Apple, Ireland, EU, Tax Avoidance, Margrethe Vestager, CCCTB


**Oops, Wallonia just caved… **

THE INDEPENDENT: Wallonia Withdraws Objection

I hope Ireland can at last a few more days than Wallonia on CCCTB?


I’m not sure that we would want to. The benefits to the economy appear limited to a 20% puff to GDP that amounts to a higher payment to the EU and not much else.


CCCTB does two things that changes the attractiveness of Ireland to MNCs:

  1. CCCTB signifiacntly dilutes the amount of IP transfer pricing that MNCs can do to move cash to Ireland (irrespective of whether it pays 12.5% or Apples 0.05%). It can reduce the tax savings of Ireland to MNCS by 50%

  2. By being forced to recognise more profits in higher taxes Euro countries, CCCTB further incentivises MNCs to move more costs (i.e. MNC Jobs) to those higher taxed EU countries to maximise the tax relief.

The 20% puff to GDP (i.e. Leprechaun Economics), and its additional EU GDP levies it brings, has become almost part of the State Secret Act. Everybody knows it was Apple (and will cost us over €300m in extra EU GDP levies), but the State is still spinning the Aircraft Leasing angle (even though the Aircraft Leasing, due to its high attached debt, makes a tiny net contribution to GDP, sorry Cliff Taylor in Irish Times). Makes me even more nervous as to why the State would want to cover up that Apple = Leprechaun Economics like this (when everyone knows otherwise)


Erm, yes, but 1&2 are good things. Leprechaun economics are a dead end.

Is your objection “because it’s Europe”? Or is there some bit of the good thing that I’m missing?


1 & 2 are bad things for Ireland? MNCS move Irish jobs to Germany etc.

(which would have a big effect on the Dublin Commercial Property prices).

Agreed on Leprechaun Economics - a fools game, and we are the fools to play it.


Again, who gives a shit about overpriced commercial property in Dublin?

  1. Irish banks have lent our deposits (again) against this overpriced Dublin Property (= You will pay their Bail Out)

  2. Because Commercial is so overpriced, land is back to 2006, nobody wants to build new Resi (= Housing Crisis)


In the brave new coco world, no, 1 is not true.
Land price crash? What’s not to like?


Please yoganmahew can you explain what the coco world is?

What does coco refer to in terms of stability and insurance of banking markets?


That is the theory but as soon as any coco experiences any loss, the entire bank capital structure will collapse (if it hasn’t been collapsing already beforehand), including depositors, and a State bail out will immediately follow (as the Italian State is finding out with the world’s oldest bank) - you always end up with a back stop State (or ECB) guarantee to give the capital structure time to get its confidence back (or decide terms it will come back on). Without that, it doesn’t work. Given the existing Texas Ratios of BOI, AIB and Permanent TSB, they would be given a small window before structure collapse.


Head of ASI in Ireland pays €45,000 fine to avoid jail in Italian tax evasion probe. … 67822.html


Contingent convertible bonds - the idea is they are the first call rather than the state after equity and equity like instruments.

In theory the state wouldn’t be called on :neutral_face:


Apple preparing for the inevitable … (despite the Irish media spin)

Anybody who has taken the time to read the Apple tread (God bless you) will know that, with very high probability, Apple is going to be paying the Irish State €13bn plus €6bn in fines within the next year or so. We can already see in Apple’s recent 10k that they are getting ready for the inevitability of this event:

IRISH TIMES: Apple expects to offset €13bn Irish tax bill by paying less in US

Probably the most deliberately “under-reported” Irish moment of 2016, was the fact that Apple on-shoring its “stateless” IP (Appl Sales International) created “Leprechaun Economics”, made fools of us internationally, and will cost us over €300m per annum in EU GDP levies.

We covered it here:

The c €7bn extra Apple charge Margrethe Vestager uncovered without even knowing it

And even Max Keiser picked it up (via Karl Whelan, who understands these things):

MAX KEISER: [KR965] Keiser Report: Leprechaun Economics

We even still have Cliff Taylor (no stranger to taking the odd “plant” article from our Section 110 SPV thread), recently spinning the Department of Finance’s line that it was mostly Aircraft Leasing (mentioning balance sheets of €35bn). But anybody who understands Aircraft Leasing and how Irish GDP is constructed, knows that this is mis-information as the debts linked with Aircraft Leasing, make its net contribution to Irish GDP tiny. You could move the entire balance sheet of the world’s biggest Aircraft Leasers to Ireland (NAV of < €7bn) and it would be a small single digits contribution to Irish GDP (<4%). (fyi - the entire balance sheet of the world’s biggest Aircraft Leaser was not moved in Ireland in 2015).

The fact that the State wanted to hide Apple’s on-shoring (and made us fools for it), and that they still take the time to push mis-information articles via Cliff Taylor that it wasn’t all Apple (even though everybody knows it was), means that something is up.

