The Story of Apple's $14B Tax Bill
bloomberg.com
bloomberg.com
A common scheme is that companies pretend to have 0 profit in a market (using various tricks) and then argue they shouldn't pay any tax on their profit in said country, because they don't have any profit there.
But it doesn't make any sense. If Apple actually made 0 profit in Europe for the past 10 years, it wouldn't stick around. But they have opened hundreds of new stores and hired scores of people. Everyone know they make boatloads of money in Europe (just as everywhere else). Of course they should pay taxes on this profit.
The difference between revenue and profit is really important here. You can have a lot of revenue without any profits if you're reinvesting the money, I think? So even if there are a lot of games you can play in terms of which profits you reinvested, I don't think it's as simple as "doing lots of business = owing lots of taxes".
"We have to pay our headquarters Y billion to use 'their' very valuable logo". And this amount Y just so happened to match our gross profit X in market A. So X - Y = 0 profit in market A.
My point is that this doesn't make any sense. If the company actually didn't make any profit year after year they wouldn't stay. Everyone knows this is true. Any other argument is just PR-bullshit to justify the tax dodging.
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Another common trick is to buy something with intangible assets, for example software, in a market where you have untaxed profits (as described above).
Then you wait a few months and suddenly realize that this was a stupid mistake and that all this software is now worth zero.
You make a huge write-down (which is a cost) that can help you reduce your (bookkeeping) profit to 0.
You still actually made money though + your 'worthless' asset [the software] is still around, and will keep generating money in the future.
It is designed to prevent abusive income shifting practices.
They might be able to make this case for Apple but it's really a subjective call.
Apple can argue that any other company would agree to the same Ireland IP licensing because they can make a profit.
It really comes down to a subjective argument of how much profit is needed to make it attractive to 3rd parties at arms length.
https://www.techdirt.com/articles/20121018/01054720744/holly...
I've also seen this happen in real estate. You can make a ton of profit, but if your on-paper amortizations outweigh your in-real-life profit then you on-paper lose money even though in the real world you're richer than you were before.
Everyone can see that these are all tax avoidance tricks that may or may not be legal, but they certainly are not based on economic reality, they are not in line with the intentions of law and can't be defended to public opinion. These companies get access to markets, use public infrastructure and get support of the US and EU governments. They should simply pay the taxes where they are due, mostly in the US and also in the EU.
Only as long as countries and politicians don't really try you are right. Giving up on trying to make corporations pay taxes they should pay because "you can't win" seems like a very weak way to handle this.
Corporations will immediately start discussing income tax or VAT and invent avoidance schemes on that, playing countries against each other, and that game also can't be won. There's no end.
The big economic regions like EU and US should completely stop accepting all these transfer pricing and IP deals, and tax these multinational companies on something that is based on the profit that they report to their shareholders, divided by the approximate regional share of the company's total market.
Hedge funds have preserved material gains via Bermudan tax laws for years. They park money in Bermudan insurance companies whose investment arms manage the funds, while deferring tax payment on trading profits. Eye-opening to learn about...
Tax agencies typically use the Arm's Length Test to determine if this income shifting is allowed.
The basics of the test come down to:
Would another company agree to the same arrangement if they weren't owned by the same company / person.
Like many laws, there are subjective components and that is what precedents and courts are for.
Tax agencies understand that businesses exist to make a profit and try to come up with systems that are compatible with that.
>>Like many laws, there are subjective components and that is what precedents and courts are for.
But this is not similar to subjective laws where you need to come-up with interpretation for some case. Here you would need to assess "real value" of every transaction out there which is just not possible.
>>Tax agencies understand that businesses exist to make a profit and try to come up with systems that are compatible with that.
This is not an argument. There exist taxes which are simple in structure and which are not possible to evade without committing forgery. VAT is one such tax, taxing revenue (but not income) is another idea. Income tax isn't like that.
The unfair part is that small companies (startups and others) can't do any of this fancy tax-dodging.
(there are many arguments for/against taxing individuals/corporations; I think there are good arguments on both sides, but this isn't about that)
Doesn't it create some kind of weird cross-border investing incentives though? I.e. we drop the corporate tax in the US, we could raise the income tax to recoup some of that, but not all of it, due to foreign investors who get taxed in their home countries.
(1) Does that mean rich people should incorporate?
(2) Taxing a rich person takes operating money away from that rich person to spend on other things.
https://en.wikipedia.org/wiki/Luxury_tax#Luxury_tax_in_the_U...
Rich people were taxed, the industries that depended on them suffered (I'm from Florida, and yacht manufacturing industry alone laid off tens of thousands in the state).
