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The Politics of Tax thread

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  • Off_it said:

    That's like offering Prague out to a duel @bobmunro !
    :wink:

    This one is gonna run and run today

    As long as I can choose the weapons!!
  • That would be my advice - don't leave it to Prague. Otherwise it would be Freedom of Information Requests at dawn and you would be slowly bored into submission!
  • edited August 2016
    Indeed.

    So Bob, what is the legitimate operational purpose of Apple's so called Head Office that in fact does not physically exist (has no office) and therefore has no people in it? How would Apple as a business function differently and worse if this office did not exist?

    BTW I am accusing Ireland too. Specifically their tax office of wilfully believing fairy tales. Many businesses and individuals spin fairy tales to their tax offices. The task of the tax office is to expose them as such.
  • bobmunro said:

    Richard, Apple are the largest company on the planet - selling to pretty much every country on the planet. A typical SME manufactures and sells or provides a service based in a country to consumers in that country. Apples (pardon the pun!) and oranges.

    Large corporations employ tax advisers and General Counsel, and engage the services of large accountancy and corporate law firms. This isn't a fairy tale - it's how multi-nationals structure their organisations - and twas ever thus. My Company is globally the largest in its sector and we do exactly the same thing.

    Apple have done nothing wrong here - they haven't broken any national or international tax laws. Ireland have been deemed (subject to appeal) to have provided state aid against the EU Commission rules.

    J'accuse Ireland, not Apple.
    yeah i dont understand when people go after people/companies who have arranged their affairs to minimise their tax expenditure - they're perfectly within their right and would continue to do so in other ways if the current loopholes are closed. You need to go after the politicians that let this thing happen.

  • edited August 2016

    Indeed.

    So Bob, what is the legitimate operational purpose of Apple's so called Head Office that in fact does not physically exist (has no office) and therefore has no people in it? How would Apple as a business function differently and worse if this office did not exist?

    BTW I am accusing Ireland too. Specifically their tax office of wilfully believing fairy tales. Many businesses and individuals spin fairy tales to their tax offices. The task of the tax office is to expose them as such.

    The operational purpose of the 'Head Office' is to minimise the organisation's tax exposure - plain and simple - AND legal. A Head Office is where the board of directors meet (and I believe one of the elements of any appeal will be the board meeting minutes). It isn't, or doesn't have to be, where main activities take place.

    Back in 1992-3 Digital Equipment Corporation was lured by the UK from Galway to Ayr in Scotland by promises of equipment purchases, tax breaks and other subsidies. The Irish complained about this as illegal state aid to Brussels, to no avail. It seems around then that they determined not to have this done to them again, and started to look at tax policies. I'm pretty sure that Apple are not the only major corporation in Ireland to have these tax breaks - and if Ireland can prove that then no illegal state aid occurred.

    You also have to bare in mind that Apple's tax strategy globally is to minimise the tax it pays in the US, not Ireland. A big chunk of Apple's cash reserves are held outside the US and will continue to be that way unless and until the US lower their CT rates that happen to be amongst the highest in the world.
  • yeah i dont understand when people go after people/companies who have arranged their affairs to minimise their tax expenditure - they're perfectly within their right and would continue to do so in other ways if the current loopholes are closed. You need to go after the politicians that let this thing happen.

    I agree but the clever people are not the politicians or those employed to chase these companies. I think they work for the other side, one or two steps ahead.
  • yeah i dont understand when people go after people/companies who have arranged their affairs to minimise their tax expenditure - they're perfectly within their right and would continue to do so in other ways if the current loopholes are closed. You need to go after the politicians that let this thing happen.

    There is a moral argument there. Obviously that has f*** all impact from a legal point of view. But a strong moral one exists for me
  • I don't think going after them is the same as exposing what they are doing. Apple has gone on my list of do not buy from. If all consumers did the same they would act differently.
  • cabbles said:

    There is a moral argument there. Obviously that has f*** all impact from a legal point of view. But a strong moral one exists for me
    For me too, Rob - my points are made from a commercial and legal perspective only.
  • edited August 2016
    bobmunro said:

    The operational purpose of the 'Head Office' is to minimise the organisation's tax exposure - plain and simple - AND legal. A Head Office is where the board of directors meet (and I believe one of the elements of any appeal will be the board meeting minutes). It isn't, or doesn't have to be, where main activities take place.

    Well, that was not what I meant by "operational" purpose. I understand that it has a rational purpose from the point of view of maximising post tax profits. I was asking whether Apple would function less efficiently if it did not exist. You then say, without qualification, that it is legal. Well, I think we are going to see about that, aren't we. In so far as I understand it, the EC are saying it's not. And I rather fancy they have spent a lot of time and money testing that conclusion before they have aired it.

