APPLE PIE?

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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. 

APPLE SAUCE?

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At this time of publishing, it is not known yet how much the EU has decided that Apple owe the Irish Exchequer in ahem, "avoided" taxation over several years. J.P.Morgan in New York estimate the figure to be upwards of €19 billon

There are several aspects to this wrangle, not least the question as to why the EU has stuck its oar in. Every European country has its sweetheart deals with big employers in their own regions. Spain made special arrangements with Santander and don't tell me the French have no wink and elbow arrangement with Renault. A flat rate of corporation tax is not set in stone and even the rate itself is subject to change as needs must. We all know that the big guy always gets looked after and Apple is the biggest company in the world by market capitalization. This would be the case too if they were cited in Germany or anywhere else for that matter but in Ireland, the Apple influence on our Government bean counters is understandably enormous because our economy is so small.

When I began work with Apple Computer Sales Ltd in Dublin, there was a model in place  to do business. Effectively, our job was to supply Macs that were ordered and bought by our office and supplied to the 26 counties of Ireland. We were what's known as a "Cost Centre," meaning we ran our office as a stand-alone going concern. We ordered and purchased the equipment from a notional Apple Central at a price of X per unit and sold these on at Y per unit in our own territory. The difference between X and Y was gross profit and from that was deducted our overheads and  cost of doing business. then after local taxes were paid the remaining amount was profit for Apple Inc. This was known as the "contribution," and was paid to head office in the US as the return from the 'Irish' sales cost centre. But as I was not the one to actually write that year-end cheque, I have no idea where it was posted to, as it were. 

It was one way to do business but for a global multinational, it was certainly not the most efficient way. Our competitors like Hewlett Packard, Compaq and Dell had much more streamlined and profitable operations and at Apple, we only had five per cent of the personal computer market. In fact, strong rumours persisted in technology circles at the time that Apple was going bust. I can only speculate at this point but I do know that Steve Jobs returned to the helm around this time and big changes began to happen. He was not just a brilliant technological visionary, he was a damned sharp business operator as well. It seems reasonable now to believe that the great man took a look at the business model the company used and saw that, in Europe for example, each country ran its own cost centre. I reckon Steve decided to gather all of his chips in one place, but why Ireland?

He travelled to Ireland at the invitation of the Industrial Development Authority, (IDA), in the late seventies and by the early eighties, Apple had bought a large industrial site at the edge of Cork City. Choosing to buy this huge acreage is important to the story because most multi-nationals lease property and buildings, reflecting their flexible attitude to re-location. Then Apple designed and built a custom facility with the expressed purpose of making the full range of Apple equipment for the European, Middle Eastern and Asian markets. It was their first facility outside the US. An IDA grant sweetened the deal but the real attraction was a willing and english-speaking workforce, open access to markets via the Irish EEC membership and a high standard of education locally. Good quality of life in Cork was also a factor. On the downside, there were no direct flights from the US to Cork, meaning executives had to either fly to Shannon, 70 miles away, or London, another flight away. Then all manufactured products from Cork had to go by sea to the European mainland, an added logistical cost. 

Through the eighties and nineties, Apple was a steady if unspectacular employer in Cork and because of their decision to cite their European headquarters in Ireland, Microsoft, IBM, HP, Dell, Epson, Compaq and many more copied the move and did likewise. However, all of these chose Dublin, except Dell, who  went to Limerick. EMC however chose to be beside Apple in Cork. In the nineties, Jobs "left" the company to set up Pixar and Next Computer taking a lot of the best techies with him. At one point in the late nineties I heard a rumor that Apple Inc had a mere €300m left in bank and we could all be out of a job before the summer. Then the great man was invited to return to lead the company that he had founded. Within a short time, you could sense the drastic changes without knowing specifically what was going on. It may be strange now to reflect that while I worked in the Dublin office, my home and family were in Cork and I returned every weekend. But during the working week, I never had ANY dealings with Apple in Cork. I knew some of the lads there of course because Cork is small but I didn't have a need at any time to visit or even pick up the phone to them. 

With Steve back, first came the five colours of iMac, those zany colorful all-in-one boxes and the PC publications instantly pronounced them the final nail in the coffin for Apple because they had no floppy drive. Imagine that! But the big news was the addition of the letter "i" as a prefix and this was largely overlooked at the beginning. It stood for internet or 'internet ready' and denoted that Steve saw the future of the whole industry online. Traditional Apple sales offices around the world were under notice of closure because the selling process was going to the AppleStore online, and when our office in Dublin went, I was transferred to the plant in Cork. By this time there was a new and discernible buzz around the place and iPod, quickly followed by iTunes came into existence. But the business model changed too and it quickly became apparent that Apple finances outside the States were routing through Cork. Local cost centers were replaced by a global internet view of the world and with it, a smarter way to handle the profits. That would have been the point that the company big-hitters may have sat down with the Irish Revenue Commissioners and outlined what they intended to do and what they needed from the Irish to do it. There is nothing illegal or underhanded about it though and neither party at those negotiations did anything wrong. The same scenario probably takes place everyday somewhere in the world with different Governments and different companies. 

