Paradise Papers: Dear Tim Cook | Hacker News Reader

Paradise Papers: Dear Tim Cook

projekte.sueddeutsche.de

1,200 pointsmpweiher791 comments

What annoys me the most is that, as a small company, I can't evade from my country tax system. I pay the taxes. All of them, at full rate.

But there are these big companies which can afford to create offshore companies/holding just to evade some tax system, and lower their tax rate.

So, what? The tax rate of a country is now "artificial", because it will never be applied to all revenues from all companies, because the higher profiles will be able to evade a part of it.

If governments want to reclaim more, they could raise up the tax rate, considering that the biggest players will only pay a fragment of it. But the small companies, the one that can only follow the rules? They are screwed.

All companies should be considered equals regarding the tax system. It is simply not the case when such schemes are used.

Edit: exactly the same point of view as jitbit: https://news.ycombinator.com/item?id=15651457

These companies evading taxes are responsible for increased hardship and suffering of a society as well, leeching off of the nations they exist in, and being able to outcompete the honest organizations and people in them. The damages are far greater than the tax avoided. "They are doing it too" isn't a valid excuse either.

They aren't, for the most part, doing anything illegal though. They are using the existing laws to their best advantage.

The fix for this can't be trying to appeal to their morals. It would have to be something else that just limits the legal choices.

Edit: If you disagree, are you saying that shaming them into not doing this solely on some moral compass is the right fix? Does that scale?

“They are doing it too” is legally a valid excuse. The way legal disputes get settled usually is based on the outcome of precedent legal cases and how they relate to the current case. Your moral outrage (and the outrage caused by paradise papers type reports) is just a failure to see the world for what it is. An ant can complain all day about the size of the mammoth, complain that it’s unfair that it’s got a fur coat or that it’s one step is equivalent to hundreds of ant steps, but this won’t change reality. This is how success works: if you do it for so long and in such a way comparable to Apple, you are able to have more leg room than other ants. My only criticism of Apple is that do portray themselves as very humble engineers that love designing beautiful products. Engineers who have any experience designing software and hardware products have a deep admiration for Apple as an organization, specifically because we know exactly how much work goes into a working product, moreso because Apple’s products, even though they are not perfect, show a high level of resiliency both in the market and in our day to day lives.

Admitting thus that at least some of the people and companies that hide their money in tax havens made their money in a legitimite way (we’ll get into this later), don’t you think they are entitled to try to save as much of it as they can? The author of the piece makes reference to the mostly public educational system which implies Apple has some social reaponsibility to give back to it’s country. How about the high salaries that Apple pays to its engineers? Isn’t this enough to show that they value craftmanship?

How exactly are they inflicting all that harm, hardship and suffering? In my eyes, they are creating tremendous value every day while following every single law nations impose on them. They would risk everything otherwise.

You're throwing demagogic, populist accusations without a single shred of support. Is emotional discourse an acceptable replacement for the rational one?

Just a nitpick but they are not "evading" taxes, which would be illegal.

The correct term would be "tax avoidance", which is legal (albeit ethically questionable).

So... Basically Apple is increasing the suffering by creating all those laptops and iphones? That is very difficult for me to grasp. Apple creates computers and phones which make peoples lives a lot better, and people are willing to pay for those. Why is the suffering increasing? I guess world would be a better place if apple would pay more taxes, but I'm pretty sure that world would be worse place without Apple, whether it pays taxes or not.

By default, big companies always get preferential treatment from governments. Open a mega-factory? They get tax cuts, cheap real estate, free utilities. Why? Those shiny new jobs look great on a politician's resume for the next election...

What does the little business guy get? A letter of "don't forget to pay your taxes in full or else"

It's time to accept the fact that governments are NOT a fair and impartial warden of the economy. Therein lies the problem. Reducing their power of meddling in the economy is the solution.

Those with wealth will always try to capture the system - whether its formal or informal. The natural state of any business is to try and become a monopoly because that maximizes rent taking ability - NOT competition.

Practically the ONLY power able to stop monopolies from forming is the government. In absence of the government's ability to "meddle", businesses can and will cut deals with big competitors and squelch smaller ones through anti competitive practices to dominate

Well, the flip side of this is that the society we build and paid for with income tax has become a huge risk because of automation.

