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Ireland will eliminate Apple's sweet tax deal within four years
Apple and other tech giants had better not lean too heavily on Ireland's super-favorable tax environment; at least one big perk is going away. Finance minister Michael Noonan has detailed a new budget that, among other things, will phase out the "double Irish" system that let companies operating in Ireland (including Apple) move their revenue to an Ireland-registered offshore tax haven. As of 2015, companies incorporated in the country will have four years to make sure that they're also tax resident -- that is, they'll pay the same as any other corporation operating on the Emerald Isle.
EU says Apple's Irish tax deal is illegal
An EU commission has accused Ireland of granting "state aid" tax breaks to Apple that may break market rules. That was the result of an investigation by the Organisation for Economic Cooperation and Development (OECD) over Irish deals brokered in 1991 and 2007. It has now asked Ireland to provide more information about its tax arrangements with Apple and other companies, including Fiat and Starbucks. The OECD also looking into Luxembourg and the Netherlands as part of a larger probe to find out if certain EU nations help multinational companies swerve taxes. At 12.5 percent, Ireland has a lower tax rate than any other EU country, and Cupertino's complex tax deals there have been questioned before. As the US Senate saw recently, shuffling money around countries helps Apple avoid nearly $20 million a day in taxes -- and the EU seems to have a dimmer view of its strategy than the SEC did. [Image credit: pieceoplastic/Flickr]
Crawl devs devise a better way to announce a delay
Just like Mother always said: "If you have to deliver bad news, use a gif." Crawl, the monster-infested multiplayer dungeon crawler from Powerhoof, won't launch on its promised July 17 date. Powerhoof is an independent studio in Melbourne, Australia, and the team has run into tax issues that prevent the game from coming out on time. Right now, founders David Lloyd and Barney Cumming are waiting to clear the final pieces of red tape as they transform Powerhoof from a partnership into a company, meaning a delay of days or weeks. "Everything was on track until pretty much the last step, where we got hit with an unexpected bit of red tape that we were told 'may take up to 30 days' to resolve," Cumming writes. "We tried to find a way around it, but there's nothing we can do." Crawl is ready to roll, Cumming says, so with the extra time, he and Lloyd will look at adding some of their wishlist ideas. Crawl was Greenlit in March, and we thought it was the clear standout from that batch of 50 games. It's a pixelated multiplayer montser mash, where one player is the hero and the rest are evil beasties out to kill him – the monster who kills the hero becomes the hero, and the goal of the game is to escape the dungeons. It's like Evolve had a baby with Binding of Isaac (and didn't name it Isaac). Crawl is due out on Steam for PC, Mac and Linux. [Image: Powerhoof]
One-time tax holiday for Apple's overseas cash gains traction in D.C.
Apple today has over $150 billion worth of cash in the bank. Only problem is, the vast majority of that cash (~$138 billion) is held in overseas accounts. For some time now, Apple has been reluctant to bring that cash back to the United States because it would be subject to a 35 percent corporate income tax -- the highest rate anywhere in the world. Indeed, Apple's reluctance to brings its cash back stateside is why the company decided to issue debt to fund its ever-increasing capital return program. For quite some time, Apple and a number of other blue chip companies with vast cash holdings overseas have made it known that they'd love some sort of one-time tax holiday that would allow them to bring their cash over without taking a 35 percent hit. Now comes word via Reuters that the idea may be gaining traction in the halls of Washington. Top Senate Democrats and Republicans on Tuesday said they were considering offering American companies a one-time tax break if they repatriate profits stashed abroad. The senators anticipate the proposal would generate a windfall in revenue that would be used to fund federal transportation projects. U.S. Senate Minority Leader Mitch McConnell told reporters in the Capitol that Republicans had discussed a corporate tax repatriation "holiday" idea and "it enjoys a good deal of support in our conference." Back in May of last year, Tim Cook touched on the topic of a tax holiday during an interview with the Washington Post. "If you look at it today, to repatriate cash to the US, you need to pay 35 percent of that cash," Cook said. "And that is a very high number. We are not proposing that it be zero. I know many of our peers believe that. But I don't view that. But I think it has to be reasonable" Supporters of the tax holiday argue that enabling companies like Apple to repatriate billions of dollars in foreign cash at a significantly reduced tax rate would provide a much needed influx in federal funds. In particular, supporters articulate that the resulting revenue could help replenish the quickly depleting Highway Trust Fund. While no legislation has yet been put into motion, it has to be encouraging to Apple that the powers-that-be are talking. The last time Congress allowed a tax holiday was in 2004 when companies were able to bring back their foreign cash at a paltry 5.25 percent tax rate.
