eSignature Legitimacy for Operational Budget in European Union

How to eSign a document: e-signature legitimacy for Operational Budget in European Union

In 2015, the Irish economy grew by  an unprecedented twenty-five percent. In just 12 short months, it achieved  the previous 12 years worth of growth. Needless to say, that… doesn’t happen. Anywhere. The global average that year was 3.1%. Even China  and India could only manage seven and eight. And yet 2015 wasn’t the only time Ireland exceeded   all possible expectations. Six years  later, its economy grew by nearly 14%. Today, Ireland is the second-richest country  in the world with a population over one   million. Its per-capita GDP of $104,000  is 36% higher than the United States. Even more impressive is how recent all this is. Thirty years ago, Ireland lagged slightly behind   the European average. Now, it’s  almost three times wealthier. In the 70s, 80s, and 90s, it received  billions of Euros in subsidies from   the EU. Today, it contributes billions of Euros. Back then, thousands fled the country  in search of greener pastures. But since 1996, the flow  of migration has reversed;   skilled professionals from around the globe  now relocate to the island every year. For all these reasons, Ireland has been  called the “Celtic Tiger” — in reference   to the rapid rise of the four “Asian Tigers” —  Hong Kong, Taiwan, Singapore, and South Korea. There’s just one tiny problem: it’s not… real. These numbers are all real. And these facts are  technically true. But what they imply is not. The Irish economic “miracle” is an  elaborate, carefully preserved illusion. To see why, we need to roll back the clock  to 1980, the year everything changed… Sponsored by GiveWell — the independent nonprofit   whose rigorous charity research allows you  and I to make the largest possible impact. In 1980, Apple became the first foreign  tech company to manufacture in Ireland. ing to CEO Tim Cook, it saw in the  country — quote — “a community rich with   talent,” and one that could “accommodate growth.” And, in the official corporate version of  history, that’s where the story ends. Apple   took a chance on this small, developing nation  and the two grew hand-in-hand. Apple’s press   release for its 40th anniversary repeatedly  refers to its Irish “family” and “community”. But the timing tells a different story. Ireland has pursued business-friendly  policies since at least 1956, when it   began offering 10 years of generous  tax breaks to foreign manufacturers. But after joining what would  become the European Union in 1973,   it agreed to phase out those  incentives starting in… 1981. Apple, in other words, snuck in the door  right at the eleventh hour — securing   for itself a full decade of tax breaks  during the company’s most vulnerable era. It was during this period that Steve Jobs  was replaced by the former CEO of Pepsi,   John Sculley, who initiated a major  restructuring. The company was   losing billions of dollars and  bankruptcy was on the horizon. Ireland wasn’t doing much better. Nearly a  quarter of its population was unemployed. So, as its 10-year window began to close,  Apple approached the country with an offer:   it would funnel nearly all its worldwide revenue  into Ireland, but it was only willing to pay an   effective tax rate of less than 2%. And while 2%  may not be much, that was 2% the country would   otherwise never see. In return, Apple would have  a safe place to stash its international profits. Ireland, desperate for whatever  cash it could get its hands on,   accepted this opening bid without negotiation. The only thing left to do was… write the tax code. To make this arrangement legal,   it worked backwards, crafting rules that  would artificially produce the 2% figure. And just like that, Apple  had set its own tax rate. Now, the reason this was  possible was IRS Form-8832. Form-8832 doesn’t look like much — it’s  a pretty unassuming three pages. But it   completely transformed the American tax landscape. Before 8832, U.S. corporations were  required to pay U.S. taxes on their   worldwide income — whether their bananas  were sold in South Carolina or South Africa. Until recently, that rate was 35%. After 1996, U.S. corporations  could simply “check a box”,   allowing them to avoid paying this tax  as long as their money stayed overseas. A year later, Ireland passed a similar law. Now,   companies only had to pay tax in the  country where their “key decisions”   were made. In practice, anywhere they  wanted. Or, even better, nowhere at all. The trick was that no one was  enforcing consistency. In America,   Apple could argue its subsidiary was  genuinely Irish. Over in Ireland,   Apple could simultaneously argue it was  really based somewhere else, like Bermuda. That was step one. Apple had created a low-tax Irish  subsidiary. But it still needed to   move its international profit into that company. When you walk into an Apple Store  in Munich and buy an iPhone,   that profit needs to somehow end up  in Apple Ireland, not Apple Germany. The solution was intellectual property. IP is the perfect vehicle for tax avoidance  because it’s (a) extremely valuable — who   could argue that the Apple logo  isn’t worth a fortune? and yet,   (b) extremely difficult to value — whose  to say it’s worth one trillion and not 1.2? By moving around these priceless  though intangible patents, logos,   and other trademarks, Apple  could move its profit, too. It simply gave the rights to use its IP outside  of the Americas to its Irish subsidiary. Then,   whenever it sold an iPhone  in Munich for, say, $100,   Apple Germany would have to pay Apple Ireland,  let’s say $98 for use of its trademark. Thus,   98% of the profit would be  attributed to low-tax Ireland. But… there’s a wrinkle. Officially, Ireland’s corporate tax rate is 12.5%.   