We’re wealthier than ever, but we can’t use the wealth to society, because we’ve moved it from the masses to the few.

Now this probably isn’t a popular thing to say in American contexts because it sounds like socialism, but historically the levels of inequality we’re seeing now have lead to only one violent outcome.

We’re not in danger yet, the middle class isn’t starving after all, but if we don’t radically change taxation to match modern society then we’re going to be fucked in 25-50 years. Because we’ll desperately need a model for society where not everyone has to work.

There is a lot of double think today around issues of fairness and justice, most of it lends towards enabling ideas consistent with movements towards centralizing powers, and authoritarianism. Small business enthusiasm--consistent with individual determination, responsibility, democracy, and consumer rights & choice--is just passe. No one is tweet storming about "small business rights."

Or, let's just go trip over all the homeless on the way to work in the Bay Area while tweet storming about the imminent dangers of mansplaining to society.

Not only do they get tax cuts and cheap real estate from governments, they also get direct money.

When google decided to create a data center in Sweden, the Swedish government gifted them $20 million in "establishment support". Money sent from the tax payer directly to the bank account of Google. Reason? So that google would pick Sweden. The politicians argument is that Sweden grain prestige if google has their data center here so its worth spending those millions. Its a bribe in all the sense of the word except that its a game between nations.

The charitable interpretation is that large companies create demand for services in the community where they are located, thus functioning as an economic stimulus. The demand may entice smaller companies to co-locate in the same neighborhood.

With this interpretation it would make sense to entice large corporate entities to arrive and/or stay put.

Of course, the path from economically motivated kick backs to pure cronyism is not too long, so cynicism is always warranted.

You need a globally cohesive solution in order for this to happen. Countries part of the solution will need to play by the decided upon rules or not be able to participate in the economies of those in the agreement. It's as simple as that - of course the status quo exists being of bullies.

Yes, it is like wholesellers vs. retailers. Governments don't like to spend time talking with zillion of companies when they can talk with the few ones.

Apples not getting any direct government subsidies. It’s paying more taxes than anyone else in the world, and doing it legally.

Sounds like we need an 'uber for tax avoidance' where the start up creates a holding company in a low tax environment and then you sign up and for a 3% going down to say 1% of your "normal" tax obligation they will slosh all your revenue through the tax haven.

This is not a joke, it is a serious suggestion. The issue here is governments and regulatory capture where the wealthy have insured these tax avoidance schemes can work and the governments allow it because they can still get enough taxes from people who aren't wealthy enough to play the game. If we can create a startup that lets everyone avoid taxes the system will be threatened and it will force the governments of the world to fix this or to run out of money.

Well as you can see with the poor OPSEC, the offshore incorporation industry is ripe for disruption.

Although I've never had any of my entities "leaked", as if they were secret anyway, these leaks are mana from heaven as these are client lists you can POACH and offer better services for cheaper.

I've been using OTONOMOS for some time for incorporation and offshore entity management, which stores some client signatures on a blockchain, but behind the scenes they still defer to more antiquated registrars.

The costs of forming offshore entities are perpetuated by the expensive lawyers, registered agents and incompetent government representatives in these tiny jurisdictions. (For what its worth, even most United States are pretty incompetent at these administrative processes. Really only a few financial centers and a few exceptions have it all streamlined.)

These are scale problems primarily.

Also, American citizens should note that it isn't as simple as making a HOLDING company to avoid US taxes, unless you were just going to try to be NON-compliant and not tell anyone which will be a losing battle. There is a way, but it isn't simple.

For American citizens, offshore company's primary benefit are:

- protect trade secrets or initiate transactions without showing your hand to the market

- to deter creditors (as long as they aren't the US Government) as it raises the bar for them to find those assets and sue it and get a judgement and collect on that judgement

- segregated assets. Some jurisdictions offer entity structures which are very immature in the United States or haven't caught on yet. The Series LLC exists in a handful of US states but may lack case law, Segregated Portfolio Companies exist in other places like the British Virgin Islands and may have more case law or better statutory conditions.

- deal with more international clientele. Many times there are parallel US laws specifically for offshore clientele. For investors its the difference between Reg D and Reg S, I had one other example but I forgot it.

Same goes for US individuals living abroad not having any business relations or even holdings in the US. Yet they are required to file and pay US taxes in addition to local taxes.

