#AppleTax: Dear Tim Cook – you are not Mother Teresa

| September 3, 2016 | 0 Comments

160901Riverdance2When Mr. Steve Jobs strode into the Cork plant in 1980, the workers greeted him, crying out “Top of the morning to you, sur!” A bare-footed child dressed in rags ran towards Jobs, offering him a slightly dishevelled bunch of shamrock, tied together with some old yellow twine; tears running down her emaciated face, she thanked him for investing in the god-forsaken piece of turf that is Cork, writes Catherine Feore.

OK, I exaggerate a little and, while I mock, I – and my fellow countrymen – are and continue to be enormously grateful to Apple for the jobs, the desperately needed investment and the role they played in helping to transform Ireland from a rural backwater to a 20th century knowledge economy.

Following the European Commission’s state aid decision (30 August) people are lining up on either side of the argument to make the case for or against Apple. In one corner, we have the US Treasury, the Irish government and Apple itself, the self-proclaimed ‘responsible corporate citizen’, dedicated tax-payer, and innocent victim of ‘obvious targeting’ by the European Commission; on the other side we have a rapacious, un-elected bureaucracy intent on stripping Apple and any other American multi-nationals of their honestly earned profits.

We take a brief look at Apple’s history in Ireland and then dive in to the rights or wrongs of this rather vexed situation.


In a letter to their customers – of whom I am one –  Apple reminds us that they moved to Ireland way back in 1980, back in the days when the Single European Act was just a twinkle in Jaques Delors’ eye and Irish dancing only involved leg movements. It was the year when Johnny Logan reeled in yet another Eurovision song contest victory for Ireland; thinking about it, our best export in 1980 probably was Johnny Logan.

To put it mildly, Ireland was not the obvious place to invest. But a year after the entire population turned out for Pope John Paul II – the first pope to visit Ireland – Steve Jobs stepped off a plane as if in answer to our prayers; prayers that could only be answered by a Californian, Zen Buddhist, high-tech entrepreneur.


Roll forward to 1991, the little girl is about to graduate in IT at the thriving campus of University College Cork and she is hoping that by 1996 her parents will be able to legally seek a divorce. Things are not going so badly in Ireland and in a few years’ time people will be calling us the ‘Celtic Tiger’ and voluntarily paying hard cash to watch Irish dancing. 1991 is also the year when Apple received its first tax ruling in Ireland.


Ireland is over-brimming with confidence. In 2007, we agree to a second tax ruling for Apple. Just a year later, Minister of Finance, Brian Lenihan will issue a state guarantee to Ireland’s reckless banking sector and incidentally help a number of reckless banks, insurers and investors from across Europe. Our largesse knows no bounds when it comes to helping out the struggling private sector. We are willing to put several generations in hock in order to send a clear message that Ireland is always open for business.



In 2011 the US Senate starts an investigation into the tax arrangements of various companies. Some busybody in Brussels gets wind of this testimony and in 2013 the EU starts its own investigation into Apple’s tax arrangements and starts checking to see if they are compatible with the European Union’s state aid law. Apple replies in a detailed statement, saying “Huh?”

The US and its companies just don’t understand that one of the quid pro quos of forming a super state by consensus – rather than by civil war – is that you have to put a few safeguards in place such as state aid law – not because assistance to companies isn’t allowed, but you have to provide some justification before you go out throwing around grants, guarantees, tax dives… to companies in one sector/country/region rather than another.

For our American readers, here is my ‘Dummies Guide to Illegal State Aid’, this was written in response to a decision in January on Belgian state aid, where the EU seemed to be pointing their guns at European multi-nationals. It isn’t just you, Apple!


Apple testifies to the US Senate’s hearing in March 2013, they explain their reasoning behind their tax arrangements – here is a link, pay particular attention to pages 12-14.

Apple’s tax arrangements as understood through Catholic teaching on Limbo

Apple appears to have modelled its tax system on the Catholic Church’s teachings on Limbo: it is a state that includes the souls of infants (read company corporate tax liability) who die subject to original sin (Ireland) and without baptism (hasn’t arrived in America), and who, therefore, neither merit the beatific vision (the Irish corporate tax jurisdiction, 12.5%), nor yet are subjected to any punishment (the US corporate tax rate, 35%), because they are not guilty of any personal sin.

Being free “of any personal sin” is a pretty good description of how Apple sees itself.

It is worth noting that even the Catholic church – not known as an early adopter – did away with Limbo in 2007.


The European Commission starts its investigation.


09h30, 30 August e-mail arrives Commissioner Vestager will be addressing the press room on a competition case 12h. Surely not… It’s still the summer holiday, it is August, is nothing sacred to these people? We’ve just come back from our holidays, the Commissioners are about to go on an away-day to the seaside, for goodness sake!

