Ireland, Apple and the final nail

[Carolinesbeanies]

Possibly parking this here as this is going to be a slow burner, but as Macron is running the gauntlett avoiding the unions, his Finance Minister Le Maire, has succeded in gaining support from various EU states for taxing the likes of Google and Apple basically at point of sale on turnover. Ireland and Apple have already been brought to task over their tax arrangements, (appeals pending) but this latest proposal would have yet another catastrophic impact on Ireland.

Whilst I dont think it will actually get very far, several small states are already kicking back, the timing of this is bewildering. This proposal could see all US tech giants pull bases out of the EU. Its utterly nutty. The only reason I can see this even being tabled at the moment, is financial desperation in the bloc. I know the tax issues surrounding Google et al are extremely controversial and unpopular, but its not exactly new news. (And the EU should have avoided this whole issue in the first place) but why go for a populist policy now, that flies in the face of proposed global taxation deals, when the nett effect will be so detrimental?

Either way, it looks as though Irelands 'HQ' appeal is being utterly hamstrung by their 'benevolent' EU masters.

www.thelocal.fr/20170916/france-slams-silicon-valley-for-skirting-tax-in-europe

What will have a far more catastrophic effect on Ireland is the U.K. leaving the EU.

It looks like you're inventing reasons to say, 'Look! Our EU overlords are screwing us!'.

Caroline - Ireland (like the U.K. In fact) would be a lot less attractive for a corporate HQ if it were outside the single market. The EU ruling against Apple was not against the low corporation tax rate, but the fact that Apple didn't even pay that! The EU had a point me thinks

You'll find that support for leaving the EU in Ireland is exceptionally low. Instead it is seen as a vainglorious adventure by a country which has never reconciled itself to its past - whether the brutality and racism of the British Empire, nor the losing of it.

In any event, Ireland has a derogation on harmonisation of the corporate tax rate. You won't recall that this is what happened between the first and second Lisbon Treaty vote, but it is.

May has already indicated a willingness to do deals with the tax-dodging big corporates. Making equality an even bigger joke than it is now.

Whoa, this is starting to unravel already. Think Ive just answered my own question about timings! Monheim am Rhein.

(Yoko, I really dont have to invent reasons, the EU are more than capable of creating their own. )

Spring breeze, whilst I did post in the EU ref threads (for the obvious reason of mindnumbingly dull topic matter to many MNetters) I actually wasnt coming at this from an in/out position.

Ireland have managed to take themselves from the dire bailout situation to a healthily increasing GDP by in short, deciding their own taxation policy. There are 4 key EU states who would be catastrophically immediately impacted by this change, Ireland, Netherlands, Luxembourg and Cyprus, and many others such as Denmark who would see a slow painful decline.

However, what has just become apparent however, and sticks in the craw of this seemingly 'fair' equalisation of tax revenues propsal, is that Germany are creating mini tax havens within their own municipalities. They are using their internal tax laws to protect internal tax havens. Heres the latest sales pitch from one such German tax haven, Monheim am Rhein. They call it 'smart'. 'Innovative'.

monheimplus.monheim.de/en/business-en/investing/

Have Tech giants anywhere to go? Yep, Monheim. And its now looking like the EU will write tax policy to support that, and in doing so France too are cueing themselves up with their tax reforms, to mirror Monheim.

The actual principled bunfight about tax havens in general, isnt whats going on here, though riding the wave of populist opinion may indeed provide impetus to succeed. (Hence my confusion about timings). The EU are not looking to take on Branson and the BVIs for example, these really are the hands that feed, they are simply looking at grabbing a piece of the pie.

In tax haven rankings, whilst Ireland is currently 7th, somewhere between Saudi Arabia and the Oman, France and Germany are way down the rankings around the 150s. Its becoming apparent that thats all this is about. Its 'asset' stripping the weaker states, creating unassailable alternatives within the EU big hitters, and it stinks.

Monheim am Rhein

I thought that back in the noughties, Brown and Balls had argued the case against this and won?

Not remotely surprised Caroline

Honestly!

I am Irish and it doesn't stink. The taxation policies of Google, Apple etc should be of concern to us all. There is unfair competition with other retail businesses leading to increased dependence on a few monopolies who have data on us Big Brother would envy. The Google shopping decision is a good example of the power that the EU combined have which no member state has. Google was found to have manipulated the search results to favour those who pay large advertising fees to google - not what the consumer thought they were getting.

Whilst taxation is a factor in the Irish location decision, a well-educated English-speaking workforce also matter. I have always been perplexed at how well Ireland has managed developing in the regions (under the EU) and how little the UK has.