The US is the only major country in the world that has such a ridiculous and distorting rule for corporate taxation as the repatriation rules. This single rule drives a very large portion of the global tax avoidance industry. It drives economic behaviour which results in misallocation of resources via situations like companies borrowing onshore US against their overseas cash horde and using the proceeds to return to shareholders.

They should abolish this silly rule and go with what everyone else does: either tax US corporates on global earnings and allow deductions for foreign taxes paid, or tax territorial earnings only.

Moving abroad, I now fully understand the feeling behind "Taxation without representation is tyranny".

I actually have a hypothesis that US citizens are actually less likely to even consider going abroad to work because of this filing requirement. There are many other reasons too (the US is a large market in its own right and has been for many years now), but it'd be interesting to compare and contrast the local population count of other developed countries with their expatriate population count.

A follow on hypothesis would be that a country having a larger percentage expatriate population compared to another all other things equal would have more global outlook e.g. the local population is more favorable towards immigration and free trade, and has a more accurate knowledge of the details behind world events.

You can apply for the foreign earned income tax exemption. I work abroad, and I reclaimed all my US taxes for my income earned abroad.

When it hits the fan, and you want to come back to the US for safety, unmolested, you'll be able to. Should that be free?

But as an US citizen you still use some US benefits like the army and international protection, right?

(I'm not from USA or currently living abroad but i think that is "fair")

Tax is really just skimming the surface of the advantages that result from being big and powerful. Yes it means that they get subsidized in a way by the public tax payers but their employees pay for it even worse. The inequality between executive pay and ordinary workers is more than ever over the last few decades and those workers are paying for it by living a two hour commute away in crappy property, saving pennies at the grocery store etc. all of these are sacrifices and subsidies for the big company, the tax savings are just half of it.

What you are describing is a perfect storm of two economic fallacies -- the theory of marginal productivity and regressive taxation. The former describes how increasing pay will correspondingly increase productivity and the latter describes gradually decreasing tax rates as the amount being taxed increases.

Executive productivity is notoriously difficult to quantitatively measure and it is generally determined by compensation committees, whom are staffed by executives themselves and/or those with a vested interest in voting to raise executive pay. Such incestuous planning structures are almost always subject to graft and corruption.

Regressive taxation (including generous deductions hidden to those unable to afford the best tax planners) may be touted as necessary to reduce capital flight but the naked and bald-faced wealth inequality is simply unconscionable. Relatedly, Trump's tax plan is most definitely a bone throw to the rich as it includes repealing the estate tax. Democracy and progressive taxation have gone hand-in-hand since the end of WWII and it must go hand-in-hand in the twenty-first century.

We need a service that makes it easy to setup whatever structures are necessary to pay the same taxes as Apple et al. Hear me out. Let's call it "Double Irish as a Service", referring to the famous Double Irish tax strategy[0]. Similar to Stripe Atlas, you sign up, and it sets up whatever structures and accounts are necessary to get the tax advantages. Then, once every company can do this (and not just the big companies), then the laws may change.

0. https://en.wikipedia.org/wiki/Double_Irish_arrangement

Rich people and corporations will never pay full taxes. The only way to make it fair is to lower taxes for everyone.

EDIT: downvote me all you like, but the facts and all human history are on my side. Taxes are and always have been paid mostly by poor + middle class. Rich people used to collect them and now have a ways to negotiate a better deals or to avoid them. Look at Trump and his loans schemese. Look at multinational corporations. Look at our local oligarchs in eastern Europe. If you are in middle class, your only hope is to fight for more fair society where tax hells dont exists, and taxes are low for everyone. Because high taxes will never be paid by everyone.

If governments want to effectively tax the largest players, they would need to take up arms against those companies and spill some blood. Or at least grab a few top level executives and put a gun to their head and lock them in a cage. Do you see that happening? Of course not, it sounds entirely insane. And the executives know that. For them, however, the true sociopaths who rise to the top because they are willing to do literally any thing short of slitting their own throat in order to be at the top, a gun in the face is the sole thing they will listen to. When they accept that as their standard of having their behavior changed in a room full of people not bankrupt enough to pull a trigger? They don't have a single thing to worry about.

Those who fail to learn from history will be doomed to repeat it. All the things you really wish to cry out "but no one would DO that"... can you really not think of any examples from history where it already has been done? And on smaller scales even? Why would someone now not be willing to do it for much higher stakes?

