Corporate Tax Evasion: "No, Apple, there is no Irish tax fairy"

Hi -Tec Tax Evaders

You wouldn’t think we’d be taking sides against a cool, innovative, imaginative tech corporation, Apple Inc., and standing with one of the world’s most opaque bureaucracies, the European Commission. But we are. And you should too.

Apple’s deserved success doesn’t depend – and never depended – on complex income-shifting and income-tax-fleeing arrangements, including income-tax enticements in Dublin that seemed mutually convenient, back in 1991. But its bottom line was helped by them.

On general principles, a company’s profit is taxed according to where its value is generated. However, Apple created a number of internal arrangements that moved profits around within the company, and across geographies. For example, it stated that much of its intellectual property rights resided in Ireland, and that subsidiaries around the world were required to pay some share of their profits to the Irish subsidiary, as compensation for using Apple’s intellectual property.

But Apple also had an arrangement with the Irish government under which nearly all of those profits notionally sent to Ireland ended up untaxed in Eire, or anywhere else.

The Irish government was quite happy with all this. It levied very little tax on Apple but, without this deal, it might not have collected any tax at all from Apple. The EU, however, says this accounting sleight of hand, and the special tax break thereby given to Apple, weren’t acceptable under European law. It says the deal cost the Irish government 13 billion euros in unpaid taxes. And it has ordered Apple to pay up.

The Irish government seems at least as angry at the European Commission as Tim Cook, the CEO of Apple Inc. But Margrethe Vestager, the competition commissioner of the EU, is surely correct. Her job is to prevent EU countries from giving special advantages to particular companies. Aside from being anti-competitive, such special deals are pointless. Rather than creating economic activity and jobs, they merely shift them from one place to another, with taxpayers in the receiving place picking up the tab.

When it comes to innovation and marketing, Apple has a history marked by genius. But Apple is also one of many multinationals that has devoted considerable effort to, and shown a comparable genius for, tax-code alchemy. The EU was right to call it out.

Read more: No, Apple, there is no Irish tax fairy - The Globe and Mail

Corporate Tax Evadors: US 'hits out at EU tax probes'

The United States has attacked high-profile EU tax probes into American companies as unfair and encroaching on the US government's right to tax them, the Financial Times reported Saturday.

The European Commission has cracked down hard on companies, including US icons such as Apple, Starbucks and Amazon, who worked out arrangements with EU member states allowing them to slash their tax bills.

EU Competition Commissioner Magrethe Vestager has made a point of testing these "tax rulings," which are legal in themselves, to see if they breach strict bloc competition rules by giving some companies an advantage over their rivals.

The FT said Robert Stack, a US Treasury official, met EU competition officials in Brussels on Friday to express Washington's concerns.

"We are concerned that the EU Commission appears to be disproportionately targeting US companies," Stack was quoted as saying.

Stack's visit came just one day after the Commission launched plans to stamp out tax avoidance by multi-national corporations.

"The days are numbered for companies that aggressively reduce their tax bills," EU Economics Affairs Commissioner Pierre Moscovici said.

The key proposal is that a company should report its profit country by country, rather than as now be allowed to shift earnings around into lower tax jurisdictions.

The plans were unveiled amid a storm of protest at a British government agreement for Internet giant Google to pay £130 million ($185 million, 170 million euros) in back taxes.

Critics denounced the deal as ridiculously low given Google's size and earnings but the company insisted the settlement was fair and that it complied fully with the tax laws in the countries where it operates.

Italy is meanwhile demanding Google pay some 200 million euros in back taxes and France reportedly wants 500 million euros after an investigation that included raids by police.

Google and Apple have complained they are being unfairly targeted by the European authorities.

Commission officials were not immediately available for comment on the report but Brussels has rejected charges of an anti-US bias in the past.

 Read more: Flash - US 'hits out at EU tax probes' - France 24

EU unveils draft laws to end secret sweet tax deals

Tax Evasion

The European Union plans to oblige member countries to share details of tax agreements made with big companies and end the practice of sweet deals made in secret.

The EU’s executive commission unveiled yesterday draft laws that would require countries “to automatically exchange information on their tax rulings” every three months.

EU countries rarely share information about their tax decisions and are often unaware of rulings made by their partners, which creates a gap that some multinationals exploit.

The EU’s top economic and finance chief, Pierre Moscovici, said: “It’s high time to re-establish a tax balance and for companies to pay what they owe.”

The move comes after the so-called LuxLeaks allegations about sweet deals for multinationals with offices in Luxembourg. In February, the EU set up a special committee to look into national tax rules following the revelations.

The commission, which polices EU laws and drafts new legislation, also opened tax investigations last year into Apple in Ireland, Starbucks in the Netherlands and Amazon in Luxemburg. It is also looking into tax provisions in Belgium.

The commission believes that many multinational corporations are taking advantage by shifting profits between countries and that this deprives EU governments of tax revenues.

Tax rulings are the confirmation or assurance that authorities give to taxpayers on how their taxes will be calculated.

The new legislation would force national tax authorities to send a short report about all cross-border tax rulings they have issued.

Read more: EU unveils draft laws to end secret sweet tax deals | Shanghai Daily

US Tax System = Paul Krugman Lays Bare Latest Corporate Scheme to Rob American Taxpayers

If corporations are people, as the Supreme Court says, then why don't they have to pay taxes? Paul Krugman expresses outrage about the latest corporate scheme to dodge taxes in today's New York Times column.

Admittedly, corporations do still pay some taxes. "The federal government still gets a tenth of its revenue from corporate profits taxation," the Nobel-prize winning economist writes. "But it used to get a lot more — a third of revenue came from profits taxes in the early 1950s, a quarter or more well into the 1960s. Part of the  decline since then reflects a fall in the tax rate, but mainly it reflects ever-more-aggressive corporate tax avoidance — avoidance that politicians have done little to prevent." 

The latest of these aggressive tax-avoidance ploys is called “ inversion.” And as Krugman explains, it's a purely legal maneuver that allows companies to claim that its "U.S. operations are owned by its foreign subsidiary, not the other way around, and uses this role reversal to shift reported profits out of American jurisdiction to someplace with a lower tax rate." 

The company does not need to move overseas to do this. What a quaint and old-fashioned notion. It's all done on paper. Sometimes, it might involve opening an office somewhere abroad. The most egregious current example is Walgreen, which will continue to operate its thriving pharmacy business in the U.S. (have no fear, your local Walgreen's will remain) but for purely tax reasons, is reportedly about to declare itself Swiss, which "will deprive the U.S. government of several billion dollars in revenue that you, the taxpayer, will have to make up one way or another," Krugman writes.

 Read more: Paul Krugman Lays Bare Latest Corporate Scheme to Rob American Taxpayers | Alternet