[TheJoeMan]

“Many large multinationals use cost-sharing because it reflects the global nature of their business.”

A comparable example might be Apple, where sales of my (american) app being sold from (american) servers somehow curiously involves the Republic of Ireland and their low corporate tax rates…

[drivebycomment]

Apple pays the majority of taxes to US. They report US income and pay taxes for that to US. Ireland is involved only so far as EU income. So if your American app is sold to European users, the income is recognized as EU, and reported to Ireland.

https://fortune.com/2017/10/31/trump-tax-reform-apple-multin...

There are other possible criticisms on corporate tax and Apple, but this isn't a valid one.

[kwhitefoot]

Of course it is valid. The principal on which much of taxation is based is that it is a tax on the benefit that the income provides. And that benefit accrues in the US.

The only way it can be claimed to be invalid is by conflating legal with moral.

[esrauch]

You're suggesting that their EU sales shouldn't pay EU income at all, rather US income taxes instead? Usually the criticism of this is the opposite direction, that sales in Germany should pay taxes in Germany.

[littlestymaar]

> You're suggesting that their EU sales shouldn't pay EU income at all,

Well, since this is Ireland tax rates we're talking about, this is almost the same thing…

[disgruntledphd2]

That used to be true, but is no longer. Currently Apple et al pay 12.5% corporation tax in the Republic of Ireland, unlike the past where this rate existed but was notional as most of the revenue was ultimately booked to a real tax haven like Bermuda et al.

[littlestymaar]

Glad it changed. It's still a 50% discount compared to most of EU though…

[nodamage]

This is a common misconception but not actually true.

If Apple sells a copy of your app to an American customer the revenue from their royalty is booked to Apple Inc. (the U.S. company) and they would pay U.S. income tax on that sale.

The only time the sale would be booked to their Irish subsidiary is if the customer was located in Europe, or it would go to one of their other international subsidiaries depending on the specific location of the customer.

[oldbbsnickname]

Legal BEPS exist and is more complicated than this oversimplification. While Apple didn't do Stanley Works "moving" to Bermuda, Tim Cook is no slouch in the financial domain as that was (and is) his wheelhouse. The calculus involves a myriad of factors including a risk appetite, leadership ethics, lots of data, and decision support. As an aside, I once parted ways with 2 potential business partners because they were on the privately-admitted illegal side of BEPS and tax minimization in speech and action. (Last I heard, they're lobbyists for political interests based in another country.)

Also, the books for taxes and the books for securities regulators aren't precisely equivalent per jurisdiction based on how things are counted or not counted. For example, in general, Norwegian and US accounting practices tended to be/are vastly different in some areas... hence a need for local external auditors.

Corporate Inversions: Stanley Works and the Lure of Tax Havens (2002) https://www.hbs.edu/faculty/Pages/item.aspx?num=29288

[nodamage]

Sure, but not sure how that’s relevant to my point that Apple does not actually move US profits offshore. The major controversies around Apple’s tax practices are from:

1. Apple not paying US tax rates on products sold outside of the US because that money is kept offshore instead of being repatriated, and

2. Apple paying low Irish tax rates on products sold outside the US instead of the specific tax rate of the country where the product was sold.

(1) I don’t find all that controversial because they would technically owe US taxes on the money if it was ever brought home, but (2) is understandably more controversial. Nonetheless given that Apple won their appeal against the European Commission it might not actually be illegal under EU law to do what they did.

[Y_Y]

It's simple enough, an Irish company called Apple licenses its very valuable IP to its entities in cheaper countries so they can do things like manufacturing, server farms, customer support.

(It also carries on these some of these functions in Ireland, as it happens, and pays a ton of tax at the relatively high income tax rates there.)

It's frankly curious to me when a multinational chooses to base itself anywhere less favourable.

[gemstones]

At one point, it wasn’t an Irish company. Now technically the American company sold or transferred its IP to the Irish company. But it did so as a fiction, to avoid taxes, and neither I nor a government I help elect are obligated to honor that fiction.

[c0pium]

Of course they are, it’s a contractual agreement that is within the law. The fact that you don’t like it could not be less relevant, you don’t matter. If the government doesn’t like the law, they can (try) to change it but that has to go through the actual process. They are welcome to be as mad as they want that their law is poorly written but it is still their law.

[skeaker]

I believe "their law" is what is being criticized, and GP's "government that I help elect" would do away with "their law." Pointing out that the law being criticized as bad is in fact a law is at best a tautology...

[realusername]

Every law is judged with the intent behind the action... except for taxes which is the single exception I know of. And here the intent is pretty clear.

[sokoloff]

I hope (and think) that laws are judged primarily by their text and entirely so when it can be determined that the facts match the text even if many of us wish the text was different in light of these specific facts.

