Why Apple Owes Ireland $14 Billion in Taxes

In this week’s Make Me Smart newsletter, we explain why the European Supreme Court ruled that Apple is owed billions of dollars in unfair tax breaks. We also explore the ghost towns up for sale and take stock of Chinese adoptions around the world.

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The news fix

Pay up, Apple. While CEO Tim Cook was selling a new $1,000 phone, Europe slapped Apple with a multibillion-dollar tax bill. The European Union’s highest court ordered Apple to pay Ireland €13 billion, or about $14.4 billion, plus interest, for 11 years of unfair tax breaks.

What types of tax breaks did Apple receive? Ireland has one of the lowest corporate tax rates in Europe, which is why multinationals have often chosen to set up shop there. Many companies, including Apple, have also taken advantage of a now-closed tax loophole known as “Double Irish,” which allowed companies to reduce their effective tax rate to single digits by funneling their revenue through Irish companies based in tax havens like Bermuda. The practice was technically legal until 2020, despite pressure from the US and EU to limit its use.

But Ireland has given Apple additional tax breaks through administrative rulings that it has not extended to other companies. The European Commission said Apple’s effective corporate tax rate fell from 1% in 2003 to 0.005% in 2014. Antitrust authorities argued that the tax breaks unfairly diverted investment from other countries, so they ordered Ireland to claw back the money.

In reality, $14 billion isn’t a lot of money for Apple, Multinationals took in $383 billion in revenue last fiscal year. That figure is just a fraction of the tax revenue lost under similar programs around the world. The Organization for Economic Cooperation and Development estimates that countries lose between $100 billion and $240 billion in total revenue each year when multinationals shift profits to low-tax or no-tax countries.

For its part, Ireland has not yet decided what it will do with the money. Apple’s back taxes could end up in the country’s new sovereign wealth fund, which, as our reporter Henry Epp recently explained on Marketplace, are reserves of cash that act like huge piggy banks in which governments can invest and grow their wealth.

Intelligence at a glance

“Selling Sunset” is a guilty pleasure for many of our team members. It’s an addictive fantasy of extreme wealth. The discerning viewer understands that these shows tend to emphasize on-screen drama, but “Selling Sunset”’s eighth season was also marked by off-camera conflict.

Alanna Gold, the new real estate agent at the Oppenheim Group, introduced herself to her colleagues by bragging about “owning a little western town in the desert… called Pioneertown.” Her castmate replies, “I didn’t know you could buy a town.”

Hollywood investors developed Pioneertown, California, 140 miles east of Los Angeles, as a low-budget Western movie set with an 1880s theme, complete with operating businesses including a grocery store, restaurants and hotels. More than 50 films were shot there in the 1940s and 1950s. When Westerns went out of fashion, most of the residents left, except for a few hundred.

So when some Pioneertown residents caught wind of what Gold was claiming on the show, they took to Instagram and issued a joint statement to clarify that Gold’s holdings occupied less than 1% of Pioneertown’s 640 total acres.

Gold has apologized for overestimating her real estate value, but the idea of ​​buying an entire town isn’t as far-fetched as you might think. Many ghost towns have come on the market, including Cerro Gordo, California, Buford, Wyoming, and Bankersmith, Texas.

These deals typically attract a particular type of buyer who wants to preserve or restore towns to their former glory. But revitalization isn’t cheap or easy. Many homeowners are learning the hard way why their ghost towns were abandoned in the first place.

The numbers

China officially ended more than three decades of international child adoptions last week, with parents of Chinese nationals the only exceptions. Let’s do the math.

1992

China opened up to international adoption in 1992. The one-child policy, in effect from 1979 to 2015, led families to abandon thousands of children, mostly girls, for fear of heavy fines, job loss and infanticide.

2 trillion yuan

Demographer He Yafu estimates that the Chinese government collected about 2 trillion yuan ($282 billion) in additional child fines (“social maintenance fees”) between 1980 and 2012.

160,000

Over the past 30 years, more than 160,000 Chinese children have been adopted worldwide. According to the U.S. State Department, more than half of them have been adopted by families in the United States.

$40,000

Adopting from China could cost adoptive parents up to $40,000, including agency fees, travel costs, donations to orphanages and other expenses.

1%

The decision to end international adoption comes as China’s population is shrinking. According to research firm BMI Country Risk & Industry Analysis, the shrinking labor force will cause the country’s economic growth to decline by 1 percent each year over the next decade.

None of us are as smart as the rest of us

The first and perhaps only presidential debate between former President Donald Trump and Vice President Kamala Harris took place this week, in which the candidates presented their contrasting visions for the American economy. Here’s Marketplace’s recap, along with some interesting reading with useful context.

Tax cuts galore, but for whom exactly?

Both Harris and Trump say they would cut taxes, albeit for very different groups. Vox analyzes the proposals and explains why both tax plans would likely fail, given the gridlock in Congress.

Politics should not be a zero-sum game

This Washington Post op-ed (link to white paper) was published a week before the debate, but it remains relevant. The op-ed examines how progressive and conservative politicians increasingly frame their policies in terms of winners and losers. But economics teaches us that there are many ways to create win-win scenarios.

The Truth About Tariffs

Ask an economist how tariffs work and they’ll tell you straight: Tariffs are taxes. Read this CNN fact check to learn why Trump’s statements about tariffs during the debate were inaccurate, especially about how they affect American consumers.