Connect with us

Business

Apple hit with $14.5 billion (S$19.78 billion) Irish tax by EU

Published

8 years ago

on

Just this Tuesday (30 August), the European Commission (EC) ordered Apple Inc. to pay Ireland an unpaid tax up to 13 billion Euros (S$19.78 billion).

The Commission stated that the company had received illegal state aid.

In response to the ruling, Apple in U.S. headquarter and Dublin replied that the US company tax treatment was already in line with Irish and EU law, and they will appeal against the decision.

Reuters reported on 30 August that Apple said the alleged illegal aid was part of the European Unions’ drive in sweetheart tax deals, an offer commonly given by the smaller countries of the block to multinational corporations to attract jobs and investment.

U.S. Companies targeted?

A Spokesman from U.S. Treasury warned that the step taken by EC risks weakening the US investment in Europe and “the essential spirit of economic partnership between the U.S. and the EU.”

Starbucks Corp. has earlier been instructed to pay up to 30 million euros to the Netherlands, and Amazon.com Inc. and McDonald’s Corp are also being investigated by the Commission, which is the EU’s executive arm.

EU Competition Commissioner, Margrethe Vestager has asked how people might think a setting that allows Apple Ireland to pay a tax rate, which was conducted in 2014, of only 0.005 percent was fair.

“The verdict given by the Irish Taxes have artificially reduced the tax burden Apple for more than two decades, in violation of EU state aid rules. Apple now has to pay compensations,” said Vestager in a news conference.

Analysts said the size of the claims underscore the aggressive view of the Commission, but the lawyers said it was difficult to see whether a greater claim is still likely or not.because each case involves different circumstances and tax rules.

Apple, which has more than $239 billion (S$325 billion) in cash and market ready securities at the end of June 2016, might be able to drag this case for many years in the EU and possibly in the courts of Ireland.

Apple warned investors in July regulatory filing that the Commission’s investigations can result in “material” liability for further tax payments, but they can not estimate the impact.

On Tuesday, the company said it expects to put “some amount of money” in an escrow account.

Tax experts said that the European Commission face a tough battle to convince the court to support its position.

While the European Union has found that certain tax rules are anti-competitive, they never before ruled whether countries have adopted tax regulations like with Apple, Starbucks and others. As a result, some lawyers and accountants said they doubted that this case would end up with Apple paying back any tax.

Tim Wach, managing director of global international tax advisors, Taxand, said, “I am not persuaded by the reasoning given by the European Union.”

“Made up” arrangement

The EU ruling challenges the way the Irish agreed to tax profits of Irish-registered Apple subsidiaries, through which most of the non-US profits seeped.

Apple Inc. licenses the rights of the American design technologies to a subsidiary in Ireland, and then they hire contract manufacturers to make devices that they sell to Apple’s retail subsidiaries throughout Europe and Asia.

Because production costs are a fraction of the price of retail sales and its subsidiaries were given a small operating margin, the Apple Ireland is very profitable. In 2011, it earned $22 billion (S$30 billion) after paying $2 billion (S$2.73 billion) to US progenitor in connection to the rights to Apple’s intellectual property.

However, Irish tax authorities agreed only €50 million (S$75.96 million) of this amount is taxable in Ireland, said the European Commission. Under the terms of Apple tax deal, first agreed in 1991 and updated in 2007, Apple could allocate a portion of profits earned by the Irish operating unit for a “head office” that does not have any employees or have any location.

‘The headquarters’ does not have the operating capacity to handle and manage the distribution business, or other substantive business for that matter,” said the Commission.

The Commission said that this agreement has no basis in tax law and not available to others, so it is represented by state aid.

Irish did not agree?

Irish Finance Minister Michael Noonan said he did not agree with the decision and to preserve the attractiveness of Ireland for the investment he would appeal.

“There is no economic basis for this decision. It’s weird, and it’s an exercise in politics by the Competition Commission,” said Noonan.

“They do not have the responsibility for taxation, and they opened the back door through the state aid to influence tax policy in the European countries when European treaties say tax policy is a matter for the sovereign government,” he added.

Low tax rates in Ireland has been the cornerstone of economic policy for decades, to attract investors from multinational companies that account for nearly one staff of 10 workers in the country.

For many technology companies like Google and Facebook, the main puller is that Ireland allows the company to adopt a tax structure which they pay much less than the headline rate of 12.5 percent. The companies say they followed all tax regulations and Apple said it was confident of winning the appeal.

CEO Tim Cook said, “The European Commission has launched an attempt to rewrite the history of Apple in Europe, ignore the tax laws of Ireland and upend the international tax system in the process,” in a letter to customers posted on Apple’s website.

“The profits of a company should be taxed in the country where the value is created,” he added.

U.S. opposition

The U.S. Treasury Department published a white paper last week in which it said it was looking at the possible response to what it sees as an unfair targeting of the companies, which could result in extra taxes on U.S. arms in European companies.