> What annoys me the most is that, as a small company, I can't evade from my country tax system. I pay the taxes. All of them, at full rate.

I am not even annoyed by that. I am an immigrant into Canada. We sort of made a deal: you let me into a place where I can live a safe and free life and I will pay my taxes leading to that. I stand by that deal. I had a company in Gibraltar (which, by the way, was completely legal, I am a citizen of the EU and I exercised my right to establish a company wherever I in the EU pleased) which I closed down and moved my affairs into Canada and I am a proud Canadian taxpayer (and now even a citizen but that came much later).

But gosh. I am a very small fish here. I only make a few hundred thousands a year. Could we please implement a system where I report my earnings (not my profits), slap a flat tax on it and that's it? No bookkeepers. No complexity. No exceptions. Just a friendly, flat small business tax.

A tax on earnings? Do you mean revenue?

I think that's a bit insane and lot's of business wouldn't be able to survive. If I buy something for $100 and sell it for $110 I now have to pay tax on the $110 amount rather then the $10 amount, increasing my tax tremendously.

For businesses with lot's of inventory that would be murder.

These companies will follow the law. When Ireland changed theirs, Apple moved.

This problem can be fixed with laws. What's difficult is changing those laws, because the rich pay off those that write them.

Think sales tax. Apple can't avoid sales tax. But they don't care, because it's not them being taxed.

But then again, Amazon did avoid sales tax, and used the internet loophole to compete with local smaller businesses using their "no sales tax" discount. And they kept pushing for special treatment in ways no small businesses could. Now the laws have been adjusted, and they collect sales tax.

If profit had to be taxed within the country or even district of sale, it's over.

There is no "if laws are changed we will be screwed" mechanism. The laws are designed to screw and unscrew. Attention should be directed to those writing them, because they know exactly what they're doing, because they are succeeding.

This. I run a small company as well, and taxes are a damn maze.

I just checked the tax authorities website in this country, and there are no less than 121 different tax-exempt health activities – things my company can pay for me, without having to also pay taxes. For most other things, there's sales tax (possibly other kinds of tax too, but let's limit it ourselves for brevity) that comes in at no less than three different levels, depending on what you're paying for. Many things, most things, my company can't legally pay for directly, but must pay me income, which I then pay for, as well as paying the taxes. This probably makes sense, except of course now I'm being taxed twice: once on the income itself, and then again on the expense. Oh unless of course it's a deductible expense, in which case I might be able to deduct it from my year end declaration. Also this depends on what it is I'm paying for, some services are subsidized and the subsidy is applied immediately, so I'm only paying half the taxes – unless I've used up my subsidy limit (which I can't check.)

I don't mind paying taxes, I really don't, because I can clearly see what I get for them for the most part. The streets are clean, health care is paid for and mostly seems to work for me, the garbage truck shows up on time, the water flows freely from my taps, and the electric grid never seems to have any issues. My friends with children get to take a lot of time off to care for their kids, and when they are old enough for day care that works too. I had the privilege of attending great public schools, and higher education is paid for. The list goes on.

I really don't mind paying a reasonable amount of taxes, and I'm not even that upset about companies and people investing their money wisely. But when there are legal ways of "optimizing" your tax foot print, if you can afford the expertise to do so, it becomes really demoralizing to pay your taxes as asked.

Corporations and individuals aren't going to change their ways, so government has to step in and fix these things. It's probably real hard to do, but it needs to be done.

Either that or provide tax optimization services for free, so we can all enjoy these same incredibly low tax rates. (At which point tax reform probably has to happen anyway.)

Governments have no interest in fixing it. Usually law makers and legislators benefits from those loopholes, directly (with their own money) or indirectly (with campain supporters). Not only in corrupt contries but also in well stablished democracies.

Those loopholes are used even by people who claims doing a lot of charity, as Paradise paper is showing.

I'm very pessimist about this going away anytime soon.

an alternative (which i m not sure is better, but...) is to have absolutely zero tax across the board. Then every possible service any entity requires is paid for in a user pays system.

I feel the other solutions is obvious in that we need to align tax law to meet the global mobility of money, in the same way we aligned trading laws. Something like;

1) A group like the WTO/G12 get together and agree to minimum tax rate for any corporate/country/individual that wants to do business and or have access to these economies/nations. Any company/individual that earns income in lower tax rate countries is fine to do so but must tax equalise to the minimum or they can not do business or visit these countries.