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Your distinction is arbitrary (especially considering point #1).
I would also like to add that a luxury tax is very different than taxing rich people. I am not a fan of luxury tax at all.
Trickle up economics (is that what you call a luxury tax?) doesn't work.
> August 1993, the Congress decided to eliminate the “luxury tax” since it did not achieve its main objective...According to the tax's critics, these revenues were disappointing and unsatisfactory and also negatively impacted the incomes of the sellers of the luxury items.
We being the operative word. Do "we" want people to buy more soylent green and fewer flatscreen TVs? Depends on who "we" is.
I submit that in aggregate what "we" want is what "we" are already buying.
Your sweaters-for-cats company can pay for a cruise if it's a sales trip to promote the product. So promote the product.
Super annoying, but if it saves a lot of money, people will do it.
The IRS is already ahead of you there. Although it is a common statement here, you'd be very lucky to pull it off with any reasonable success.
There are some workable tax avoidance strategies, but they typically involve already having a bunch of money and family trusts.
(By extension, those wanting to abolish corporation tax should come up with an argument why companies that reinvest profits to research or expand should pay more tax - on the goods and services they buy to improve - than companies that do nothing with their large piles of cash except hope it's enough of a war chest to deter others from investing in competing with it)
One of the reasons 'hardware is hard' is because the government makes it hard.
You nailed it. We need a system where "corporate taxes" should be entirely at the shareholder level, and corporations should be allowed to propagate tax liabilities all the way to individual shareholders (so that holding entities aren't taxed). Then we should apply a progressive income tax on any capital gains made by shareholders. That would make our the system fair and economically efficient.
My argument is that a set of tax laws exist today and as long as they do all companies should be treated the same.
> just to keep them down
As an aside, Ireland's corporate tax is 12.5%, roughly 1/3 of the US corporate tax rate (35%). So it's not like Apple is being horribly 'kept down' here.
Two companies A and B work in the same market, produce the same thing of the same quality and have the same labor/material costs and revenue. Both companies make 100M in the market. The difference is that A is a local company and pay corporate tax on that 100M and B is buys "brand" or "marketing strategy" from a company located somewhere else (maybe on some island in the middle of Caribbean Sea or something). The rights to use the brand cost 100M/year. Company B pays 0 income tax in the country it operates.
This is an obvious failure of the tax system. The solution is quite simple: get rid of corporate income tax, focus on consumption taxes. Then you won't need to chase anyone around trying to prove they overpayed or "hid" income. You just don't care at all about those things. You also invite other corporations to come to your country and pay salaries and then you get consumption/real estate/land taxes on that salaries as well (and maybe personal income taxes as well if you are into that). I mean it seems so obvious for anyone who ever did any business on any scale where international sales are involved and who has seen how easy it is to avoid paying income taxes and how it really is a tax on honesty and on how ethical you want to be.
Most countries struggle only to make small changes to their tax-systems (just look at all the loopholes and flaws most countries have sprinkled throughout their tax code).
Or India, they've spent some ~25 years working on an update[1].
A global, synchronised overhaul of the tax-system would be very hard. Most likely, it'll have to be a gradual change.
I also think more emphasis on consumption tax (VAT) and real-estate taxes would be good. But any change will take time.
[1] http://www.nytimes.com/2016/08/04/world/asia/india-goods-and...
Let's take BigCorp'inc or whoever which is selling stuff in the UK and not paying any corp tax; should the uk govt take them to court and try to reclaim money it feels its owed? The govt doesn't really have the teeth for that fight; it's in BigCorp's interest to fight incredibly hard and throw vast sums at that kind of problem.. I'm feeling like the endless pockets of these companies would force the govt to drop any case when the costs get high enough (with enough lawyers, how many years do you think even the frist phases of such a case could be drawn out, and at what taxpayer cost?) that would be a huge embarrassment and would mean publically admitting we can't actually enfore this and so we don't even try to do it...
So what's another option? We could attempt a sales ban, but that's a simple bit of math from BigCorp's side which makes it also pointless to attempt: If losing access said market forever costs less than paying taxes in all other countries where you are doing that kind of advoidance is, then goodbye to that market.. Right? If a sales ban on the UK worked, then the same thing would start happening everywhere -- it makes sense for them then to just walk away (certainly, it'll be cheaper).
So we can't force them to pay, and we can't threaten them with exclusion unless everyone else does too, so what else is possible? Drop corp tax and double vat?