Anyway, I presume you think it would be terrible if the UK tried to be a tax haven post Brexit (just think of poor Ireland....)

Surly they can all just move to the UK, problem sorted.

Springbreeze, youre confusing 'HQs' with actually providing local jobs. They dont. (Though the increase in GDP obviously provides higher spending capacity for local governments in other areas). As the EU enquiry found, all Apple did was register an address, hire a couple of local legal firms to hold several meetings a year on their behalf, and take minutes of those meetings. That was the crux of their determination against Apple and Ireland. (And why you can see 30 or 40 odd huge corporate 'HQs' "working" out of the same office block floor).

To counter this, the EU are proposing to apply corporate tax basically at the point of sale, on the turnover of product in each individual nation. This is a huge shift in tax policy, anywhere, and if applied across all business' world wide that provide to any EU state, the likes of Branson (who loves tax havens for his companies) will be hit by a weighting of Id guess around 30% on all goods and services sold into the EU. (France corp tax is 33% Germanys is around 30% which is split between 15% national rate and 15% municipal rate, the municipal bit is what Mondheim have near enough done away with). It makes the 2% saved on 'access to the single market' tariff an utter irrelevancy.

The difficulties in doing this are also huge however, for example, iphones are designed and created in the US, then manufactured in China. How much of the cost of an iphone is cost of invention/design? How much is cost of manufacture? and how much is therefore cost of distribution? Another example is, what makes a tax haven? If Kenya offer say a 5% corporate tax, why would that be a 'haven'? Just because the EU say corporation tax should be 30%?

In short, why do companies from countries with low corporate tax, (such as Ireland currently offering 12%) now have to pay an EU decided rate of corporate tax on all products and services to trade within the EU? The EU are proposing to disregard the cost of production, disregard the cost of manufacture, and solely hit the value of sales.

If they succeed, (of course Apple will continue selling iphones and ipads into europe), however, 2 things will be guaranteed to happen. 1/ HQs will absolutely move out of all EU nations taking their 'turnover' figures with them (its those figures that boost Irelands GDP and secure finance), and 2/ Any corporate 'turnover' tax will be added onto your cost of product. The EU consumer will pay. Thats you. (But only in EU nations of course. Brits post brexit, would of course be able to buy these products 30% less, unless the EU start negotiating and fast over Brexit and come to some deal.....)

So the EU becomes a much less attractive place to export to then!!!

Best find some new markets then!

And these magical new markets are going to appear from where?

We'll just ignore the half a billion plus consumers on our doorstep in favour of what?

When are Leavers going to realise we are not as popular a nation as you think we are?

Bear - have you read the whole thread? If our products become 30% more expensive due to a new tax resheme the EU has imposed then we ain't going to sell so much to them are we! I'm not suggesting we ignore them but we would have to look else where wouldn't we.

Yes, I've read the thread. I'm still wondering where we're going to find all these new markets that suddenly want to trade with us?

Actually, the multinationals do provide jobs in Ireland. Over 180k are employed directly, and many more indirectly. The Irish government made having local staff a condition.

www.idaireland.com/newsroom/fdi-employment/

Apple itself has 5,500 direct employees in Ireland. Unlike the UK, these are mostly not in apple stores.

Do you honestly think Apple will lower prices in the UK? Why don't they do so already given they charge 30% more than in the US?

Springbreeze, the Cork facilities etc arent the immediate issue here. They pay standard corporation tax at Irelands current level of 12%. The only way that would be impacted directly, is IF the EU standardised all corporate tax across the entire bloc. They would never never get approval to do that. They could however be impacted indirectly, by whats now being proposed on tech corp taxation, as well as the EU ruling on Apples tax affairs.

I know its a tad confusing but I'll try to explain. Let me start from the top.

Apple have set up a group of subsidiary companies in Ireland, I used the umbrella term 'HQ', but they are known as 'Apple Operations International', or AOI.
What they then do, is funnel all world wide sales through these umbrella subsidiaries. Most of these subsidiaries dont exist in physical, staff terms, they are lines on paper, but to meet certain requirements, they hold meetings, make occasional decisions and exist as an 'entity' for tax purposes. Its this set up, and the funnelling of world sales via Irelands low tax agreement (which is tiny, but its a tiny piece of a phenomenally huge pie), that brought the EU stamping down on them. The EU then demanded they pay 13 billion in back tax on the AOI dealings. Both Apple and Ireland are currently appealing this decision. (Which could take years).