I can say, hand on heart, that Apple were always extremely ethical, frustratingly so at times when I wanted to try a clever sales gimmick myself but was refused permission. The company went to extreme lengths to do things correctly in all of its dealings. I do not believe that they broke the law in their negotiations with Ireland Inc but I do know that they would have got the best possible deal they could get for themselves without crossing the legal or ethical boundaries. When they started the plant in the eighties, they did so with twenty employees. Today there are 5,000 with another 1,000 coming on stream when the new building is complete. A whopping 64 per cent of all Apple profits flow through the Cork operation but very little of it is generated in Ireland. Looking today at the EU case against Apple you can deduce that they do not believe the company has broken any European laws by repatriating profits from EU countries to Cork and I would surprised if they had. Instead, the EU is accusing the Irish Government of making a deal locally with Apple as to what happens that (corporate profit) money once it got to Cork. 

Reading between the lines, our Government is publicly saying they did nothing wrong while privately telling the EU to fuck right off. Anything which threatens the huge corporate presence in Ireland would be a cause for this country to pull out of the EU, it's as simple as that. When the expected ruling from the EU is delivered this afternoon we will promptly take a case to the ECJ to drag out this saga for at least three more years. This is a real hot potato though because to the ordinary Irish man and woman, we are in the frame for a possible €19 billion windfall and our Government appear to be doing anything they can to avoid receiving that money. It would be similar to the UK turning down £200 unexpected billions.

UPDATE!!!!  The EU ruling is in and the unelected ones have demanded that the Irish Revenue Commissioners must immediately collect thirteen billion euros from Apple in unpaid taxes for the last ten years. "Jesus H"

For several years now member states of the EU have been bitching on the fringes about the Irish corporate tax rate of 12.5 per cent. It now appears that the big boys in Europe have got together to shatter the Irish experiment with large multinational employers and really destroy our economy. As a result of this ruling today, Apple begins to consider re-location elsewhere, you can bet your ass the French and Germans will be rolling out big enticing red carpets for them. Other European headquartered corporates here will naturally follow suit and our Finance Minister Michael Noonan knows that too. So you can expect that this formal ruling from Brussels today is the beginning rather than the end of the matter.

 

 

RESEARCH CONTRIBUTES TO IGNORANCE

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Whenever the average Joe Soap thinks about researchers as a breed, he likely visualizes serious faced blokes in white coats milling reverently around a laboratory of gleaming steel and glass, clipboard in hand. In the mind's eye, it must take years of tedious and painstaking hard work but important life-changing discoveries are made sometimes. In reality though, nothing could be further from the truth.

Today's researchers have a PC at home instead of a laboratory and use statistics instead of microscopes and chemicals. Real world conditions and scenarios are dumped and computer statistical models are used instead. It is the study of populations or Public Health, as it is better known. The new science is called epidemiology and I had a go at that in an earlier article.

One of yesterday's headlines read, "School dinners contribute to obesity." The latest buzzword in research is obesity as it tends to draw research funding like pins to a magnet. The lead researcher from the obesity project was on the radio yesterday morning and she was in her element. Hers, was the voice of concern and caring as she skimmed over the methodology of her work in favour of words like, risk, danger, fatal disease and estimates. All this wishy washy drivel was facilitated by a fawning presenter trying  frantically for some scary soundbite that, "You heard here first folks." Like most of her ilk, she was peddling fear as a tool of profit.

Inconsequential findings such as yesterday's nonsense should never see air-time because they are pure speculative crap spewed out of a computer, as pre-arranged results before the research ever begins. It's a case of, "Here's the answer, now how did we get it?" Epidemiology is plagued with all sorts of failings not least of which are 'confounding factors,' and 'bias.' Psychology teaches us that any question can be carefully manipulated to illicit the preferred response for the questioner and this is vital to know when epidemiology is based on the answers given by a selected group to a selected set of questions. A bias in one direction or another can shape the questions to get the desired answers. A pre-disposal to personally believe a conclusion you have not yet proved, but have to prove, can lead to tinkering with the imputed information until the statistical model gives you the right overall answer. Not only can this be done but it is done routinely these days. 

But the biggest bias in all epidemiological research is known as "The funding bias." Real science poses a question and then sets about getting a viable answer to it. If it works in one condition then it is tested in multiple other conditions for validity. After exhaustive testing by the scientist in question, his new theory is made available to his peer group with the expressed wish that any of them can disprove it. If the theory stands this most rigorous examination then it can be called a discovery or a new breakthrough of some kind. Even then, the possibility always exists that years down the road, the theory may be disproved. This is honest, open, real science that makes a difference. Epidemiology though is so flexible and open to manipulation, that it attracts funding like bees to honey. In plain english, epidemiology can prove whatever you'd like it to prove for the right fee. 

