U.S. taxpayers could end up paying Apple’s bill for back taxes in Ireland

“European authorities have clamped down on a special deal between Apple and Irish tax authorities, saying the arrangement uniquely favors Apple and is unavailable to other companies,” Rick Newman reports for Yahoo Finance. “Nixing the deal—which lowered taxes on much of Apple’s foreign income to virtually nothing—will force Apple to pay taxes in Ireland at the higher rate other companies pay. The bill: about $14.5 billion.”

Newman reports, “But Apple may get reimbursed for all of that by an unlikely benefactor: the US taxpayer. ‘It’s extremely possible the US taxpayer will have to pay this bill,’ says Stuart Gibson, a former government tax official who’s now editor of Tax Notes International. ‘For every dollar in tax Apple has to repay in Ireland, they may get to reduce their US tax bill by $1.'”

“In a simplified example, if Apple paid $14.5 billion in taxes to Ireland in a given year, and its tax liability to Uncle Sam was $50 billion, it would generally be able to reduce its US income tax by the amount of taxes it paid to Ireland. So it would only owe $35.5 billion in US taxes,” Newman reports. “That’s $14.5 billion in revenue the US Treasury won’t get, which means the government can cut spending by $14.5 billion to offset the loss, or borrow to make up the difference. In reality, the government never cuts spending based on the flow of revenue from a single source, or raises taxes on some other entity in real time. So the difference is essentially made up by borrowing, which is a future obligation borne by US taxpayers.”

Read more in the full article here.

MacDailyNews Take: Yup.

At its root, the Commission’s case is not about how much Apple pays in taxes. It is about which government collects the money.Apple CEO Tim Cook, August 30, 2016

SEE ALSO:
Morningstar: Apple remains fundamentally undervalued after EU tax grab – August 30, 2016
Obama admin worries EU’s Apple decision will cost U.S. taxpayers; Bernie Sanders applauds EU tax demand – August 30, 2016
Ireland doesn’t want Apple’s $14.5 billion in so-called back taxes – August 30, 2016
U.S. Treasury: The European Commission’s retroactive tax demands on Apple are unfair – August 30, 2016
EU demands Apple pay massive $14.5 billion in taxes plus interest – August 30, 2016
Apple CFO Maestri: Despite EU tax ruling, we will continue to invest in Ireland – August 30, 2016
Apple CEO Cook blasts European Commission for ‘ignoring Ireland’s tax laws, upending the international tax system’ – August 30, 2016
European Commission to rule Ireland’s tax arrangement with Apple illegal – August 29, 2016
Ireland prepares for a fight with EU over Apple tax clawback – August 29, 2016
U.S. government warns EU: Do not hit Apple with a massive back tax bill – or else – August 25, 2016
European Commission denies anti-U.S. bias after U.S. Treasury intervention over Apple, Amazon tax probes – August 25, 2016

24 Comments

  1. Well, that should make all those idiots here happy who say Apple shouldn’t pay tax. Maybe when your local school is failing, the electricity keeps cutting out, and holes in the road no longer get filled then you’ll realize what it means for big corporations to pay a tax rate of 0.005%.

    Over the last 30 years the middle class got progressively poorer while the rich got richer because – as Martha Stewart said- “Only the poor pay taxes”.

    Truth, Justice, and the American Way. Well, one out of three ain’t bad.

      1. I believe part of the costs of infrastructure is supported by Federal funds.. If that disappears or is reduced a higher burden falls on the State and County for local schools, electricity and roads.

    1. Martha Stewart did NOT say “Only the poor pay taxes”. She is not a tax cheat. Her crime was lying to the FBI about insider trading. You’re thinking of Leona Helmsely.

      1. ok so it was Leona Helmsley instead… That doesn’t change the point. The RICH (and huge corporations like Apple and countless others…LIke Mylen Phamara…also NOT a tax “cheat” in the legal sense of the word…) continue to skirt their fair share, and that leaves it to the rest of us to pay more and more and MORE.

  2. If this article is true then the US government is subsidising its companies that are selling in foreign countries. That in itself is unfair competition to the companies that are based in that that foreign country. They pay their taxes so are at a cost disadvantage.

    1. Not true. The calculation is based on Apple already owing that money to Ireland for taxes not paid. Therefore Apple have declared profits that never actually existed, and have paid US taxes on those profits. Given that the nominal US corporation tax rate is MUCH higher than the 12.5% Ireland levies it’s probably roughly the same amount that Apple have paid in the US after rebates that it owes to Ireland according to today’s ruling. So if anything Irish citizens have been subsidising US citizens, and this would be correcting that.

      1. [Therefore Apple have declared profits that never actually existed,]

        No company/individual pays taxes on profits that don’t exist.

        [and have paid US taxes on those profits.]

        US Corporations DO NOT pay taxes on foreign profits, unless those profits are repatriated to the US. Period.

        1. I was also under the impression that profits are taxed in the country they are generated. Thus all non-expatriated foreign profit has not yet been taxed by the U.S. and as a result is taxed in the U.S. when expatriated.