The paper also noted that the European Union executive’s tax ruling could cost the U.S. exchequer money.

Under US tax law, profits of Apple Ireland are taxable if brought back to the United States – something that would have to be done if the company wants to use the money to pay dividends. But any tax paid in Europe decreases due taxes paid in the United States.

The Treasury said the Commission’s approach is contrary to EU tax law and international treaties.

The Commission, which has also ruled European companies, including car maker Fiat and Swedish engineer Atlas Copco AB to pay the tax bills worth more than $350 million stated that the application of competition law to the tax follow EU law and treat all companies equally. However, the Netherlands, Belgium, and Luxembourg have appealed the EU ruling against their tax deals with multinational, Reuters reported.

Apple employs 5,500 people in the field of logistics and distribution in the city of Cork in Ireland, which is about a quarter of the are European-based Apple staff.

Previously the Commission has said that the Apple tax treatment has been “motivated by employment considerations.”

Apple said it had paid the Ireland’s rate of 12.5 percent of on all income that it generates in this country.

Apple Chief Financial Officer Luca Maestri denounced the effective tax rate quoted by Vestager as “completely made-up number.”

Apple’s stock price fell less than 1 percent; Reuters reported.

Bloomberg also pointed to important questions related to the European Commission’s ruling on Apple’s taxes in Ireland in its report here.

Using low tax to attract overseas investments is not uncommon, the Economic Development Board of Singapore refers to Singapore as  one of the lowest corporate tax rates in the world and states, “on top of a host of other tax schemes and incentives, Singapore is easily one of the best countries in Asia for companies to grow their businesses.”

 

Related Topics:
Continue Reading
Click to comment
Subscribe
Notify of
0 Comments
Newest
Oldest Most Voted
Inline Feedbacks
View all comments

Business

Temasek in negotiations for over US$1 billion stake in India’s largest snack maker

Temasek Holdings is in talks to acquire a minority stake in Haldiram Snacks, India’s largest snack manufacturer. This potential transaction could value Haldiram at around US$11 billion (S$14.3 billion). Temasek is considering buying 10% to 15%, with an investment worth over US$1 billion (S$1.3 billion), possibly paving the way for an IPO.

Published

6 hours ago

on

4 October 2024

By

SINGAPORE: Temasek Holdings is reportedly in discussions to acquire a minority stake in Haldiram Snacks, India’s largest snack manufacturer.

As reported by Bloomberg news, sources familiar with the matter have indicated that the transaction may value Haldiram at approximately US$11 billion (S$14.3 billion).

The Singapore’s sovereign wealth fund is contemplating purchasing between 10 per cent and 15 per cent of the company, which could equate to a stake worth over US$1 billion (S$1.3 billion).

The potential investment could serve as a stepping stone towards an initial public offering (IPO) for Haldiram, though the discussions are still at a preliminary stage and may not culminate in a deal.

The company, also known as Haldiram’s, has attracted interest from various other bidders, underscoring its significant market position.

A representative for Temasek has declined to provide any comments, and Haldiram has not responded immediately to requests for information.

Established by Ganga Bishan Agarwal in the 1930s in northern India, Haldiram’s offers an extensive range of products, including sweet and savoury snacks, frozen meals, and breads.

The company also operates 43 restaurants in and around Delhi, as detailed on its website.

The Agarwal family is reportedly considering various options, including a potential sale of the business or an IPO, as noted by Bloomberg News.

The growing interest of global investors in India has been fuelled by the nation’s rapid economic expansion, making it a prime location for significant deal-making.

Over the past two decades, Temasek has invested nearly US$37 billion in India, according to Mr Vishesh Shrivastav, the managing director for India investments at Temasek.

In July, Mohit Bhandari, Temasek’s Managing Director for India, during an interview with Reuters, indicated that Temasek Holdings plans to invest up to US$10 billion (approximately S$13.4 billion) in India over the next three years, with targeted investment areas including financial services and healthcare.

As Temasek becomes more cautious about investing in China, it is leaning towards increasing its investments in India.

India’s economy is growing rapidly, with its stock market near historical highs, and there is a boom in initial public offerings and mergers and acquisitions.

Bhandari stated that India currently accounts for 7% of Temasek’s global investments, and the company intends to increase this proportion.

Approximately 22% of Temasek’s investments are in the US, while 19% are in China. In the last fiscal year, for the first time in a decade, Temasek’s investments in the Americas surpassed those in China.

Temasek has been focusing on acquiring minority stakes in companies, assisting them in their growth, while largely avoiding the trend of securing majority holdings in Indian firms.

Its primary areas of interest include digitisation, consumer trends, and sustainable living.

Notable potential minority investments are said to include VFS Global, which is valued at about US$7 billion, including debt, according to Bloomberg News.