    While we wait to see how that actually pans out, I'll call how I see this so called "legality". Again I am not familiar with the Irish legal system so I'll stick to the UK, and concentrate on Google. Google assert that their invoicing and therefore CIT paying in Ireland is 'legal". However our legal system is based on the concept of the reasonable man. If HMRC went to court and said, "what actually happens is this: Google turn up at the offices of, say, Group M in London to discuss terms for £200million of advertising in the coming year. Group M's London offices largely serve clients advertising in the UK market (they have offices in all the other global markets). Google's executives in this meeting are all UK based too. The deal is done. Google invoices Group M London. The invoice comes from Ireland (or at least it has an Irish address on it) Where should the reasonable man conclude this business was done? In the UK , or in Ireland?" I know where my money goes on that answer.

    Google spin the fairy tale. HMRC buy it. But don't tell me it's legal. HMRC just haven't had the balls to test it in court.
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  • Well, that was not what I meant by "operational" purpose. I understand that it has a rational purpose from the point of view of maximising post tax profits. I was asking whether Apple would function less efficiently if it did not exist. You then say, without qualification, that it is legal. Well, I think we are going to see about that, aren't we. In so far as I understand it, the EC are saying it's not. And I rather fancy they have spent a lot of time and money testing that conclusion before they have aired it.

    While we wait to see how that actually pans out, I'll call how I see this so called "legality". Again I am not familiar with the Irish legal system so I'll stick to the UK, and concentrate on Google. Google assert that their invoicing and therefore CIT paying in Ireland is 'legal". However our legal system is based on the concept of the reasonable man. If HMRC went to court and said, "what actually happens is this: Google turn up at the offices of, say, Group M in London to discuss terms for £200million of advertising in the coming year. Group M's London offices largely serve clients advertising in the UK market (they have offices in all the other global markets). Google's executives in this meeting are all UK based too. The deal is done. Google invoices Group M London. The invoice comes from Ireland (or at least it has an Irish address on it) Where should the reasonable man conclude this business was done? In the UK , or in Ireland?" I know where my money goes on that answer.

    Google spin the fairy tale. HMRC buy it. But don't tell me it's legal. HMRC just haven't had the balls to test it in court.
    Well they would operate less efficiently because they would possibly pay more tax. But no, the operation of the company would not suffer whether they used a head office in Ireland or Outer Mongolia.

    Our legal system is based on legislation and precedent - and some of it is reasonable and some not, depending on your point of view. Regarding your analogy about advertising purchasing - let me give you another one. British Aerospace send executives to broker a deal with the Saudi government on the supply of 20 Euro-fighters. All of the discussions take place in Riyadh with agents of British Aerospace based in the middle-east and the planes will be used for Saudi Arabia's own defence. The deal is successfully struck and the Saudi's are expecting an invoice from whom? It will be British Aerospace - Farnborough.
  • edited August 2016
    bobmunro said:

    Well they would operate less efficiently because they would possibly pay more tax. But no, the operation of the company would not suffer whether they used a head office in Ireland or Outer Mongolia.

    Our legal system is based on legislation and precedent - and some of it is reasonable and some not, depending on your point of view. Regarding your analogy about advertising purchasing - let me give you another one. British Aerospace send executives to broker a deal with the Saudi government on the supply of 20 Euro-fighters. All of the discussions take place in Riyadh with agents of British Aerospace based in the middle-east and the planes will be used for Saudi Arabia's own defence. The deal is successfully struck and the Saudi's are expecting an invoice from whom? It will be British Aerospace - Farnborough.
    And in which country is British Aerospace based? Where are the planes manufactured? Who licenses British Aerospace to sell weapons to a foreign nation?
  • Fiiish said:

    And in which country is British Aerospace based? Where are the planes manufactured? Who licences British Aerospace to sell weapons to a foreign nation?
    It doesn't matter where they are manufactured - the deal is done where the supplier of the goods are based.

    If I buy a BMW direct from BMW in Munich, I pay in euros and the deal is struck in Germany. If I buy a BMW from a UK based dealer then the deal is struck in the UK as my contract is with the dealer and not BMW. I pay in sterling and the dealer pays the invoice from BMW in euros - the dealer's deal is struck in Germany.

    Google sell advertising from Ireland - it is supplied from Ireland - where it is purchased and/or consumed is irrelevant.
  • bobmunro said:

    For me too, Rob - my points are made from a commercial and legal perspective only.
    Well this is it. Of course Apple and others are going to exploit the system. And because they are of the size they are, this ruling is unlikely to impact public opinion to the detriment of world wide revenue. I think short of us discovering Apple are funding ISIS, such is their brand, innovation and success on a product level, this is probably something that could be easily swatted away.

    You've also got to take into the public's appetite for vemgeance. The longer this gets dragged out, the less people care.