IRS tastes its own medicine, will pay Microsoft millions for Windows XP support
Usually, the Internal Revenue Service is the one getting paid this time of year, but Uncle Sam will be lining someone else's pockets this tax season because of its attachment to Windows XP. In case you hadn't heard, support for XP officially stopped on April 8th, meaning that Microsoft will no longer provide support or security updates for the venerable OS. However, governmental computers can't be left vulnerable, so the IRS will be paying Microsoft millions of dollars for custom support to keep their machines secure and functional. Right now, over half the agency's PCs still run XP, despite Microsoft telling the whole world that it would stop support for the OS in 2014 six years ago. The plan is to have all IRS machines running Windows 7 by the end of the year -- at which point the clock starts ticking on the transition to Windows 8. No rush, though, Microsoft has pledged to support Windows 7 through 2020. Let the governmental procrastination begin! [Image Credit: Alamy]
IRS says bitcoins are taxable property, but not currency
People love referring to Bitcoin as a "cryptocurrency," but the Internal Revenue Service looks at it a little differently. According to a new IRS statement, Bitcoin should be considered property, not currency. What does that mean for US Bitcoin aficionados? Quite a bit, actually.
Apple accused of tax fraud in Italy
Reuters is reporting that an Apple subsidiary in Italy is currently under investigation for tax fraud. According to a judicial source cited by Reuters, authorities in Italy are currently investigating whether or not the Apple subsidiary in question hid US$1.34 billion in revenue from tax authorities. The maker of the iPhone is the latest prominent corporation to become the target of a tax probe in Italy amid a global crackdown on tax cheating by multinationals. In Italy, where tax authorities have become more aggressive in their dealings with global companies, fashion designers Domenico Dolce and Stefano Gabbana were handed in June a 20-month suspended prison sentence and a heavy fine for hiding hundreds of millions of euros in unpaid taxes. Both deny any wrongdoing. For whatever reason, Apple seems to have a penchant for running afoul of various Italian laws. You might remember that Apple previously had a drawn-out spat with Italian regulators with respect to its AppleCare Protection plan.
DUST 514 1.4 update to bring usability changes, taxes
On September 3rd, CCP will deliver its biggest update yet to EVE Online-linked, PS3-exclusive shooter DUST 514. Among the changes are performance tweaks, bug fixes, and controller/mouse control improvements, along with the introduction of a hub for collecting player data. And because this is CCP we're talking about, DUST 514 players can also look forward to the addition of corporation taxes. Simply put, player corporations can set their tax rates to whatever they please, and members of those corporations will see the proper amount of ISK deducted from end-of-battle rewards. As in EVE, corporations are free to spend tax revenue in whatever manner they see fit; corps that exist in both DUST and EVE will have one tax rate for both games. It's worth noting that tax rates will be publicly available to players searching for a corp, only rewards greater than 100,000 ISK will be subject to taxation, and NPC corps will have 0% tax rates.
Irish MPs vote to let Apple off the tax inquiry hook
The chairman of the Irish parliament's finance committee has led a vote which has decided Apple will not face any questions over its tax practices in the country, according to The Guardian. The Irish Parliament originally agreed to conduct a tax inquiry into Apple's practices in the country after the United States Senate held a similar inquiry into Apple's tax practices last month. The US Senate inquiry found that in 2011 over two-thirds of Apple's global taxable profits (about US$34 billion) were "earned" by Apple companies registered in Ireland. Those profits came from the United States and other EU nations, but were then routed through Ireland so Apple could take advantage of its special 1 percent corporate tax rate (or less) in the country. While the Irish parliament's vote may work well for Apple, it's sure to infuriate other countries like the United States, the United Kingdom and other members of the European Union. Not all Irish politicians are happy about the finance committee's decision. As the finance spokesman for the Sinn Fein party, Pearse Doherty, puts it: "How can we look anybody in the eye out there and defend the type of austerity measures that this government is introducing when we're unwilling to take companies in [before parliament] who are not paying their fair share in this state? It can only be presented as this committee protecting these multinational firms who pay no tax here, who don't employ anybody and who don't pay any tax internationally. I think it makes a mockery out of this committee, an absolute mockery."