So firstly you have to look at Apple Ireland in 2 separate entities. Theres the Cork facility which is ticking along nicely as a normal company would do, employing thousands and is hopeful to expand its data business, and then theres the AOI business. The furore about tech firms avoiding tax, specifically relates to AOI, and is pretty much what Google, Microsoft, Intel etc do, not to mention a whole raft of pharmaceuticals.

There is however, an undeniable link between the two.

Ireland firstly offered these tax incentives a/ to attract the world wide business revenue streams, the 'turnover' (tiny piece of a humongous pie) but b/ also to create new employment hubs, such as Cork. This worked great for both Apple and Ireland. As you say, it was an available english speaking workforce, working for a fraction of the cost of UK, or German or French counterparts. But the link is, Cork has been paid for by AOI. This is where the indirect impact on Cork may come. Can Cork stand alone, even if it retained its 12% corp tax? Can it indeed compete against chinese manufacturers, or UK export chains? Thats the billion dollar question when you then look at the EU, slamming the door on the AOI business.
Ireland would immediately lose the AOI business overnight, (its pretty much only lines on paper) if the EU succeed, as theres no reason whatsoever to then have AOI in Ireland. The second stream, Cork, would be subject to normal market movements.

What I then posted about, was possible, hypothetical ways the EU may indeed slam this door. The French Minister has tabled a proposal that corporate tax on all sales within the EU, should indeed be taxed on national turnover, basically at point of sale.

In short, where now all sales made in Germany for example, are 'accounted' for and taxed in AOI Ireland, they would be taxed directly in Germany. I plucked a figure of 30%, as Corp tax in both France and Germany is sitting around the 30% mark, but no one has actually suggested a figure as yet.

So it isnt a case of reducing the cost of an ipad today in the UK by 30%, its a case of, if this proposal succeeds, the cost will undoubtably increase by 30% (or whatever % the EU decide) in all EU states that buy Apple products. The UK would avoid this EU 'corporate tax ruling' due to Brexit, so yes, ipads could indeed be 30% cheaper here.

Ive used a guestimate, but I cant see the EU dropping below 25% or going higher than 30%.

There are of course a thousand more questions this raises, such as, will the corporate tax rate of the individual nation apply, rather than a standardised tax rate? It could, but with schengen, I cant see how theyd make that work. The Germans and French would simply cross the border and buy in the Netherlands. So imo, the only way they could implement this turnover corp tax, is a standardised tax rate throughout the EU. The implications of that are huge.

As I said, this is going to be a slow burner, and more than likely wont even get an inch off the ground. But the fact theyre throwing this idea around, really isnt good news for Ireland.

"So the EU becomes a much less attractive place to export to then!!!"

Not neccesarily, goods that are affected by this proposed turnover tax, just become significantly more expensive in the EU. Apple, Google and co, arent going to stop selling in europe, they just cant give their products away at a loss. Someone has to pay the upcharge, and itll be the consumer. Will this open the door for say an Estonian smart phone? Not really, as despite the costs, this proposal can only impact EU sales. Apple, Googles world wide market share is phenomenal and they will continue advancing technology at a hugely rapid pace.

For Europe to seriously take on the US tech giants, will take years and years, and its time the EU hasnt got.

It will become less attractive if they expanded a standardised corporation tax on 'turnover' on all goods..... and whose to say they wont, if they succeed with this?

Caroline. i take it from all this that you personally are happy to pay more taxes so that Apple etc can subsidise the Irish economy?

The UK may avoid this but only due to massive tax avoidance by US multinationals , which leads either to poor public services or to UK taxpayers making up the shortfall.

I utterly despise tax avoidance Springbreeze, and am a tad outspoken about Branson and particularly his tax havened Virgin Care, then being awarded a multi billion contract into the NHS, that his missing taxes would have provided in the first place.

However, and heres the rub, I hate worse a supra-national tax 'office' dictating globally to all nations, especially when said 'tax office' implements policy by 'silent procedure'. That is, in EU council speak, if no one objects to a proposal, it goes through. That is exactly how the EU have implemented their tax avoidance legislation.
Tax is one of the fundamental pillars of our civilised democracy, but it is by agreement with its people, not something to be punitively implemented.

We as individuals, agree to pay tax, in return for government support of our civilised society. We pay tax, to support our weakest, educate our children, police society to keep us from harm, support road transport networks etc etc and in the UKs case, provide healthcare. That is the tax 'contract'.

