Linked by Thom Holwerda on Wed 21st Dec 2016 22:48 UTC
Apple

On Monday, an angry Apple appealed against an August ruling by the European Commission ordering the company to pay Ireland some €13 billion in back taxes, plus interest. Disappointingly, the Silicon Valley tech giant failed to address the fundamentals of the case, relying instead on a series of ad hominem attacks and procedural objections. If this is the best the company has to offer, it deserves to lose its case and pay its bills in full.

The problem for Apple (and Ireland) is that the company has no leg to stand on - so it has to resort to flat-out lies, like stating laws are being applied retroactively (not true - the treaties and laws applied are much older than this case) or that the case is unprecedented and Apple is being singled out (not true - dozes of companies all across the EU have been punished for the same thing) or that it's just anti-American rhetoric (not true - many of the punished companies are European).

What's even worse for Apple - this thing is a PR nightmare, at least here in Europe. In many European countries, we're used to relatively high taxes (compared to other parts of the world), so large corporations, be they American, European or otherwise, paying an effective tax rate of only 0,005 (no joke!), doesn't exactly sit well with European citizens.

It's really hard to swallow for people in a EU net contributor country like The Netherlands to see our tax money sent to Ireland in the form of bailouts - Ireland received a €64 billion bailout from the EU after the 2008 banking crisis - while Ireland then proceeds to illegally give Apple one of the biggest tax breaks in history. It's a little populist to frame it this way, but here it goes: I pay taxes to my government in the assumption they would go to maintaining services in my own country and all across Europe (I'd like other nations to come to our aid, too, if we were ever in such a position), while in reality, a part of it went to Tim Cook. That irks me.

Apple is not going to win this case. The EU's case is strong, detailed, and built on a solid base of legal precedent. And this brings us to Trump's meeting with technology leaders last week. During that meeting, Tim Cook also got some one-on-one-one time with Trump (and Elon Musk), something not all attendees were granted. When asked by Apple employees why Tim Cook attended the meeting, he had this to say (among other things):

We have other things that are more business-centric - like tax reform - and something we've long advocated for: a simple system. And we’d like intellectual property reform to try to stop the people suing when they don’t do anything as a company.

Apple has several hundred billion dollars sitting in foreign, non-US bank accounts. If it were to repatriate that money, Apple would have to pay the United States corporate tax, which amounts to about 39.6%. Apple obviously doesn't want to pay those taxes, so that's why it keeps its massive cash pile in foreign bank accounts.

Apple wants a tax holiday. It wants the US government to give Apple a special tax deal wherein it can repatriate those more than 200 billion dollars at a much, much lower tax rate, and with a Republican president, Senate, and House, such a deal seems a lot closer than it was before. However, the Trump administration is, obviously, not going to declare such a tax holiday out of the goodness of their hearts. This is politics, this is business; nothing comes for free.

This means Apple will have to give the Trump administration something it wants, and if you look at Trump's campaign, one of the first things that could come to mind is Apple bringing manufacturing back to the US. The problem here is that bringing manufacturing back to the US is a multi-decade undertaking of strengthening, improving, and expanding vocational education, construction of factories, and the development of brand new manufacturing lines (assuming it's even possible at all, which is a big assumption). Tim Cook can't just snap his fingers and magically recreate Foxconn in the US - this will take decades, and far outlive Trump's four-year or even eight-year term, at which point some other president will take credit for it.

Trump will want something else - and it's going to be Apple's cooperation in the fields of anti-terrorism and homeland security - big, big issues during Trump's campaign. During the campaign, Trump called for a boycott of Apple because the company refused to assist the FBI in breaking into a terrorist's iPhone. Admirably, Apple and Tim Cook took a very principled stand against it, standing up for encryption and user privacy.

And here we have it. I wouldn't be surprised if over the coming years, Apple will be forced to choose between a tax holiday for its 200+ billion dollars stored in foreign bank accounts on the one side, and encryption and user privacy on the other. How do you think shareholders will react when they hear Apple can repatriate more than 200 billion dollars at a very low tax rate... And all they have to do is give in on encryption and user privacy? Do you think shareholders will be able to resist that?

