specific information that might add to my understanding. 

@carnegie ;

 Got your drift. 

How about this one that includes lots of links and sources and specific information? It should cover all your stated objections to reading the other one.
https://www.nytimes.com/2017/11/06/world/apple-taxes-jersey.html
And if you doubt the professionalism of the writer:
https://www.nytimes.com/by/jesse-drucker

Still not interested? Then you only think you already know it all if you're being genuine in your comments. 

I read that piece. I'm still not sure why you wanted me to read it unless you wanted me to comment on its accuracy. You had asked how something worked and I tried to explain it. Then you posted a link to that article asking how it played in. So maybe you were suggesting that it somehow contradicted what I had said? At any rate, I'll return briefly to that in a moment.

First though I'd like to say a few other things. For one, my stated objections were just telling you why reading that article wasn't important to me - why it wouldn't help my understanding of the situation. I would either already know what it said or, for the things I didn't know but which it was asserting, I'd have no way of knowing whether I could trust what it said. So, for me, it wasn't important to read the article. If you wanted me to read the article to offer my opinion of its accuracy, I'd have been happy to do that when I had time - and I eventually did. The article may otherwise have value to others, just not for me - it doesn't help with the way I go about trying to understand things I'm interested in.

For another, the second article you posted (which reads a lot like the first one) doesn't include useful links. It still doesn't link to the documents it references. It had some generic links to other (news?) websites. But that doesn't do me any good. They should link directly to the documents they are quoting from or characterizing. That way someone who cares to understand what they're talking about - or to judge their accuracy or fairness - can look at those documents for themselves. As it turns out I don't need those links as I'm already familiar with the documents in question and they don't really support some of the assertions the article makes later.

For another, your link about the writer doesn't do me much good. I'm not necessarily doubting his professionalism. But I still don't know him from Adam. Regardless of who he writes for or what else he's written (if I haven't read it), I don't know that I can trust him to be accurate and fair in his explanations. There aren't many people for whom I take what they say at face value. And for them, it's because I've heard or read them enough to feel confident that they're honest and understand the subjects they talk or write about. I've read and heard too much from other people that is bunk to just trust stuff others write or say without first seeing enough from them to assess them. When I read stuff from people I don't already have confidence in, it's not typically for the accuracy of what they're saying - it's for pointers. What they say may cause me to think about something such that I'll go try to sort out the reality of it for myself.

All that said, about the article in the NYT... It talks about some things we already covered. But it does a poor job of explaining how certain things work. It's also flat wrong about some things. Further, it's quite misleading about the Jersey situation. Either the author himself doesn't understand how certain things work with international tax law or he's intentionally trying to mislead people - trying to conflate different issues. I'm happy to explain in greater detail if you're genuinely interested. But the reality is that Apple didn't shift foreign earnings out of Ireland in order to continue avoiding paying taxes on them. What the article suggests (or speculates) happened doesn't make sense if you understand the changes that Ireland made to its tax policies in 2014.

The move the article suggests would both not work (Ireland doesn't even have a double taxation treaty with Jersey, as far as I'm aware) and not be needed. The reality is that Apple started paying a lot more in foreign income taxes when Ireland changed its tax policies - an amount that's about right if it started paying Ireland's statutory rate on income from outside the Americas. In other words, Apple effectively accepted the changes rather than trying to (or succeeding in) designing some new scheme to avoid that taxation. The move to Jersey (for a part of Apple's operation, but not the parts the article suggests) was, best I can tell, an effort to avoid the possibility of a conflict relating to foreign passive income (e.g. interest earned on cash holdings) as a result of the changes Ireland made to tax residency rules. Based on those changes, Apple might have been required to pay income taxes on that passive income to Ireland rather than to the U.S., it's always paid them to the latter because that's what U.S. law requires.

