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Apple Files 14-Point Appeal Against European Commission's $14 Billion Tax Edict (appleinsider.com) 176

An anonymous reader shares an AppleInsider report: Apple has filed its appeal with the European court of appeals, all declaring that the European Commission's decision to levy $14 billion in taxes on Apple on behalf of the EU is erroneous, against the rule of law, and should be stricken. The 14 points of appeal introduced by Apple on Monday challenge the European Commission (EC) on several fronts. Primarily, Apple contests that the Cork, Ireland, headquarters of Apple's European wing was properly set up, in accordance with all regulations and laws. Additionally, other apparent accounting blunders by the EC while making its decision were brought up as well. Apple points out that the taxable income attributed to the Ireland branch was misapplied, giving more weight to the Irish operation than it should, and that back taxes were being applied to worldwide profits.
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Apple Files 14-Point Appeal Against European Commission's $14 Billion Tax Edict

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  • Worldwide profits? (Score:5, Interesting)

    by thesupraman ( 179040 ) on Monday February 20, 2017 @10:40PM (#53903565)

    Well, Apple.

    The EU is applying the back taxes to worldwide profits, as Apple is choosing to transfer those profits
    to the EU using IP licensing charges, and therefore those profits ARE present in the EU.
    That, kids, is why they play this game. They hide worldwide profits in a tax haven, but now they want to
    pretend they didnt do that.. Boo Hoo.

    • The EU is applying the back taxes to worldwide profits, as Apple is choosing to transfer those profits
      to the EU

      Apple doesn't transfer U.S. profits to to the EU, so how is it fair for the E.U. to tax Apple on U.S. profits again exactly?

      That, kids, is why they play this game.

      There are $14 billion reasons why the EU is playing this game but legality or fairness is not one of them.

      • by Pikoro ( 844299 )

        Then why do US citizens have to pay taxes to the USA no matter where in the world you live? Hypocrite much?

        • by Ihlosi ( 895663 )
          Then why do US citizens have to pay taxes to the USA no matter where in the world you live?

          It's not just citizens, but also anyone with a permanent residence permit (Green Card).

          The US is one of two countries that does that, the other one is some third world country that most people will struggle to name or find on a map.

          And why? I believe it has to do with the US civil war. It's long over, of course, but the laws stuck around.

      • Re: (Score:3, Informative)

        by aXis100 ( 690904 )

        Of course Apple transfers profits. They do this by one company division charging another division a fictional/unrealistic licensing fee, causing the worldwide retail branches to see higher costs and be less profitable, whilst the Irish licensing branch becomes more profitable.

        The fact that the Irish branch barely employs any people and is largely just a convenient IP holder makes this even more blatant.

        See https://en.wikipedia.org/wiki/... [wikipedia.org]

        • by DarenN ( 411219 )

          The fact that the Irish branch barely employs any people and is largely just a convenient IP holder makes this even more blatant.

          Apple Ireland employs around 4,000 people in Cork, in areas from sales to finance to customer support. It's a major employer in the city and has been for over 30 years, where it used to provide a lot of manufacturing jobs (few of these are left now). The only country in the EU with more Apple employees is the UK, where the number of Apple retail stores (37) explains the difference.

          So it's hardly a brass-plate operation.

          • by Rob Y. ( 110975 )

            And none of those 4000 people are involved in generating intellectual property - for which the Irish company collects the tax-free royalties. Nobody said Apple doesn't have a real office in Ireland - just that that office is being credited for revenues it didn't really produce. That's the game.

      • by dbIII ( 701233 )

        Apple doesn't transfer U.S. profits to to the EU,

        They transfer Asia, Oceanic etc profits to the EU.
        As an example, despite a lot of sales Apple Australia has made a loss for many years because they buy everything from Apple Ireland and sell below cost. It is called transfer pricing.

      • by Kiuas ( 1084567 ) on Tuesday February 21, 2017 @04:01AM (#53904199)

        Apple doesn't transfer U.S. profits to to the EU, so how is it fair for the E.U. to tax Apple on U.S. profits again exactly?

        To my understanding this is not about US profits. The 14 billion comes from Apple applying what's known as the double Irish [wikipedia.org] tax loophole that used to exist in Irish law, allowing them to effectively dodge paying taxes to either the EU or the US. Quoting the wiki:

        two Irish companies are used in the arrangement. One of these companies is tax resident in a tax haven, such as the Cayman Islands or Bermuda. Irish tax law currently [NOTE: not anymore, wiki wording is out of date] provides that a company is tax resident where its central management and control is located, not where it is incorporated, so that it is possible for the first Irish company not to be tax resident in Ireland. This company is the offshore entity which owns the valuable non US rights that are then licensed to a second Irish company (and this one is tax resident in Ireland) in return for substantial royalties or other fees. The second Irish company receives income from the use of the asset in countries outside the United States, but its taxable profits are low because the royalties or fees paid to the first Irish company are tax-deductible expenses. The remaining profits are taxed at the Irish rate of 12.5%.

