Tag Archives: regulation

Ireland, Luxembourg, UK, and EU Commitments

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In a letter to the Irish government published Tuesday, the European Commission, the 28-member bloc’s central antitrust authority, said it had reached the “preliminary view” that tax deals struck in Ireland in 1991 and 2007 in favor of Apple constituted state aid.

1991! No statute of limitations here. That’s a small matter, though. The larger matter is the degree of freedom that sovereign nations have to govern their internal affairs while remaining a part of the European Union.

The beef here, and it’s a similar one involving Fiat in Luxembourg, and Starbucks and others in other constituent nations of the EU (the details vary from case to case), is this. Ireland didn’t impose a high enough tax on Apple’s Irish-earned income to suit the Authorities of the EU. That letter, in the form of a “report,” complained:

The main question in the present case is whether the rulings confer a selective advantage upon Apple insofar as it results in a lowering of its tax liability in Ireland….

The EU long has objected to the low Irish tax rates, insisting that these are somehow unfair to the other member nations, nations that have much higher tax rates. And no, don’t expect those nations to lower their taxes to compete; Ireland must raise its taxes so as to be less competitive.

The EU complained further:

[There were] several inconsistencies in the application of the transfer pricing method chosen when determining profit allocation [and costs had been] reverse engineered so as to arrive at a taxable income.

Because it’s shameful for a company—or a nation—to work to protect the company’s (and so the company owners’) money. It’s not their money, after all, it belongs to the EU. To paraphrase a man from the other side of the Pond, they didn’t earn that. Somebody else made that happen.

As James Stewart, a tax expert at Trinity College Dublin, noted,

There’s no doubt that this is damaging to Ireland. There’s a deeply held belief that our low corporate tax regime is central to Ireland’s industrial policy. The commission letter gives notice that these types of tax rates are under scrutiny. It will be much more difficult for Ireland to give similar deals to other multinational companies.

But that doesn’t matter. Ireland didn’t earn that, either.

The UK needs to watch this situation in Ireland very carefully and to think long and hard about the value of an EU commitment and the cost of EU insistence on intruding into the domestic affairs of its member nations. The importance of the occurrence of the UK’s EU membership referendum has gained immeasurably from this EU behavior, and the outcome of that referendum now is even more important to the vitality of the UK.

Ireland, Luxembourg, and the others, also need to think very carefully about the value they’re gaining from EU membership, and the costs they’re bearing from that membership. What is the EU’s commitment to its members, if it reserves the right to intrude?

The European Commission’s allegations can be seen here.

Arrogance and Encryption

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I wrote a bit ago about liberty and encryption. Here’s an example of the arrogance of the government’s attitude toward an American citizen encrypting his communications against government snooping.

Regarding Google and Apple plans to market encryption capabilities for their smart phones, FBI Director James Comey had this to say:

What concerns me about this is companies marketing something expressly to allow people to place themselves beyond the law[.]

This comes in the context of Brent Kendall’s paraphrase of Comey’s concern in Kendall’s WSJ article, also summarized in the link just above

FBI Director James Comey on Thursday said he is concerned about moves by Apple Inc and Google Inc to market phones that can’t be searched by law enforcement….

There are two things wrong with this, both of which a talented lawman at the peak of his career knows full well. First is the fact that encryption does not at all place anyone “beyond the law:” get a warrant. Also, the government, as has been well publicized, has an IT capacity fully capable of breaking encryption should the cell phone’s owner decide jail is preferable to honoring the warrant. Finally, the cell phone service providers aren’t the ones engaged in the communications of government interest; the cell phone owners are. The only legitimate targets of warrants for communications are the communicators, not the service providers.

The second thing wrong is the appalling arrogance inherent in Comey’s quoted statement. Leaving aside the foolishness of his claim of unsearchability, he’s cynically conflating “the law” with “law enforcement,” the police. Of course, this is…inaccurate. “The law” is what we citizens, through our elected representatives, say it is; the police are not the law but folks we hire to enforce it.

Here is the modern Liberal government in action.

Liberty, Security, and Encryption

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Moves by Apple Inc and Google Inc to put some smartphone data out of the reach of police and the courts are raising alarms inside US law-enforcement agencies, current and former officials say.

Of course the government is upset. Heaven forfend anything should interfere with its convenience in fishing for wrong-doing in our private correspondence. Privacy, though, is a necessary component of individual liberty and responsibility.

There is a trade-off, to be sure, between that and government’s ability to do the job of protecting us from others and from extra-national threats that we’ve hired it to do, but we must be very wary about how much of our liberty we surrender and how much of our responsibility we foist off, and we must be extremely chary of the trade-offs we make in that regard.

One Justice Department official said that if the new systems work as advertised, they will make it harder, if not impossible, to solve some cases. Another said the companies have promised customers “the equivalent of a house that can’t be searched, or a car trunk that could never be opened.”

“Harder to solve,” perhaps. “Impossible,” though, is a coarse exaggeration: our cops are better than that. Additionally, it’s long been American philosophy that it’s better that ten guilty men go free than one innocent man gets locked up. Today’s threats aren’t enough to walk away from that bastion principle of liberty.