Apple did what it needed to in order to keep paying those taxes to the United States. But it otherwise accepted tax residency in Ireland which would mean paying far more in corporation taxes in Ireland. The Jersey move wouldn't work to avoid taxation (as Apple previously had) on foreign earnings (i.e. non-passive) both because of the changes Ireland made and because of the changes the U.S. made with the Tax Cuts and Jobs Act.

gatorguy said:

@carnegie ;

How does any of this play into your generalized scenario regarding taxable income?
https://www.irishtimes.com/business/apple-s-cash-mountain-how-it-avoids-tax-and-the-irish-link-1.3281734

I'm not sure what you're asking. But Apple used Ireland as a base of operations in Europe for a number of reasons. One of those was the friendly nature of Irish tax policies. Ireland had, quite intentionally, set up its tax policy to be attractive to foreign businesses. As I indicated previously, the rule whereby non-Irish branches of Irish corporations weren't taxed on their earnings by Ireland was an outlier. It was a way by which Ireland competed with other taxing jurisdictions to attract economic activity. It allowed Apple and others to, quite legally, avoid taxation on meaningful portions of its foreign earnings.

The idea that Apple funneled profits through Ireland is just standard international tax policy stuff - nothing at all unusual or improper about that. That has to do with how governments - for a long time and for good reasons - have taxed income, as distinguishing between economic activity which occurs within their countries or as trade coming into and out of their countries. It isn't the result of loopholes, it has to do with that being the sensible way for countries to fairly tax income (as opposed to sales) without each country stepping all over the others when it comes to who gets to tax which economic activity.

The part which allowed Apple to effectively avoid a lot of taxation was Ireland's atypical tax rules and comparably low tax rate, not the fact that Apple used Ireland to 'sell into' rather than 'sell within' much of Europe. That later part is just trade, as distinguished from domestic economic activity.

Then you had a situation where the U.S. was still (quite inexplicably) extra-territorial when it came to income taxation. By that I mean, the U.S. still thought it was okay to tax economic activity that happened elsewhere if it was a U.S. company doing it. Most advanced economies had already abandoned such extra-territorial taxation policies. But even though the U.S. presumed to tax earnings made elsewhere, that taxation was deferred until those earnings were repatriated. So that allowed Apple to avoid (or defer) U.S. taxation of Irish earnings even though the effective rate those earnings had been taxed at by Ireland was quite low. Apple can't do that any more for a number of reasons.

For those who want to read what the General Court actually said in its press release, instead of relying on the characterizations of others...

https://curia.europa.eu/jcms/upload/docs/application/pdf/2020-07/cp200090en.pdf

crowley said:

davgreg said:

It is all so stupid.
Corporations do not pay taxes- they pass them on to the customers.

Sure, that's largely true, but if some corporations are allowed to evade or avoid paying some or all tax then they have an unfair competitive advantage over those that cannot.  The whole point of this is the claim that Apple was afforded special treatment that wasn't available to their competitors.

The Commission's problem is it can't demonstrate that the profit allocation method which Apple was allowed to use wasn't available to other similarly situated parties. (That's not necessarily the problem it had in the General Court. But that's its big picture problem.)

This was an interpretation, by Ireland, of its own tax laws and policies. It told Apple that a certain method (what I'll call cost plus) for determining the profits of the Irish branches of its Irish corporations was okay. Did Ireland tell similarly situated parties that it wasn't okay for them to use such method? The Commission couldn't identify any such parties. That's what it really needs to make its case. It needs to demonstrate that Ireland told others that they couldn't use the same method which Apple used.

The Commission's decision essentially said... We don't like what your interpretation of your tax policies allowed to happen. We don't think it made for good policy. And we wouldn't have chosen such tax policies, so you must not have chosen such tax policies and what you allowed Apple to do thus wasn't consistent with your tax policies and was thus state aid.

The Commission would deny that reading of its decision, I'm sure. But that's what it boiled down to. It couldn't, and didn't, demonstrate what it claimed.