        For companies whose ultimate ownership is located in the United States, the payments between the two related Irish companies might be non-tax-deferrable and subject to current taxation as Subpart F income under the Internal Revenue Service's controlled foreign corporation regulations if the structure is not set up properly. This is avoided by organizing the second Irish company as a fully owned subsidiary of the first Irish company resident in the tax haven, and then making an entity classification election for the second Irish company to be disregarded as a separate entity from its owner, the first Irish company. The payments between the two Irish companies are then ignored for American tax purposes.

        The loophole was closed last year:

        Under Finance Act 2015, a new system has been introduced whereby innovative companies who choose to incorporate in Ireland can now benefit from the introduction of the Knowledge Development Box (the “KDB”) in Ireland, the scheme is seen as a replacement for the “double-Irish” tax system which was recently closed. An effective tax rate of 6.25% can be obtained on qualifying profits generated in periods commencing on or after 1 January 2016.

        So Apple (and other large tech companies) have been using both the double irish as well as its other variant the Dutch Sandwhich [wikipedia.org] which functions similarly, to dodge taxes on both sides of the Atlantic, while claiming to European tax-authorities that they're paying tax to the US, and to the US that they're being taxed in Europe, while in reality the majority of the income is not taxed in either. The EC is arguing that the use of these loopholes goes against EU regulations and that they now want these companies to pay what they actually should have been paying all the time. This is going to drag in courts for a long time, and Apple is going to claim that since it functioned within Irish law (at the time) it shouldn't have to pay anything. The EC on the other hand, is going to build their case on the grounds that the Irish law itself that allowed for this arrangement was in breach of EU law and cannot be followed and back-taxes are owned.

        This whole case is one of several ongoing ones regarding the use of tax-havens to dodge corporate taxes, which has been (and still is in some senses) relatively easy to do for large multinationals. The EU is currently trying to crack down on it, whereas the US, especially now under Trump's heavily wall street backed cabinet, is g

        • by DarenN ( 411219 ) on Tuesday February 21, 2017 @05:08AM (#53904347) Homepage

          The double Irish tax maneuver is worthless on its own without the Dutch sandwich.

          The double Irish involves having an Irish registered company legally headquartered elsewhere than the EU (like the Caymans) as well as an Irish registered company headquartered in the EU. This used to be allowed, but it is not allowed any more (and existing structures of this sort have to wind down over the next few years).

          There are two components to this. First, the Irish tax is based on where the income is made and only tax Irish income, so do not tax based on income from sales outside the country. This seems reasonable on it's own, but it interacts with other countries tax rules which tax based on where the income is booked. As a result, a company can book profits in Ireland, and fall into the gap between these positions.

          The second component is profit moving - the resultant profits can be moved between the resident company and the non-resident company at no (or extremely low) taxes, but moving the money out of the EU to the external HQ would be taxed heavily from Ireland. However, this is not taxed heavily in Holland (due to historical attachments to the Dutch Antilles). So the organization move the money to Holland (inter-EU transfer, low tax), and from that subsidiary to the tax haven (Dutch law, low tax) and then have it in a tax haven for a very low cost. Where they sit on it because the US tax is punishing.

          The solution is not higher taxes, it's closing these gaps that companies exploit.

          • by Kiuas ( 1084567 )

            The second component is profit moving - the resultant profits can be moved between the resident company and the non-resident company at no (or extremely low) taxes, but moving the money out of the EU to the external HQ would be taxed heavily from Ireland. However, this is not taxed heavily in Holland (due to historical attachments to the Dutch Antilles). So the organization move the money to Holland (inter-EU transfer, low tax), and from that subsidiary to the tax haven (Dutch law, low tax) and then have it

          • by swb ( 14022 )

            The solution is not higher taxes, it's closing these gaps that companies exploit.

            Doesn't this just end up boiling down to higher effective taxes?

            You total up your revenue or profits and divide by what you actually paid in taxes and that's your effective tax rate? I don't think at the scale and complexity of a corporation the size of Apple the notion of a nominal tax rate makes much sense.

            So if you close loopholes to increase the absolute amount of tax paid, you're raising the effective tax rate even if the

            • by DarenN ( 411219 )

              Doesn't this just end up boiling down to higher effective taxes?