Do you think Tim Cook will be able to resist that?

The coming years will be a massive test for Apple and Tim Cook. How much is their loudly proclaimed morality - and by extension, that of their customers - worth?

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Thom_Holwerda
Member since:
2005-06-29

Fine -- penalize Ireland for the $14B.

Apple followed the law that was in place at the time so it owes the taxes to the US.


No. That's not how tax law works. Even if your tax agency makes a mistake and charges you too little tax over 2016, you will still have to pay said back taxes at some point, whether you like it or not. That's no different for companies. Apple paid too little in taxes while partaking in a deal it could have known was highly illegal (such a large corporation with so many lawyers really can't claim it didn't understand the law - that would be pathetic).

So no, Apple will just have to pay up.

Reply Parent Score: 3

jonsmirl Member since:
2005-07-06

Now you are in a fight between two governments - Ireland and the EU. Apple didn't make this law, Ireland did.

And we both know this fight wouldn't be happening if Apple has paid the US taxes it owes since there wouldn't be $14B sitting there waiting for someone to try and grab it.

What would you think if Apple had sent in the check for $30B to the US government? In that case Apple would be forced to apply for a $14B refund from the US and then send that check to Ireland.

Reply Parent Score: 2

Thom_Holwerda Member since:
2005-06-29

Now you are in a fight between two governments - Ireland and the EU.


There is no fight between two governments. The US has nothing to do with or say about EU tax and competition law.

Apple didn't make this law, Ireland did.


Irrelevant. If you buy stolen goods, and you reasonably should've known they were stolen, you will be prosecuted. You will also be forced to return the stolen goods in question [or taxes] to their rightful owner [Ireland] - even if you had no reasonable way of knowing the good was stolen.

This situation here is no different, and would apply to you or I as well, as I explained above. Are you really going to argue that Apple, the largest corporation in the world, with a legal department the size of several small countries, couldn't have been reasonably aware that a deal where the tax rate is lowered from 12.5% to 0.005% was illegal? That such a tax deal was a clear violation of EU law?

And we both know this fight wouldn't be happening if Apple has paid the US taxes it owes since there wouldn't be $14B sitting there waiting for someone to try and grab it.


You keep mixing things up. The US has nothing to do with this. The companies in question are not American, THEY ARE EUROPEAN. They are Irish companies (Apple Sales International and Apple Operations Europe). United States corporate tax law has no bearing on the sales Apple stashes in these two European/Irish companies. Even if Apple repatriated its 200+ billion dollars, IT WOULD STILL NEED TO PAY ITS TAXES IN IRELAND.

Edited 2016-12-22 14:42 UTC

Reply Parent Score: 1

jonsmirl Member since:
2005-07-06

Now you are in a fight between two governments - Ireland and the EU. Apple didn't make this law, Ireland did.

And we both know this fight wouldn't be happening if Apple had paid the US taxes it owes since there wouldn't be $14B sitting there waiting for someone to try and grab it.

What would you think if Apple had sent in the check for $30B to the US government? In that case Apple would be forced to apply for a $14B refund from the US and then send that check to Ireland.

Reply Parent Score: 2

kristoph Member since:
2006-01-01

You are wrong here.

Apple spoke to Irish tax authorities and made a deal with them. This happens all the time in most countries - it's a time honored tradition to bring business to your city / state / country through a tax deal ( yes it is a 'bribe' in some sense but it's also a common and open practice accepted in most democracies ). Ireland has been doing tax deals for decades - that's partially how it became 'the Celtic Tifer' - and the EU accepted it without comment until recently.

The EU argues that this deal doesn't trump the EU laws Ireland agreed to and hence Apple is in violation of its law even if it is following Irish tax law. Why did it decide to do this now but not before - no one really knows but it's definitely political.

So this isn't as black and white as you paint it.

Edited 2016-12-22 14:20 UTC

Reply Parent Score: 2