12 thoughts on “US Secretary Jack Lew: EU decision about Apple, means EU is “reaching into the US tax base””

1. I think there is angst about the retroactive nature of this – going back a few years – as businesses always like clarity. Also, unfair for persons overseas when the US decides to start enforcing/makes new retrospective taxes.

   From what I understand at issue is this: Ireland has a low corporate tax rate of 15%. Yet, they gave a special deal to Apple that allowed it to pay tax of only 1% or less.

   The EU does not like special deals that lack transparency and give an unfair advantage to certain companies within a country. So it says Apple needs to pay Ireland the difference between 15% and what it paid = 14+ %. This goes back a few years. And we know they probably really minimsed the income in Ireland anyway with ‘double dutch sandwiches’ etc.

   The US Treasury is up in arms as any additional tax paid to Ireland would then be a credit against US taxes owed (yet we know this would only occur if the money is brought back to the US). So we know the existing system, (unlike for real persons) US companies do not have to pay the difference in US tax rates – tax rates of other countries, unless they bring the money back. They are not bringing the money back, so as it is the US would not lose any additional tax, except perhaps under new tax law to tax the cash piles kept overseas.

   Here is another point, I read somewhere along the way that Apple is being quite conservative in its tax reporting on its overseas income and – did I see somewhere – it is considering the overseas earnings as if taxed 22-24%. Then there is an additional gulf and mystery between what tax it reports and the lesser amount of the tax actually paid.

   http://europa.eu/rapid/press-release_IP-16-2923_en.htm

2. Yet again I’m struck with the feeling that the US thinks all countries operate like they do re CBT. Perhaps what is a gaping difference between CBT and RBT for those affected by it is merely a subtle difference for others. When my mother tried to explain FATCA to a retired, Canadian accountant friend, he incorrectly said: “all countries tax their citizens”. Due to the fact that most residents are a country’s citizens he missed the subtle difference that Canada, for example, is not taxing citizens, but residents.

3. I’m going to play the contrarian card here and suggest that this is a positive development for us.

   Think about it: we (‘Americans’ abroad) are the first casualties of a new era of tax fundamentalism being imposed globally by a few powerful nations facing fiscal uncertainty. The ‘cartel’ backing the FATCA/OECD tax juggernaut is too powerful to be derailed by us alone. It’s shocking that the countries of the world, and Canada in particular, didn’t move to protect the economic rights of dual citizens under the IGAs. Our governments are effectively looking away as the IRS raids our pensions and savings.

   Now we are seeing another tax situation involving a ‘US person’, the U.S. Treasury and a foreign government. The good news for us lies in the following: the US person is the biggest and most powerful US person, namely Apple. The foreign government is the biggest and most powerful foreign government, namely the EU. Most significant here, is that the primary tax claim is being made by the EU and then, without invitation, the US Treasury arrives saying “That’s ours”.

   I’m not suggesting this situation will play out favorably for us anytime soon, but think about the following:

   “Lew: EU trying to reach into the US tax base” might appear to be just another case of double standards, but unlike Susan Rice’s condemnation of Eritrea’s CBT, the antagonist here is the EU and its hallowed tax agendas. We never expected the government of Eritrea to condemn the US government on our behalf, but if the EU locks horns with Treasury over this issue, European governments might like to be made aware of how the US is reaching into the EU tax base via CBT and the IGAs. Perhaps Brockers can raise the necessary awareness through comments and forums.

   More generally, as governments find more categories of foreign economic activity to add to their tax base, they will continue to overlap with other governments’ claims and an unworkable economic environment will result. We all feel this already, but the fact that the world’s two most powerful sovereign entities find themselves competing for the right to tax the world’s most valuable company is a situation of which each one of our own circumstances is a microcosm. Apple is respected by billions around the world, and has the resources to take on the two behemoths.