12h It is the Apple decision! The US Treasury has been posturing in a very aggressive manner, saying that they will take retaliatory action against European companies; Jack Lew has obviously never dated a Dane. People mumble that the Commission will find a way to avoid a massive fine. Vestager speaks, journalists wait with bated breath…

€13.5 billion or there abouts, plus interest of tax to be repaid to the Irish government

Having bated our breath, there is a large collective intake of breath.

It would be difficult to put a price on Apple’s contribution to Ireland’s transformation. However, the European Commission has taken a punt and they say that the value is around minus €13.5bn of unpaid corporate tax. That is a lot, ‘to be sure’.

This is of course facetious, the Commission is well aware of the positive impact Apple has made to Europe in general and the Irish economy in particular. They are not as Tim Cook, Apple CEO, claims biased, it’s just that they are stuck with their rules and they have applied them in an equally savage way to European, as American companies.

As an aside, Tim, it is a good idea to produce evidence if you are going to accuse someone of bias.

Contrary to popular belief, the Commission has not issued a fine. They are just asking Apple to pay some tax they owe to the Irish government.

In its decision, the Commission holds that EU countries cannot give selected companies tax benefits. They are upholding the well-known legal principle of ‘just being fair’, and rule that Ireland has granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years.

Bearing in mind that the official corporate tax rate for every other company operating in Ireland is 12.5% – already one of the lowest in Europe, Apple’s effective corporate tax rate was much less than the amount paid by other businesses. For example, in 2014 they paid an effective rate of only 0.005%. Commissioner Vestager put this into context – for every million in profits, Apple paid just EUR 50 in taxes.


Illustration: Dunnes Stores, well-known Irish emporium

What this is not?


Leave.EU has never shown a strong interest in the facts. But just to say what this is not, it does not mean that Ireland has to choose between low company taxes and EU partnership. It has nothing to do with this. Ireland’s corporate tax rate is 12.5%. This is one of the lowest corporate tax rates in Europe. The Commission is not doing anything to change this.

Why this matters

It also worth remembering at this point what we pay taxes for and why – within the bounds of reason – they are a good thing:

If you want the brightest and the best you have to have a well-funded public education system.

If you want roads, rail, airports to transport your goods you need decent publicly funded infrastructure.

If you want companies like Apple to emerge you have to invest in basic research.

Basic health, bin collection, law and order… These are things we all pay for because we believe them to be for the common good and also because it is economically more efficient to pay for most of them collectively.

However, there is a particular area of significance to Apple and that is publicly-funded basic research.


So, Tim Cook, you are not Mother Teresa, we are just asking you to pay your dues. You have done well, we applaud this and wish you further success; but Europe’s vision is not the iPhone 7, we want to use our taxes – at least, in part – to invest in our future, to start the Apples of the future, to meet the challenges of the future and to create the jobs and growth of the future.

Background – Some of the ‘arguments’

You are picking on us

Apple argue, or should I say accuse the Commission of picking on them. I say accuse, as they haven’t bothered to come up with any supporting evidence. The US Treasury say the agreement was not selective. The Commission argue that a tax ruling with one company – not even a type of company, or a particular sector – is about as selective as you can possibly get.

Sure everyone was doing it

Ireland compared to some countries was not issuing many tax rulings – this wasn’t something that was offered to any Tom, Dick or Harry. Tax rulings, per se, are allowed but they have to be done within the law. If Ireland was after legal certainty they could have asked the Commission, this process is called ‘notification’. European multi-nationals have also been pulled up in similar – if not quite so generous – cases.

We knew naawthing!

State aid rules have been around for some time, 1958 to be precise.

The, we knew nothing defence, is not considered to be a solid one. As Jean-Claude Juncker might say ‘Ignorantia juris non excusat’ or, not knowing about the law is not a defence. It certainly isn’t a defence when – it looks a bit fishy.

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

Now you are getting into the swing of it Tim, it doesn’t have much to do with how much Apple pay in taxes, it is about where those taxes are payable. The Commission have said that you have to pay where the profits are made, current arrangements suggest that that is in Ireland. The EU also hints that the US may want to revisit this, but the EU cannot interfere with US tax authorities, this is up to them.

The Commission does some further heavy-handed hinting that other jurisdictions might want to use the information uncovered by their investigation to ask Apple to pay more tax on profits of the two companies over the same period, under their national taxation rules.

Please note, the European Commission will not see a penny of this tax.

The EU is not prepared to speculate on how much this might amount to and say that it is outside their control, being a question for national sovereign tax rules. That’s right LEAVE.EU, the Commission are respecting your sovereignty.

While the Commission is broadly agreeing with Tim Cook, it is leaving the ball(s) in the court of national administrations to let them decide whether or not to pursue claims on the recovered €13.5bn plus interest.

‘In Apple’s case, nearly all of our research and development takes place in California, so the vast majority of our profits are taxed in the United States.’: Tim Cook

Correct. Should you maybe be paying more in the US? Well, probably. Over to you.


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