Apple, Ireland and Taxes: Shredding The Letter from Tim Cook [Updated]

Update: Apple has created a document with frequently asked questions for shareholders, which you can read here in English.
While we have a keynote in little more than one week, the announcement of the decision of the European Union on the taxes of Apple in Ireland is the news of the day. According to the Commission, which has been the case, Apple should pay to the Irish State up to 13,000 million euros in taxes not levied at the time. Therefore, it is not a fine.
The issue is of great importance. Both the own Tim Cook has decided to respond with an open letter to the European Union, one that can be read on the Spanish website of the company. It is quite a few interesting points that we are going to interpret and shred in this article.

“A message to the community of Apple in Europe”

Long before the iPhone, iPod or even Mac, Steve Jobs has launched 36 years ago, established the first operations of Apple in Europe. By then the company already knew he needed a base there to cater to its European customers. Thus, in October 1980, Apple opened a factory in Cork (Ireland) with 60 employees.
The European Union claims taxes since 2003, because it can not go further in time. This leads us to ask ourselves the following: If the subject of the investigation originated 36 years ago, what is investigated now? Not should it have been resolved decades ago? What has changed since 1980 to 2014, when did the research?
In those years, Cork suffered a high rate of unemployment and extremely low volume of economic investment. However, the direction of Apple was able to see a place rich in talent, able to grow with the company if it reached the success that was expected.
Since then we have continued to work steadily in Cork, even in periods of uncertainty for our own company, and today we give employment to nearly 6,000 people in all Ireland. The vast majority continues in Cork, including some of our first employees, meeting the most different functions as part of the global project of Apple. A host of multinational companies have followed our example of investing in Cork, which today enjoys a local economy more prosperous than ever.
Often forgotten is that the activity of a company not only taxes reports. It also creates jobs that are listed and generate sales that bring their VAT (which, in the case of Spain is a surprising 21%). In short, Apple activity generates wealth to establish. Tim Cook knows it and why mentions it in this letter. On the European continent, Apple generates:

  • 22,000 employees of Apple in Europe, 1,400 in Spain.
  • 14.100 employees of Apple retail in Europe by 109 stores scattered across the continent.
  • 4,700 vendors in 23 countries that provide components, materials or machinery to Cupertino.
  • Some 600 premium resellers throughout the continent, assuming an average of 4 employees would be added other 2,400 employees generated thanks to Apple.

The success which has propelled the growth of Apple in Cork comes from a few innovative products that excite our customers. This success has helped us create and maintain more than one million and a half jobs across Europe: employees of Apple, hundreds of thousands of developers of apps that give their best on the App Store, as well as other jobs between our manufacturers and suppliers. Countless small and medium-sized businesses rely on Apple, and we are proud that they can count on us.
Second derivative of the activity of Apple in Europe: the creation of companies and indirect employment. More specifically and as Apple said earlier this year about its indirect activity in Europe:

  • 1.460.000 jobs created thanks to the activity of Apple, both workers and suppliers and iOS developers.
  • More than 10,200 million euros between European developers, i.e., almost 28% of the total of 40,000 millions of dollars distributed to developers around the world until the beginning of 2016.
  • 1,200,000 jobs directly related to the iOS, 61,000 of them created in Spain, 75,000 economy in Italy.
  • Nearly 3 million developers registered in Europe, 191.000 in Spain.

