Specifically in Ireland, corporate taxes were being lowered from late 1980s until 2003, in a series of agreements with the EU regulators. It's not like Ireland lowered the taxes in a sneaky scheme, or grandfathered-in an abnormally low rate.
Just to be clear - I don't think many people have (much) of a problem with ireland's "headline" 12.5% CT rate.
The problem is the selective tax rates that Ireland gave to many multinationals, often as low as 0.005% (effectively in return for ensuring x amount of jobs were created in Ireland). I think these are really very much sneaky schemes.
The problem with all of this is that it's all sneaky schemes.
You probably have something in mind for how a government is supposed to spend tax revenues. Assistance for the poor or something like that. But as a sovereign state they get to decide for themselves.
Except that as soon as you admit this there is no point in having any kind of minimum rate etc., because there are a thousand ways for the state to return the money to corporations if they intend to. Subsidize energy costs so they have the lowest electricity prices and tech companies build data centers there. Provide something like the earned income tax credit but with no phase out, subsidizing employers who hire workers there. Just offer generous tax credits and deductions in general, leaving the nominal rate high while lowering the effective rate.
There is no real way to prevent this kind of thing. Is a country that offers public healthcare subsidizing employers who then don't have to pay for employee health insurance? What if you create a 100% tax credit for constructing non-fossil power plants up to the amount of the buyer's total taxes? Apple would commission $13B in solar farms and nuclear reactors, take the credit and then turn around and sell them to get all the cash back. Can you even say that would be a bad policy? It might have a desirable result. But it would also zero out their taxes.
> > But as a sovereign state they get to decide for themselves.
> Not really no. The results of the court case prove that.
To be fair, none of the states that are part of the EU _are_ sovereign states, because there is a high authority over them. Admittedly, that's debatable, because they can choose to leave the EU (as was seen by Brexit), but unless they do, they're not in complete control.
You seem to be assuming that this isn't an iterative process. The process continues until the scheme is convoluted enough to satisfy the court while still being effective in attracting companies through de facto lower taxes.
Meanwhile Ireland now has $13B to throw at Apple somehow to convince them to stay.
> The problem with all of this is that it's all sneaky schemes.
The problems start if one member selectively introduces practices that benefit them at a significant cost to the other members.
Universal subsidies of healthcare or electricity come at a net cost for the country, and so doesn't create a competitive advantage. (It will lead to higher taxes that offset the benefit of specific reduced costs).
Target subsidies are different. While countries can still get away with it if done on a small scale, large scale cases come with a risk of this kind of response.
> Universal subsidies of healthcare or electricity come at a net cost for the country, and so doesn't create a competitive advantage. (It will lead to higher taxes that offset the benefit of specific reduced costs).
But it doesn't lead to higher taxes, because the whole point is to use the minimum tax rate and then achieve a de facto below-minimum rate by somehow refunding the excess money.
They're not trying to attract only Apple, they're trying to attract businesses in general. Subsidies for things employers would otherwise have to provide apply to all employers and lower the de facto tax rate across the whole country, which is exactly the idea.
> Target subsidies are different. While countries can still get away with it if done on a small scale, large scale cases come with a risk of this kind of response.
"Targeted" is essentially undefinable. All allocation of tax money is targeted at something -- the untargeted thing would be to use the money to uniformly lower the tax rate.
> They're not trying to attract only Apple, they're trying to attract businesses in general.
Ok, so this is about circumventing the 15% minimum corporate tax?
Is this somehow related to the objectives of directive 2022/2523? It seems to me that 2022/2523 is in place mostly to prevent transfer of profits from one jurisdiction to another to minimize the tax on profits generated elsewhere.
Unless, let's say, a Germany corporation registered in Ireland would somehow be affected by electricity costs or healthcare costs covered by the Irish government, I'm not sure if the benefit is large enough to matter.
Obviously, for companies with most operations happening within Ireland, the total tax pressure has a larger effect. But I don't think that was the type of problem this directive was designed to solve.
> There is no real way to prevent this kind of thing
You do realise that US, EU and China regularly sue each-other in WTO over this? What counts as subsidies, etc. is a constant subject of dispute. That’s normal,
They regularly sue each other because it's intrinsically ambiguous. There is nothing for a government to spend tax revenue on that isn't a subsidy to somebody. If anything they should be demanding that the other governments have lower taxes so they can't use the money for subsidies to distort international trade in their favor.
"There is nothing for a government to spend tax revenue on that isn't a subsidy to somebody."
That's just nonsense; so if the USA spent $1 and got a nuclear powered aircraft carrier in return that is subsidising the builder? More like running them out of business.
Government spending is only a subsidy if the government spends over the market price for something. And if your next statement is that the government *always* pays over the odds, you'll need some good evidence. Because although it does happen it is not always.
> Government spending is only a subsidy if the government spends over the market price for something.
All they have to do is control who gets the contract, because the market price for something already includes a margin.
But more than that, the subsidy isn't just who gets the money, its who gets the benefit of what's bought. Who benefits from the US having aircraft carriers, other than the defense contractors? Multinational oil companies, for example, who don't want their tankers captured by pirates or blockaded by adversarial nations.
