The EU ordered Ireland to recover $14.5 billion in back taxes as Apple had made illegal agreements with Ireland tantamount to state support. The money is going to Ireland, not the EU, though the EU would necessarily get some of it as that $14.5 billion is added to the amount from which Ireland's EU membership dues are calculated from.
Quote:This story kind of caught my eye and wonder what other people's thoughts are about it. To me it looks like a money-grab from the EU and could very much fall on the taxpayers in this country. This brings up a couple of points. First, our corporate tax rate is too high and forces businesses to move a lot of jobs out of the country. Second, if Apple is forced to pay the money, they can deduct that expense from the corporate taxes paid here in the U.S.
Here are a couple of articles for reference.
EU hits Apple with $14.6 billion tax bill (CNN Money)
US taxpayers could end up covering Apple's back taxes in Ireland (Yahoo Finance)
Nobody forced Apple to have operations in Ireland where they have a deal that makes their effective tax rate basically 0. That's fine that Ireland is willing to play ball and create jobs, ect. but then Apple is able to turn around and send the products back here to our country and reap the benefits of our market. It's kind of a cheap trick to maximize profit... but hey, everybody is doing it.
I think this tax decision by the EU will likely be overturned after an appeal. Even if they are forced to pay, I dont think it will have much affect on the American tax payer. The headline I think is misleading. It sounds as if the government will bailout Apple with taxpayer funds to pay the tax. It's more of an indirect impact.
Quote:This story kind of caught my eye and wonder what other people's thoughts are about it. To me it looks like a money-grab from the EU and could very much fall on the taxpayers in this country. This brings up a couple of points. First, our corporate tax rate is too high and forces businesses to move a lot of jobs out of the country. Second, if Apple is forced to pay the money, they can deduct that expense from the corporate taxes paid here in the U.S.
Here are a couple of articles for reference.
<a class="bbc_url" href='http://money.cnn.com/2016/08/30/technology/apple-tax-eu-us-ireland/index.html?iid=hp-stack-dom'>EU hits Apple with $14.6 billion tax bill (CNN Money)</a>
<a class="bbc_url" href='http://finance.yahoo.com/news/us-taxpayers-could-end-covering-000000874.html'>US taxpayers could end up covering Apple's back taxes in Ireland (Yahoo Finance)</a>
Isn't our corporate tax rate so high because our individual earnings taxes are so low? I think every other country does it the other way. Low corporate taxes but higher taxes on earnings.
If I remember correctly Reagan cut the tax rate for top earners from something like 70% to 50 and then again to something like 28 or 29%. To help make up for that shortfall corporate taxes were increased.
Haha poor Ireland, everyone knows they are only there because of the low tax rates. They don't want Apple to pay more taxes otherwise they risk losing business.
Given the reaction of the White House, it would seem that Apple does consolidate their tax return with the Ireland "branch" (whatever it is), but I dont know if that's really the case. Corporations do not HAVE to consolidate their returns. It's a choice. If they don't consolidate the return, there would be no foreign tax credit on Apple's return, so the assumption of the foreign tax credit cutting in the tax revenue (hurting taxpayers) would not even be an issue. They would be reporting income separately like two separate entities.
I'm confused how if Apple operations in the US report income to the US, and the Ireland branch reports income to BOTH Ireland and the US, how is that saving money? I think the answer is they don't consolidate. Corporations do not have to recognize foreign income of subsidiaries unless the funds are actually transferred back inside the US, hence why Apple would make the Ireland tax haven deal to begin with. All their profits in Europe can stay in Europe without incurring US tax liabilities.
Quote:The EU ordered Ireland to recover $14.5 billion in back taxes as Apple had made illegal agreements with Ireland tantamount to state support. The money is going to Ireland, not the EU, though the EU would necessarily get some of it as that $14.5 billion is added to the amount from which Ireland's EU membership dues are calculated from.
I'm not getting where the "illegal agreements" part fits. It's my understanding that Apple has paid the corporate rate in Ireland.
Quote:Nobody forced Apple to have operations in Ireland where they have a deal that makes their effective tax rate basically 0. That's fine that Ireland is willing to play ball and create jobs, ect. but then Apple is able to turn around and send the products back here to our country and reap the benefits of our market. It's kind of a cheap trick to maximize profit... but hey, everybody is doing it.
I think this tax decision by the EU will likely be overturned after an appeal. Even if they are forced to pay, I dont think it will have much affect on the American tax payer. The headline I think is misleading. It sounds as if the government will bailout Apple with taxpayer funds to pay the tax. It's more of an indirect impact.
Regarding the first part in bold, that's exactly what a lower corporate tax rate does. Create jobs.
As far as the second part in bold, eventually it will affect U.S. tax payers since it will end up being less tax revenue coming in. Every dollar that Apple pays in taxes to a foreign country can be deducted from their U.S. tax bill.
Quote:Haha poor Ireland, everyone knows they are only there because of the low tax rates. They don't want Apple to pay more taxes otherwise they risk losing business.
I'm assuming by "they" you are talking about Apple as well as many other companies.
Quote:I'm not getting where the "illegal agreements" part fits. It's my understanding that Apple has paid the corporate rate in Ireland.
Regarding the first part in bold, that's exactly what a lower corporate tax rate does. Create jobs.