As citizens and members of a responsible company, we are also proud of our contribution to the local economies of Europe and communities around the world. Our growth over the years has made us more taxpayer Attorney from Ireland, contributing greater United States Attorney and the greater taxpayer Prosecutor world.
Translation: Apple has contributed more than 80,000 million in taxes in countries around the world between 2003 and 2015. Which leads you to Cook to say that your company is the largest contributor from the USA, the EU and around the world. In particular, the evolution of revenue, taxes and profits in these years is the following:
And the effective tax rate during all these years has been between 25% and 30% (which, remember, benefits and no revenues are taxed):
During this time we have received advice from the Irish tax authorities to comply properly with their tax legislation, the same type of advice given to any other company with a presence in the country. Apple complies with the law and we paid all the taxes that we owe, in Ireland and in all countries in which we operate.
The Irish Minister of finance said this morning: “the position of Ireland continues to be that” the total amount of tax has already been paid and in this case there has been no State aid of any kind. Ireland has not given favourable treatment to Apple. Ireland does not make deals with taxpayers.”
It’s funny, the country which is should be willing to collect uncollected taxes He says that he has now claimed all he had to charge Apple. However, the EU says that it is not so.
The European Commission has started a campaign to rewrite the history of Apple in Europe, ignore tax laws of Ireland and step radically change the international system on tax matters. The opinion issued on 30 August alleges that Ireland granted Apple a special tax treatment. This claim has no basis in facts or in law. We never asked and never received any special treatment. We are now in the exceptional situation that us requires retroactive payment of additional taxes to a Government that says that we owe him nothing more than we have already paid.
The opinion of the Commission is unprecedented and its implications are serious and far-reaching. What he actually proposes is to replace Irish tax laws by another version, which the Commission believes that it should have been. This would be a devastating blow to the sovereignty of the Member States of the European Union in relation to their own tax affairs and at the beginning of the certainty of the legal regime in Europe. Ireland has announced that it intends to appeal against the decision of the Commission and Apple will do the same. We are confident that the order of the Commission remain without effect.
Both paragraphs are very interesting. The so-called special treatment there, because other international companies have also benefited from the Irish laws. Again referred to Ireland does not claim him nothing to Apple in fiscal issues. Each EU Member State has sovereignty over its fiscal policy, which asks the Commission questioned the same sovereignty. Which has serious political implications.
Ultimately, the case presented by the Commission is not so much about how much money paid Apple in taxes, but about what Government collects that money.
And we come to the crux of the matter. As we have seen in the previous graphics, Apple paid a 25-30% a year in taxes on their global activity. What is being debated here is where those more than 80,000 million tax in the last few years. Apple doesn’t care pay for them in one country or another according to what mark law, but States do not give them equal. And then comes this dispute.
Taxation of multinational enterprises are a complex issue, but there is a universally accepted principle: a company’s profits should be taxed in the country where they create value. Apple, Ireland and the United States are in agreement on this point.
It’s laws and international tax agreements, which establish a subsidiary activity is taxed in the country of origin of the company. In the case of Apple, and Europe, in Ireland. The case for Spanish companies with activity in Latin America: Telefónica and BBVA pay all local taxes (VAT, social security, etc.) in each country but corporation tax is imposed here in Spain.
In the case of Apple, almost all our research and development takes place in California, so the vast majority of our benefits are taxed in the United States. European companies that do business in the United States pay tax according to the same criteria. However, now the Commission wants to change the rules retrospectively.
The decision focuses obviously on Apple, but its most profound and harmful effect will be seen in investment and the creation of employment in Europe. If the theory of the Commission will take practice, all companies in Ireland and the rest of Europe would be likely to be subject to the payment of taxes by laws that have never existed.
In other words, This will not only Apple. It affects all companies operating in the European Union. If Member States end up deciding that they prefer to seize instead of raising, international companies that can flee that fiscal hell will go to other countries. And the handicapped will be users, because we will have to pay more for the same products. Not only Apple but also any other multinational.
Long ago, Apple supports the reform of the tax system with a dual objective: the simplicity and clarity. We believe that these changes should emerge from a proper legislative process, which takes into account in its proposals the voice of the leaders and citizens of the countries concerned. And as with any other law, the new rules should apply, rather than retroactively mode.
We are committed to Ireland and it is our intention to continue to invest there, growing and serving our clients with the same passion and dedication as always. We firmly believe that the facts and legal principles on which the European Union is founded will prevail.
What they say in these cases: made the law, made the trap. The tax system and its current regulations is a maze. If you reform more rational and clear, would win all: companies, customers and States. Apple has already announced that he will fight to the finish this decision, but it has already warned that deliberations will extend for years.
Again, if it confirmed the decision of the European Commission, We will see how to react other economic powers United States with the large European multinationals. Obama has already announced that it is not nothing in accordance with this decision. We will see how the issue develops.