Recall that to reduce this to less  than two percent, Apple declared its   Irish subsidiary a tax resident of somewhere  like Bermuda, where the rate was even lower. Except… Ireland imposes a special 20% tax on  transfers to “known tax havens”… like Bermuda. Apple, therefore, needed to transfer its money  through an intermediary — another company,   this time in the Netherlands, to which the  first Irish company would sub-license its IP. Next, Apple created a second Irish company,  which sub-licensed the IP from the Dutch one. Lastly, this second Irish company would license  its IP to Apple subsidiaries across the globe. Now, all together: You walk into a German Apple Store and buy an  iPhone. Apple Germany argues that most of the   value of that sale was derived from intellectual  property — property it doesn’t own. Therefore,   Apple Germany pays a “royalty”  to that second Irish company. The second Irish company also doesn’t own  anything. It too pays a fee to the Dutch company. The Dutch company does the same  — forwarding most of the money   it’s just received onto the first Irish company. Finally, the first Irish company  claims its “key decisions” are   made in a small Caribbean country, where the  corporate tax rate is at or near 0%. Voila! Apple pioneered this strategy — which  became known as the “Double Irish with a   Dutch Sandwich” — but it was by no means  the only corporation to take advantage. Google, Microsoft, and Facebook all did  the same. During the 90s and early 2000s,   U.S. multinationals made an  increasing share of their   profits overseas — billions of dollars  of which made their way to Ireland. And while most people assume  some level of tax shenanigans,   the astonishing scale of this effort  largely flew under the radar for years. Much of what we know today is only  thanks to independent researchers   and academics like Emma Clancy,  Brian O’Boyle, and Kieran Allen. Then, in 2013, as the public began taking notice,   the U.S. Senate held high-profile  hearings, attended by Tim Cook. With the world’s attention focused on Ireland,   the country feigned innocence. Apple had  simply exploited a “loophole”. Never mind   that it had expressly written its  tax code to produce these results. The Double Irish was no more, it  announced. Irish companies would   now be taxed in — if you can believe it… Ireland! Apple’s first Irish subsidiary could no longer  claim to be a “tax resident” of, say, Bermuda. But, not to worry! Generally speaking, tax  treaties supersede local laws. Companies,   therefore, could simply replace Bermuda with a  country that shared a tax treaty with Ireland. For Apple, that ‘country’ was Jersey,   the British Crown Dependency with a  population of just over 100,000 people. Problem solved. Now, it should be clear by now that  Ireland is, in fact, a tax haven. The question is: Is its economic success real? Recall that Ireland is one of the  richest countries on the planet,   with a per-capita GDP of over $100,000, and  that its economy grew by 25% in 2015 alone. Critics of its tax regime argue that this is  all just a statistical mirage — that the country   is little more than a Bermuda, Bahamas,  or British Virgin Islands with castles. Consider, for example, what happened in  2015. Irish workers weren’t suddenly 25%   more productive. Nor did Irish  companies export 25% more goods. No, what really happened is that  when Ireland closed the “Double   Irish” “loophole”, it opened  a new one. Starting in 2015,   companies could subtract from their tax  bill the full cost of any IP they purchased. So, what did companies do? They “bought” a  whole lot of IP. (From themselves, of course) Companies like Apple transferred an estimated   $270 billion worth of trademarks and  patents into their Irish subsidiaries. And since on paper, trademarks are no  different from oil or refrigerators,   Ireland’s GDP grew by 25%. This is what skeptics mean when  they say its economy isn’t “real”. Even worse, while the benefits aren’t  real, they argue, there are real costs. The dominance of foreign multinationals in tiny   Ireland has contributed to a housing crisis  that makes America’s look tame by comparison. Between 1991 and 2007, Dublin home prices  increased by 429%, ing to these researchers. Secondly, the Irish economy  is incredibly dependent on   a very small number of American corporations. Just ten are responsible for 60%  of the country’s corporate tax   receipts. The top three pay  about a third of the total. From the recent boom to the busts of the  Great Recession and the DotCom bubble,   the Irish economy is fully  at the mercy of Washington. In 2021, Ireland was pressured into signing an  OECD agreement that sets a 15% global minimum   corporate tax rate and re-allocates profits to  the country in which a sale physically occurred. If the past is any indication, Ireland will  simply invent a new “loophole”. Still, the   risk remains that it will one day truly be forced  to change its ways and lose out on this revenue. And not just revenue. As proponents of Ireland’s tax  regime are quick to point out,   part of the implicit bargain struck  nearly 40 years ago between Apple and   Ireland was that the former provide  high-quality highly-paid employment. The United States, along with much of the  world, experienced a baby boom following   the end of World War II. Twenty years  later, these millions of young adults   joined the workforce — producing this  steady, 40-year rise in employment. Ireland’s baby boom, on the other hand, was about  30-years delayed and much more compressed. As   you can see, it suddenly had millions of  