Yes, it is indeed: 1) if a company does local business, they should pay local tax, and, 2) by making sure the company has physical presence instead of being a P.O. box. Ie. by flagging those companies who claim they are in the middle of the Caribbean Sea while they're clearly not as tax evaders who ought to be prosecuted 3) use whitelists on companies who are honest, and for those who are not: immediately distract the corporate income tax from their transactions (it is 2016, after all). EDIT: 4) the construction with fake companies who the companies deal with should also be pretty easy to catch with some ML/AI :)
Your solution:
> get rid of corporate income tax, focus on consumption taxes.
Would give corporations a free ride at the expense of consumers. It'd stimulate consumers to start fake corporations just to avoid tax. Finally, it'd lower the value of the money the consumer has as it is. Hardly a fair solution.
This is delusional to be honest. There are many shades of gray when it comes to tax avoidance. Other than straight up fraud there are costs which really are needed but might be a bit overblown. Are you really going to use resources to prove this piece of software bought in Bermuda is worth 4M and not 5M? It's a fundamental problem with income tax which can't be fixed unless you have access to an oracle which just spits a real value for everything.
>>4) the construction with fake companies who the companies deal with should also be pretty easy to catch with some ML/AI :)
It doesn't need to be fake at all. You just overpay for software/advice/tours/coaching/brands here and there. It's fluid, there is no chance tax authorities catch all of those or prove they were in fact overpriced. It becomes tax on honesty/ethics again as people not willing to play the game will pay more.
>>Would give corporations a free ride at the expense of consumers.
No it wouldn't. Consumption taxes as well as corporate income taxes are 100% financed by what consumers pay.
>>It'd stimulate consumers to start fake corporations just to avoid tax.
It's way more difficult to avoid VAT than income tax. Avoiding VAT on any significant scale requires forgery while avoiding corporate income tax is as easy as overpaying a bit here and there and maybe getting "unlucky" with some risky purchases.
>>Finally, it'd lower the value of the money the consumer has as it is.
No it wouldn't. It doesn't matter if you tax a consumer or corporation the money comes from consumers anyway. It seems you are not very familiar with how consumption taxes work and how they the tax burden under them looks comparing to corporate income taxes. I don't want to suggest sources but as this is widely discussed issue by economists on all sides it's easy to google for it. There are issues mainly concerned with consumption taxes not being progressive (or regressive if you take immediate look) but "giving corporations free ride" isn't one of them.
FWIW, I never said it was easy. I also never said I didn't want additional punishment on the crime. I do; and in addition to jail time. That way you hurt the criminals where it hurts. If the BSA, RIAA, MPAA can claim missed income with ludicrous amounts, why can't the tax departments? Oh wait, reading the article, they did, and apparently that is just 100% + interest. For maximum efficiency, go after the big fish _first_. But there's so much fish slipping through with regards to BSA, MPAA, RIAA, and also (corporate) income tax. Tech can help us here, but the legal system is flooded as it is. In practice there's out of court settlements which is less ideal since it creates a shadow justice system.
Now, if we do what you suggest, abolish income tax, VAT will go up due to loss of income from income tax, and the state needs income from somewhere. However the effective income of the consumer would go up as well which I forgot. Since there's so much corporate income tax evasion, the consumer and honest businessmen end up with a net advantage of purchasing power compared to the current situation, and we save money/time/lawyers/experts. Although I suppose some lawyers/experts lawyers need to respecialize.
A caveat is that we must implement it on a global scale. Else the VAT is higher in certain countries, while lower in other, which increases the incentive for fraud (buy by proxy). Also, it is too bad it won't work with any of the progressive tax systems. Which is what we in Europe have (YMMV). We could however, while abolishing income tax, move the weight of the progressive income tax to VAT, but what's gonna happen then? With physical items people would end up buying items for others. But like you said it is difficult on a large scale, and for something like a car that wouldn't work very well, since its pretty much bound to a driver's license and its movement is tracked via GPS. With items bound via DRM or service w/o resale value, there's no problem either. In other words, progressive VAT on service would work.
There's also the side effect that people sit on their money. If they spend it, it is (more) heavily taxed. I think that is going to create a massive black market, but perhaps that could be tackled in the 21st century. My main beef with your point is that you believe people are gonna keep getting away with it. I disagree. I believe technology is going to force^H^H^H^H^H us, on the longer run, more honest. But if we were to swap to a progressive VAT-only system we'd also be able to use tech.
EDIT PS: A way to avoid progressive VAT problem would be to rescale incomes. Well... yeah... I just don't see that happening...
This depends a lot on the other details of the tax system. Giving corporations a "free ride" can be unfair if it benefits one group of people at the expense of others, but it can also make a lot of sense when you think about all the different ways corporations can be organized.
