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 Post subject: Re: Apple, Ireland, EU, Tax Avoidance, Margrethe Vestager, C
PostPosted: Sat Sep 03, 2016 10:08 am 
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Too Big to Fail

Joined: Feb 21, 2008
Posts: 4219
FTBer wrote:
Interesting...
http://m.rte.ie/news/2016/0902/813591-santander-apple/

More detailed than many an RTE article.


Very interesting article. As you said very unusual for RTE which usually deals in trite generalities.

What I took from the article is that if the Commission findings had been against Google, Facebook or MS and their tax arrangement in Ireland then the companies would eventually prevail on appeal. But the key problem for Apple is the fact HQ was not tax resident anywhere. That is a circle than cannot be squared. Anywhere. In any jurisdiction. Even if HQ had ultimately been tax resident on Norfolk Island it would have given them a legal fig leaf. Although a very small one. But still far better than the legal position they currently find themselves in. The null tax resident HQ was just Apple playing silly buggers. A step too far.

Apples best legal strategy for now is to drag the legal war out for years and years and eventually the Commission in its current form will eventually go away. This legal strategy worked really well for IBM in the anti-trust case brought against them in 1969 to break them up. Thirteen years later, in 1982, the case against IBM was dismissed when it seems IBM's chief defense counsel in the anti-trust case was made head of the Federal Anti-Trust division. For some reason he saw no merit in the case.

Thats how you win big court cases like this.


Last edited by jmc on Sat Sep 03, 2016 10:11 am, edited 1 time in total.

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 Post subject: Re: Apple, Ireland, EU, Tax Avoidance, Margrethe Vestager, C
PostPosted: Sat Sep 03, 2016 10:10 am 
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FTBer wrote:
Interesting...
http://m.rte.ie/news/2016/0902/813591-santander-apple/

More detailed than many an RTE article.

The Santander case was one that many EU countries had no issue with (for various reasons). That is why it failed on appeal. The ECJ is not some independent group of wise men. It is a politically driven body that enforces the will of the main EU partners. Apple is an outsider to the EU (hence the monumentally ironic "political crap" statement from Tim C(r)ook, when a phone call to Washington couldn't make it go away.) and their reaction so far only proves this further. The RTE Samtander case study should be put on the shelf beside last weeks "it will only be a couple of hundred million fine according to well informed sources".

Ironically, while Apple (and a few other MNCs in Ireland) are going to nailed by both US and EU tax authorities for using badly advised tax structures to try and take the complete p**s out of Europe (going for 0.005% rates), the future is fine for Ireland. More compliant MNCs will be a tax bonanza to Ireland (plus payment of back taxes).

HOWEVER, if all of this revokes the CCCTB debate (now the British veto is gone), then, as mentioned earlier, that would be very bad for us. Even if our tax rate was 0%, we would be toxic to MNCs, who would want to re-locate cost base to offset higher tax EU locations.


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 Post subject: Re: Apple, Ireland, EU, Tax Avoidance, Margrethe Vestager, C
PostPosted: Sat Sep 03, 2016 10:17 am 
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Posts: 4172
observer35 wrote:
Pill wrote:
Quote:
but Apple illegally re-charged its Apple Ireland IP to EU states (from a stateless residence with whom the EU has no tax treaty)


Don't follow, the absence of a tax treaty would render the invoices from the stateless entity not tax deductible in the various EU states - is that what you mean? :?

Yes - and particularly so in the case of re-charging inter-group intangible items like IP.

i.e.

If you are a German company, and in your tax return, you have a large intangible inter-group cost item with an Isle of Man entity, that is not to work unless the German Revenue grant you a particular exemption (which can happen). That is the big flaw of Apple's Irish structure. Apple have been "implying" to the German Revenue that Apple Ireland was Irish resident (there are standard EU agreements that cover IP royalty charges within the EU). In reality, while Apple Ireland was located in Ireland (in the offices of Matheson) is was not Irish resident (according to Irish Revenue). It was not resident anywhere. That is a big (big) no no with the German Revenue (and all other EU Revenues), and there could be even greater financial consequences for Apple than the €19bn fine.


* * * * * *

This is the reason why all the US MNCs need to be "resident" in Ireland.
This is material mistake that Apple made, but it was too greedy (or its tax advisors too stupid).
Apple wanted the EU TP system (to avoid EU taxes), but also wanted to avoid all Irish taxes.
That is what Margrethe Vestager shows (and why Apple are paranoid on report confidentiality).
When this gets digested, Apple are going to have a change of heart over the €19bn fine.




