Ireland was recently stunned with the news that Apple owed it 13
billion euros it did not want. The underlying tax arrangement was
relatively straightforward: Corporations that do businesses in
different jurisdictions often configure their internal operations
to reduce their tax obligations. The process ensures they are
compliant with the tax law of every country they operate in, while
still limiting their taxes.
This procedure is neither novel nor illegal. It is common enough
to have a descriptor: "tax arbitrage." The objective is
recognized in Anglo-American jurisprudence. In 1929, the House of
Lords held that "[n]o man in this country is
under the smallest obligation, moral or other, so to arrange his
legal relations to his business or to his property as to enable the
Inland Revenue to put the largest possible shovel into his
stores." Five years later, Judge Learned Hand wrote "Any one may so arrange his affairs
that his taxes shall be as low as possible; he is not bound to
choose that pattern which will best pay the Treasury; there is not
even a patriotic duty to increase one's taxes."
This principle has enabled Ireland to attract business on the
basis of an attractive tax system. The Celtic Tiger campaign has
been successful, recruiting major companies, including technology
giants such as Amazon and Apple. Against this backdrop, European
Union's unsolicited tax bill came as a bolt from the blue.
Greatly simplified, the EU premise was this: EU members are free
to set their own tax structures. Ireland and Apple were on safe
ground there. But the EU went on to hold that the Irish tax
structure constituted a de facto subsidy. Such a subsidy would be
impermissible under EU law. Therefore, Apple's payments to
Ireland were improper.
In effect, the EU decision grafted principles from one legal
area – trade subsidies – to another – tax policy.
One view would dismisses this as routine jurisprudence: for
instance the Affordable Care Act was famously upheld as a tax. But
another views it more cynically. Brussels, this view holds, has used the subsidy principle as an
expedient to strong-arm members on tax matters that would otherwise
be outside its remit. Other members including Luxembourg and
Belgium are next in line on the basis of their treatment of other
multinationals such as Facebook, Google, Microsoft and Amazon.
So how does this cynical view potentially impact the U.S.-E.U.
data framework? Readers will
recollect that that framework – Privacy Shield –
has been rolled out in the wake of the Schrems decision which
struck down the previous framework. There are questions about
whether Privacy Shield can survive, particularly when critics view the EU regulatory climate as hostile to
American technology giants. This view holds that protectionism, not
differences on principles, drives EU enforcement.
The EU has tried to rebut this view. Nevertheless, the
road ahead contains two potential potholes. One, Privacy Shield
could struck down in a subsequent legal challenge. In that case,
corporations who had adhered to it in good faith would still face
potential penalties. Two, even if Privacy Shield is affirmed, a new
regulatory regime, the EU General Data Protection Regulation (GPDR) is
imminent. Under the cynical view, GPDR would join an array of other
regulatory disputes bogging down American businesses in
So what does the prudent data holding or processing entity do?
It has three option. First, many companies relied on model
contractual clauses or binding corporate rules post-Schrems. They
may want to do so as an additional safety measure despite Privacy
Shield: a belt-and-suspenders approach to ensure compliance. Two,
since GPDR is expected in two years, it is time to prepare. Three,
companies should incorporate "privacy by design" concerns into
developing processes and procedures. Processes and procedures that
incorporate privacy considerations at every stage from inception to
launch would go a long way to heading off even the most zealous
privacy regulator at the pass.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Radio Shack bankruptcy case raised a fundamental question regarding the sale of personally identifiable customer information: Can it be done? The answer is "Probably". (You expected anything else?)
On 28 July 2016, the European Court of Justice rendered a decision in a dispute between an Austrian Consumer Protection organization known as VKI and Amazon EU Sŕrl, a subsidiary of Amazon registered in Luxembourg.
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