Apple made £68 million in the UK last year, paid £0 corporation tax
Apple is once again under fire in the UK for paying no taxes last year, even though the company earned £68 million (US$103 million) in the country. Apple got around paying UK taxes by offering employees £40 million worth of stock, which the company could then write off as a business expense, thus lowering its taxable income. The company has also carried a £3.8 million tax deduction forward for next year. It should be noted that Apple's tax activities are entirely legal, even though its moral and ethical implications leave a bad taste in the mouth. Multinational corporations have increasingly come under fire in the UK and the rest of the EU. Companies like Starbucks, Facebook, Amazon, Google and Apple are now receiving extreme scrutiny from government regulators over their unscrupulous, but apparently legal, tax practices. Many feel (including myself) that in an age of austerity where public budgets are being cut from almost every facet, it is not fair that companies are avoiding paying taxes on an estimated $21 to $32 trillion a year -- an amount that could effectively wipe out global poverty, global hunger and provide free education for every person on earth. Apple may make great products, but that doesn't mean it shouldn't be held to the same standards as the individuals who buy its products.
Sprint forced to defend $300 million New York State tax fraud case
Sprint's bid to dismiss a $300 million tax suit filed by New York's attorney general has been denied by the state's supreme court, according to Bloomberg. The judge in the case decided the claims "satisfactorily allege that Sprint knowingly submitted false monthly tax statements," and that a hearing will take place later this month. The so-called whistle-blower lawsuit arose in 2011 after Sprint believed it could withhold up to 25 percent of the taxes it was supposed to collect on fixed-rate wireless contracts. For its part, the state claimed it illegally treated them as nontaxable, adding that operators like AT&T and Verizon "correctly paid" them. The carrier said it intended to file an appeal, adding that New Yorkers, "who already pay some of the highest wireless taxes in the country," are being forced to "pay even more." Of course, given the recent merger approval by shareholders, Sprint's headache could soon become Softbank's, too.
UK games industry still waiting on promised tax breaks
UK games industry trade association TIGA has urged the European Commission to deliver promised tax relief for local game developers after failing to meet a proposed implementation date. The UK government planned to issue a total of £50 million in tax breaks for UK developers, starting in April of this year and extending through 2015. The proposed Games Tax Relief (GTR) plan offered 25 percent tax relief on 80 percent of a qualifying game's budget, and required passing a "cultural test" for consideration. In April, the European Commission launched an investigation regarding the plan's necessity, delaying its implementation.
France orders Apple to pay $6.5M in taxes
Apple has been ordered to pay US$6.5 million (5 million euros) in taxes in France by SACEM (Google translation), a French organization which doles out the "copie privée" tax to writers, artists, producers, musicians and other content creators. The "copie privée" is a tax in some European countries on digital devices that can display, copy or transfer copyrighted content. Though Apple has applied the tax to all devices it sells in France, SACEM has said it has not received the 5 million euros worth of "copie privée" taxes Apple collected from consumers from iPad sales in 2011. There has been no public response from Apple at this time over the allegations, though this is sure to be cleared up pretty quickly as Apple is under fire in several countries over the amount of taxes it pays. [via TheNextWeb]
Ireland says it has no special "tax deal" with Apple; Senators Levin and McCain dispute claim
Despite claims to the contrary, Ireland Ambassador Michael Collins this past week penned a letter to US Senators Carl Levin and John McCain exclaiming that Ireland has no special tax deal with Apple. The letter reads in part: First, Ireland's tax system is set out in statute - so there is no possibility of individual special tax rates being negotiated for companies. All tax resident companies in Ireland are liable to corporation tax on the chargeable income at the rate of 12.5% on trading income and at 25% on non-trading income. The tax rates attributed to Ireland in the Memorandum appear to be calculated by reference to the companies' entire profits, as if those companies are tax-resident in Ireland. This is despite the fact that the Memorandum clearly states that the companies concerned are not tax-resident in Ireland. The tax rates attributed to Ireland are wrong and misleading. Second, building on this analysis, the Memorandum refers to Ireland as a "tax haven". As you will be aware, the OECD has identified four key indicators of a tax haven. None of these criteria applies to Ireland. Understandably, many politicians are upset over Apple and other multinationals leaving billions upon billions of profits overseas. However, in their