Spare a thought for Tom ‘Slab’ Murphy as he lies in his cell in Midlands Prison tonight (Republican inmates in Portlaoise refused him entry so he ended up in the smaller jail nearby) serving a sentence of 18 months for evading tax bills between 1996 and 2004.
Over in Europe meanwhile, Apple Corporation has been ordered to pay some $15 billion in unpaid taxes in Ireland; or rather the Irish government has been told by the EC to collect the unpaid debt from the world’s trendiest, but now one of the most crooked corporations, in the history of capitalism.
It is not known for sure how much tax the IRA’s former Chief of Staff evaded thanks to his cross-border shenanigans but his trial was told that Irish police had found some 700,000-800,000 euros in cash and checks at his farm when it was raided while English police had confiscated nearly £500,000 of property in the north-west of England that had been traced to him (was that why Manchester was bombed during the ceasefire interregnum)..
Whatever the full scale of his criminality one thing is for sure: it paled into insignificance compared to the squalid thievery orchestrated by the people who brought you the iPhone, iPad and the MacBookPro.
There is another difference: in ‘Slab’s’ case the Irish state threw its full weight behind the pursuit and prosecution of the South Armagh republican chieftain. Only the innocent or stupid failed to see this for what it was: revenge for South Armagh’s role in the Troubles (including the subversion of key Gardai) and a way to embarrass Sinn Fein and its leader, Mr G Adams.
In Apple’s case, not only did the Irish government not pursue Apple it actually conspired with it to facilitate the tax evasion and now that Apple has been prosecuted, found guilty and sentenced by Europe, the people who run Ireland’s government in Dublin plan to resist legally the order to retrieve Apple’s tax debt.
You could not make this up. Unfortunately it did happen, as a brilliant article penned by my former Sunday Tribune colleague Gene Kerrigan details. As you read, spare a thought for ‘Slab’ Murphy and ask yourself who should be sharing his cell in Midlands Prison.
Gene Kerrigan: We don’t take taxes from cool people
Apparently, things are so good today we can afford to turn away billions owed in taxes
Published 28/08/2016 | 02:30
You want to get out of paying taxes? We’ll tell you how it’s done.
You already know that much of Irish politics involves throwing shapes. That is, making broad but empty gestures you hope will create a favourable image of yourself. Well, before the General Election, Fine Gael threw lots of shapes. One of them was a promise to get rid of the Universal Social Charge.
Last week, we were told how the mandarins of the Department of Finance felt about that.
If you’ve been around long enough to know who “Sir Humphrey” was, you’ll know how the senior civil service reacts to proposals it doesn’t like. It gives ministers a list of dire choices to live with if they go ahead.
So, Michael Noonan was told he’s free to cut back the USC but he’ll have to increase property tax by 600pc.
Or, perhaps, put 5pc on income tax.
Or, perhaps put up taxes on petrol and beer and throw a 5pc Vat increase on kids’ shoes.
In short – Yes, Minister, you can keep your promise, but you’ll also have to do something else that will make you even more unpopular.
Basically, what the Government’s going to end up doing is putting more money in one of our pockets and taking at least the same amount of money out of some other pocket.
Because, according to the Department of Finance, things are so tight they’re really considering hitting children’s shoes.
Except – things needn’t be that tight.
The Government is actually turning away money it’s owed.
Enda Kenny and Michael Noonan are bracing themselves for an overdue ruling from the European Commission. It was being talked about two years ago, it was promised in 2015, then in early 2016 and it’s expected now in the next few weeks.
In the ruling, Apple is expected to be directed to pay our Revenue Commissioners a large sum of money.
Large could mean hundreds of millions of euro. It could mean thousands of millions of euro – up to €19bn.
Apple produces those neat, shiny phones and lots of other cool stuff. Apple is so cool that it apparently doesn’t see why it should pay tax.
And, so – way, way back – it set about arranging things so it can, eh, maximise its tax efficiency.
You want to pull the same stroke as Apple?
First, set up a company in Ireland to control your income – let’s call it Soapbox Inc. Then, appoint a couple of people to control and manage that company – and they have to be based in the USA.
That’s the trick – set up the company in Ireland; but get someone to manage it from the USA.
Now, when the US Revenue comes looking for taxes you tell them Soapbox Inc wasn’t set up in the USA, and, therefore, is not liable for US taxes. (The United States determines tax liability based on where the company is set up.)
So, you might say, since Soapbox Inc was set up and is based in Ireland, wouldn’t it be liable to pay its taxes in Ireland?
No, because Ireland determines tax liability not on residency but on where the company is controlled and managed from.
And since Soapbox Inc is controlled from the USA, not Ireland, it’s not liable for Irish tax.
Apple’s global web of companies trade with one another, to ensure the costs are borne elsewhere and the profits flow through Ireland. And one part of the Apple web pays nominal taxes here, just to take the bare look off things.
Otherwise, a company called AOI is stacking up the tens of billions in tax-free profits.
AOI is the equivalent of Soapbox Inc. It was set up in Ireland over 30 years ago. It’s based in Ireland but it has no physical presence here. It has no headquarters, no workplace, no address, no employees. It is managed from the USA.
Apple could not reap those monumental profits without the complex global network of services – roads, schools, hospitals, civil service, courts, police – that enable modern states to function.
And it doesn’t pay its fair share to maintain them.
We pay our share. And we pay Apple’s, too. In income taxes, in Vat, in the USC.
