The European Union clamps down on Apple's Ireland-supported tax evasion—and the U.S. balks?

By Egberto Willies
Sunday Sep 04, 2016 · 9:01 PM EDT

The European Union is bringing sanity to the troublesome issue of government-supported tax evasion by companies like Apple. They ruled that Apple owes $14 billion in back taxes, because the tax evading scam they orchestrated with Ireland is illegal. This ruling is a great thing in the long run.

So how was the company able to evade $14 billion worth of taxes? Reuters explains the scam, also referred to as an “artificial arrangement,” as follows:

The EU's ruling challenges the way that Ireland agreed to tax the profits of Irish registered Apple subsidiaries, through which most of its non-U.S. profits flowed. Apple Inc licenses the rights to technology designed in the United States to Irish subsidiaries. These then hire contract manufacturers to make devices which they sell to Apple retail subsidiaries around Europe and Asia. Since the manufacturing cost is a small portion of device sales prices and retail subsidiaries are allocated a small operating margin, Apple Ireland is very profitable.
Apple created financial structures to maximize profits at all costs. The business was simply an abstraction. People and labor were fungible.

In 2011, it earned $22 billion after paying $2 billion to its U.S. parent in relation to the rights to Apple intellectual property. However, the Irish tax authority agreed only 50 million euros of this was taxable in Ireland, the European Commission said. Under the terms of Apple’s tax deal, first agreed in 1991 and renewed in 2007, Apple could allocate most of the profits earned by its Irish operating units to a "head office" that did not have any employees or own any premises. “This 'head office' had no operating capacity to handle and manage the distribution business, or any other substantive business for that matter,” the Commission said. The Commission said this agreement had no basis in tax law and was not available to others, and so represented state aid.
In other words, Apple got a hell of a deal that many companies in Ireland are not getting, given the Irish corporate tax rate of 12.5 percent.

Read more
http://www.dailykos.com/stories/2016/9/4/1565698/-The-European-Union-clamps-down-on-Apple-s-Ireland-supported-tax-evasion-and-the-U-S-balks