Just for a simple example, imagine two different pencils. Pencil A is made by a big company that owns graphite mines, logging equipment, factories, ships, warehouses, and retail stores. Pencil B is made by lots of small companies, one of which is a graphite mine, which sells raw materials to a pencil factory, which sells finished pencils to a distributor, etc etc.
We really don't want a system that taxes pencil B more than pencil A. Because corporations aren't "real"; they can get bought and sold and merged and split. So of course if pencil A is taxed less, then overnight the market would organize itself into nothing but giant pencil companies just to pay less in taxes. We need some way to decide what "share" of taxes each small company gets, so that all else being equal they add up to the same tax the big company was paying. We could do that with profits vs losses, or with value-added taxes, but we have to do it some way or another. How should we do it?
In an ideal situation Pencil B should be taxed less than Pencil A, as taxes would offset this overhead and incent this shift toward many small independent actors participating in an open marketplace.
In the real world, we have the opposite scenario. Companies are incentivized to become more like Pencil A, forming large vertical monopolies that minimize overhead and lock smaller players out. Even worse, once they're big enough to do business across national borders, taxation becomes mired in international law and cross-jurisdictional quagmires. In this laissez faire world, nations race to the bottom and compete for these businesses by offering places to incorporate at the lowest rates they can accommodate.
If coupled with increased progressive taxation elsewhere this might be okay, but otherwise it's a big problem.
The truth is there isn't a 'simple' solution to this, which is part of the reason that status quo is unchanged (another part of the reason is obviously the lobbying power of large/multi-national corporates.
-tax necessities at lower rate -give every citizen some way to get some of the consumption tax back (up to X amount) -introduce more social programs like some kind of unconditional payment; as this will be much bigger % of income for poorer people it will in effect make consumption tax progressive.
>>The truth is there isn't a 'simple' solution to this, which is part of the reason that status quo is unchanged (another part of the reason is obviously the lobbying power of large/multi-national corporates.
I think your "another part" is what is really going on here. I would add one more reason: people are not good at understanding economics and consequences of regulations. Even if you prove on paper that consumption tax is just more fair, will make companies pay in market they operate and therefore will lower tax burden on lower/middle class it's still easier for a politician to shout: "tax the rich CEO's!" and they will get people to follow them.
I feel the better solution is a global tax treaty. Where WTO nations or appropriate group all agree to have a minimum corporate tax rate if they want to trade. This will stop any race to the bottom by countries trying to attract companies via a double Irish type method and remove the incentive of corporations for this. All while allowing taxes to be collected at the corporate level in a global economy.
The problem of removing corporate tax is corporate vehicles will become a holding vessel for profit hoarding. E.g for someone like me that likes to save rather than pay my tax bill each year on investment earnings I'll set up a company and put all my savings into this. Each year these invest profits will be retained tax free as I continue to save. This will pull massive tax revenue from the economy as people do this at scale. For this reason shifting to consumption tax only will just open another tax avoidance option.
>>The problem of removing corporate tax is corporate vehicles will become a holding vessel for profit hoarding.
I don't mind it. Sooner or later they spent the money. If we have inflation at some decent level that will serve as a tax on hoarding.
>>E.g for someone like me that likes to save rather than pay my tax bill each year on investment earnings I'll set up a company and put all my savings into this. Each year these invest profits will be retained tax free as I continue to save.
I don't see the problem. It's a basic arithmetic property of multiplication that it doesn't matter if you save more first and then are taxed at 23% (or w/e the rate) or are taxed first and save later. If you are buying assets then some other people get the money to spend.
>>This will pull massive tax revenue from the economy as people do this at scale
I think encouraging savings is good, it stops over the top consumption and allows building capital to finance new ventures and therefore allow for faster progress of our civilization. If you never spend the money it's great for everyone (you provided free services and didn't want anything in return), if you spend it: you are taxed. If you buy some assets you will be taxed on that and some other people will have your money to spend and be taxed there. I just don't see it as a problem as long as there is at least minimal inflation (aka tax on keeping cash).
1. https://en.wikipedia.org/wiki/Financial_transaction_tax#Unit...
IMO, we should tax things that don't contribute to actual growth. Basically companies that merely extract wealth from the system without contributing anything of value like high frequency trading and predatory patent trolls.
Taxing income makes no sense to me. Isn't that a disincentive to work? Work is one of the primary drivers of creating prosperity.
Am I the only one outraged by this ? There is no guarntee your money is safe. You hire tax advisors. You go as far as to get confirmation from Finance Minister. Its apparently not enough. This level of legal uncertainity is just insane.
