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Comment by newjersey | Hacker News Reader

Apple pays VAT and all the taxes it is legally obliged to pay. Don't blame Apple. They will pay the least amount they have to pay. Fix the loopholes.

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The loopholes exist because corporations like Apple (but even more so others), lobby for them to exist.

It's not like corporations are exploiting some totally neutral loophole they discovered -- those are there on purpose.

Not trying to deny what you say is true, but just out of curiosity, is there any proof that Apple is doing this and how do implementations of this lobbyism look like? Just trying to understand how all this works.

Maybe it's because of coming from a European background, but this kind of questions are quite baffling for me. I know you mean well, but I find that the idea that corporations do this kind of thing doesn't need any more proof than the fact that the earth is round.

If one follows the news, there are constant reminders of this kind of lobbying going on (corporations asking for special treatment, especially when it comes to taxes) for a whole century. Besides a lot of this is done right out in the open. I mean coorporate lobbying was invented exactly for that -- to push governments for favorable laws, special treatment, laxer environmental and other protections, etc. On top of that, there are all kinds of under-the-table deals (with lots of them exposed frequently) with politicians and corporations.

That said, here are some pointers to the issue. First the general Wikipedia article:

A number of published studies showed lobbying expenditures can yield great financial returns. For example, a study of the 50 firms that spent the most on lobbying relative to their assets compared their financial performance against that of the S&P 500 in the stock market concluded that spending on lobbying was a "spectacular investment" yielding "blistering" returns comparable to a high-flying hedge fund, even despite the financial downturn of the past few years. A 2011 meta-analysis of previous research findings found a positive correlation between corporate political activity and firm performance. Finally, a 2009 study found that lobbying brought a substantial return on investment, as much as 22,000% in some cases. https://en.wikipedia.org/wiki/Lobbying#United_States

And the US specific one: https://en.wikipedia.org/wiki/Lobbying_in_the_United_States

The Atlantic: http://www.theatlantic.com/business/archive/2015/04/how-corp...

The Guardian: http://www.theguardian.com/politics/2014/mar/12/lobbying-10-...

National Review: http://www.nationalreview.com/article/421664/corporate-lobby...

Fortune: http://fortune.com/2015/09/04/lobbying-corporate-washington/

Economist: http://www.economist.com/node/21553020

Forbes: http://www.forbes.com/sites/chrisbarth/2011/12/14/29-compani...

Oxford University Press: http://www.amazon.com/The-Business-America-Lobbying-Corporat...

Lawrence Lessig: http://www.amazon.com/Republic-Lost-Money-Corrupts-Congress/...

The Influence Machine: The Influence Machine: The U.S. Chamber of Commerce and the Corporate Capture of American Life

Lobbying America: http://www.amazon.com/Lobbying-America-Politics-Business-Twe...

And those are "establishment" sources -- you'd get far better coverage in more outspoken and critical voices.

Regarding Apple in particular: http://www.theguardian.com/business/2015/jan/21/us-tech-tax-...

http://www.theguardian.com/technology/2014/sep/30/apple-repa...

One possible solution is making corporate lobbying illegal, with severe penalties, i.e. long prison sentences for those involved. Corporate lobbying corrupts democracy, so why should it be allowed to exist?

Then, simplify the tax system. The more complex a system is, the easier it is to game. If necessary, tax revenue instead of profits: if a widget is sold here, the company which sold it should be taxed here.

I agree with both ideas. Unfortunately for the thing to be fixed those passing laws should benefit from it being fixed -- but on the contrary they benefit for it being broken.

So, the first thing that should probably be fixed is: no campaign donations, at all.

Campain donations just let the politicians catering to the richer population get more advertising and marketing power.

I'd go as far as forbid all political / campaign advertising. If they want to convince, let them organically convince their local voters, then their state, and up to the whole party etc. Not with costly marketing, videos and large, costly, speaking appearances.

100% Right fix the laws. This is horrible and the Rich pay round 10% tax rate (They argue they pay so much? They pay a ton in taxes but in terms of percentage they pay less than most people)

Except that the reason the loopholes exist is because of the lobbying of companies that take advantage of them.

The fact that companies are able to create loopholes via lobbying is the problem. When you accept corrupt government as an unchangeable fact of nature, you've already conceded defeat.

or... you might become a realist, and maybe try to come up with solutions applicable in real world, on real people and real situations.

I'm not claiming I know what the solutions are. But I am damn sure theoretical solutions for theoretical situations tend to fail spectacularly in reality, no matter what topic they are about.

You could support Lawrence Lessig's presidential campaign.

I think you missed the part of parent comment about "realism".

Lawrence Lessig is a real person and thus my answer satisfies at least one of the criteria given.

100% agree, and this has been very frustrating for me over the last decade or so. Elected reps (in the US, at least) are barely going through the motions of obscuring the quid pro quo any more, and it seems like nobody really cares.

How can this loophole get fixed? My (admittedly minimal) understanding is that these companies don't have to pay taxes on the money until they repatriate it. From the perspective of countries like the US or UK, Apple earns very little in "profits" because they have expenses in licensing fees between their own companies that effectively pushes the profit to countries with very low corporate tax rates.

This all sounds sinister and it certainly is clever. But I don't see an easy way to fix it. I don't think a tax system where countries can tax profit that never enters its borders is viable. How would the UK feel if the Cayman Islands levied a tax on profit earned by UK companies?

a very heavy handed approach that will almost certainly fail in the real world would be to tax corporate revenue, not profit. This is VERY invasive and I would not recommend it at all but I don't see an approach that is simple enough like this that does not require international co-operation.

In my simple mind, the failure is in defining profits. How do we define profit? The devil is probably in the details. *

If Wally's world buys widgets for $6B and sells them for $10B but then turns around and spends $5B on long term infrastructure, did they make a profit? Do they owe any taxes?

Something closer to home: Once we get into the details, it is very easy to get lost in there. When they spend $100 per hour to hire a consultant (programmer), does that count as capital expenditure? How?

I am not a lawyer and I am definitely not an accountant. I would imagine loopholes can be closed but it requires technical expertise that I lack.

* Perhaps only allow cross-border expenses to countries that honor a certain level of agreement?

PS: I am not so sure about taxing income in other countries. None of what I say applies to expatriating money from overseas. It only applies to monies a company makes in our country and tries to ship overseas. If Apple sells $100B worth of iPhones in the UK, should they pay corporate income tax on it in the US? Why not pay corporate tax on that in the UK?

How is taxing revenue more invasive than taxing profit? In the former scenario you have half as many things to audit than in the latter.

I think he means invasive as in it would affect companies' bottom lines more. Imagine something that primarily runs on a razor thin margin and makes up in volume and has $100M revenue and $5M profit, versus a company that has high margin and has $50M revenue and $5M profit. The first would be taxed much higher even though they have the same amount of profit.

Of course, because of the way companies can be structured, [Hollywood Accounting](https://en.wikipedia.org/wiki/Hollywood_accounting) is significant.

The UK tax office has been trying to fix loopholes.since transfer pricing abuse and offshore trusts started in the 19thC.

Non-dom has taken about 100 years to be scrapped which was creatively spawned by the Vesteys

http://www.theguardian.com/uk-news/2015/jul/08/non-dom-tax-s...

VAT is a tax paid by end consumers, its just collected by retailers.

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