“Sanctioned by the state” is irrelevant. An illegal action remains illegal even if sanctioned by the state. We call this the rule of law.
As for being upheld in court, that remains to be seen. Apple can (and will) challenge the Commission’s finding in the courts.
It remains legal if both sanctioned by the state and upheld in court. We call this the rule of law.
But please, keep trying. That chip on your shoulder is digging a deeper and deeper hole into sheer incoherence.
I don’t understand how you don’t get that Apple, not Ireland, was the wronged party here. Ireland lured Apple, with tax incentives, into investing in their country, and benefited substantially from that investment. Then years later the EU comes over and declares the deal illegal and demands Apple pay huge fines, and here is the interesting part, and demands that money paid to the Irish Government. So the Irish government is the beneficiary of it’s little tax scheme, doubtless the EU will demand that all the other companies that Ireland has given breaks to also pay.
Seems to me that this is less about anti-competition as it is the EU heads are trying to come up with ways to get Ireland money without needing to barrow more from Germany.
It might help them in the short term but tech companies are not going to invest in Ireland as they used to and this will leave Ireland poorer in the long run.
No. The rule of law requires that sanctioning by the state must itself be in accordance with law. If the state sanctions something which is itself against the law, it remains against the law. If the state wants to change that, it needs to change the law, not just “sanction” the unlawful action. And changing EU competition law is not within the unilateral competence of Ireland.
The tax ruling which Apple sought and obtained from Ireland was (in the view of the Commission) in breach of EU competition law, and therefore invalid. The fact that one of the parties this transaction was a member state is irrelevant; a legally ineffective action by a state is still a legally ineffective action. Apple is not protected from the consequences of the action being found to be ineffective by the fact that the other party was a state.
If Apple wants to challenge this (and they do) they have to challenge the Commission’s view that the ruling is an impermissible state aid. They can do this in the courts. SFAIK this question has not previously been litigated. The alternative argument (“Yes, it’s an impermissible state aid, but nevertheless we should be allowed to retain it because we’re a foreign corporation”) is on a hiding to nothing.
I think this analysis overlooks the fact that Apple and Ireland both benefited from the investment - otherwise the investment would never have happened, and would not have been maintained for so long. Also worth pointing out that Apple invested in Ireland - and in a major way - ten yeas before the tax ruling was given, so the direct connection between “luring” Apple to Ireland and giving the tax ruling is hard to sustain.
It’s not a fine; it’s back taxes, recomputed without the benefit of the tax ruling, which is why the money goes to the Irish government.
If the EU does have an agenda here, it’s not to give Ireland more money. It’s to prevent or limit race-to-the-bottom tax competition between EU member states.
And your analysis that the Irish government is the beneficiary overlooks the fact that Ireland would prefer to have the capacity to give valid tax rulings than to have the revenue. Ireland is in fact considering whether to challenge the Commission’s determination in the courts.
Bit tendentious. Ireland isn’t looking for more money from the EU and, if it were, it would be much easier just to tell it “raise your corporate taxes” than to go through this rigmarole.
Which is precisely why this ruling isn’t a benefit to Ireland, as you present it above.
Stringbean, do you understand that EU competition law is superior to Irish competition law?
I think a possible source of confusion here may be an assumption or impression that EU rules are a set of rules that apply as between member states of the EU (much like WTO rules apply between member states of the WTO).
No. EU law is part of Irish law (and part of the law of every other member state). In spheres that are within the competence of the EU (which includes the regulation of competition) EU law is directly enforceable in Ireland, in the Irish courts, including against the Irish state, and any Irish legislation has to be consistent with, and give effect to, the EU rules.
Yep, and EU level law takes precedent if there is a conflict.
You have fallen for the bumper sticker economics trap. Almost nothing in economics is true in all cases. Building a factory in one place does not preclude building a factory in some other place. But locating the payroll processing of the factory workers and the currency hedging of their salaries in one place means they are not going to be doing as much of this in other places unless you build a lot more factories. AFAICT, the Ireland operations were back office operations that grew depending on how well the rest of the company was doing. In what way does that create more jobs elsewhere in the EU?
Just like pharmaceutical companies locating their drug patents in offices of tax friendly jurisdictions and paying taxes on the royalties based on the location of the patents, the jobs associated with administering those patents does not really change. When they are moved from New jersey to Bermuda, that income just moves, it does not help create more income elsewhere (or at least not much).