No, of course not outraged like that.
Outraged by Apple not paying taxes like every ordinary person
It's important to keep in mind that Apple, being a business, is doing exactly what the primary function of a business is - making money. Reducing tax burden is effectively making money they otherwise wouldn't have.
So while as a consumer and citizen I'm happy that Apple is being held to account, I agree with your concern that not even Apple, having gone to such lengths to ensure that such an approach is ostensibly a legal and legitimate method of doing business, can effectively have the authority turn around and say "We change our mind, you owe us fourteen billion dollars." It creates much uncertainty in the legal and administrative processes.
I would prefer to see them simply close the hole for future endeavours.
Because it's cheaper. Duh.
If a company charges too much people don't buy their products and go to a competitor. Likewise if a government charges too much tax businesses change their tax nexus to somewhere else.
It's unreasonable to expect a business to operate against its own self-interest. Any system that requires it is bound to fail.
Governments must design their tax systems to be competitive if they want revenue.
Arguing that companies should opt to pay more in taxes is like arguing that consumers should buy a product that costs more. It makes no sense. It's the reason why Walmart exists and why people don't buy local. It's a matter of practicality.
You can make all the moral arguments you want but the facts are that people and companies are going to act in their own self-interest. Until we can be frank and accept this as fact, we can't design moral, legal, and tax systems that work effectively.
The issue here is that a small hardware startup competing with Apple cannot use shady tax-dodging techniques. Thus they are at a disadvantage.
> Likewise if a government charges too much tax businesses change their tax nexus to somewhere else.
Apple still want access to European customers. So it's fair that they follow the European law. It would be fair if Apple ceased selling in Europe and also didn't pay taxes there. But they don't want to leave the worlds second largest economy.
This is true of 'personal' taxes in the US as well. Warren Buffet pays a lower tax rate than his secretary because when you're rich, you can afford a lot more tricks to bring your effective tax rate down, and you can afford a lot more things that can make you money.
Another similar effect: the mayor in my town bought a house in an expensive part of town, which he could afford to do because he had hundreds of thousands of dollars for the down payment. Real estate prices in this city are out of control, growing by leaps and bounds, so after a year, he sold the house he'd bought at a profit of hundreds of thousands of dollars.
I don't have hundreds of thousands of dollars, so I can't afford to buy that place. If I could, I could have made that same profit. If I came across a million dollars tomorrow and had to give it back in two years I could make a lot of money - maybe even double it, if I made the right real estate investments. Two years from now I could give back the new million and keep my own million.
But as it is, without that million dollars I can't make the down payment to afford a place, which means I can't ride the wave, which means instead of getting less profits I get zero profits.
This isn't a dig at the mayor, btw; he and city council are making a lot of moves to help affordability in this city, but being a successful businessman before becoming mayor he has those opportunities that most people don't and can't.
One problem here is that in the race to the bottom it will always be difficult to hold companies accountable.
wgt regulations in general, the same happens in every state in the US (see delaware)
You approached this discussion with the assumption that the new federal government of Europe has a legitimate authority over their taxation argument, when it simply does not have a clear case, it doesn't have supportive case law, and the administrative procedure is being made up on the fly.
The public servants in the European Commission honestly believe in the concept of fairness, but are interacting in a revenue collection system where that was never a prerequisite.
What am I supposed to feel?
Fairness however should be of interest for the people that make these laws.
But the law was changed in their favour by Luxembourg in a deal to deprive other EU countries of tax by creating sweetheart deals.
Jean-Claude Juncker, the current president of the European Commission, who was prime minister of Luxembourg admitted after the “Lux Leaks” publications that the system was “not always in line with fiscal fairness” and may have breached “ethical and moral standards.”
http://www.bbc.com/news/world-europe-36662636
The only people who suffered directly as a consequence were the leakers
> Former PricewaterhouseCoopers employees Antoine Deltour and Raphael Halet received 12 and nine-month sentences respectively for leaking documents.
'Tax evasion' is illegal - it implies you're doing something like hiding money offshore, and not declaring it.
Apple is doing nothing more than not paying the taxes they are not supposed to.
If you claim your 'moving expenses' on your tax form, are you 'evading taxes'? No - you're just playing by the rules.
Apple basically played by the rules. Nothing they did was illegal until the EU change their laws 25 years retroactively.
2)
Europe definitely has a right to tax business activity in Europe.
3)
The US does have a right to also tax business overseas, but it needs to be reasonable. Today, the laws are whack and US companies are double-taxed. If they weren't all that money would be coming back.
