iPhone 7 May Boost Apple’s Fortunes But Has Its Irish Luck Run Out?

Original image: Apple. Clipart leprechaun: DepositPhotos.com

DTAC launched pre-registration to pre-order the iPhone 7 and 7+ today, Oct. 7. Seven is a lucky number, they say, or is it?

No firm date was given for actual delivery of the units – nor were the prices. What was announced today was heavy on the “pre.” A pre-registration page for pre-orders that goes live at 12:01am in one week on Oct. 14. Apple Watch 2 pre-orders also go live on that day, while the new iPad can be pre-ordered starting Oct. 21.

I may be splitting hairs, but while DTAC’s press release described it as pre-registration for pre-order, the other two telcos only put up a page to register one’s “interest” in the upcoming launch.

Given how unlucky the number seven has been for Samsung with its spontaneously combustible Galaxy Note 7, the lack of any bad news over the iPhone 7/7+ launch was good news for Apple. Or was it?

Away from the tech side, things have not been so rosy for our friends in Cupertino. Sorry, I mean our stateless friends formerly from Cupertino.

On Aug. 20, the European Commission ruled the Irish government gave Apple illegal state aid in the form of tax breaks dating back to 2004 amounting to a total of EUR19 billion (737.2 billion baht). In 2014, Apple paid an effective tax rate of 0.005 percent.

Apple is of course appealing, saying it did nothing wrong and made the deal in good faith. And oddly, in this age of austerity, the Irish government is appealing the ruling as well, fearing a loss of some of the 5,500 high-tech jobs Apple brought to County Cork, home to its European headquarters.

Makes one wonder if anyone in ASEAN is taking exception with Thailand’s own generous zero-percent tax deals?

Yet it is instructive to look at the phenomenon of what economist Paul Krugman has described as “Leprechaun economics.”

In the last quarter of 2015, Ireland saw a whopping 26 percent growth in GDP. This confused just about everyone, as no developed country grows that much in a year. Later it became known that much of it was due to Apple relocating its intellectual property to Ireland.

But by transferring its valuable IP, Apple also created a not inconsequential cost for the state. EU nations each pay a levy based on their GDP, so what was essentially Apple’s internal accounting translated into a permanent increase of EUR380 million per annum in Dublin’s share.

Those 5,500 highly paid Irish jobs seem less appealing if they cost EUR69,000 each.

Since the Apple case, it’s been open season on tech companies. Taiwan is suing Uber for USD$2 million (67 million baht) in unpaid sales taxes. Indonesia is suing Google for USD$418 (14.5 billion baht) for tax on profits it believes were unfairly transferred to Google Singapore, and Japan has demanded (and received) USD$118 million (4.1 billion Baht) from Apple for withholding tax via its iTunes division.

As for Thailand, well, the Finance Ministry recently announced plans to crack down on tax evasion online, targeting popular websites, net idols, streaming sites as well as applications which until now have operated largely under the radar. More importantly, back in January, the National Legislative Assembly announced it would amend the tax code and take aim at online advertising revenues. It explicitly mentioned Google and Facebook.

The amendments would disallow exemptions for spending on online advertising with foreign companies. This would mean companies would have to pay 20 percent corporate taxes on any advertisement cost. With online advertising, the state’s coffers would swell by upward of 3 billion baht to 15 billion baht, according to estimates.

Prime Minister Prayuth Chan-ocha suggested he may introduce a two-tier tax with a lower rate for companies who set up shop in the country, pay proper local taxes and cooperate with government censorship and surveillance requests.

Most countries want cash. Some, like Ireland, prefer jobs to direct tax revenue.

But Thailand wants control more than anything else. Not that anyone would be surprised anymore.