ostensible effort to paint Apple as the bad guy, they are not only ignoring the tax code which allows Apple to do what it does, but have also gotten a number of key facts wrong. For instance, Carl Levin initially stated that Apple's operation in Ireland was nothing more than a ghost operation with no employees. Come to find out, Apple actually employs upwards of 4,000 employees in Ireland. In any event, both Carl Levin and John McCain responded to Collins' letter wherein they disputed his assertions. Their statement reads: Records obtained by the subcommittee clearly reflect that, for years, Apple paid Irish tax authorities a nominal rate, far below Ireland's statutory rate of 12.5 percent, on trading income. Testimony by key Apple executives, including CEO Tim Cook and Head of Tax Operations Phillip Bullock, corroborates that Apple had a special arrangement with the Irish government that, since 2003, resulted in an effective tax rate of 2 percent or less. Most reasonable people would agree that negotiating special tax arrangements that allow companies to pay little or no income tax meets a common-sense definition of a tax haven. Well, this clearly isn't a topic that's going to die down anytime soon. Note, though, that until Congress changes the law in some regard, Apple will continue to keep its $100 billion cash hoard overseas.
Former US Senator John E. Sununu defends Apple's tax practices
Former New Hampshire Senator John E. Sununu on Monday penned an op-ed piece for the Boston Globe defending Apple's tax practices. Just last week, of course, a trio of Apple executives made their way down to Washington D.C. to answer questions before a congressional subcommittee regarding Apple's foreign cash hoard of $100 billion. In the op-ed piece, Sununu accurately points out that none of what Apple is doing is illegal. On the contrary, Sununu notes that Apple is simply doing what any other similarly situated multinational corporation would do, which is to minimize its tax liability within the confines of the law. As it stands now, the US currently has the highest corporate income tax rate in the world. Consequently, Sununu writes that the real blame with respect to corporations keeping untold billions in profits overseas falls directly on Congress. By refusing to feel guilty about the results produced by a 30-year-old corporate structure, Cook placed the responsibility for the taxes Apple pays where it belongs: on the US Congress. And Congress, being Congress, took the bait. Amid hearings of the House tax-writing committee he leads, Representative David Camp bluntly declared, "The tax code is a mess." John McCain observed that the Apple situation "reflects a flawed corporate tax system." [Carl] Levin closed his own hearing by saying, "It's unfair. It needs to change." Of course, calling for change is much easier than implementing it. Sununu points out that reworking the tax code isn't necessarily straightforward because Congress needs to strike a balance between raising revenues and simultaneously enticing corporations to repatriate billions in overseas profits.
TUAW TV Live: Taxes, Texas and Tim
Today on TUAW TV Live, cohost Shawn "Doc Rock" Boyd and I will be conversing about a number of topics. Yesterday saw Apple CEO Tim Cook being grilled by a Senate committee about corporate taxes and at the same time passing along a hint that a "refreshed Mac line" will be manufactured in the Great State of Texas, so both of those are worthy of banter. There are also some new products that have made it to the TUAW Labs in recent days, so we'll have some quick unboxings for your viewing pleasure. To view the livestream and join the chat, visit the TUAW TV Live page here. Be sure to bookmark that page on your browser for future TUAW TV events. Past episodes can be found on our YouTube channel, and today's show will also appear on this page within 24 hours.
Ireland distances itself from Apple's tax inquiry
Ireland has responded to criticism from Senater Carl Levin (D-Mich.) that Irish tax laws allowed Apple to avoid playing taxes on tens of billions of dollars in profits using Irish subsidiaries. So what did Ireland have to say for itself? In a statement to RTE, Ireland's national broadcast network, Deputy Prime Minister Eamon Gilmore said: These are not issues that arise from the Irish taxation system. They are issues that arise from the taxation systems in other jurisdictions, and that is an issue that has to be addressed first of all in those jurisdictions. Ireland's answer is simple. If American companies like Apple are using loopholes in the American tax system to skirt playing their taxes, it's not Ireland's fault, and we should fix our system before we come after theirs. It's a good point. The issue isn't that Ireland provided a safe haven for Apple to hide profits. It's that American tax law is so convoluted and full of loopholes that American companies like Apple can enjoy all the benefits of being an American company while paying a fraction of the taxes our laws say they own. It will be interesting to see if these hearings will simply be an attempt to shame the company for tax avoidance, or if it will finally be the catalyst for closing the massive web of loopholes that make up the country's tax system.