Your comment about Trump are unfortunate, I don't like him either, but he was elected. Also, the bureaucracy has not changed.
But consider this: Trump is actually going to change the repatriation laws, and you'll likely see a Trillion dollars parked overseas come back to the US. A good chunk of it will go to investors as dividends, but still, even that money will circulate back into the economy, and that's not all of it.
It's surprising Obama did not do this - if he made repatriation laws consistent with the rest of the world ... it could have been a big bump to the economy when the US needed it the most.
Edit: to be clear (thanks to Marzan, below) 'double-taxation' is not quite the appropriate term, as US companies are given credit for taxes overseas.
Well they did take part in secret sweetheart deals with Luxembourg that were designed to specifically route tax from EU countries into Luxembourg tax shelters. I would define that as "more than following the law"
https://www.icij.org/project/luxembourg-leaks/new-leak-revea...
Jean-Claude Juncker, the current president of the European Commission, who was prime minister of Luxembourg admitted after the “Lux Leaks” publications that the system was “not always in line with fiscal fairness” and may have breached “ethical and moral standards.”
Assuming that it did "circulate back into the economy", it seems most likely this money would be funneled into the already bloated financial sector where it can most readily participate in the variety of internal US tax avoidance schemes.
I'm saying that corporate profits returned from overseas are effectively coming back into the economy.
Actually - this is statement of fact. It's 'in the US system' as opposed to overseas.
Second - your position basically implies that 'corporate profits' are not beneficial to the US economy, which is a stretch.
Almost all of the money coming back will be put to use.
Do you want to know just one of the many ways:
STARTUPS
The massive number of startups being funded, at amazing valuations, is a function of 'extra cash' in the financial system. All of those failed startups employees are being paid with those dollars. And in many ways 'it's good' - they learn, they move on to better companies etc..
Massive amounts of money coming back into the US economy is a 'good thing' - the onus I think would be on you to demonstrate how this could really be a negative thing, and I suggest it would be impossible to demonstrate.
A significant portion of those profits were shifted overseas to avoid taxation within the US. Providing a "tax holiday" in order to repatriate those monies essentialy validates the tactic of shifting profits overseas to avoid taxation until a critical mass of dollars has accumulated so that it is politically attractive to institute another "holiday" just to bring the money home sans the tax.
This tactic is starving the US Treasury of funds needed for the People's Government to perform its functions.
This isn't the first go around with this, it is in fact becoming cyclical.
https://en.wikipedia.org/wiki/Repatriation_tax_holiday
In the meantime, these entities are parking dollars out of reach (actively removing them from circulation) instead of investing or spending them within the US.. where they would have been circulated anyway if not for the tax avoidance. They are being rewarded for removing the money and then politicians are being hailed as heroes for "convincing" them to return it by helping them avoid paying taxes to put it back in the economy it was removed from.
I fail to see how you think any of this is beneficial to the US economy.
In Apple's case this is not true at all. The money they are holding in Ireland comes from profits generated overseas, not from profits made in the US. (This is all well documented from the Senate investigation into Apple's finances a few years back.)
No - they are not removing anything.
Listen - if you lived in Dubai and earned $300K/year and paid minimal taxes, and moved back to the US with $100K in your Dubai account ...
If you left it there, and used it for travelling overseas, making investments, there would be no tax.
If you brought it to the USA - and it would be taxed at say 25% ...
Would you leave it there, or bring it back?
Would you be a tax evader/avoider for leaving it there.
No.
It's perfectly reasonable for you to want to leave your money overseas.
(I should point out that this is merely an analogy, personal taxes don't work this way for Americans.)
Apple has done nothing wrong.
If the US adjusts it's tax system to be more commensurate with how the entire rest of the world works ... it would be very beneficial to America overall.
I really don't like Trump, but I think he's going to fix this one issue, and that's going to be quite a big deal and a 'good thing'.
People are not fictional entities that can be created and destroyed at will; corporations are.
Shell corporations are being created within tax haven countries for the sole and explicit purpose of parking revenue within the boundaries of tax friendly regimes. The companies are not actually moving anything to these countries in terms of physical assets or corporate function.. only revenue. This is nothing like a person moving overseas and working and getting payed within that country.
They may have found a legal framework that makes them within the bounds of US & International law in order to do so. The problem with doing this is the inability to repartiate those funds without paying tax in the country you wish to move the money to.
There is nothing broken about taxing profits. You may not agree with the rate of taxation for corporations, but you would be at odds with the vast majority of the electorate. Companies choose to park revenue overseas in protest of the US tax rate.