Who benefits when a government subsidizes higher education? The schools, of course, but also the companies who hire the graduates.
"Well that's the good kind of subsidy", you might say. And so says everyone else about everything else.
"because the market price for something already includes a margin."; that's called value add, and all customers pay it, so it doesn't matter whether the government buys it or directs someone else to pay it, the value add becomes the profit.
The government isn't some magical "outside the market" participant, as a purchaser it's a part of the market like all other participants. If they pay over the market price then they've been ripped off, just like if anyone else paid over the market price.
> "because the market price for something already includes a margin."; that's called value add, and all customers pay it, so it doesn't matter whether the government buys it or directs someone else to pay it, the value add becomes the profit.
And now the company has profit it wouldn't have had, as a result of the government, which can use control over that profit to attract businesses to the jurisdiction etc.
> If they pay over the market price then they've been ripped off, just like if anyone else paid over the market price.
Only if the thing they want is the thing they're nominally buying, instead of the thing they're actually getting for the money, e.g. convincing a corporation to employ local workers or move into the jurisdiction and declare international profits there.
> And now the company has profit it wouldn't have had, as a result of the government, which can use control over that profit to attract businesses to the jurisdiction etc.
That only works if the government buys something that no one else wants; in which case it is buying at a price, ipso facto, that no one else will pay (at that price which is above the market price).
But if the government buys something at the same price (or lower) that everyone else pays, then it isn't a subsidy.
> That only works if the government buys something that no one else wants; in which case it is buying at a price, ipso facto, that no one else will pay (at that price which is above the market price).
Not at all.
Suppose the government funds research. Private entities fund research too. It's clearly worth something. But if the government funds it, the research happens in their jurisdiction. Even if the exact same private company paying the taxes that fund the research might have done the research themselves, they might have done it somewhere else, so the government is now creating a subsidy for doing research in their jurisdiction.
The value of the research could be fully identical regardless of where it happens, but the government subsidizes it because they want it to happen there.
> But if the government buys something at the same price (or lower) that everyone else pays, then it isn't a subsidy.
It could only not be a subsidy if the thing they're buying is identical in all respects to the thing the taxpayer would have bought had they been left to keep the money. Otherwise it's subsidizing the thing the money is being allocated to over the thing it would have been allocated to. That's what subsidies are -- the reallocation of resources through action of law. It's a synonym for spending tax money.
No, we entered a common trade market. We're not even part of Schengen. We're an odd fish in terms of EU membership overall given our geographical position, size, and CTA with the UK.
We are the only EU member state that are obliged to hold public referendums on Treaties. Ratification of the Treaty in all other member states is decided upon by the states' national parliaments.
Ireland, Netherlands, and Luxembourg also have veto powers when it comes to EU wide regulations.
In short, if we didn't have so many of our national parliament trying to appease the bureaucrats in the EU so they could land cushy numbers in the European Parliament for retirement, you'd see a lot more sabre rattling from Ireland regarding EU interference.
The opposite, no? The government accepted _much_ less money than is required in exchange for jobs for their constituents.
This is an example of a government prioritizing benefits for some of their constituents (emphasis on some) over the collection of tax dollars (direct benefit to the "government") or monetary reward for themselves (corruption).
Apple settled on Ireland precisely because of that tax scheme. Had Ireland levied taxes at a normal rate, they wouldn't have gotten any dollars. The choice for Ireland was between jobs and nothing.
Apple (& al) played countries out against each other and had Ireland not done it another one would've. It's a tragedy of the commons, and as always, that can only be solved through collective action (cue TFA).
We aren't democratic governments. We are subjects to governments, who we must pay taxes to, and customers of corporations, who we pay if they can produce stuff we like for cheap enough.
This moves the conversation to questioning the notion of representation of a people by its government. It is true that the entire conversation about whether or not it's good if Apple can play governments out against each other in order not to pay any taxes, rests in part on that assumption. That's a fine conversation to have. But in TFA and in here so far, it is assumed.
Note btw that even in your narrower definition of what government is to us, you still mention taxes, and that is precisely what is in question here, so even according to your formulation everything holds and it is still good for us if corporations can't play out governments against each other to lower their tax bill, because that's directly us footing that bill. You'd have to find some kind of definition of government that doesn't cover that, or argue that if Apple doesn't pay taxes, all those gains are passed on to us, the people, in a better way than if they do. Through a stronger tech market leading to better tech products, or something?
Anyway I think the original assumption is fair and the discussion holds. "Cheating on your taxes = stealing from the people" is a such a well established fundamental axiom that challenging it basically changes the conversation entirely.
> "Cheating on your taxes = stealing from the people" is a such a well established fundamental axiom
Excuse me?! Cheating on your taxes is illegal. Minimizing your taxes is what everyone of us does - it is perfectly normal and justified behavior.
And the discussion was not about that - companies are paying their taxes just fine. The discussion was about governments colluding to form a cartel to uniformly raise taxes. That is not OK.