Word on the street is that Apple, despite on-shoring its ASI balance sheet to Ireland in 2015, to escape further accrual of liability to Margrethe Vestager, are still not going to be paying anything like the 12.5% Irish tax rate. It is whispered that buried in the Finance Bill 2017, after extensive discussions with Apple’s Dublin lawyers, are the structures to allow Apple avoid all Irish taxes (again), but this time legitimately, in a way that the EU cannot contest.

And of course, if Apple’s Dublin lawyers happen to use these structures for other clients (i.e. like vulture funds in Section 110 SPVs avoiding billions in Irish taxes) who need “legitimate” shielding from all Irish taxes, then so be it. Creating (another) avenue for mass Irish tax avoidance is a price worth paying for 5,000 medium paying jobs from the world’s largest tax avoider. This is even more so when those jobs are based in Cork, home of the two Michael’s. Thus giving perfect alignment with FF and FG on this issue.

Word is also out that the EU Commission understand the gist of what the State is going to try to do for Apple, and have circulated such details in their briefings on what Europe needs CCCTB (i.e. we will never get those naughty Leprechauns into line).

We had the “Golden Goose” of Europe’s lowest tax rate.

With CCCTB, a lot of it’s benefit goes out the window.

We only have ourselves to blame.


Europe’s taxman could have Amazon in its crosshairs … 1478601008 via @WSJ


IRISH TIMES: Trump tax plan will see ‘flood of companies’ leave Ireland

If there is one policy that Trump has been very consistent on - it’s the end of US MNC tech firms using places like Ireland to avoid all US taxes and roll up $bns offshore.

It is clearer now that these US MNC tech firms had become untouchable by the US IRS in return for using their powerful media channels to support Democrats / Clinton (something I have sympathy for - but that is for another thread).

It is now time for payback.

The aggregate US tax bills of US MNC tech firms is going up.

Whether Trump does it the hard way (allow the US IRS to do the same job that Margrethe Vestager is doing), or the soft way (a Bertie Ahearn FF type tax avoiders amnesty for repatriation ), the game is up.

We may see a reversal of Apple’s “leprechaun Economics” moment (which the Dept of Finance have been spinning madly as due to Aircraft Leasing, despite the fact that the huge debts attached to Aircraft Leasing make it a tiny net contributor to Irish GDP, as its NAV is so tiny) in the next year as Apple goes home ?


All he has to do is allow the IRS to designate Ireland as a recognized tax haven, which a lot of senior guys in the IRS have wanted to do for almost two decades, and a whole lot of IRS penalty laws / regs automatically kick in. Nothing else need be done.

And if he drops corp tax to 20% / less as promised then its really game over.


So true

The Irish “experts” are in no panic mode, because of their extensive “experience” with Trump.

IRISH INDEPENDENT: Colm Kelpie: US firms not going home in the morning - but future is under threat

George Bush ignored existing US Tech MNCs in places like Ireland, as it was small stuff back then in scale of things, and the quantum of US tax avoidance was quite small pre 2008.

The Denocrats allowed the exploding new US Tech MNCs post 2008 to do whatever they wanted with their exploding non-US profits (and as we saw with Apple Tax, vigorously defended their rights to make fools of the US tax code to do this).

In return, these new US Tech MNCs became emphatic supporters of the Democratic party.

Trump seems to take the opposite view (and got almost zero help from US Tech MNCs).

He could shut down US Tech MNCs offshoring of jobs quite quickly if he wants to.

All depends whether the Republican majorities in Congress and Senate are with him?


As a policy, how does this stack up economically for the US?


Trump doesn’t need to drop to 20%

He just needs the US IRS to be allowed to prosecute without interference from Washington.


Well based on UK and other countries experience dropping the Corp Tax rate from 40/50% effective in states like Cal to around 20% would at least double revenue in a few years. The percentage of total tax from corp tax has declined quiet a bit over the last 40 years. Just like it did in other countries pre drop. 50% was pretty much the going rate before the '90’s. And net yield was relatively low. Reduce the rate and corps will stop expending huge effort and expense in managing their tax bill. So revenue goes up.

High corp tax rate is purely an old school populous political slogan. Nothing more. Its got nothing to do with maximize tax yield from an economic sector.

Trump has none of the lobby baggage that the Dems/Reps had for the last 25 years. Since the last serious tax reform movement petered out. 1986 was the high point of the last wave.

All Trump has to do is drop the effective rate to 20%. Allow the IRS to enforce the current laws, especially retained earnings rules, and corp tax rate revenue should double very quickly. Apple net margins would collapse, As would companies like MS, Google and Facebook. Their very high nets are purely due to them paying almost no tax. Anywhere. Make them pay 20% and they are still very profitable companies. At least in the short term. But those huge cash balances would quickly disappear.

If Trump drops corp tax rates and end double taxation of dividends (the most damaging tax rule of them all) then you will quickly have a 1980 style boom of real economic growth. Its only in retrospect that I now realize just how much good Reagan actually did. You need to lob a political hand grenade once a generation at the entrenched establishment to insure the whole edifice does not collapse due to institutional incompetence.

What this mean for Ireland and it tax haven is short term, much instability but long term it will be facing an 1950’s like existential crisis. Its not going to be pretty.