You have fallen for the bumper sticker economics trap. Almost nothing in economics is true in all cases. Building a factory in one place does not preclude building a factory in some other place. But locating the payroll processing of the factory workers and the currency hedging of their salaries in Ireland means you either have to move your current payroll and hedging employees to Ireland or fire them and hire new ones in Ireland. Either way, the old payroll office is going to have fewer workers. AFAICT, the Ireland operations were back office operations that grew depending on how well the rest of the company was doing. In what way does that create more jobs elsewhere in the EU?
Just like pharmaceutical companies locating their drug patents in offices of tax friendly jurisdictions and paying taxes on the royalties based on the location of the patents, the income associated with those patents does not really change. When they are moved from New jersey to Bermuda, that income just moves, it does not help create more income elsewhere (or at least not much).
So you don’t think that corporate taxes could affect shareholder returns? Only consumer prices?
Yep, Apple was hoodwinked by the Irish tax authorities. :rolleyes:
The same people who understand how tariffs can result in a race to the bottom that hurts everyone, don’t seem to understand how tax cannibalism within a single economy can do the same thing.
Ireland would not be attractive to all of these companies setting up in Ireland if they weren’t a member of the EU.
I know people are interpreting this judgement as imposing a penalty on Apple. This is a misunderstanding. The Commission doesn’t have the right to impose penalties on citizens or corporations. Nor is it retrospectively imposing a higher tax rate.
Here’s a simplified analogy:
In 1991 I sit down with the tax man and we agree that my taxable income is $100,000. My business is very complicated, so it’s hard for anyone to say whether this figure is really correct, but it seems about right, so I pay income tax at the normal rate on that $100,000, and everyone is happy.
Year by year, my income keeps going up until I am earning over $2 million a year, then $20 million, but I still have my agreement - the “tax ruling” - that my taxable income is $100,000, so for 13 years I keep paying tax on that basis, and everyone is happy. The rest of my income gets accredited to some semi-mythical “head office” and doesn’t get taxed.
Many years later, between 2014 and 2016, a quasi-judicial investigation is carried out, and determines that my agreement with the tax man was illegal, that I should have been paying tax on my full income (and not some arbitrary and increasingly tiny fraction of it), and that my tax treatment gave me an unfair advantage over my competitors. Note that the investigation does not concern itself with whether the tax rate was appropriate; only whether it was applied correctly.
The judgement prescribes that, to remedy the unfairness, I now pay the tax that I should have paid over the years, at the normal rate on my actual income. There is no penalty involved, neither for me nor for the tax man who failed to apply the tax law correctly.
No it’s more like the state of New York offering you the opportunity to open a business for up to 10 years tax free http://startup.ny.gov/ and then 10 years later the federal government decides that New York wasn’t at liberty to make that deal and forces you to pay money to New York even though we had an agreement because Idaho didn’t think it was fair.
No. It’s like the federal gov spelt out the rules 20 years ago. 10 years later Apple and New York cooked up a plan to give Apple a market advantage in return for investment, and then they were horrified the federal law was applied.
No, it’s not more like that, although this description helps to highlight two misunderstandings on your part.
If Ireland had publicly offered a tax break of the kind you describe, applied transparently and available to all, there would have been no State Aid investigation and no adverse finding. Ireland is free to set its tax rates, and any exemptions. The EU has no competence in this area. The adverse finding related to a “tax ruling” in 1991 (and a follow-up in 2007), that was - and this is the critical point - a private arrangement between Apple and the Revenue Authorities, that had the effect of Apple not being taxed on its full income at the normal rate.
Your reference to “Idaho not thinking it was fair” suggests that you see this as a finding of unfair tax competition between Ireland and other member states. If so, this is another misunderstanding of the judgement. The reason this kind of state aid is not allowed (or, to be more accurate, is only allowed under certain enumerated circumstances, with the prior approval of the EU Competition Authorities) is that it disadvantages Apple’s competitors, not that it disadvantages other Member States (although in fact it does).
Ireland is absolutely free to charge a low corporation tax rate to Burger King and McDonald’s and everyone else. What it can’t do is come to a private arrangement that favours McDonald’s while continuing to charge Burger King the normal rate. This would constitute illegal state aid.
They certainly do understand that. One way of understanding the Comission ruling is that the Commission is trying to set a limit to the extent to which member states can use their power to use tax policy (which is a competence of the member states, not of the Union) to attract business.
Believe me, we understand that very well.
I support the ruling. I am talking about the “free market fundamentalists” who think that tarrifs are horrible because it creates a race tot he bottom, but tax competition is awesome because … lower taxes are awesome.
Well, tell all the guys saying that Ireland should leave the EU over this.
You’ll find that not many of those guys are Irish, or know the first thing about Ireland (or, frequently, about the EU).