   The ‘tax cartel’ to which I made reference earlier was bootstrapped by the US’s willingness to leverage its indispensable banking system in the creation of FATCA, which in turn enabled the OECD’s Common Reporting Standard (CRS). The US’s refusal to sign up to CRS, ineffective FATCA reciprocity and ascension of the Financial Secrecy Index (list of tax havens) have thawed relations with other members of the cartel. With any luck, the grab for Apple’s tax revenue will provide the necessary ingredient for the perfect storm which might begin the deceleration of this misguided global agenda.

4. So I assume that I just don’t get it but here’s my question. Corporations are people right? Apple is a U.S.”person” and is allowed to earn outside the U.S. and not pay tax until the income is returned to the U.S. right? So I am a person and earned income outside the U.S. Why if I am a U.S. Citizen do I have to pay taxes before the income is “repatriated?” Am I being stupid here!

5. @Cheryl

   Unfortunately the ‘repatriation deferral’ is only available to corporations. The US corporate tax is a different set of rules from the individual income tax. The term ‘US persons’ is a catch-all term for any individual or entity over which the US claims a taxing jurisdiction. When it comes to tax treaties, however, they apply to individuals and entities equally; except that they were drafted primarily with corporations in mind. So individuals get the worst of both worlds: no repatriation deferral in US law and no particular consideration under the treaties.

6. Countries are different though. They’re another species, not persons.

   https://i.chzbgr.com/original/8970110464/hFA8FA98E/1

7. I am moving this comment from Neill over to this post. He writes:

   http://isaacbrocksociety.ca/media-and-blog-articles-open-for-comments-part-3-of-3/comment-page-89/#comment-7655601

   I like this bit:

   ‘The European Union is going to grab this money, instead of the US,” Schumer said. ”It’s a big signpost here for us. Let’s get moving.”

   He added: ”We’re trying to protect our US tax base. That money sitting over there should be here in the US, not in Ireland and not in the EU.”

   http://www.business-standard.com/article/international/outraged-by-apple-s-tax-dodge-then-now-by-its-tax-bill-116090200032_1.html

   Schumer is a piece of work. So desperate are they for that overseas money that they couldn’t come to some agreement how how to change the tax code to let companies bring it back. Democrats were blocked by the desperate need to tax the deferred earnings that aren’t taxed by other nations and only get taxed for American corporations. They don’t want to let that money go. They accuse the EU of changing the tax code retro-actively while they themselves want to change the tax code to tax money that was deferred over decades.

   Of course they consider this money part of the american tax base while it was already taxed int he countries it was earned since those countries have the right at first shot to tax that money.

   I think what the EU is doing here is bad but they have a right to do it. The US is being massively hypocritical.

8. Seems to me that the EU making sure Ireland treats all corporations equally will actually do more to create certainty. The elephant in the room is the US tax treatment that compels US companies to go offshore, isn’t it?

9. Mr Obama can’t help it. It is in his DNA. he hates America and all that goes with it, especially capitalism. His mother his grandmother and his grand father were all avid Communists and his childhood mentor recruited by his grandmother for him to have a black role model was Frank Marshall Davis, who was trained by the Soviets and was an advocate of freelove and wanted the state to own all means of production just like Russia. ( according to Davis’s book he could be Obama;s real father) In his two books Obama expressed admiration for all the old communists, but those who vote for a living now out number those who work for one. he republic id doomed unless the young people rise up and overthrow them and go back to the Adam Smith model of financial dealings.

10. Mr Obama and Mrs Clinton have used a handbook written by Saul Alinsky called ”Rules for radicals”. Every speech and every move either makes is right in the book.
    Hillary wrote about him and did a term paper on him. Her admiration of Alinsky shows to everyone who had read it.

11. https://3.bp.blogspot.com/-SvcC82xto7k/V8nWlTHgjDI/AAAAAAAAADk/9Nl_gfMIOf45i9LsrwBLuZo6FQzpY3HFwCPcB/s1600/JackLew_theAss.jpg

12. MEP Sophie in’t Veld tells it like it is re FATCA:
    “US very loud abt EU being out of bounds in Apple case, very quiet on extraterritorial impact of #FATCA”
    https://twitter.com/SophieintVeld/status/770897743569117185