Observer35, are you sue about this? I'm no tax expert and certainly not on IP TP, etc. However,in Ireland and Luxembourg as examples only, invoices are tax deductible for CT purposes, irrespective of whether or not they come from tax treaty countries, no? Italy, AFAIK, has a black list......

However, perhaps its the IP TP aspect where I must admit my knowledge/experience is poor?


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 Post subject: Re: Apple, Ireland, EU, Tax Avoidance, Margrethe Vestager, C
PostPosted: Sat Sep 03, 2016 10:17 am 
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FTBer wrote:
Interesting...
http://m.rte.ie/news/2016/0902/813591-santander-apple/

More detailed than many an RTE article.

It's a good article alright. I wonder could it be argued that the treatment of IP is also selective?

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 Post subject: Re: Apple, Ireland, EU, Tax Avoidance, Margrethe Vestager, C
PostPosted: Sat Sep 03, 2016 10:31 am 
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Pill wrote:
observer35 wrote:
Pill wrote:
Quote:
but Apple illegally re-charged its Apple Ireland IP to EU states (from a stateless residence with whom the EU has no tax treaty)


Don't follow, the absence of a tax treaty would render the invoices from the stateless entity not tax deductible in the various EU states - is that what you mean? :?

Yes - and particularly so in the case of re-charging inter-group intangible items like IP.

i.e.

If you are a German company, and in your tax return, you have a large intangible inter-group cost item with an Isle of Man entity, that is not to work unless the German Revenue grant you a particular exemption (which can happen). That is the big flaw of Apple's Irish structure. Apple have been "implying" to the German Revenue that Apple Ireland was Irish resident (there are standard EU agreements that cover IP royalty charges within the EU). In reality, while Apple Ireland was located in Ireland (in the offices of Matheson) is was not Irish resident (according to Irish Revenue). It was not resident anywhere. That is a big (big) no no with the German Revenue (and all other EU Revenues), and there could be even greater financial consequences for Apple than the €19bn fine.


* * * * * *

This is the reason why all the US MNCs need to be "resident" in Ireland.
This is material mistake that Apple made, but it was too greedy (or its tax advisors too stupid).
Apple wanted the EU TP system (to avoid EU taxes), but also wanted to avoid all Irish taxes.
That is what Margrethe Vestager shows (and why Apple are paranoid on report confidentiality).
When this gets digested, Apple are going to have a change of heart over the €19bn fine.




Observer35, are you sue about this? I'm no tax expert and certainly not on IP TP, etc. However,in Ireland and Luxembourg as examples only, invoices are tax deductible for CT purposes, irrespective of whether or not they come from tax treaty countries, no? Italy, AFAIK, has a black list......

However, perhaps its the IP TP aspect where I must admit my knowledge/experience is poor?

Yes. There is a reason why the MNCs have HQs in Ireland (and Holland and Luxemboug), instead of doing it all directly from the Cayman Islands (i.e. the ultimate end location for the cash). To make EU TP rules work for IP re-charges, you must be resident in the EU. The rules are extensive and very helpful. There are cases where IP can be re-charged from outside the EU but it requires more sign-off and scrutiny from each individual local EU tax authority. However their guide will be the appropriate tax treaty. A "stateless" company cannot have a tax treaty with the EU. Therefore it cannot re-charge IP across the EU. I would guess that the local EU tax authorities didn't realise that Apple Ireland was "stateless" (and there will be questions around whether this was their own mistake, or whether they were misled).

Image

The Irish Revenue's own statement that Apple's main "Irish" operation was stateless is the final nail in the coffin here (and why Apple moved their operation "onshore" in 2015, because of which we will pay €380m in additional annual EU levies).


Last edited by observer35 on Sat Sep 03, 2016 1:49 pm, edited 1 time in total.

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 Post subject: Re: Apple, Ireland, EU, Tax Avoidance, Margrethe Vestager, C
PostPosted: Sat Sep 03, 2016 10:37 am 
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Thanks Obserer35 for that clarification.

BTW, excellent stuff from you.


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 Post subject: Re: Apple, Ireland, EU, Tax Avoidance, Margrethe Vestager, C
PostPosted: Sat Sep 03, 2016 10:42 am 
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yoganmahew wrote:
FTBer wrote:
Interesting...
http://m.rte.ie/news/2016/0902/813591-santander-apple/

More detailed than many an RTE article.