              For companies the size and structure of Apple, yes it does, although then they'd move on to more aggressive transfer pricing or something else.

              My general sense is that the larger problem isn't paying or not paying taxes, its the cash hoarding these semi-monopoly companies do. A lot of the money just ends up in short-term treasuries or other semi-liquid investment vehicles and doesn't circulate in the economy. In some ways, taxes can be seen as the economic investment of last resort -- a way to bring hoarded capital into the market.

              Yes, I tend to agree with this, although the not-paying of taxes is a contributory factor in the cash hoarding .The cash hoards get so large in part because of the tax avoidance. A further factor is the US corporation tax rules, and rates, which are very high.

              A better policy would seem to be incentives to spend and not hoard capital so it gets put into motion in the economy.

              Easier said than done! Although companies have figured out some ways around this, Apple again being one of th

      • BULLSHIT. You are seriously going to try and tell us that apple doesn't license its IP cheaply to international subs in low tax zones? or that none of its sub charge them high fees for services or goods from other countries? transferring profits isn't just about sending the profits from your local sales offshore, it is also about realising profits and losses in different countries by transferring costs through pricing. This isn't just some tactic Apple uses either, but if you seriously think Apple don't do
      • The EU is applying the back taxes to worldwide profits, as Apple is choosing to transfer those profits to the EU

        Apple doesn't transfer U.S. profits to to the EU, so how is it fair for the E.U. to tax Apple on U.S. profits again exactly?

        That, kids, is why they play this game.

        There are $14 billion reasons why the EU is playing this game but legality or fairness is not one of them.

        Ireland does not charge taxes for profit made in other countries. Apple transferred their profits to Ireland to avoid paying taxes in other countries. If they transferred US profits to Ireland then, yes, they do have to pay tax on it. This is because of the way that Apple transfers the money - as a patent licensing fee. The subsidiary in Ireland is making a profit on all those fees they paid to Ireland worldwide.

    • They hide worldwide profits in a tax haven, but now they want to pretend they didnt do that.. Boo Hoo.

      And Ireland isn't allowed to be a tax haven under EU Law. Also as I recall the European Commission targeted the Irish & Dutch governments to claim taxes that were owed after they had illegally under EU Law failed to collect the taxes in the first place.

  • Comment removed (Score:4, Insightful)

    by account_deleted ( 4530225 ) on Monday February 20, 2017 @10:47PM (#53903599)
    Comment removed based on user account deletion
    • 3. Apple pays Ireland seven billion dollars to leave the E.U.

      Or you can think of any variant you like of "what can Apple do with up to fourteen billion Euros that would cause the E.U. to back off".

      As the old saying goes: Billions for defense, but not one cent for tribute!

      • Re: (Score:3, Interesting)

        by Anonymous Coward

        Can you shill any harder? Christ, they aren't paying you!

        They're a fantastically wealthy company that doesn't pay their fair share in taxes. 14 Billion is, very likely, far less than they legitimately owe. It's also an amount they can pay without noticing. If you got a letter saying you owed a buck and a quarter in taxes, you'd be annoyed, but actually paying it wouldn't change anything for you. That's what 14 Billion is to Apple -- a buck and a quarter.

        Regardless, you're on Slashdot shilling for your

        • If you got a letter saying you owed a buck and a quarter in taxes

          Apple's cash after you remove current debt is roughly $200 billion (conservative estimate as they have over $50 billion in debts).

          !4 billion in Euros is roughly $14,814,100,000 billion US, or almost fifteen billion...

          That means that what the E.U. is asking for is 7.5% of Apple's cash. I don't know how much you make but I assure you that in my case 7.5% of my house and savings comes to quite a lot more than $1.25, and in fact I would be taking

          • by Anonymous Coward

            Come on, Steve Jobs isn't going to rise from the dead so you can suck his cock.

          • by jabuzz ( 182671 )

            I'm saying what the E.U. is doing is theft, and would say the same thing about any company the E.U. s trying to illegally steal money from.

            Except the issue is whether or not Apple and Ireland colluded to give illegal state aid in the form of tax breaks not available to everyone. The EU contend that they did and the illegal state aid must be repaid. It's all perfectly legal and not theft. The only criminals in this are Apple and the Irish government.

        • by jabuzz ( 182671 )

          The 14 billion is less than they owe, because the illegal state aid can only be tracked back so far and Apple have been benefiting from the illegal state aid (via a tax deal unavailable to most businesses) for longer than the EU can legally go back.

      • Re: Third Path (Score:2, Insightful)

        by Anonymous Coward

        You think seven billion dollars is enough to persuade Ireland to leave the EU?