young, working-age people in the 1990s. Apple and its peers put thousands  of these 20 and 30 years to work. Today, as much as 10% of the Irish workforce is   employed by foreign companies — nearly  all American and nearly all in tech. Apple’s 2020 press release about  its Irish “community” wasn’t a   total smokescreen — it truly does  employ more than just accountants. Even if low taxes brought multinationals  in the first place, this argument goes,   they’ve stayed for its genuine  operational advantages. Indeed, Ireland is now the only  English-speaking country in the   EU. It’s a mere six hours from New York  and its population is highly-educated. Sure, Ireland is a tax haven, they might  admit, but its economic success is very real. But what both those who argue Ireland’s  economy is ‘real’ and those who argue   it’s ‘’ misunderstand is that “real”  and “” aren’t contradictory. In fact,   these two sides of its economy are complementary. Take, for instance, what happened in 2013. Shortly after the explosive U.S. Senate hearings,   the European Union launched an  investigation into Apple’s tax practices. And in 2016, it concluded that Ireland had  granted it special treatment. And while it is,   of course, entitled to set its own  tax laws, as a member of the EU,   it also agrees not to grant preferential  treatment to any one corporation. The court — in a ruling that has since been  overturned and is now in the process of a   second appeal — ordered Apple to pay  Ireland $14 billion in unpaid taxes. So, how did Ireland react to  this $14 billion windfall? With outrage. To the confusion of many Irish citizens,   their government launched an  immediate challenge to this ruling. Now, you might be thinking “Of course  — better to turn down a small sum of   money today to preserve the larger flow tomorrow.” But this was no “small” amount of money. Remember,   Ireland is a country of just 5 million  people. $14 Billion would’ve paid for the   country’s entire annual health budget  or seven years of transportation. Let’s not forget that lower corporate tax   rates are merely an alternative  means of achieving the same goal. The Irish government — like every other  government — is in the business of collecting   more taxes. So why turn down so much cash?  Especially since, in the eyes of Apple,   Ireland’s hands were clean — it didn’t  initiate the court case, the EU did. Because… Ireland is not just a tax haven. After all, there are safer, cheaper,  and more secretive places to stash   your profits. It isn’t even the lowest-tax  jurisdiction in Europe! Apple could surely   find a more “accommodating” government in a  smaller, less democratic Caribbean island. What Ireland really sells — and what the Caribbean  can’t offer — is its untarnished reputation. Yes, the ultra-low taxes  of the Cayman Islands. But   without the connotation of “the Cayman Islands”. Here’s how it works: First, Ireland’s real economy — the one in which  real people go to work every day and fix pipes,   connect servers, and sell computers  — creates the illusion of legitimacy. Second, thanks to this illusion,   companies concerned about their image — like  Apple — choose Ireland as their tax shelter. Third, in doing so, Apple inflates the country’s   economic health — creating the  appearance of unbelievable wealth. Fourth and finally, this “economic miracle”  is seized upon by those with an agenda to   lower corporate tax rates, who argue “look what’s  possible when you’re just friendly to businesses”. Without the “real”, in other words,   the “” wouldn’t exist. And without  the “”, neither would the “real”. In that 2013 Senate hearing, Tim Cook proudly  proclaimed, quote, “Apple does not hold money   on a Caribbean Island,” and, quote, “does not  have a bank account in the Cayman Islands”. That was true. And that’s  why Apple chooses Ireland. The reason Ireland fought the  EU ruling was that something   more important than $14 billion was at stake. Something extraordinarily valuable, yet  impossible to precisely value — much   like the intellectual property Apple moves  between its subsidiaries — its reputation. In truth, many of the things we  value the most are also the most   difficult to measure — happiness,  love, creativity, and doing “good”. We all want to do the most “good”.  But when we give, say, to a charity,   how do we ensure that we’re making  the most effective possible impact? Well, in 2007, a few friends had  that same question and decided to   start GiveWell. They closely scrutinize  all the data we have on charities and   publish this information on the GiveWell website,   allowing you and I to compare the over 1.5 million  nonprofit organizations in the United States. That way, when we go to donate, we know where  our money is going, what it’s doing, and who it’s   helping. These are non-partisan, cost-effective,  evidence-backed causes like preventing malaria,   solving vitamin deficiencies, and  incentivizing childhood vaccines. We shouldn’t have to become experts on  charitable giving. When we shop for phones   or cars, we search for reviews. So why not  outsource that work to charity researchers? What I like about GiveWell is that they don’t  take any fees. All of your money goes straight   to the charity of your choice. They’ve even  gone out of their way to advise me not to   disparage other charities, which to me is  a pretty clear indicator of their values. Plus, right now, new donors can get  their entire donation matched — up to   $100 — before the end of the year, as long  as funds last. So hurry now while you still   can and go to Givewell.org or click the  link in the description or on screen now,   then choose “YouTube” and enter “PolyMatter”  at checkout to do twice as much good.