It's a good article alright. I wonder could it be argued that the treatment of IP is also selective?


This bit jumped out...

Quote:
Santander's lawyers argued that multinational companies are different.

They have to work out how to be taxed when products and services are being bought and sold across borders between their subsidiaries, a concept known as Transfer Pricing.

That meant that they should be differentiated when it came to how they were assessed for tax, and that this was why tax rulings - or letters of comfort - were vital.


:nin

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 Post subject: Re: Apple, Ireland, EU, Tax Avoidance, Margrethe Vestager, C
PostPosted: Sat Sep 03, 2016 11:05 am 
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Observer35, I also really laughed hard when before the ruling I heard the media spinning out the line of "it'll only be a couple of hundred million fine according to well informed sources".

A bit like the Sect110 scandal, the message was: Move along. Nothing to see here.
Well, that wasn't true, and everyone knew it.

No matter who "the well informed sources" in Gubbernment were, they were probably as useful as asking the local blowhard down the pub....
... which is really the origin, I feel, of many of our politicians.
That or "the canny local teacher" who seemed smart to all the other local gombeens as he propelled himself through the parish with a wink & a nudge.


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 Post subject: Re: Apple, Ireland, EU, Tax Avoidance, Margrethe Vestager, C
PostPosted: Sat Sep 03, 2016 11:44 am 
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Pill wrote:
Thanks Obserer35 for that clarification.

BTW, excellent stuff from you.

Thanks Pill

You will also understand from this why Theresa May is going to have to invoke article 50 quite soon, and what her #1 goal will be - to keep Britain inside the EU TP system. As I pointed out on my first post on this thread, without being inside the EU TP system (or a customised version of it), you are not only useless to MNCs, but you are toxic. MNCs will be forced to leave London to re-base in a EU country, where they can get full tax relief on their London costs.
http://www.thepropertypin.com/viewtopic.php?p=889542#p889542

George Osborne was well on his way to making London a Dublin Mk 2. The Brits are used to financial engineering (IOM, Jersey Trusts, PM using BVI) and have bigger hungrier law and tax firms in London. It was the ultimate irony after decades of whining about the EU, an arch-Tory like Osborne (proclaimed Thatcher devotee), suddenly "saw the light" and wanted to remain.

However, as we will see from Margrethe Vestager's report, the EU now realise the trick going on with US MNCs avoiding all EU taxes. The UK have little chance of getting full access to the EU TP system. Best case is that they will get a separate tax treaty bristling with protections around IP re-charging (a draft of the CCCTB initiative), which will kill London as an EU TP hub.

The final "spin" that London will still be the hub, but with smaller local EU offices for pass-porting into the EU is a fantasy - London will be toxic for MNCs are they won't be able to offset costs (and in addition, the main reason to have "jobs" in an EU TP hub like Ireland or the UK is to bolster the "economic" justification behind the IP; when your ability to charge out the IP goes, so does the justification for the jobs). I would say that Vestager's report was a shock in Whitehall.

Image


Last edited by observer35 on Sat Sep 03, 2016 5:19 pm, edited 1 time in total.

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 Post subject: Re: Apple, Ireland, EU, Tax Avoidance, Margrethe Vestager, C
PostPosted: Sat Sep 03, 2016 4:46 pm 
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Pill wrote:
Thanks Obserer35 for that clarification.

BTW, excellent stuff from you.


Damn right Pill. Outstanding work by Observer.

Let me broach another angle on this . You may have noticed that Apple/Facebook/Amazon ( which contains Dropbox/Netflix)/Google and Microsoft are frantically building Datacenters in Ireland these days.

There a lacuna in EU VAT rules which allow a country to charge 'collection fees' to another. EG a transaction out of an Irish DC to another VAT Jurisdiction will result in a payment to Ireland and that other country both, until 2018 at least I think and probably thereafter it becomes permanent.

The Irish Vat take is proof of domicile in Ireland for economic activity purposes as I understand. iTunes was based in Luxembourg unlike other Apple activities as Luxembourg VAT is only 15% but I hear it is in Dublin nowadays. While a Luxembourg consumer will still pay 15% VAT on an itunes transaction in an Irish DC I think the Revenue keeps a % of that 15% and not all of it goes to Luxembourg and the Revenue is an agent of every other EU revenue in terms of ensuring the forwarding of the monies collected...minus its own cut. OTOH we pay 23% to iTunes since 2015, not 15% to the Lux Revenue as was the case.