        You are delusional. Even the full 14 wouldn't be a tiny part of it.

        Ireland needs EU membership more than almost any other EU state. And that's before you take into account its tax shelter gains.

      • 3.a) Apple can no longer use Ireland as a tariff free shelter inside the EU. Apple branch in Ireland is shut down.

      • by Anonymous Coward

        3. Apple pays Ireland seven billion dollars to leave the E.U.

        This will never happen since Ireland will get 14 billion dollars from Apple and get to stay in the EU if the ruling holds.

        Remember that the EU ordered Ireland to collect the taxes owed by Apple, everything goes to Ireland, nothing to the EU.

        • by jabuzz ( 182671 )

          Nothing goes to the EU for now. Actually Irelands net pay into the EU will go up for starters. Then there are potential fines to Ireland for the illegal state aid.

      • by mjwx ( 966435 )

        3. Apple pays Ireland seven billion dollars to leave the E.U.

        And the EU starts invalidating patents, seizing property, issues arrest warrants for executives (yes, unlike the US, the EU is willing to jail tax evaders).

        Just how much money do you think Apple has involved in Europe. Hell, they dont even have to start seizing property, they can just issue arrest warrants for execs and they'll find it hard doing anything in a country that you cant be extradited to the EU from.

        Attempting to say "Fuck you EU, I'm taking my ball and going home" is just going to end badl

    • Comment removed based on user account deletion
  • by Anonymous Coward

    Already! Any normal American would be in PRISON for 10,000 years by now!

  • ...and we will let you off all profit on which tax has been paid. All profit that has not had tax paid on it is due.
  • Should Apple just hand over $14B or spend $20M on a strategy with a 10% chance of paying $0?
  • How much an Apple is like a Big Mac.

    • How much an Apple is like a Big Mac.

      What, good looking in pictures and tasty in theory but actually a disappointing mess of crap?

      • by MrKaos ( 858439 )

        How much an Apple is like a Big Mac.

        What, good looking in pictures and tasty in theory but actually a disappointing mess of crap?

        How dare you. Hundreds of millions of independent creative individuals, who are not sucked in by all of the advertising hype bought these products _because_they_know_what_they_want. They're not like the sheep and clones who bought, you know, the other, thing. How Dare You!

        how dare you.

  • They must think the E.U. is having trouble seeing things their way.
    If this doesn't work they'll use 24 points to make a bigger impact.

  • This issue is very simple to solve with a few changes to tax policy.

    1. Remove deductions for Intellectual Property payments. This is the chief way corporations avoid tax. Example, Burger King / Tim Horton merger.

    2. Profit, no matter where situated, is taxable in the country of origin. Example: If Apple sells 100 billion in the US, then the gross profit of that 100 billion is due in the US. Self dealing exchange of expenses by off shoring 99.9% of the price of the phone (or other product/service) would no lo

    • by bongey ( 974911 )

      1. Remove deductions for Intellectual Property payments. This is the chief way corporations avoid tax.

      True, but it would never stand up in an IRS court. Intellectual property-ie patents are considered real property.
      Unless patent law is changed significantly there would be no legal grounds for objecting by the IRS.
      Know for a fact a very large company,nearly Apple size, uses the same method through another EU country.Friend did their tax returns for years.

  • Know for a fact a very large company,nearly Apple size, uses the same method through another EU country.Friend did their tax returns for years.
  • That's why it is called 'getting high'.

  • by ytene ( 4376651 ) on Tuesday February 21, 2017 @03:41AM (#53904157)
    Unfortunately, this story is about much more than just Apple and/or Ireland.

    The tax practices employed by Apple (and others, including Microsoft, Amazon, Facebook, Starbucks and others - and I don't mean to pick on US companies, but by and large they do appear to be the most flagrant abusers of this system) use tax "vehicles" such as the licensing of intellectual property rights to move exceptionally large amounts of cash from one country [tax jurisdiction] to another, thereby massively reducing their tax burden.

    However, for the "donor" country - i.e. the one that is not collecting any tax revenues from the sales achieved by that company, the problem gets much, much worse. The literally billions in taxes not being paid to these countries still has to be collected from somewhere. And that is exactly what happens - the individual, personal tax payers of those nations end up footing the bill.

    Next, it gets worse still...

    The governments of countries with "higher" Corporation Tax regimes then get visits from senior management from these large multinationals, explaining that of course they would like to "do more business" [and thus pay more tax] in those nations. Except, of course, the tax levels are just, simply, too painfully high. So, regrettably, the company will move its regional offices next door, to a lower tax regime.