    The only way forward is for a fairer and simpler tax system so that multi nationals make no massive material gain wherever they set up. This point of consumption tax you talk of makes sense here
  • edited August 2016
    cabbles said:



    The only way forward is for a fairer and simpler tax system so that multi nationals make no massive material gain wherever they set up. This point of consumption tax you talk of makes sense here

    Absolutely - and I'm sure Apple would be more than happy to pay point of consumption tax. The problem with international tax law for multi-nationals (rarely applies to SME's) is that they wouldn't want to pay CT in say the UK for all the profits generated from sales in the UK and then, when they repatriate the net profits, have to pay CT in the US as well.

    Think about PoC as an import tariff - if I produce widgets in Ulan Bator and sell them in the UK I would not expect to pay full CT on the resultant profit as well as CT in Outer Mongolia. If a UK company wants to buy widgets from my company then the UK government shouldn't expect to levy CT but could reasonably levy a tariff.

    Within the EU we are tariff free - BMW sell a lot of cars in the UK but would not pay a penny CT to the UK government. The dealers would though on the net profit they make from selling on the cars.

    I also accept that I am beginning to sound like a bore on this issue so no more posts from me.
  • bobmunro said:

    Absolutely - and I'm sure Apple would be more than happy to pay point of consumption tax. The problem with international tax law for multi-nationals (rarely applies to SME's) is that they wouldn't want to pay CT in say the UK for all the profits generated from sales in the UK and then, when they repatriate the net profits, have to pay CT in the US as well.

    Think about PoC as an import tariff - if I produce widgets in Ulan Bator and sell them in the UK I would not expect to pay full CT on the resultant profit as well as CT in Outer Mongolia. If a UK company wants to buy widgets from my company then the UK government shouldn't expect to levy CT but could reasonably levy a tariff.

    Within the EU we are tariff free - BMW sell a lot of cars in the UK but would not pay a penny CT to the UK government. The dealers would though on the net profit they make from selling on the cars.

    I also accept that I am beginning to sound like a bore on this issue so no more posts from me.
    With the BMW point you could say you've very neatly linked the EU thread with this one and perhaps AFKA could now amalgamate the two and save Prague having to post on 2 fronts ;-)
  • bobmunro said:

    Absolutely - and I'm sure Apple would be more than happy to pay point of consumption tax. The problem with international tax law for multi-nationals (rarely applies to SME's) is that they wouldn't want to pay CT in say the UK for all the profits generated from sales in the UK and then, when they repatriate the net profits, have to pay CT in the US as well.
    Then they should not repatriate the profits, they should keep them within the UK and either invest it into higher wages for existing staff, or use it to employ more staff.

    We do not exist just to generate obscene profits for foreign multinationals. If they want to make a profit here then fair play but they should show some corporate responsibility and make sure that the profits they make are reinvested into the economy they are exploiting to make the profits in the first place. Whether the USA then fleeces them in their home country is not our problem, they should be pressuring the US government if they feel they pay too much tax already.
  • bobmunro said:

    Absolutely - and I'm sure Apple would be more than happy to pay point of consumption tax. The problem with international tax law for multi-nationals (rarely applies to SME's) is that they wouldn't want to pay CT in say the UK for all the profits generated from sales in the UK and then, when they repatriate the net profits, have to pay CT in the US as well.

    Think about PoC as an import tariff - if I produce widgets in Ulan Bator and sell them in the UK I would not expect to pay full CT on the resultant profit as well as CT in Outer Mongolia. If a UK company wants to buy widgets from my company then the UK government shouldn't expect to levy CT but could reasonably levy a tariff.

    Within the EU we are tariff free - BMW sell a lot of cars in the UK but would not pay a penny CT to the UK government. The dealers would though on the net profit they make from selling on the cars.

    I also accept that I am beginning to sound like a bore on this issue so no more posts from me.
    Accept you have had enough Bob, but feel it important to point out two thing above which i know for a fact to be incorrect.

    1. if you buy a BMW, (or nearly any other brand), from an authorised dealer, your car is supplied to the dealer by BMW UK Ltd or the equivalent for other brands. This is the case in most countries, and is one reason why the grey market exists because each national office has its own pricing policies, even within the eurozone.

    2. When a company or agency buys advertising from Google the only thing that comes from Ireland is the invoice. It is a moot point where advertisng of that type physically comes from, but trust me, its not Ireland. They have built up sizeable R&D and admin centres there but they do not "produce" any advertising.

  • edited September 2016
    This could turn out to be an unexpected benefit for Brexit.

    If the EU does force through this fine and if, as rumoured, Philip Hammond reduces corporation tax to 15%, a number of US companies currently using Ireland may change tack and make their base in UK instead.
  • stonemuse said:

    This could turn out to be an unexpected benefit for Brexit.