So back to the lady on the radio yesterday and how I would have handled the interview if I were the presenter. My first question would have been, "Who funded the project?" I would have pursued this line of questioning for quite a while until the full picture emerged. It is vital to ask how much was paid, over what period of time and to who. Then  there is the question as to whether this lady had funding coming in before she was tasked with exploring obesity. Was the awarding of this contract a God-send for her and her team? Indeed, is there anything further on the horizon for them now that they've completed this one. If I sensed any reticence in answering any of those questions then I'd persist by  demanding that the listeners had a right to know. The slimming industry is big business and they would have a vested interest in shaming the obese into buying their products, would they not? An official sounding report on some university's letterhead would represent valuable sales literature for such companies and university researchers are just crying out for money.

I would ask intensely about how the research project was presented to them, (by the funders), and what objectives they were given before they began. How were the questions to the participants phrased and how were the participants chosen in the first place. How many were there, (how large and representative was the research), and over what period of time? What confounding factors were taken into account and which ones were discarded and why? Then I'd get really sticky and ask if we are looking at cause or merely some speculative relationship that may or may not be true like correlation. I would want to know a hell of a lot more about the statistical computer model used like who wrote it, in what computer language, what is it called and how much did it cost for the software? Computers don't think for themselves they just calculate figures faster than you do. I would ask if she might have got a different answer is she'd also asked the participants about their levels of stress or earning potential. Were they home owners or renters. gay or straight, christian or atheist, young or old, male or female, fit or lazy, intelligent or stupid and a whole myriad of other possible confounders. Indeed did the lady take her base mark from the now maligned body mass index? There are hundreds of questions that should have been asked before her findings are even mentioned.

I would consider it my job to tear the story her shreds and rubbish her findings because that is precisely what they do in real science. If I couldn't then the listener would know that the woman and her team might be on to something. But yesterday's interview didn't do any of that and they never do. The woman had the carte blanche of fawning respect hurled at her by the presenter and accredited an almost God-like status for the duration. She could have been lying through her teeth to make a comfortable living and we'll never know. But the worst part of it is that our legislation is deeply informed by such junk science and the airwaves are the open platform to soften up the public for an attack on the overweight population in order to increase taxation. It's not science, but it is coercsion by means of propaganda. 

It disgusts me!

PEACE, PROSPERITY, FREEDOM AND THE EU

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"The leaders of Italy, France and Germany have insisted that Britain’s shock decision to leave the European Union (EU) will not kill the bloc," according to the journal this morning. The EU “is the answer” to Europe’s problems, for it cemented “peace, prosperity and freedom,” Italian Prime Minister Matteo Renzi said.

So, there you have it. The reason we in Ireland are so peaceful, so prosperous and free is because we're in the EU. I think that bears closer scrutiny. The warring factions in our country were never approached by anyone from the European Continent. To my certain memory, Britain was told to sort it out and the Irish officials were told to shag off. Peace came about through the tenuous and painstaking work of people on the ground in Northern Ireland, the British and Irish Prime Ministers and the Yanks were dragged into it finally to get it over the line. The EU had nothing to do with peace in Ireland.

From 1973, when we joined the EU to about 1996, we had high unemployment, joblessness and emigration as an almost accepted fact of life here. Farmers were proportionally better off but that's about it. The Celtic Tiger of the 'noughties' was a home grown phenomenon based on a 60-hour weeks as almost standard and a huge influx of American capital through the multinationals citing themselves on the island. EU projects such as roadbuilding were co-financed by the EU and our local gombeens. It was during this time too that we became net contributors to the EU. Our biggest trading partners remained as the UK and the USA though we did buy big German cars in the good times.

And as for freedom, I have lost count now of the number of times our Government Ministers have stood up sheepishly to announce some unpopular law or tax only to throw up their arms in mild apology before explaining it was an EU directive. Far from freeing the Irish, the EU began to look like enslavement by a thousand cuts. When the worldwide meltdown came in 2008, the paddies were picked as the stooges. Under EU insistence, the Irish Nation of 4.5m people was saddled with 46 per cent of all the bank debt across the EU while 60m Germans were given a mere 12 per cent of it. That alone took away our personal freedom overnight.

I've said it before here, the EU itself never had anything to do with peace and security on the continent. NATO on one side was counter-balanced by Russia on the other and this alone kept ambitions in check. As before, the individual countries of the EU protected their own citizens their own way. What the EU is good at it though is meddling in our personal lives and chipping away at those freedoms we hold dear. They are good at stealing money from our pockets while paying themselves huge salaries and benefits. The EU is expert at waste and bureaucracy. The unease of the British public leading up to BREXIT was totally mis-handled by the EU and the aftermath of it is also being fucked up by the unelected Brussels brigade. They sent Cameron home empty-handed when he needed their help and now they appear to believe that sneering at the British for opting out is the best coarse of action.

So the Italian Prime Minister has it wrong on all three counts. To re-phrase his speech, the EU is out to take away our freedoms one by one, it is happy to sit back and let the Yanks bank-roll world peace, such as it is, and prosperity is an illusion as long as we are paying back the extraordinary bank debts accrued around Europe. Our grandchildren will still be struggling with that one when I'm long gone.

An hour after writing this I read a new article on the same topic by Ian O'Doherty in the Irish Independent. He fills in a lot of my blanks for me.

"EU's big boys look out for themselves – without a thought for the rest of us."