I'm sure VAT will rest a tad, on occasion, on its way out. :)

Someone else might have more on this VAT agreement and the minute details, all EU transactions on Google Play, Facebook and iTunes will be handled in/from Ireland by late 2017, not sure about Netflix.

http://www.revenue.ie/en/tax/vat/guide/ ... vices.html

Quote:
The changes to the place of supply rules are being implemented over a period of 5 years with most changes having come into effect on 1 January 2010. There are changes to the place of supply rules for cultural, artistic, sporting, scientific, educational and entertainment services which came into effect from 1st January 2011, further changes to the rules for hiring out of means of transport which came into effect from 1st January 2013, and there will be a significant change in 2015 regarding the place of supply for Business to Consumer services, which will shift the place of taxation from the place of the establishment of the supplier to the location of the customer.

This section is concerned with the place of supply rules.

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 Post subject: Re: Apple, Ireland, EU, Tax Avoidance, Margrethe Vestager, C
PostPosted: Sat Sep 03, 2016 4:55 pm 
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A question that no Irish media have asked, AFAIK: why did the cabinet need to agree to lodge an appeal by the end of the day yesterday? The full EC ruling isn't even available yet.
Is there a good reason, or is it because Tim Cook told Enda Kenny to do itty Friday?

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 Post subject: Re: Apple, Ireland, EU, Tax Avoidance, Margrethe Vestager, C
PostPosted: Sat Sep 03, 2016 5:01 pm 
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Mantissa wrote:
A question that no Irish media have asked, AFAIK: why did the cabinet need to agree to lodge an appeal by the end of the day yesterday?

Because Microsoft Facebook Google and Amazon expect the Irish Government to protect them too. Think of all the children Mantissa. :)

It was the US Senate wot nabbed Apple, the EU Commission merely clarified some aspects of what they found out in reaching their decision.

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 Post subject: Re: Apple, Ireland, EU, Tax Avoidance, Margrethe Vestager, C
PostPosted: Sat Sep 03, 2016 6:18 pm 
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When the IRS gets their teeth into this, sooner or later, the really interesting question is when will the IRS start using some of the laws passed back in the 1960's and 1970's against tax shelter vehicles, extensively prosecuted at the time, which all became moot post 1982/86. In Apples case pretty much every single last bit of i.p was created in Cupertino. Its not like they have the wriggle room that MS and Google have with their international dev centers. Even though all the important stuff is still done in Redmond and Mountain View. Given some of the case law from back in the 1970's regarding professional services companies trying to reassign income to third party low tax structures if the IRS ever decided to prosecute the offshoring of i.p then Apple really are toast. There are double penalties on that kind of stuff so that few hundred billion offshored would very quickly disappear in penalties and fines.

This show is going to run and run..


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 Post subject: Re: Apple, Ireland, EU, Tax Avoidance, Margrethe Vestager, C
PostPosted: Sat Sep 03, 2016 7:18 pm 
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Absolutely this show will run and run.

How many times have we been frightened by electoral candidates in the US promising to deal with offshore profits? Yet when Apple get threatened by the EU, the White House weighs in.

Nothing changes.

Henry Temple, 3rd Viscount Palmerston noted to the House of Commons in 1848 that

Quote:
as the eternal ally or the perpetual enemy of England. We have no eternal allies, and we have no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow... And if I might be allowed to express in one sentence the principle which I think ought to guide an English Minister, I would adopt the expression of Canning, and say that with every British Minister the interests of England ought to be the shibboleth of his policy.


https://en.wikiquote.org/wiki/Henry_Tem ... Palmerston

Nicked by that C*** Henry Kissinger

Quote:
America has no permanent friends or enemies, only interests



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 Post subject: Re: Apple, Ireland, EU, Tax Avoidance, Margrethe Vestager, C
PostPosted: Sat Sep 03, 2016 7:40 pm 
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Matheson promise a corporation tax rate of only 2.5% using their special 'structures', bless em .

Image

From > http://www.matheson.com/images/uploads/ ... h_2013.pdf

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Last edited by 2Pack on Sat Sep 03, 2016 7:48 pm, edited 1 time in total.

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