As far as the second part in bold, eventually it will affect U.S. tax payers since it will end up being less tax revenue coming in. Every dollar that Apple pays in taxes to a foreign country can be deducted from their U.S. tax bill.
I'm assuming by "they" you are talking about Apple as well as many other companies.
I dont see how that is possible since Apple doesn't report income made in Ireland to the US.
This article is very informative as to the corporate tax structure:
http://europa.eu/rapid/press-release_IP-16-2923_en.htm
Here's the deal... Apple owns a separate entity in Ireland (Apple Sales International) that has sales in Europe. This income is not taxed in the US in the first place. There would be no foreign income credit... so I am disagreeing with the premise that this will fall back on American taxpayers. The income wasn't going to be taxed here anyway. See what I mean?
And about the corporate tax rate... What do you suggest we do? How do you beat Ireland's tax deal? That would require our government also making exclusive deals with certain corps like Apple.
Quote:I'm not getting where the "illegal agreements" part fits. It's my understanding that Apple has paid the corporate rate in Ireland.
Not really. They have a special deal. They do pay taxes there, but it's lower than what other corporations would pay.
That's what they deserve for cutting corners
Quote:I dont see how that is possible since Apple doesn't report income made in Ireland to the US.
This article is very informative as to the corporate tax structure: http://europa.eu/rapid/press-release_IP-16-2923_en.htm
Here's the deal... Apple owns a separate entity in Ireland (Apple Sales International) that has sales in Europe. This income is not taxed in the US in the first place. There would be no foreign income credit... so I am disagreeing with the premise that this will fall back on American taxpayers. The income wasn't going to be taxed here anyway. See what I mean?
And about the corporate tax rate... What do you suggest we do? How do you beat Ireland's tax deal? That would require our government also making exclusive deals with certain corps like Apple.
I appreciate that link. I'm starting to get a better understanding of how this all works. In some ways it kind of amounts to money laundering, only in a legal way (U.S. law).
Now where it comes back to U.S. tax payers is not nearly as complicated. Both "shell companies" set up by Apple in Ireland fall under Apple Inc. (Apple Sales International and Apple Operations Europe). If the "mother company", in this case Apple Inc. has to pay the tax, they in turn get a dollar-for-dollar tax credit on corporate taxes paid here in the U.S. under the foreign tax credit.
As far as what I would suggest we do, I would say that we need to lower the corporate tax rates here to be more competitive with other countries.
Quote:I appreciate that link. I'm starting to get a better understanding of how this all works. In some ways it kind of amounts to money laundering, only in a legal way (U.S. law).
Now where it comes back to U.S. tax payers is not nearly as complicated. Both "shell companies" set up by Apple in Ireland fall under Apple Inc. (Apple Sales International and Apple Operations Europe). If the "mother company", in this case Apple Inc. has to pay the tax, they in turn get a dollar-for-dollar tax credit on corporate taxes paid here in the U.S. under the foreign tax credit.
As far as what I would suggest we do, I would say that we need to lower the corporate tax rates here to be more competitive with other countries.
That's the thing with the credit though. You can't claim a credit for foreign tax on income you don't report.
The whole point of the credit is to avoid double taxation on the same income.
Quote:
I'm assuming by "they" you are talking about Apple as well as many other companies.
Yes, otherwise they would most likely set up their European operations in the likes of London. Can set up in the cheaper EU countries and then sell to the rest of the EU and pay minimal tax. The big winners could be post-Brexit Britain.
Just get each Apple fanboy to pay $10,000 for their next iPhone. Problem solved.
Quote:That's the thing with the credit though. You can't claim a credit for foreign tax on income you don't report.
The whole point of the credit is to avoid double taxation on the same income.
However, we aren't talking income tax here. If a corporate expense involves paying tax over seas, the company gets the credit.
Quote:However, we aren't talking income tax here. If a corporate expense involves paying tax over seas, the company gets the credit.
Yes we are. The foreign tax credit is a provision for income taxes (individual or corporate)
Now could Apple claim the tax as an expense against their income if they do pay it out of the parent company funds? I think so, but that isn't the tax credit the white house and these articles are referring to. And it wouldn't result in a 1 for 1 increase of tax burden on tax payers.
This is the best conversation I have seen in the politics forum in a long time. Very interesting.
I think what's happening here is not a concern for American taxpayers. This is a concern for their own wallets. Politicians and lobbyists for a long time have been trying to come up with a solution for corporations to "repatriate" foreign funds with minimal tax, which if ever done successfully would result in some back room kickbacks (i imagine).
They see the EU ruling as an attack on funds that they are trying to have returned here. That's what it's about i think. Not a shift in tax burden, but a downer on their future plans.
Quote:This is the best conversation I have seen in the politics forum in a long time. Very interesting.
It's nice to actually discuss issues rather than the political smearing that generally goes on. I'll admit that I'm just as guilty of it as anyone else.
Quote:This is the best conversation I have seen in the politics forum in a long time. Very interesting.
What I find interesting is the politicians going to bat for Apple and trying to garner public support by saying, "if this happens YOU will have to pay this burden. This is hurting Joe Taxpayer." for reasons I've stated that doesn't really make sense to me. Their motives, as usual, are selfish.