Apple are the biggest tax payer in the entire US. They pay tax and billions of it. They pay tax in China. They pay tax in Cork. They pay tax in all nations either as VAT (to the EU) or local 'sales' tax on everything they sell. What is at issue here, is after paying all that tax at source and point of sale, they then make a profit. Corporate tax is about taxing that profit. Currently Apple pay a negotiated corporate tax rate to Ireland. The bun fight is, its too low.

Secondly, I hate worse, 'selective' targetting. Either treat all multi nationals the same, or none at all. Why then are the tech firms, and tech firms only, being targeted here within the EU? The only answer I can come up with is popular opinion (and therefore a quick raid on unpopular corporations) and the fact they are quite simply ultra rich.

I, you, our children, have lived through a technology boom era that sees us access a world wide web, cheaply and efficiently. If I tried to explain to my long gone great grandparents, what Im doing this morning and what my ipad is, they would be utterly bemused. We spoke to peoples in Egypt during their coup, we heard instantly from Turks, during their coup, if youve ever driven up the A16 to Calais, you will see refugees/economic migrants, tapping away on their iphones as they walk up the motorway. These tech giants have utterly changed the world, and changed how governments cant now control media, information and propoganda to then control their people. In terms of 'democracy' the tech boom has liberated billions of people.

Should Apple pay tax? Absolutely yes. Should Apple pay a one off EU tax on EU sales only? Absolutely not. Not when the citizens of the EU have no say whatsoever on a/ how that tax is then spent and b/ how much tax is then demanded.

Tax is indeed a social contract, it exists to support society, and works only with the approval of its society. In doing what they are doing, the EU have removed all authority from its people.

Its a very dangerous precedent and one that is driven purely as a punitive action, on a selected branch, of a selected industry, in a selected market, the EU. It doesnt get much more totalitarian than that.

Thank you Caroline. That is really interesting. I have learnt a lot from your posts.

Its just one view Corcory, but when you have people like Guy Verhofstadt, wishing to give Brussels the power to tax all EU citizens directly, with no voice, no vote, no say or influence on how that money is spent, (and as weve seen in EU budgeting terms, where UK citizens pay one of the highest contributions, yet receive proportionally, one of the lowest returns), you realise just how far from basic democratic principles, the EU has gone.

Guy Verhofstadt justifies it by saying, 'citizens wont mind, as long as they end up paying what theyre paying now' meaning, Brussels must demand nations cut their national personal taxation on their citizens, (therefore direct cuts to national hospitals, schools, police etc) to be able to add on a new personal EU tax, for the EU council to spend where and as they please.

Someone needs to remind the EU they are not a democratic government, of some mythical nation. We digress slightly, but in losing sight of fundamental concepts, citizens are sleepwalking into a nightmare they cant do anything about or get out of.

I can guarantee, Brexit, will be the first and last referendum ever offered to EU citizens on the question of 'membership' if this financial net is tightened and ultimate taxation authority is given to the EU.

We digress slightly, but its far more significant than the TTIP deal was in giving Corporations the power over national governments, in that TTIP applied to US corporations only, whereas this move will apply to all global corporations. (Though TTIP may indeed be back on the table as a double whammy, who knows).

The EU are using the previous treatised agreement given to them by all member nations to set and charge VAT. Thats the sole level of their authority. They then tacitly expanded their authority by 'silent' process. No where, at any time, have any nation given consent to the EU to decide corporate, or personal national taxation issues. Yet here we are, with Ireland in the dock, Apple retrospecively fined, and Guy Verhofstadt confident his suggestions could indeed be legally enforceable.

Ireland absolutely need our support. Their democratically elected government, agree taxation policy with the approval of the Irish peoples. If the Irish peoples dont like any policies, they have the power and authority to change it. The EU are absolutely removing that authority.

Ireland absolutely need our support

What patronising drivel. Brexit will likely have a negative economic effect on Ireland, the only saving grace is Ireland will pick up business and jobs from companies leaving the UK.

www.theguardian.com/business/2017/sep/19/lloyds-of-london-dublin-brexit-xl-group-eu-single-market

Europe generally, including Ireland thinks Brexit is madness.

Poll suggests 88% of Irish people want Ireland in EU

www.rte.ie/news/2017/0509/873610-eu_poll/

Were Brexiters thinking of Ireland's best interests when their vote throws the Good Friday agreement into doubt?

Aw. It is great so many Brexiteers are so concerned about Ireland getting support in the face of Brexit the EU.

You must be cheering then that 'Lloyds of Dublin' is happening to help plug the hole.

"So the EU becomes a much less attractive place to export to then!!!"

Why are the UK holding everything hostage for a trade agreement then? It would interesting to see, the taxpayer funded, numerous impact assessments of Brexit that the government won't publish.