Criminal trials carefully lay out how the state believes the actions of the accused meet each required element of the crime. They don’t get to say “Foo definitely killed Bar. The law intends for people to not kill each other, and Foo meant to, therefore Foo is guilty of 1st degree murder.” Rather, they have to prove Foo’s actions met all required elements of the charge.

If you rear-end me while I’m stopped at a light, your intent doesn’t matter, only your actions. If you fail to stop for a school bus displaying red stop lights, your intent doesn’t matter.

I think the IRS step doctrine is relatively rare in legal interpretations, but at a minimum, it’s not “every other law is interpreted that way”.

I don’t take a position on Microsoft’s actions here, other than “if it can be shown to be plainly compliant with the law as written, I’m uncomfortable with the law being changed during interpretation such that it’s deemed to be non-compliant.”

[tw04]

> If you rear-end me while I’m stopped at a light, your intent doesn’t matter, only your actions. If you fail to stop for a school bus displaying red stop lights, your intent doesn’t matter.

Huh? In both of these examples, intent 100% matters. If I rear ended you because I had a medical emergency vs I was texting on my phone vs I had a bout of road rage and wanted to kill you vs I know who you are and you’re sleeping with my wife so I followed you from work to try to kill you:

All VERY different levels of potential punishment based entirely on my intent.

[ceejayoz]

> If you rear-end me while I’m stopped at a light, your intent doesn’t matter, only your actions.

Bullshit. If you intended to do it, it’s something like assault or attempted murder. If you didn’t, it’s likely a civil traffic ticket and an insurance claim.

SCOTUS precedent permits use of legislative intent to resolve ambiguously worded legislation, too.

<https://en.wikipedia.org/wiki/Johnson_v._Southern_Pacific_Co...>

> The rule that penal statutes are to be construed strictly does not permit such a construction as defeats the obvious intention of the legislature.

[PH95VuimJjqBqy]

> I hope (and think) that laws are judged primarily by their text and entirely so when it can be determined that the facts match the text even if many of us wish the text was different in light of these specific facts.

What do you think a legal test is?

https://en.wikipedia.org/wiki/Test_(law)

The canonical example of this is a restauraunt banning all head coverings. Despite the fact that technically everyone must adhere to it, since it disproportionally affects those who wear hijabs, it's considered a violation of civil rights.

These tests are created to help lower courts navigate grey areas, negligence is an area where this is applied a lot.

[realusername]

> I hope (and think) that laws are judged primarily by their text and entirely so when it can be determined that the facts match the text even if many of us wish the text was different in light of these specific facts.

The facts do matter when you are judged, laws aren't code. The only reason taxes are the single exclusion to this rule is because there's a massive amount of money to be made. You are not bound to the same justice system as them.

[mathgeek]

You should probably clarify that intent doesn’t matter in terms of baseline fault, as it definitely matters in terms of punishment and charges.

[Nursie]

Actually there seems to be a lot of intent in tax law, reading the wikipedia page about the Apple/Ireland controversy - some tax mechanisms/structures are specifically called out as not being available for firms looking to reduce their tax bill, use must be for genuine business requirements only.

[kwhitefoot]

> not being available for firms looking to reduce their tax bill, use must be for genuine business requirements only.

That's just a fig leaf.

[realusername]

And yet the reality is Apple doesn't product their value in Ireland, regardless what they say on their paper.

[londons_explore]

When it comes to tax-free allowances, groups of companies can sometimes be considered one - if, for example, they shared a phone number or website.

[PH95VuimJjqBqy]

despite what a lot of people think, you can ask for forgiveness from the IRS and will typically get it if you're a first time offender and it's clear your intent wasn't malicious.

Sometimes people screw up on their taxes, etc.

[spockz]

I think this is more of an Anglo-Saxon vs rest of Europe distinction. In UK (and presumably US) the letter of the law is more important than the intent. In the rest of Europe the intent is more important than the exact letter.

In both cases it is up to the judiciary to make the trade-off/judgement.

[realusername]

That's pretty much the same in both systems, if anything the common law system is based even more on intent than civil law.

[Y_Y]

Anglo-Saxon? What has that to do with Common vs. Civil Law? Or is it a magic term like "Caucasian" or "Judeo-Christian" that just handwaves some psuedo-historical distinction for "us vs them"?

[IshKebab]

No it's definitely true for taxes as well. Even on a tiny individual level you can argue with the tax authorities about whether something was purchased for business or personal use for example.

[gemstones]

As a voter, I’m OK with them not following the process on this one!

[c0pium]

That’s a very near-sighted idea. Can you really not see the problem?

[gemstones]

It’s not a problem for me! It sets a precedent, sure, but I’m okay with the tradeoff there.