        2. Well there’s definitely €12bn of profit showing on Apple’s balance sheet that shouldn’t have been there, since that money should have been paid to the Irish government had Apple been paying 12.5% corporation tax.

    2. It isn’t. My understanding of federal tax law is that taxes paid to another entity are only deducted from federal obligation, IF THAT TAX IS DERIVED ON THE SAME INCOME, i.e.., federal tax on Apple’s revenue earned in California is reduced by the tax California assess that income. Apple’s income derived in Ireland does not come under US federal jurisdiction, unless and not until, those profits are repatriated to the US. At THAT time Irish taxes paid would be deducted from any US tax due.

  3. Huh. I haven’t seen anybody here saying Apple’s shouldn’t pay tax. In fact Apple pays a higher US tax bill than any other corporation.

    If you’re using your username ironically, it’s clever.

  4. I guess I wouldn’t mind paying taxes if we had a government that ran itself as a responsible business and spent its income responsibly and with discretion. We don’t have that in Canada, and you don’t have that in the USofA. There are agendas, payoffs, expenditures for political gain – it’s endless. So I don’t disrespect anyone – corporations included – for maximizing their tax savings within what the law will allow. Don’t forget here – there was no special deal for Apple. No laws were broken. Apple followed Irish tax law, plain and simple. They followed it really well, mind you, but the law is the law. Any company could have done the same.

  5. NO WAY!

    Apple’s shareholders would pay those back taxes and that’s proper.
    Going forward those taxes may be assessed, but not the claims of the passed. Apple must not pay those back taxes.

    35% is the tax rate in the states, but that’s not what they would actually pay. 2,000,000,000,000,000 dollars of US corporate money, overseas in some state of flex …, that works out to 700 billion in taxes, can you say deficit gone with 200 billion in the bank.

    Oh well.

  6. This article isn’t quite accurate. Tax credits apply to,the specific income,that was taxed. The EU wants to charge taxes on revenue back to the 80’s but Apple can’t take taxes paid for 1995 inc me, for example, against 2016 income, it can only be applied against the year it occurred. Tax credits can’t be carried forward unless they have been declared. So I am not sure that all these back taxes can be taken as credits against this year’s income. They can go back and apply back tax amounts ONLY (not the penalties) to corrected tax returns for only four years, I believe. I could be wrong but the general rule on foreign tax credits is they apply to revenue only from the year the revenue occurred. Also, income earned outside the US is no longer taxable in the US unless they move it to a US entity. So Apple will pay the taxes from European cash reserves. It should have zero effect on its US tax bill unless they use US cash to,pay the bill. It would not be smart for Cupertino to pay the bill. The European business must pay it, they incurred it.

  7. It seems to me that this Gibson fellow (“former government tax official”, apparently) has an agenda here and is making up stuff.

    Apple, headquartered in the US, has income in the US and pays tax on that income. Apple’s office in Ireland reports income there and pays tax on that income. If Apple wants to move any money from their office in Ireland to the HQ in USA, that would be treated as additional income and taxed additionally.

    I can’t possibly see how Apple could deduct some foreign tax liability from income earned (and taxed) in the US, if that foreign income remains offshore. IRS cannot tax anything that happens outside the US borders, nor can it reduce tax burden based on taxation that happens overseas.

    The only way Apple could possibly reduce their tax burden in the US by those 14.5 billion would be if the US president (or government) somehow declared a one-time tax holiday and then Apple were allowed to repatriate all that foreign cash at much lower tax rate. In such a(n unlikely) case, those 14.5 billion that Apple already paid to Ireland wouldn’t have to be paid to the US. But this would only be possible if the US did this one-time repatriation tax break. Mind you, if for this purpose the US proposed no taxation for repatriation of all that money, those 14.5 billions could NOT be deducted from Apple’s domestic tax bill.

    So, about the only way this could possibly be “paid by the US taxpayers” would be if Apple were to move that money home under some special arrangement that would allow them to do it with much lower tax rate. Obviously, if this were to happen, IRS would still get a significant tax windfall from all those foreign profits that were previously kept offshore, and for which there was never any tax revenue in the first place. So, instead of getting many billions of extra tax revenue, the American taxpayers would receive $14.5B less, since that was already paid to the Ireland / EU.

  8. Everyone should look at how these companies actually do these taxes overseas. I’m not for a one time repatriation anything. But the past tax deal, done. Apple must not pay any part of a reassessment. Going forward though, the EU needs to get Ireland on board.
    The “If the law in Ireland was different, Apple would have paid”, yes, if the law was, the law was not.
    That’s done. EU needs to look forward to close that tax foolishness among its member states.

    These guys (generic) , american corporations, need to decide where they want to be millionaires, the US or somewhere else. It’s too bad all they seem to want to do is participate in these convolute tax reducing schemes. These schemes do not help the stockholders cause the stockholders do not see any of the money. Come on 1, 2, 3 percent via a dividend. Please!

    To keep up with all this tax avoiding has to have a cost, not too much higher than what they would actually pay in the US. Lawyers, politicians, PACs, political parties, opening offices in other countries, lawyers in other countries, operational staff in other countries, I guess where there is confusion there is opportunity. That was in a movie, right?

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