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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kristoph
Member since:
2006-01-01

Except in the almost 30 member states of the EU. This isn't some vague, weird interpretation of how the EU works; this is the very core of its existence. Claiming it is "unusual" is - I'm sorry to say - stupid.


Thom you're like the Brexit poster child honestly. It is 'unusual' by the standards of any normal person who believes in democracy to have a group of people outside of your country tell the people you elected to represent you how they should dispense the law.

Ultimately, the NATION of IRELAND through it's ELECTED OFFICIALS made this deal with Apple ( and a bunch of other companies ) so whatever is "at the core of how EU works" Ireland is clearly happy to ignore that. You are totally ignoring this colossal pink elephant in the room because ... "OMG APPLE AND TIM COOK ARE EVIL"!

Now you can say 'this is wrong' and I am not going to disagree with you but you can't demonize companies for 'ignoring the law' when a NATION says 'this is how this law works here' and you follow that law.

Except this isn't unusual. This is normal. This has been this way for decades, and everybody knows this. Every EU citizens knows this, every EU politician knows this, every EU company knows this - and you're telling me Apple didn't know because it's somehow "unusual"?


I am not saying Apple didn't know the laws of the EU. I am sure it did. However Ireland obviously believed the law in questions did not apply and that should be good enough for any company. Now the EU doesn't like that and this is why we are where we are.

What if I go to a US state where prostitution and marijuana are illegal, and I have sex with a prostitute while smoking marijuana, do you really think I can say "well, I'm Dutch and those things are allowed here, what kind of unusuual bullshit is this - you have no right to arrest me!"?


You're comparisons are goofy but let's run with it. If you went to, say Seattle and you went to hempfest and there was a bunch of police officers handing our munchies and telling you to smoke weed behind the yellow line ( which totally happens ) with the other ten thousand people and you went and did that you would be - I dare say - shocked if suddenly the FBI showed up and arrested you, no?

The claim that Apple was somehow unaware of how EU law works is so incredibly preposterously stupid, I can't even fathom anyone would bring it up as a valid argument.


I didn't, at any point, suggest Apple didn't know EU laws. You did. I am saying that Apple followed the laws of Ireland and it's interpretation of it's obligations to EU laws. This is what this dispute is fundamentally about - whether Irelands interpretation of this law trump the EU's interpretation of this law.

Reply Parent Score: 2

Alfman Member since:
2011-01-28

kristoph,

Now you can say 'this is wrong' and I am not going to disagree with you but you can't demonize companies for 'ignoring the law' when a NATION says 'this is how this law works here' and you follow that law.


Sure we can. When companies and individuals do not pay their taxes, they are cheating the rest of us have to pay our taxes. The fact that these guys are using loopholes in the law or specially negotiated arrangements doesn't dismiss the fact that it forces the remaining tax payers to pick up the burden.

You can read the original case about how illegal state aid was given to apple:
http://europa.eu/rapid/press-release_IP-16-2923_en.htm

So long as Ireland belongs to the EU, apple's tax exemptions are illegal because they are discriminatory. You may disagree with the courts, but it's their decision to make and I for one am glad they're putting their foot down on special tax rates for privileged companies. I'll concede there's still an awful lot more to do around the world, but at least it's a start.

Reply Parent Score: 2