[Projectiboga]

That tax break "Double Irish Dutch Sandwich" is being phased out. It involves both those countries with one of the Irish companies managed out of Bermuda. It has shifted to other schemes now. https://en.m.wikipedia.org/wiki/Double_Irish_arrangement

[nixass]

https://en.m.wikipedia.org/wiki/Feargal_O%27Rourke

You know things are nuts when one corporate accountant gets his own wiki article

[Horffupolde]

What other schemes?

[zdkl]

Nice try, FBI.

[londons_explore]

As soon as a scheme has a wikipedia page, you can be pretty sure it will become illegal within a year or two...

[hattmall]

It's no less fiction than any other contract or legal document.

[lmm]

The idea that the business' value is being created in Bermuda (in Google's case, but there will be similar things going on here) is a fiction. The idea that what creates the value is a single concrete piece of intellectual property is a fiction. The idea that that piece of intellectual policy was transferred to Bermuda is a fiction. The idea that what was transferred could be legitimately valued at zero when transferred and yet suddenly responsible for 100% of the business' value in subsequent years is an especially blatant fiction.

I'd love to see the government of Bermuda nationalize that piece of intellectial property and claim all of Google's global income. They've made such a careful, vigorous legal argument that it's responsible for 100% of their revenue, surely they would acknowledge the things they've been claiming for years and continue to pay 100% of their profits to Bermuda.

[londons_explore]

> government of Bermuda nationalize that piece of intellectial property

And, more importantly, nationalize it while compensating the owner for it's declared value, which was zero (or near to).

[thfuran]

I'd rather see the US declare that the IP is no longer promoting the progress of science and the useful arts and annul it.

[londons_explore]

I would like to see an experiment where a country disallowed any company from keeping any secrets at all - IP or otherwise. Everything on all the companies computers and hard drives would always be visible to competitors and the public.

While it discourages long research projects, it really incentivises fast execution and building on other companies designs.

[gemstones]

Although in this case, this was a good use of government time even if it goes to the courts! I would like to see the government instill a culture of fear in these companies’ legal departments, that leaves them wondering them the law will change to hit them.

[gemstones]

Yes it is, because this one negatively affects enough people that the law should make a special case to disallow it. Contracts are enforceable when laws say they are enforceable, but governments are free to change laws.

If the government says it is a fiction, it is a fiction.

[Nursie]

> "a ton of tax at the relatively high income tax rates there"

Firstly, that's not Apple paying income tax, that's their employees.

Secondly, they don't pay much in the way of corporation or other taxes that usually apply because of a sweetheart deal (Google also has one IIRC), which is why much of the EU is up in arms about the Irish government's behaviour here, that effectively allows these multinationals to operate across the EU without paying the usual expected taxes, giving them an advantage over local businesses and depriving governments of income, and there have been various court cases about it.

[Y_Y]

"Sweetheart deals" are not allowed in the EU, and whether or not there was one in this case is a matter of controversy[0]. In fact the EU courts have decided that there was no breach of law by Apple, though a further appeal maybe yet be made. It's easy to sling around accusations like this, but it's important to check the facts at the same time.

[0] https://en.wikipedia.org/wiki/Apple%27s_EU_tax_dispute

[Nursie]

Whether they were precisely sweetheart deals or not, it remains that Apple and the Irish government did negotiate 'deals' and that Ireland has facilitated a lot of tax reduction for large US multinational corps, which much of the EU believes costs them both revenue and competitiveness.

It is interesting that the last news about this is the EU saying they are going to appeal, three years ago.

I find the use of such schemes pretty awful regardless of whether they technically fall inside of the law.

[Y_Y]

I can't disagree with any of that, except to say that I don't think the choice that a multinational makes is between Ireland and nothing.

At some point you are making enough money that it makes sense for you to hire experts to "optimise" your tax liabilities, just like you'd hire someone to improve your IT infrastructure or your heating bill. If they didn't base their corporate structure around Ireland then it might have been Jersey or Malta or something else that got them 90% of what they had.

It sucks when the outcome is that big companies end up paying less than they're expected to and have lower effective rates than small companies. I see it not as a moral failing so much as a law of nature, like flood waters taking the path of least resistance and destroying slums before bank buildings. Reasonably people certainly differ though.

[kawhah]

I don't think you've successfully checked any facts.

The GP correctly and idiomatically described a tax deal between RoI and Apple as a 'sweetheart' deal. This is not a legal term of art. The fact that Ireland won its court case and is facing an appeal does not change the fact that something took place which exactly meets the commonly understood definition of a sweetheart deal.

[daft_pink]

There are limits in place that prevent these ip schemes these days.

[olliej]

The same applies to all the BS Delaware corporations.

[alexanderchr]

AFAIK Delaware incorporation is more benign and has more to do with predictable courts and lots of case law existing rather than paying as little tax as possible.