Even if the stated purpose is somehow justifiable, government collusion is not good for the people. By definition governments are natural monopolies, they don't have internal competition. The only competition keeping them in check is external. And it comes in two forms: destructive (wars) and constructive (free trade). Without competition democracy alone cannot keep governments in check - just witness the decay towards populism and autocracy together with the raise of left and right extremism of the Western governments during the last few years. We need alternatives. We, the people, need to be able to pack our bags and go to a place with values and laws better aligned to ours. Otherwise we will end up prisoners behind barbed wire on the borders like the Eastern Europe the Cold War or facing fines and exit taxes like certain countries already impose on their citizens today.
In a world of bigger and bigger governments, with larger and larger budgets and deficits but smaller and crappier results, inter-national competition is the only recourse we have left. For example, the EU would be supremely satisfied with itself right now if USA's economic performance didn't point out that the Emperor is naked.
> argue that if Apple doesn't pay taxes, all those gains are passed on to us
Yes, smaller costs for Apple directly translate in cheaper products for us or larger profits for its shareholders - which is also us. On the other hand, that money going to the tax man will fund millions of fat bureaucrat jobs and countless wasteful government programs out of which an extremely tiny part will actually benefit us.
> democratic governments (us)
Even if you think democratic governments represent us (a debatable idea at best, then logically you should want competition for them. Because like us, without competition, they go lazy, wasteful and abusive.
At the same time it's clear that Ireland has been "gaming the system" here, and the proof is the huge delta between the effective tax rates between member nations we're seeing in the judgement. I don't know that there's much of a moral or principled argument to be made here, every system gets gamed, and the European Commission is another such system. And Ireland absolutely agreed to be bound in that game as a price of joining the EU in the first place.
Basically, from the other side of the ocean I don't see much to care about here beyond the microtactics of business development decisions. Let Europe sort out its business on its own.
Punishing Ireland for gaming the system by paying Ireland 13 billion hardly makes it seem like the EU is super concerned about Ireland's transgressions.
Apple having to pay those 13 B means that companies won't be as eager to have a headquarter in Ireland as they have been in the past. They could move somewhere else in the EU. That's a damage for Ireland and that's why Ireland sided with Apple for all this litigation.
Sure but the taxes are only part of the equation. Native english speakers familiar to US tech giants common law system. Large number of skilled workers. Flexible immigration system.
So - at this point is Apple and other companies going to move out of Ireland? I mean they have invested a lot and got there, probably they did alright in the situation, Ireland is a relatively nice place to move your company, it just isn't as nice as it was before - that is to say I'm not sure how bad it really is for Ireland.
Apple has been in Ireland since 1980. In the past 5 years it has invested €250 million into its Cork campus alone, and has just announced an expansion to bump its 6,000 strong workforce to 9,300.
If I were an Irish citizen paying taxes I'd be incredibly pissed that my own government is fighting against 13 billion from the richest company on the planet. I'm subsidizing fucking Apple of all things!? Absolute buffoonery, whoever made this deal in the first place should be in prison.
Our Corporate tax receipts for last year alone were almost double that.
We have almost every American Tech Company of note with their EMEA HQ and often their EMEA R&D wings based in Ireland. Making a case on behalf of our commercial tenants to protect long-term interests was exactly the right decision. Currently, one in every €7 collected by the Irish state comes from just 10 firms.
For context, Ireland has one of the highest gross public debt levels in the world, at just over €42,000 per person, due to the IMF/EU collusion that forced us to bail out unsecured bondholders in German banks, and to effectively nationalise our banks to prevent a contagion effect.
Apple is providing thousands of jobs - they pay taxes on those people, and those people pay income tax / VAT / fuel tax / death tax / etc and they consume from other companies that pay lots of taxes as well, and import tariffs as well. It's taxes and tariffs all the way down.
There are Irish customers buying Apple products. Some of that money goes into the salaries of Irish Apple employees, which pay their taxes in Ireland. Some of that money goes into other expenses in Ireland. What's left goes to the USA where Apple pays taxes on the part of them that turns to be a profit. The idea is that part of that money (the tax) should not go to the USA but stay in Ireland. In that way the money of Irish customers would stay in Ireland, which is probably good for Ireland but it's a matter of opinions.
There is also a 15% corporate minimum tax of big corporations, in effect since the beginning of this year [1] I think that there are many ways to keep circumventing even this attempt at keeping EU money inside the EU, but we will see.
Is this the case, though? How much profit is generated by Irish Apple customers compared to the giant amount of tax paid in the country due to Apple being there?
Not so giant. You can check https://en.wikipedia.org/wiki/Apple%27s_EU_tax_dispute which is updated with the latest ruling. The dispute was about taxes from 2004 to 2014. I wonder how much they'll owe to Ireland for the next ten years.
> Apple only paid an effective corporate tax rate that declined from 1% in 2003 to 0.005% in 2014.
As others are pointing out, Ireland was offering that discount to great impact, essentially taking over the UK's traditional spot as the core exchange for US companies in the EU. They absolutely would prefer not to be charging that tax.