Apple releases Senate testimony as panel announces it avoided billions in taxes
A congressional panel has found that Apple avoided billions in taxes, the New York Times reports, thanks to an intricate network of subsidiaries throughout the globe. The structure of some of these sub-companies in certain countries made them exempt from paying or filing taxes or record-keeping laws. The Senate Permanent Subcommittee on Investigations found that Apple kept US$74 billion from the IRS between 2009 and 2012. Apple is not charged, however, with breaking any laws. Apple has published the full text of its upcoming testimony to the Senate congressional panel, which it's scheduled to make on Tuesday. Among those to testify include CEO Tim Cook. Cook spoke with The Washington Post last week about his ideas to repatriate some of those billions, and points out that the company is focused on creating jobs in the US and most likely will pay $7 billion in taxes to the US in 2013.
Tim Cook talks Apple's tax situation ahead of next week's Senate hearing
Earlier this week we reported that Apple CEO Tim Cook is slated to testify at an upcoming Senate hearing focusing on the offshore tax practices of American corporations. As it stands now, Apple currently has over US$100 billion holed up overseas that it's hesitant to repatriate due to less-than-ideal US income tax rates. What's more, Apple employs a number of accounting mechanisms to both delay and lessen its tax liability. With his congressional debut just a few days away, Tim Cook sat down for a rare interview with the Washington Post where he explained his plan to suggest a number of proposals which, if enacted, would encourage companies like Apple to bring back billions of dollars to the States. Cook explained: If you look at it today, to repatriate cash to the US, you need to pay 35 percent of that cash. And that is a very high number. We are not proposing that it be zero. I know many of our peers believe that. But I don't view that. But I think it has to be reasonable Remember that while Apple's tax practices often make headlines, many companies employ the same tax avoidance strategies that Apple itself uses. To wit, the Post points out that over 1,000 US companies together have approximately $1.7 trillion in overseas accounts. During the interview, Cook also emphasized Apple's commitment to creating jobs in the United States while highlighting how much in taxes Apple already forks over to the government. Specifically, Cook explained that Apple is currently on pace to pay $7 billion in federal taxes in 2013. When one adds together Apple's state and federal tax liabilities, Cook said that "Apple is paying approximately $1 million an hour in just domestic income taxes." Cook also issued a few soundbites regarding Apple's tax situation to Politico, making a point of noting that Apple does not shift any of its profits earned domestically to overseas accounts. I can tell you unequivocally Apple does not funnel its domestic profits overseas. We don't do that. We pay taxes on all the products we sell in the U.S, and we pay every dollar that we owe. And so I'd like to be really clear on that. As a final point of interest, Cook told the Washington Post that Apple may very well be the largest corporate taxpayer in the US.
Tim Cook to testify at Senate hearing on offshore tax practices
Political is reporting that Tim Cook is set to testify at a Senate hearing next week that is investigating the offshore tax practices of American corporations: Apple CEO Tim Cook is expected to testify at the Senate Permanent Subcommittee on Investigation's hearing Tuesday, POLITICO has learned. Apple has been under fire for its tax practices. The company recently avoided paying as much as $9.2 billion in taxes by buying back stock with debt instead of offshore cash, Bloomberg reported. Apple has a reported $100 billion in offshore funds. The hearing is part of the panel's continued examination of how companies shift profits offshore and how that impacts the tax code. Representatives from Microsoft and Hewlett-Packard testified in September 2012 in a hearing on the same topic. Tax avoidance by big corporations has (finally) become a hot topic in the US. Here in the UK, pressure has been mounting for months on companies like Google, Amazon and Starbucks over their tax-avoidance schemes (Amazon only paid £3 million in UK taxes off of £4 billion in UK sales). Other EU countries are following suit in clamping down on offshore tax practices. In addition to Tim Cook, Politico states that representatives from the IRS and Treasury are also set to testify.