    If the EU does force through this fine and if, as rumoured, Philip Hammond reduces corporation tax to 15%, a number of US companies currently using Ireland may change tack and make their base in UK instead.

    The standard rate in Ireland is 12.5% - 6.25% for research and development operations. If the Chancellor of the Exchequer thinks 15% is attractive then he can't count - a tad of a disability for a Chancellor!
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  • bobmunro said:

    The standard rate in Ireland is 12.5% - 6.25% for research and development operations. If the Chancellor of the Exchequer thinks 15% is attractive then he can't count - a tad of a disability for a Chancellor!
    Still lower than any EU member state. Ireland are charging 12.5% at present and may now be forced to increase it.
  • stonemuse said:

    Still lower than any EU member state. Ireland are charging 12.5% at present and may now be forced to increase it.
    Nope - that's their standard rate. The EU ruling was about Ireland allowing a lower rate for Apple, nothing to do with the standard rate of CT because tax rates are nothing to do with the EU.
  • From what I have been reading, Apple were charged 12.5%

    However I obviously cannot confirm this so will sit back and see what happens next.

    This story has a way to go yet and I am not convinced the EU will come out of it looking good.

    However I am not a tax expert, so who knows.
  • edited September 2016
    stonemuse said:

    From what I have been reading, Apple were charged 12.5%

    However I obviously cannot confirm this so will sit back and see what happens next.

    This story has a way to go yet and I am not convinced the EU will come out of it looking good.

    However I am not a tax expert, so who knows.

    Totally agree - pretty sure the Irish government will win the appeal.

    (sorry - said I wouldn't post on this thread again. Crawls back under stone!)
  • stonemuse said:

    From what I have been reading, Apple were charged 12.5%

    However I obviously cannot confirm this so will sit back and see what happens next.

    This story has a way to go yet and I am not convinced the EU will come out of it looking good.

    However I am not a tax expert, so who knows.

    Yet according to reports the tax they actually paid was anywhere between 0.05% to 0.005%. Ireland need to recover what is owed. They are giving Apple preferential treatment because I imagine no other companies are being allowed to ignore their tax bills.
  • bobmunro said:

    Totally agree - pretty sure the Irish government will win the appeal.
    I hope they do, the EU should not be able to punish companies for decisions made decades ago. If Ireland lose this will have, ultimately, a massive negative financial impact on them. The Apple fine will not balance the potential future revenue loss.
  • edited September 2016
    stonemuse said:

    I hope they do, the EU should not be able to punish companies for decisions made decades ago. If Ireland lose this will have, ultimately, a massive negative financial impact on them. The Apple fine will not balance the potential future revenue loss.
    Except it is not being punished, it has to pay the tax it owes. Part of being in the EU means you need to enforce your own tax laws.

    If I get a letter from the council claiming council tax I forgot to pay 20 years ago, then I am not being 'punished', I am just paying what I owe.

    I don't care what the Irish do with the money, they could set it on fire for all I care, the point is that they willfully ignored tax evasion by a major company, probably to keep the company from going overseas, yet they were quite happy to abuse the structure of the EU that made the entire thing possible in the first place. If the EU did not exist then Apple would have been unable to funnel all their profits within the EU through one country.
  • edited September 2016
    Fiiish said:

    Except it is not being punished, it has to pay the tax it owes. Part of being in the EU means you need to enforce your own tax laws.

    If I get a letter from the council claiming council tax I forgot to pay 20 years ago, then I am not being 'punished', I am just paying what I owe.

    I don't care what the Irish do with the money, they could set it on fire for all I care, the point is that they willfully ignored tax evasion by a major company, probably to keep the company from going overseas, yet they were quite happy to abuse the structure of the EU that made the entire thing possible in the first place. If the EU did not exist then Apple would have been unable to funnel all their profits within the EU through one country.
    But they did pay the tax they owed according to Irish law. I agree it should be higher but it wasn't ...this is an EU diktat.

    Bottom line is that no one will come out of this looking good.
  • stonemuse said:

    But they did pay the tax they owed according to Irish law. I agree it should be higher but it wasn't ...this is an EU diktat.

    Bottom line is that no one will come out of this looking good.
    Incidentally, as I stated in the Brexit thread, the ability of the EU to overrule sovereign law was one of my reasons to vote exit.
  • stonemuse said:

    But they did pay the tax they owed according to Irish law. I agree it should be higher but it wasn't ...this is an EU diktat.

    Bottom line is that no one will come out of this looking good.
    So if the standard rate for Ireland is 12.5% and Apple were only paying 0.005% how on earth are they paying the tax they owed according to Irish law.

    The burden of proof is now on Ireland to prove that Apple were fully complying with Irish law and that the rate that Apple paid was available to other companies.
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