My last piece on Apple touched on their old business model and and how it was run along independent national and geographic lines. This continued for a short time with the sale of the "i" products through the traditional local dealer sales channels with iMacs etc, until the iStore was set up. I clearly remember Steve telling the world, "Now you can buy a Mac twenty-four hours a day anywhere in the world." The whole sales operation, the big earner for the company, moved online and Apple were the first to do so.
That was a hell of a gamble because in 2002, you had to already own a computer and have an internet connection to order a Mac directly from Apple. Today, everything is done online but in those early days of internet business, Apple was way ahead of its time in this regard. But the critical issue in all of this is that, "Apple went virtual." They became independent of country or region and became instead a virtual operation, everywhere in Europe except Cork in fact. In Cork they had thousands of direct employees, land and buildings with plant and machinery and critically, they were registered here with the companies office. They had a sort of European presence in their otherwise self-created virtual world. Though it cost me my job and career at the time, I understand what was happening in hindsight.
In the real world of big digital businesses today, you buy in a virtual world of virtual shopfronts represented by websites. My old company, registered in Dublin, Ireland, ceased to be. It was like any other company that had simply shut down. It was no longer operative or liable for anything. The virtual operation made its products in China and Eestern Europe, among other places, the products were shifted to third-party warehouses for distribution and delivery in the various territories around the globe based on the rule of allocations. Today, as such, Apple Belgium for example, is a website possibly hosted on a server farm almost anywhere whose orders are processed in Cork. Orders and payments are accepted there after which instructions for delivery are issued to the region the order was received from. This is common practice now but it begs the question, where do the actual tax liabilities reside?
The Apple Belgium store is most likely not anywhere near Belgium but it works if you live there. This though blows the whole argument from Brussels apart unless Belgium decides to ban sales over the internet there. I have no doubt that Apple applies Belgian taxes to their sales there but I have no idea which Apple office pays that bill. But you can be absolutely positive that Apple honours all sales taxes due to the countries of origin. The issue today is not about that though, it is about corporate tax and where the actual real company is resident. The answer to that has to be "the cloud."
Apple has its own version of that called, guess what?-the iCloud. Perhaps that's where the iStore lives, who knows? Under EU law, their registration and actual presence in Ireland permits them to trade with all of the EU member states but from a remote location that could be anywhere on the planet. But if they do not have registered offices in an EU country then they cannot be liable for corporate tax in that country. Mercedes sells cars in Ireland but pays its corporate tax in Germany. Certainly in Ireland where Apple are registered, they pay corporate taxes on their business within the island. What they don't do is declare their profits on repatriated overseas sales to the Irish Revenue and you'd have to say, why would they?
In this cloud frame of mind, our Revenue people agreed to a scheme whereby profits from sales outside Ireland could, sort of land here temporarily, be shifted to an imaginary place back in the cloud and then once cleansed, it could legally come back into Ireland to be shifted to a tax free haven elsewhere. All of it was a paper exercise, (or taps on a keyboard actually), and the money was never due to Ireland in the first place nor was it any of our business. That at least is our official response. We were always just happy with thousands of jobs and €50M or so every year in corporate taxes for Apple products sold in this country.
So this one is going to be a real can of worms. A ".co.uk" web address does not necessarily make you liable for UK corporate tax. You'd have to be registered as a UK company trading there. I'm not saying that the Irish authorities are absolutely right in this particular bun fight but technically, they didn't do anything wrong and neither did Apple. It begs the wider question, how do you tax the cloud, a virtual world of ones and zeros. This conundrum seems to have dawned on the dullards in Brussels. Steve must have considered this when he made the bold move first but his company has complied with tax law in the geographies and international law also. A case may be made that the Paddies were damned creative when they shook hands on this one but I doubt it was of their own creation.
Finally, the figure of €13 billion is a nominal figure conjured up by EU bureaucrats and the announcement even suggested that loads of others may be entitled to a bite of the action here also. From the Irish perspective however, Apple have paid us everything that is really due to us and the Revenue boys here know that. The only thing this can possibly achieve is to make Apple reconsider their continuing presence in Ireland and it will almost certainly rattle the cage of all of the other big boys resident here as well.
That is why, surprisingly, I am right behind our Government on this particular issue. The Irish are just being realistic and accepting the changing world we live in while the european bureaucrats are still living in the last century. The poor bastards just haven't a clue how these things are done today in the modern world and they wouldn't listen to us if we told them.