Continue Reading

Business

WP Engine banned from WordPress.org amid escalating legal fight with Matt Mullenweg

Following Matt Mullenweg’s ban on WP Engine from accessing WordPress.org resources, many WP Engine customers are left vulnerable, as they can no longer access plugin updates or security features. Mullenweg urged users to seek alternative hosts, escalating the legal conflict between the two companies.

Published

1 week ago

on

27 September 2024

By

In a sharp escalation of tensions, WordPress co-founder and CEO Matt Mullenweg has publicly criticized WP Engine, a popular hosting provider, while also cutting its access to WordPress.org’s resources.

The dispute centres on legal and trademark issues, with Mullenweg accusing WP Engine of both profiteering off WordPress’s open-source platform and damaging its community.

On 25 September, Mullenweg posted a scathing blog on WordPress.org, stating that WP Engine no longer has free access to the platform’s resources and calling for customers to avoid the service.

He also detailed that WP Engine’s recent actions disrupted thousands of websites. “WP Engine broke thousands of customer sites yesterday in their haphazard attempt to block our attempts to inform the wider WordPress community,” Mullenweg claimed.

The conflict appears rooted in WP Engine’s use of WordPress’s open-source platform while allegedly not contributing to its development or upholding community standards.

At the core of the dispute is WP Engine’s practice of locking down a WordPress feature that tracks revision history for posts. According to Mullenweg, this undermines a crucial aspect of WordPress’s promise of data transparency and protection.

WP Engine, in turn, has argued that Mullenweg is trying to coerce them into paying millions to license the WordPress trademark, a claim Mullenweg denies.

The host provider WP Engine has faced harsh criticism for disabling certain features in WordPress core, which, according to Mullenweg, is central to protecting user data.

“WP Engine wants to control your WordPress experience,” Mullenweg wrote, accusing the company of exploiting WordPress’s free services while making billions of dollars in revenue.

WP Engine’s inability to provide security updates and other resources leaves customers vulnerable, Mullenweg suggested, urging users to consider alternative hosting options.

Additionally, Mullenweg argued that WP Engine would need to replicate WordPress’s security infrastructure independently.

He emphasized that WordPress.org has collaborated with hosting providers to address vulnerabilities at the network layer, a service WP Engine can no longer access freely. “Why should WordPress.org provide these services to WP Engine for free, given their attacks on us?” he asked.

The ban leaves WP Engine in a precarious position, as customers who rely on WordPress plugins and themes may face significant difficulties accessing the latest updates.

These restrictions have raised alarms in the community, as outdated plugins are often the target of cyberattacks. Hackers frequently exploit vulnerabilities in WordPress plugins, potentially compromising millions of websites globally.

The dispute between WordPress and WP Engine has been simmering for some time.

Earlier in September, Mullenweg described WP Engine as a “cancer to WordPress” during a speech at the WordCamp US Summit, accusing the company of profiting off the platform without giving back.

In response, WP Engine sent a cease-and-desist letter to Mullenweg and Automattic, claiming that Mullenweg’s comments were an attempt to extort the company into paying for a trademark license.

WP Engine’s legal team also accused Mullenweg of threatening a “scorched earth nuclear approach” if they refused to comply with his demands.

The cease-and-desist letter was swiftly countered by Automattic, WordPress’s parent company, which asserted that WP Engine had violated WordPress and WooCommerce trademark policies.

The updated trademark policy on WordPress.org explicitly cautions users against assuming WP Engine is affiliated with WordPress. “Many people think WP Engine is ‘WordPress Engine’ and officially associated with WordPress, which it’s not,” the updated guidelines explain.

The legal dispute has thrown both companies and their customers into uncertainty.

While WordPress operates under a GPL (General Public License), which makes the software free for use, hosting providers like WP Engine must offer services beyond the core platform, such as user login systems, update servers, and security monitoring.

Mullenweg’s decision to sever WP Engine’s access to WordPress.org resources has already caused disruption, with many sites reporting functionality issues and concerns about security vulnerabilities.

WP Engine has pushed back against Mullenweg’s actions.

In a public statement, the company accused Mullenweg of abusing his influence over WordPress to disrupt WP Engine customers’ access to WordPress.org, calling the move “unprecedented and unwarranted.”

The company argued that the ban affected not only its users but also developers who rely on WP Engine’s tools to build and maintain WordPress plugins.

As the dispute unfolds, the wider WordPress community is left to grapple with the implications. Developers and hosting providers have expressed concern over the trademark battle, fearing that similar restrictions could extend to them.

The WordPress Foundation, which holds the trademark, has already filed to trademark “Managed WordPress” and “Hosted WordPress,” sparking debate about how this might affect commercial users.

For now, the WordPress ecosystem is in flux as users, developers, and hosting providers wait to see how the legal battle will unfold and whether WP Engine will regain access to critical WordPress.org resources.

Until then, Mullenweg’s message is clear: if you want the true WordPress experience, WP Engine is no longer the place to find it.

Editor’s note: This publication was previously hosted on WP Engine.

Continue Reading

Trending