2) Citizens of the above group of tax aligned countries must declare overseas assets and incomes and equalise tax payments if below a set minimum. Should undeclared assets/income be found the assets are forfeit and the person gets 1 year jail per $1mil. And anyone who provide information to create asset forfeit or additional tax owned gets 25% of that.

This, plus sanctions on tax havens.

We cannot expect companies to voluntarily pay more taxes than the minimum, while there are legal loopholes at their disposal.

The solution may mean reducing the tax rate for all companies, closing the loopholes, and then enforcing the law.

But that would require elected government leaders to put their jobs on the line (lowering corporate taxes sounds bad to many voters since corporations have been vilified, even though it has bipartisan support among economists). So it’s unlikely to happen any time soon.

Can you give a citation on "bipartisan support among economists"? All I have read seems to indicate economists are all in support for the other direction - that lowering corporate taxes at this moment is bad economics.

[1] http://larrysummers.com/2017/10/22/one-last-time-on-who-bene...

[2] https://www.cbpp.org/research/federal-tax/corporate-rate-cut...

[3] http://microeconomicinsights.org/benefits-corporate-tax-cuts...

I don't understand why you have to lower corporate tax rates first before closing all loop holes...

This is the problem with a complex and byzantine tax code: entities that can manage and manipulate the complexity profit by it. Entities that don't have those kinds of resources are stuck.

It would be good if folks from all political walks of life could come together for some kind of tax simplification. I highly doubt this will ever happen, though, as tax law is used as just another club by big businesses to beat down the small. They have the money, and they're willing to pay-off the political class to make various arguments about how simplifying things would be bad for the little guys. That's not changing. (This has nothing to do with current politics, by the way. I am not following the U.S. tax discussion and it's not relevant to my point. My point is that whether it's business, tech, or government, complexity itself is an enemy)

I'm really waiting for someone who makes the tax evasion system scale for small companies and regular people.

Tax evasion is and always will be, illegal. Tax avoidance is legal and undertaken by every single sane tax-payer who pays the minimum tax but computes that amount in accordance with the tax rules. The courts are available for redress if the tax authorities think the rules are being bent. Judgement is a legal matter and not one for debate by armchair moralists.

Those who don't like the way some tax laws operate in the realm of complex company operations should lobby the law-makers not those tax-payers working in compliance with the law.

Would you not make use of a tax break even if you taking it harmed your neighbour? Everyone's response would be "It may suck for you that you can't leverage that loophole, but that person is not breaking the law." It's like the difference between claiming mileage vs. claiming vehicle rental/gas for work trips. You're not breaking the law by claiming one over the other, you're leveraging the framework to greater effect than some others are able.

It doesn't make it morally right, but at the end of the day, everyone leverages the opportunities they have. You can't blame someone for that. They are working within the confines of the framework defined for their circumstance. If that framework had loopholes that could be leveraged by that individual, they would take them.

J.K Rowling, author of the Harry Potter books and who is fairly wealthy has an interesting moral stance on paying tax:

"... I am indebted to the British welfare state; the very one that Mr. Cameron would like to replace with charity handouts. When my life hit rock bottom, that safety net, threadbare though it had become under John Major’s Government, was there to break the fall. I cannot help feeling, therefore, that it would have been contemptible to scarper for the West Indies at the first sniff of a seven-figure royalty cheque. This, if you like, is my notion of patriotism..."

http://www.taxfairness.ca/en/news/j-k-rowling-paying-taxes-a...

That’s why the opportunity shouldnt be there. It’s unfair and leads to further concentration of power. In other words it’s anti competitive.

Most of the taxes a company actually pays are factored in with their workers' salaries. For example, if your company's average salary is lower to that of Apple for a comparable employee profile, you are effectively paying less taxes than Apple.

Or, if you company does not have profits, you are paying less taxes than a company that reports profits.

I do not think a company has to wear any nation flag. Companies have to care for their customers, employees and shareholders (in that order), wherever these are based.

Lawmakers need to care for their citizens, and need to legislate in a way that optimizes their tax collection in a sustainable way (i.e. lawmakers do not want companies or people fleeing to other countries or regions).