    The net result of all this is that countries the world over appear to be in a "race to the bottom" because they are told that this is the only way to attract inward investment. This is simply not true.

    If we take a country such as the UK, for example [currently embarking on an acrimonious but necessary divorce from the EU... and look at the tax-paying population and the amount of tax involved... the literally billions in revenue that is transferred off-shore to avoid the payment of UK Corporation tax would, if actually paid in the UK, cut taxes for UK citizens by a staggering amount. The basic rate of personal Income Tax could easily fall from the current 23% to 15% [still more than Corporation Tax in the UK - and never mind the fact that companies get to deduct their expenses first...]

    A population granted this extra income would:-

    1. Spend more - thus helping to keep the economy moving
    2. Save more - thus helping to reduce the burden on the state for things like pensions
    3. Invest more - thus helping UK business to grow and prosper


    There are countless studies showing that a better standard of living leads to a healthier population. In fact, there are no good reasons for allowing companies to "dodge" paying taxes in the way that is currently allowed [unless, of course, you happen to be a senior manager or shareholder in that company, in which case you stand to reap obscene profits].

    The fact that we're even having this discussion should tell you just how corrupt and perverted the system of international taxation has become. The sad part is, that 99% of us are losers in this game...
    • by Anonymous Coward

      But in which universe do you imagine that the additional input cost of corporation tax isn't wholly born by increase in the cost to the customer of the goods and services they consume. Corporation tax is just a hidden consumption tax on you and me any way you slice it.

      • by r0kk3rz ( 825106 )

        But in which universe do you imagine that the additional input cost of corporation tax isn't wholly born by increase in the cost to the customer of the goods and services they consume. Corporation tax is just a hidden consumption tax on you and me any way you slice it.

        This depends on the product and the market of course, but remember goods and services are already priced for maximum profit. If corporations could charge more without a drop off in demand, they would be doing that already increased taxes or not.

        If the margins are thin, you'll see an increase in price and subsequent drop in demand if its some kind of luxury item. If the margins are fat you'll likely see no change at all.

      • by ytene ( 4376651 )
        No, that is not strictly true.

        Low Corporation Tax coupled with corporate abuse allows a company to post much greater profits and dividends to shareholders... This is the reason that large corporations argue for low CT. The right model is lower payouts, balanced taxes and fair treatment all round.

        If you believe that either way the consumer/man-in-the-street is going to lose, then either you've bought into the BS being spouted by the corporations, or you are shilling for them.

        Respectfully, it doesn't
    • by AmiMoJo ( 196126 )

      The UK is looking to become the new Ireland++ after Brexit. Low tax, low wage economy, basically a kind of India/China competitor but with better English skills and physically closer to the EU and with historical hooks into it.

      • by ytene ( 4376651 )
        At a factual level I am inclined to agree with you.

        What interests me, however, is the interpretation of the expression, "The UK is looking to become..." [ and in making mention of that I am in no way challenging, disputing or criticising your choice of words].

        I find what you write interesting because of the broad spectrum it covers:-

        1. The UK actively wants to do this...
        2. The UK government believes that this will be necessary for prosperity in post-Brexit Britain...
        3. The EU core countries - i.
        • by AmiMoJo ( 196126 )

          It's been Tory policy for decades, and Brexit is giving them an opportunity to implement it. Just like the global financial crisis gave them an opportunity to massively reduce the size and scope of government, another long-term ideological goal.

          The UK has been selling off assets for a long time now. ARM was the most recent, but really we have very few large, British owned companies left already and the weak Pound is making them very attractive and vulnerable to take-over. Wages have taken a huge hit since 2

      • The edge that Ireland has is being low tax AND being in the EU. There are plenty of tax heavens outside EU. Since Apple has to be registered in EU for the business it does in the EU, brexited UK is not suitable fir the task.
    • However, for the "donor" country - i.e. the one that is not collecting any tax revenues from the sales achieved by that company, the problem gets much, much worse. The literally billions in taxes not being paid to these countries still has to be collected from somewhere. And that is exactly what happens - the individual, personal tax payers of those nations end up footing the bill.

      If the company is not consuming any resources in the donor nation, it has minimal to no impact on the tax payers in the donor

  • "Apple also points out that drawing comparisons to other tax arrangements in the EU with other multi-national companies is improper, as the facts and laws differ from agreement to agreement. As such, Apple argues that their use in a legal battle about taxes is inappropriate and unfairly prejudicial to Apple."

    That's the point of doing business with the EU Apple, uniformity. If you don't like it then maybe you should have backed Britain in their Brexit vote and not spread FUD.

    You accounting shenanigans

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