The Apple implication has the potential to effect over 700 US companies who get special tax treatment in Ireland. While Ireland’s effective tax rate is just 12.5%, Apple’s negotiated effective tax rate was .05%. They are not alone. Dell, Google, and Microsoft also paid well below the effective rate. In 2010 all companies, indigenous and foreign in Ireland paid an effective rate of just 6.5%.
But it isn’t just Ireland. Offshore accounts are said to hold over $1.2 trillion in cash. That would amount to about $620billion in potential tax revenue.
Apple leads the pack, but a close second is Pfizer, then GE, Microsoft, IBM, Merck, Johnson & Johnson, Cisco, Citigroup, Google, etc… Tax Havens are big business! Accounts are with The Netherlands, Cayman’s, Channel Islands, Switzerland, Panama, etc… because, bottom line it’s about money and the US tax structure is not appealing. Most insurance companies set up shop in Bermuda or the Caymans. Even US Defense companies are avoiding taxes. It’s a nightmare that is only growing exponentially while our government refuses to take definitive action to lower our base and lure jobs and revenue back home.
It’s all about ‘special interests’, and ‘lobbying’. It’s about 6.5% is better than nothing, which somehow seems to allude our government.
If Ireland and The Netherlands had tax agreements with these foreign companies, how can the EU override and demand ‘back taxes’? The EU Commission, within the weighty arm of the OECD, has rules of taxation which state that no one company may benefit from a lower rate than any other company. While the EU is building a case, both Apple and Ireland are already building an appeal.
The over-reaching arm of the EU Commission could create a wave of EXITS, as other governments see the advantage that Ireland has reaped in it’s tax haven status. On the other hand, if the appeal fails, 700 companies could make a mass exit from Ireland and be searching for the next best haven to grant a deal. Given the BREXIT, the UK stands to lure those thirsty behemoths. Or – Ireland becomes the next IREXIT.
Since joining the EU in 1973, Ireland has received over 50 billion euro from the EU Commission. The first year Ireland had a surplus contribution to the EU was in 2014. Undermining what has been a struggling economy could have exponential consequences and send their revenues, employment, and GDP spiraling! These foreign corporations have been a boom to Ireland, creating needed jobs, consumer spending, and growth. Ireland will fight this ruling because it could be their death.
In the meantime, the US has launched a retaliation scheme against Deutsche Bank for their role in the mortgage crisis and is threatening a levy of $14 billion. All of this parallels the military cock fights between the US and China or the US and Russia. In the end – both die. And that’s the game only this time its a bully match in economics.
The most pointed question is why now? Apple and other US companies have been enjoying these tax advantages for over a decade! Why would the EU choose now to take a stand? And what would be the trickle-down effects on other tax havens and corporations?
The idea that the EU is simply discipling Apple is ridiculous. Timing is everything. With BREXIT, is the US creating a divide with the EU?Is this furthering the Fall of Europe after the refugee crisis? Hit them with massive refugee chaos, crime, and now economic behemoths closing up shop…
Or could this be a way of encouraging the very unpopular TTIP which would allow corporations to sue governments for loss of revenue due to laws they view as impairing their profits?
Or is the Commission looking for a way to curb their losses with BREXIT?
It wouldn’t be the first time the EU Commission has come under controversy for initiating stupid laws:
- a ban on high powered small appliances, including vacuum cleaners, was proposed…
- banana’s that were deemed to have an ‘unnatural curvature of the spine’ were banned
- children under the age of eight can not blow up balloons
- restricted sale on incandescent light bulbs because they were not eco friendly
- tea bags can not be recycled as they are thought to spread foot and mouth disease
- cucumbers can not bend by a gradient of more than 1/10
- banning the labeling of bottled water as able to fight dehydration
Obviously the Commission has a lot of time on their hands to come up with a plethora of ridiculous rules! But has their blue book of rules become much like the US tax code? TOO LARGE!
The Commission was created in 1951 for the sole purpose of acting as the authority for the European coal and steel industries. Like other governmental agencies; NATO, UN, etc.., they have managed to expand their control like a sea awash in octopi. And while the Commission may impose fines for a member states failure to comply with rules and regulations, few, if any members can throw the first stone on the prostitute, for they are all equally guilty of infractions.
But Apple is not a member state of the EU, their tax agreement was with Ireland. If Ireland infringed on their ability to contract, that does not necessarily mean Apple is complicit in any manner unless it can be proven they knew their arrangement was illegal. The result? Ireland would be compelled to pay penalties, reorganize their tax structure, and create equally weighted taxes on every corporation. While their tax rate at 12.5% is still quite attractive, companies may shift to greener grasses.
While the TTIP trade deal between the US and EU has been temporarily tabled while it is renamed and rebranded to push thru without warning to the European citizens who vehemently oppose it, it could be that TTIP will give these corporations the power to sue the EU Commission for laws that unfairly reduce it’s profit… and that may be the purpose of this entire fiasco. Seven hundred corporations in Ireland could become the new benefactors of TTIP – an agreement that will give governmental power to corporations who will create a system that is above government and thus away from The People in the elective process.
In addition, The Obama administration warned the EU that retaliation will be forthcoming should they proceed against Apple. Enter the new Deutshe Bank penalty imposed by the US. But oddly there is no mention of compelling Apple to bring jobs and tax revenue back to the US. Nor is their acknowledgement that the fundamental reason for corporations searching tax havens is because the US corporate tax system is NONCOMPETITIVE!
Overall – it would seem that the US is steamrolling into a parallel universe in which we have no allies left! Alienating Brazil, Venezuela, Russia, China, the Philippines, the EU, Pakistan, the Middle East, and India waffling…we are left with a hodge podge of allies who may or may not be around tomorrow.
FYI: shortly before the announcement of the EU going after Apple – Soros dumped all his shares.