As to that second plaint, it’s another exaggeration. The searches might get harder, but the devices are easily controllable, and get a warrant.

And this:

Andrew Weissmann, a former Federal Bureau of Investigation general counsel, called Apple’s announcement outrageous, because even a judge’s decision that there is probable cause to suspect a crime has been committed won’t get Apple to help retrieve potential evidence. Apple is “announcing to criminals, ‘use this,’ ” he said. “You could have people who are defrauded, threatened, or even at the extreme, terrorists using it.”

However. It isn’t Apple that’s being accused, or suspected, or against whom probable cause is being alleged, it’s the cell phone owner. Searching Apple’s facility because the light is better there is…faulty.

Weissman also ignores both the right of an American citizen to protect himself against a government that has shown itself increasingly intrusive, avaricious, and controlling, and the fact that a warrant must be obtained on the one hand, and on the other, once a warrant has been obtained, the government can use its own facilities to conduct the search. These facilities include both the ability to sanction the phone’s owner for not providing the password and the use of government’s IT facilities for cracking the password.

Then there’s another question. Government cannot assume our responsibilities in our place morally. If government does assume our responsibilities in our place legally, we will have lost our individual liberties and responsibilities.

Without individual liberty and responsibility not only can there be no security, there can be no hope of security.

More Actual Facts

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…about climate change. In a paper, Atmospheric controls on northeast Pacific temperature variability and change, 1900–2012, released last Monday by the Proceedings of the National Academy of Sciences, roughly translated for us laymen by the AP, authors Jim Johnstone, at the time of his research with the Joint Institute for the Study of the Atmosphere and Ocean at the University of Washington, and Nathan Mantua, research scientist with the NOAA Fisheries Service in Santa Cruz, CA, found that northeast Pacific (that’s abeam the US) ocean warming since 1900 correlates better with naturally occurring wind pattern changes than with any pattern of human greenhouse gas injection into the atmosphere. According to Johnstone,

What we found was the somewhat surprising degree to which the winds can explain all the wiggles in the temperature curve. So clearly, there are other factors stronger than the greenhouse forcing that is affecting those temperatures[.]

Also damaging to the climate panic-mongers’ case were these facts:

[O]ne steep ocean warming period from 1920 to 1940 predates the big increases in greenhouse gases, and an ocean cooling period from 1998 to 2013 came while global average temperatures were at or near all-time highs.

Of course the climate pseudo-science folks demur.

They pointed out that the study sees a correlation but did not do the rigorous statistical and computer analysis to show that the cause of the wind changes were natural—the kind of analysis done when scientists attribute weather extremes to global warming.

This would be the same computer analysis—computer modeling—that has found itself unable to predict, simultaneously, the past and the present, and which predictions of the future have been wildly variable and heavily dependent on the specific values assigned to a myriad of model inputs.

The abstract is here; the full article is behind the PNAS‘ login wall.

Democrats and Inversions

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Inversions in this context, to oversimplify, are when American companies buy foreign companies and then relocate their headquarters to that foreign country in order to take advantage of that country’s lower tax rates. That this is part of an American company’s management fiduciary duty to the owners to minimize costs and maximize profits is unimportant to the denizens of the present administration and to too many “Republicans” as well.

President Barack Obama’s Treasury Secretary, Jack Lew, had some thoughts about the evils of inversions.

These transactions erode the US tax base, unfairly placing a larger burden on all other taxpayers, including small businesses and hardworking Americans[.]

Of course, Lew and Obama carefully ignore the fact that half of us Americans already pay little or no taxes, “unfairly placing a larger burden on all other taxpayers.”

They also ignore the fact that it isn’t their money in the first place; the money belongs to the companies’ owners.

They also ignore the fact that our “tax base” already is excessively progressive and that it has the highest business rates in the world.

Lew went on:

These first, targeted steps make substantial progress in constraining the creative techniques used to avoid US taxes, both in terms of meaningfully reducing the economic benefits of inversions after the fact, and when possible, stopping them altogether.

A better way to reduce the economic benefits of inversions would be to do the patriotic thing: lower, drastically, the tax rates on American businesses. Taxes, after all, are at the foundation of our Revolutionary War—not only the stereotypical taxation without representation, but also the point of that demand of representation: so we could keep tax rates from getting out of hand.

If our business tax rates were lowered sufficiently—Ireland, for instance, taxes businesses at 12.5%, compared to our 35% rate—a couple of things would occur. The first would be a cessation of inversions, and if our business taxes were lowered significantly below 12.5% (I’ve been advocating all along for an elimination of taxes on our businesses), foreign businesses would be attracted to the US, bringing with them the jobs they have.

The other thing that would occur involves the $2 trillion that American companies with foreign branches, affiliates, and so on are holding overseas in order to avoid our usurious tax rates. With those tax rates vastly reduced, that money would come home. $2 trillion is a lot of jobs and capital investment (which is more jobs in the nearby future) waiting to happen.

But tax rate reductions are anathema, if not inconceivable, to Democrats.  And to too many “Republicans.”