Trump? I don't think he will fix anything. His stated intent is to cut taxes and increase spending. Maybe lower corporate taxation is in there, but that doesn't "fix" anything. There will always be some country, somewhere willing to go lower. This shell game will continue.
That's oversimplifying what happened. What happened is that Apple was working with the Irish government for a deal with very low tax %. The EU now told the Irish government that this was illegal, and that they need to ask Apple to pay the full price. Retroactively.
If you play dirty around the rules don't complain when it does not work out. If Apple had simply played according to the rules none of this would've happened.
The excuse that 'everyone does it' is a bad one. It doesn't work out for all the criminals in jail in US for dealing drugs, now does it?
Governments give incentives including subsidies and tax breaks all the time to companies.
Nearly every film made in Canada in the EU gets tax breaks.
Are you suggesting 'film makers' are like 'drug dealers'?
Can the EU rule that tax credits for film-makers are now 'illegal' after so many years?
How about subsidies to Airbus? And defence contractors?
That this has been going on for 25 years and the EU didn't say anything about it completely absurd and shows how broken the system is.
If you're going to have a 'single market' then you must have tax harmonization, or you have these issues - ergo - the fault is again the EU.
Re-interpreting laws 25 years retroactively is firmly in the camp of 'theft of private property' by government, totally banana republic.
The EU needs to fix it's game and stop blaming other entities for it's shortcomings.
> Governments give incentives including subsidies and tax breaks all the time to companies.
How on earth is that a reply to what you are quoting? Learn to quote.
Your original statement was a deceiving lie, and I corrected it. The EU did, in fact, not retroactively change a law since that is impossible. At interpretation of a law however, can be changed. The EU has told Ireland that their deal was invalid, and asked the Irish government to still ask Apple for all the money they owe the EU. It is money we -as civilians of the EU government- never received from Apple.
As I said in my previous post (you did not address any of what I wrote except went on a completely different tangent): If you play dirty around the rules don't complain when it does not work out. If Apple had simply played according to the rules none of this would've happened.
My example of how terrible the US government is was actually one where the US government profits because the US government profits from drugs felons via free labour.
I'm not going to get into this holier than thou debate on subsidies since I find it a complex topic to judge on by a case by case scenario. Other than that I'm casually gonna mention the US does this as well (in multiple kinds of ways including for example corn), as well as waging all kind of illegal wars and installing democracies as well as dictatorships to wage illegal wars, as well as economic espionage on their allies (Belgacom hacks come to mind). All of which the EU barely does, if it even does that. Some specific EU countries do, and I'm not happy about that. One of the worst culprits on that, for better or worse, is soon leaving us and in that delight I won't shed a tear.
No law has been changed, the article cited in the ruling has its beginning in the Treaty of Rome of 1957
1. Governments fail to prevent evasion of taxes.
2. Governments make unfair claims on taxes when public outrage allows.
3. Trump got elected.
4. Most money spent by governments is blown.
I think many people seek a "one good guy, one bad guy" storyline. I'm not sure whether that's cultural, a part of our mythology, or biological. But it's probably something to avoid.
Nor is there, I wager, any duty to maximise revenue or profit or anything similar in any jurisdiction on the planet.
tl;dr: "Tax avoidance" isn't a "fiduciary duty" per Delaware corporation law. That said, APPL execs may be subject to such standards through its corporate bylaws or through a variation in state law (CA v. DE).
[0] http://uchicagolaw.typepad.com/faculty/2015/12/a-duty-to-min...
Apple was mostly only doing what's reasonable (aside from, I think a 'special tax deal' - which is unfair).
The EU makes the rules. They created the gaping loophole.
Then they decide they want to 'change the law retroactively 25 years back' [1] - this is gong-show Chavista banana republic type property theft. Apple should sue them aggressively.
What should have happened:
A) The EU should have closed the loophole, long ago, and set some harmonization rules. When the closed the loophole, it should not have been retroactive.
B) American leegislators are at fault as well. Why? Because insane US tax laws prevents US companies from just bringing the money home.
Two problems:
i) Corp tax rates are too high in the US 35%
ii) US 'double taxes' foreign profits. A US company that pays 25% corp tax in France, brings the money back - is hit with another 35% tax. US is the only country that does that. Everywhere else, they pay a repatriation fee. The US system is basically designed as though the rest of the world does not exist. US should have a repatriation fee - it can even be commensurate with level of taxes paid in country of origin to be smart about it.
The only thing really sneaky that Apple did was pressure the Irish to give them a special deal, but it's still legal, and rational.
The EU is a terrible organization, they're incompetent, ideological, and they work against us as often as they work for us.