Oh, well, says you – leaving morality out of it – at least they can’t get out of paying our legendary 12.5pc tax on Apple’s vast corporate profits, right?
Let Apple explain: “Since the early 1990s, the Government of Ireland has calculated Apple’s taxable income in such a way as to produce an effective rate in the low single digits . . . The rate has varied from year to year, but since 2003 has been 2pc or less.”
In fact, Apple says, in 2009 and 2010 they paid less than 1pc in tax. In 2011, it was 0.05pc.
Is everyone happy with this? No, the European Commission has been investigating Apple’s Irish set-up. And politicians in the USA are annoyed, too.
Well, isn’t the answer simple? This AOI was obviously set up with no function other than to avoid taxes, and companies that do that can be challenged. And that purpose would be clear from the documents created in forming the company.
Eh, they’re lost. The documents. They’re lost.
Can’t find them. Missing, mislaid, gone awol, toor-aloo. Shucks.
Can’t we all, eh, maximise our tax efficiency thusly?
Ah, no. The Government lets cool, vastly rich people like Apple do what they like – we’re not cool enough. Or rich enough.
Ah, come on, it’s more complicated than that.
Yes, it is. Our government parties – FG and FF, both of them (and Labour when they can get their hands on a Merc or three) – believe they have to kiss corporate backsides in order to get investment.
All that stuff about a great workforce, within the EU single market, speaking English – apparently that’s not enough, we have to kiss ass, too.
But, fawning on rich and powerful people is the default position for these guys. Look at the video of Michael Noonan fawning over Donald Trump; look at Enda being tickled by Sarkozy; look at the way they defer to our domestic millionaires.
The EC sees the Apple deal as “state aid” to the company, and therefore illegal. Informed speculation says it may demand that Apple pay Ireland €6bn, which the full 12.5pc tax would have reaped over three years; or €19bn if they reckon it over 10 years. It may be €2bn. (Apple recently had to pay Italy €318m, when prosecutors went after the company for tax fraud.)
What would you or I do? We’d gratefully take the money and turn to Apple and say, Ah, gee, we’re under orders from the EC, but we’ll put the money to good use.
Enda Kenny, with the backing of Micheal Martin, doesn’t want the money. Michael Noonan has said they’ll appeal such a ruling. They’ll fight like dogs not to take it.
To be clear.
The FG government, supported by FF, by Shane Ross and Finian McGrath and all the rest of our great patriots, will insist that we spend a small fortune on lawyers – to ensure that we lose a big fortune in taxes that should have been paid under the 12.5pc rate.
There was “no state aid” to Apple, Noonan told the Dail on 14 January. There was “simply no question” of a “special tax deal”. There’s nothing special, apparently, about paying tax at a rate of 0.05pc.
Pursued by Richard Boyd Barrett, Mr Noonan insisted, “There is no suggestion that there is anything wrong with our tax system”.
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It’s always been a mystery to me how judges keep a straight face. Whether it’s Ireland, Britain or the US, the situation’s the same: Bankers and corporate CEOs commit fraud with impunity; wealthy and connected individuals abuse children on an industrial scale, and smirking politicians commit war crimes that would have had them hung at Nuremberg.
Meanwhile single mothers are shoved into jail if they can’t afford their water charges or TV licenses. I don’t know what the right word for this system is, but it’s certainly has nothing to do with ‘justice’ impartiality or the rule of law.
Apple last year reported in its SEC filings that it paid $20 billion of taxes on a global net profit of $70 billion. Irrespective of whether you consider that figure ‘fair’ there is no doubt it is a significant sum if true. Generally the SEC don’t like fraudulent accounting so I am inclined to believe that hose figures are somewhat accurate of taxes that have or will be paid. Some of the reporting around Apple’s taxes has been sensationalist, biased bordering on being dishonest. Unfortunately it also misses the real point of Apple incorporating in Ireland.
It is hard to tell the difference between fact and fiction in the world of finance at the best of times, however the 0.05% tax rate seems like a ridiculous figure. We need an explanation of how that number was calculated, I refuse to take such a bold claim at face value. The most appropriate way to calculate taxes owned to Ireland, or any country for that matter, is to multiple the net profit of Apple operations in that country * effective tax rate of that country. For Ireland that would net profit of Apple Ireland * 0.125.
Most countries tax code require their incorporated companies to pay taxes from profits earned in each country according to that countries unique tax code. Those companies incorporated in one country, but selling products in a foreign company, must abide by that foreign countries tax laws for net profit earned. Global profits are then repatriated back to the companies headquarters without further taxation.
That is the ‘normal’ way of doing things.
America though is different. America has a baffling double taxation policy. Companies incorporated in America who sell products overseas first pay the tax in those foreign countries, and then when those profits are repatriated they are taxed again at a 35% rate. For example if foreign country B has a 20% tax rate, and America has a 35% tax rate, then the effective tax rate on repatriated profits is a whopping 48%.
The biggest tax dodge Apple is doing is keeping their money in Ireland, deferring repatriation to prevent double taxation. Apple’s incorporation in Ireland is not to prevent payments of tax worldwide, but rather to prevent double taxation from America. That is entirely underatandable and within Apples right.
All of this is not to claim there is no corporate taxation problem – for there is. The biggest of which is that the small to medium companies get trampled by the multi nationals. However Apple is one of the fairer global companies on tax, other companies jump through hoops, use tax havens and take on huge amounts of debt at risk to the company just to defer tax liabilities.
We need to have some perspective on all this rather than just pointing the finger.
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