There’s Nothing Apple’s CEO Cares About More Than Not Paying Taxes
theintercept.com
theintercept.com
It's the same for Apple, it's just more convenient for them to structure their overseas activity as an overseas corporation, than it is for most natural persons. (And they got a sweet tax deal from Ireland)
the reality right now is that that is the law and corporations based in the U.S. go to great lengths to avoid their legal tax burdens.
Edited to add example:
E.g. when Apple sells an iPhone in New Zealand for say $800, they are meant to pay taxes on the difference between what the phone cost and the sales price. Except, all Apple products sold internationally need to pay Apple Sales International for their IP. This amount happens to eliminate the tax liability in every country that they sell products.
So okay, then Apple Sales International should pay taxes on all of that IP licensing cash, right? Well Apple negotiated an agreement with Ireland such that all profits earned outside of Ireland are attributed to a "head office" that literally doesn't exist. So the only taxes that Apple Sales International pay are from sales in Ireland.
So they can make tens of billions in profit, pay a few million in taxes and wait for a repatriation holiday to capture that money basically tax free.
Apple has 5,500 employees in Ireland.
Ireland is basically selling the ability to tax arbitrage. The risk they are taking is other countries might apply penalties. However going by the fact that no one has really taken any effective action, it's been a pretty smart risk.
Apple has made almost $10 million per employee with those tax savings. Maybe not the fairest of trades?
Why does it matter to New Zealand whether or not Apple pays taxes in Ireland?
The fact that the money ends up in places where Apple pays very little tax or even zero tax on the profit is just rubbing salt in the wound.
This is the kernel of usefulness in the border adjustment tax Trump has tried to propose a few times. His version of it is way off from the original idea, but the original idea -- to replace "tax profit made here" with "tax sales made here" -- is sound. You can hide the existence of profit all sorts of ways, but it's much harder to hide the existence of a sale, and bordering on impossible to hide the existence of millions of sales.
So if a tax on money made from selling products is what's desired, this -- rather than an avoidable tax on profit -- is a way to do it.
If Apple New Zealand shirks their tax responsibility by taking advantage of a backdoor negotiation with Ireland, I would fully expect the local authorities to take action. If Apple's not happy with that outcome, Tim Cook can accept financial and criminal liability for anything that goes awry with Apple products in New Zealand and avoid the use of the local subsidiary.
It's transparently obvious that Apple's subsidiaries in Ireland and the Netherlands exist purely to evade taxes. However their lobbying and economic power have protected them for years, which may have broken recently when the EU determined that they owe $14 billion for illegal benefits (http://www.cnbc.com/2017/01/31/apple-misses-deadline-to-pay-...).
So to answer your question, New Zealand has an agreement with all of the companies that they recognize their revenue and expenses and pay tax on the difference. When Apple New Zealand says that they owe their Irish counterpart hundreds of dollars per phone for licensing, and the New Zeaand authorities see that it's an obvious tax dodge shell company, they can and should question whether those hundreds of dollars fall into form vs substance. There is no actual business purpose to pay licensing fees to an Irish subsidiary that was gifted huge amounts of Apple IP.
To avoid taxes? Sure. Tax evasion is a crime, though, and they haven't even been accused, let alone convicted.
>However their lobbying and economic power have protected them for years, which may have broken recently when the EU determined that they owe $14 billion for illegal benefits...
The issue for the EU revolved around whether Ireland must tax Apple under EU law, not whether the profits Apple is recognizing in Ireland can legitimately be recognized in Ireland.
>So to answer your question, New Zealand has an agreement with all of the companies that they recognize their revenue and expenses and pay tax on the difference. When Apple New Zealand says that they owe their Irish counterpart hundreds of dollars per phone for licensing, and the New Zeaand authorities see that it's an obvious tax dodge shell company, they can and should question whether those hundreds of dollars fall into form vs substance. There is no actual business purpose to pay licensing fees to an Irish subsidiary that was gifted huge amounts of Apple IP.
You're still sidestepping the question. I didn't ask whether tax authorities in New Zealand have an interest in making sure Apple pays what it owes in New Zealand. The question was why would New Zealand care whether or not Apple pays Irish taxes in Ireland.
It's almost like you're just making shit up, since the EU did exactly that with Apple's Ireland tax scheme already:
Apple tax: Why tech firm has been hit with £11bn bill[0]
Google "apple tax evasion" if you'd like to know more.
[0] http://www.independent.co.uk/news/business/news/apple-ordere...
It's almost like you have no idea what you're talking about. The issue in that order was whether or not Ireland had to charge Apple the normal EU rates, not whether Apple had done anything illegal.
In an alternative universe, Apples profit would have been taxed, and everything would have been the same, except that they would have 2/3rd of the amount in bank than they do now. But the US govt would have a bit more resources to help build the infra/research to build more companies like Apple.
For example, I (a Dropbox user in Japan) am somehow paying Dropbox Ireland for my services.
Apple Ireland did not make Macbook Pros, so why should they be the one cashing in the revenue, when the "real" sellers are Apple US?
I realize that laws are complicated, so you might want national entities or something... but in that case, given there's Apple branches in many countries, shouldn't the respective national branches collect?
Part of a complication about this is that EU has a common market but far from a unified fiscal approach... but the EU paradox is not the source of all tax manipulation.
How does it hurt the US if the policy is changed to remove tax on foreign earnings? Total change on inbound money = $0.
Frankly, screw Apple. They play fast and loose with tax law, and so what if other companies do it, it's not an excuse. Particularly given their target demographic. And here in Australia, Apple makes us pay proportionately more anyway; I'd rather that extra money go to the US citizens than Apple's $250B "let' not do anything with this" money. The US budget is in dire straits, and Apple could take a 35% haircut on its ready cash and not change its behaviour a jot. They could be doing so much with that money, from tangible Gates-style global philanthropy to re-investment a la Amazon. Nope, just throw it in a bucket and crowd around saying "ooh, that's a lot!"
The other big American 'winner' of this kind is Wal-mart. Amazingly explosive growth and armloads of cash, yet plenty of their employees rely on government food stamps to make ends meet. The US needs fewer of these kinds of 'winners', not more.
Really, the only winners would be foreign countries. I don't see why the US should change its policies to benefit Australia; aren't your own politicians capable of closing loopholes in your own laws?
How on earth did you get that out of what I wrote?
The problem is many companies have gotten too used to being able to avoid taxation essentially at will, and would not take kindly to either having their products get more expensive (if they pass the entire cost on to the customer), which decreases their profits through reduced sales, or having their profits directly reduced by paying tax on sales. The tax rate they want is zero, and they've shown they'll go to extraordinary lengths trying to achieve it.
To quote Bill Gates as portrayed on The Simpsons: "I didn't get rich by writing checks".
Cook is right to do everything possible to avoid paying this over bloated joke of a Constitutional Republic! The founders would be screaming for another revolutions years ago!
Yes, I'm aware that thanks to various tax shenanigans the offshore tax bill might be artificially low. If that was the case though, Apple would've cheated local governments and not the US government.
Not necessarily. See a comment above about New Zealand.
No, it hasn't
When Apple (or Google) declare losses in a country like Spain something is very weird