If there 'was a problem' with Apple's taxes, it was 100% their own fault - Apple was just following the law.
You can't change laws and have them apply retroactively for 1/4 century, it's totalitarian.
To be clear: I don't think that Apple should have been given a special deal, but it's not their fault for trying, or for having been given it.
It's quite common: Ontario just gave a huge subsidy to Cisco to open an office in Toronto. It could have very well been in the form of tax subsidy. EU massively subsidizes Airbus. Auto manufacturing incentives etc. etc. it's all common. Agree or not with them, but they're not nefarious.
[1] http://europa.eu/rapid/press-release_IP-16-2923_en.htm
"Following an in-depth state aid investigation launched in June 2014, the European Commission has concluded that two tax rulings issued by Ireland to Apple have substantially and artificially lowered the tax paid by Apple in Ireland since 1991"
If Apple did get a sweetheart deal, that is illegal under EU rules. That is what the whole dispute is about. But I don't think that they got such a deal. I think that Apple may have forum shopped for the best tax regime in the EU. Ireland has extremely low corporate tax rates period; no sweetheart deal required.
80% of all corporate tax paid in 2015 came from non-irish businesses. 40% of all corporate tax paid in 2015 came from 10 companies. Apple are the largest single taxpayer in Ireland. (http://www.revenue.ie/en/about/publications/corporation-tax-...)
So the Irish strategy is to be nice to multi-nationals, in return for that 80%. The understanding is that if we taxed more, they'd move somewhere else and we'd actually receive less. e.g., biting the hand that feeds you.
(This is also why the Irish govt are going to defend Apple in this - this isn't just about Apple for them, it's about scaring off 80% of corporate revenues)
Tax competition doesn't harm the EU, it makes it stronger. Because you realise, that there are countries outside the EU too, who can also lower their tax rates ...
I dont know whats "fair" and I dont care. I want things as cheap as possible.
The top employment sectors in Ireland are Food&Drink, Pharma, and Tech. The latter two of those are massively dominated by multinationals. Combine that with multinationals contributing the bulk of corporate taxes, and we simply can't afford to scare them away. Without these MNCs, Ireland's economy would be basically beef, beer, and American tourists. There simply isn't enough native industry to make up the short-fall (which is the part I think should actually be addressed, rather than the symptoms).
(And away they will - Ireland is not the lowest corporate tax rate in the EU. Liechtenstein and Cyprus have the same rate, and 3 more states have a lower rate.)
I do understand the desire for a level playing field. It's a noble goal. But we're basically being told "We'd like you to drive your economy back to the 1950s, because France feels it'd be more fair". It's not a particularly enticing proposal - all stick and no carrot.
Ironically, they're championing our post-bailout growth as a success, while they retroactively make the mechanisms behind it illegal.
This case is not about Ireland taxing more or less the companies, it is about a sweetheart deal with one company
Can you point another company that has a sweetheart deal with the Irish government like the one Apple had?
Also, I'm unaware of how profits are calculated internationally, but it seems to me that by sending the money to the US it should no longer be on the international sheets for taxation. That is, US company "charges" the foreign company $x, usually as a "licensing fee". That $x would be a "cost of business" and should offset foreign profits by the same amount. Grand total is that the $x is only taxed in the US on the US company.
Now, if they earn that $x in 2015 and send it the US in 2016, sure that particular $x is technically double-taxed. However, the offset is that $x in 2016 is not taxed at all. So again, a wash -- money is fungible and it doesn't really matter when it came from.
That can be difficult depending on what kind of arrangement you are trying to make.
The lie that regulations define an absolute set of rules with no room for subjectivity is used as a weapon by the biggest rule breakers -- who argue that subjectivity both exists and does not exist as needed to suit their position.
Intent really does need to be part of the definition of law -- the idea that law can exist without a model of intent is flawed beyond hope. It's high time we acknowledge that there exists acts which explicitly violate the intent of law -- and that there exist criteria for deciding when this is indistinguishable from violating the letter of the law.
Taking into account that there was no change of laws and there was not loophole I don't know if you really know what the case is about
> The only thing really sneaky that Apple did was pressure the Irish to give them a special deal, but it's still legal, and rational.
No, those special and not public deals are ilegal
> The EU is a terrible organization, they're incompetent, ideological, and they work against us as often as they work for us.
Citation needed
> You can't change laws and have them apply retroactively for 1/4 century, it's totalitarian.
You keep repeating this, what laws were changed?
Would that be so bad? I mean, obviously we'd have to find some other way to fund our wars, state surveillance, and other "think of the children" endeavors - but at least "tax lawyers" would finally be out of a job; the final solution.