The resulting scenario is an optimal equilibrium of forces.

All they are doing is arbitraging loopholes in the tax systems. Politicians have been trying to solve way too many problems by taxes (taxing differently x and y) or giving tax gifts to donors and various organised interests. As a result it creates an arbitrage-able tax system. I wouldn't point your annoyance to those who are optimising their taxes (after all this is merely their fiduciary duties to their share holders) but to the designers of this tax system. Create a flat tax and pretty much all tax avoidance schemes disappear.

I think you are fundamentally missing the nature of the loopholes being exploited. They have less to do with the complexity of the taxes in one country but rather the complexity that emerges naturally from different countries having different tax codes. How would a flat tax help avoid this scheme for example?: http://www.nytimes.com/interactive/2012/04/28/business/Doubl...

The whole point is they skip the U.S. tax code entirely.

>All they are doing is arbitraging loopholes in the tax systems. Politicians have been trying to solve way too many problems by taxes (taxing differently x and y) or giving tax gifts to donors and various organised interests. As a result it creates an arbitrage-able tax system.

The loopholes themselves are gifts to friends, lobbyists and donors.

>I wouldn't point your annoyance to those who are optimising their taxes (after all this is merely their fiduciary duties to their share holders) but to the designers of this tax system.

Why are you pretending that those optimizing their taxes are not furiously lobbying to keep them "optimized"?

>Create a flat tax and pretty much all tax avoidance schemes disappear.

The flat tax is possibly the most regressive tax system ever conceived. If you want to reward owning for a living and punish working for a living then it's almost the perfect tax.

A flat tax on income would help, but it's still a tax on income, and so you can move that around with clever transfer pricing etc.

Land value tax works even better: it's physically impossible to move or hide land.

> They are screwed.

That's true if you think the solution has to come from more legislation and/or more taxation. Those approaches will simply encourage companies to move more of their operations to other more favorable jurisdictions.

If there's a way to save money, and companies have a responsibility to shareholders to be as profitable as (legally) possible, they'll do what they need to in order to save the money. We need to stop expecting some kind of moral accountability above what the law demands. There are plenty of natural incentives for companies to be morally responsible above what the law requires, but anything less isn't illegal unless it's illegal.

You can continue to play cat and mouse with laws and loopholes, or take a different approach...

Instead, if you consider the option of lowering taxes (on all companies) to compete with those other countries, you'll actually provide an incentive for more large companies to keep their businesses - and their taxable profits - in the US. It may be a lower tax as a percentage, but it would actually increase tax revenue in the long run, in addition to boosting the economy.

The music industry can provide a fairly good analogy: when (the original) Napster became popular along with other file sharing networks, the music industry wanted to solve the growing piracy problem by throwing people in jail and pushing for stricter laws. In the end, that did nothing to help the problem. What did help? When iTunes actually provided a decent, legal alternative to piracy, it took off and hoards of people who had been pirating music actually spent money obtaining music legally because it was reasonable and competitive (in terms of convenience) with networks like Napster. The lesson: you don't fight widespread behavior with legislation; you steer it with aligned incentives.

Even better than bringing all corporate taxes down to the lowest rate; force tax havens to bring the lowest rate up to something reasonable. A global economy demands global rule of law. Then, yes, market forces can be used to direct corporate citizenship (and therefore employment+tax revenue) to where it is needed (assuming sufficiently far-sighted governance to realize the global equivalent of Ohio needing more federal assistance than California, and also robustness to regulatory capture).

Your race to the bottom would only ensure that governments eventually cede all power to multinational corporations. Then, we're back to feudalism, only global this time.

Playing devils advocate here:

> What annoys me the most is that, as a small company, I can't evade from my country tax system. I pay the taxes. All of them, at full rate.

How about a startup providing "tax-optimization" for the masses? Keep a cut of the money saved: win-win. Or win-win-lose, if you include the state.

http://www.independent.co.uk/news/uk/crickhowell-welsh-town-...

However, most of these techniques have a high fixed cost. For Apple paying $1m fixed cost to reduce the percentage tax to zero is economical, for a corner shop it isn't.

How would this possibly work? Just throwing out the word 'startup' doesn't solve anything. The only way to reasonably take this comment seriously is as subtle sarcasm.

You do have to make a profit and pay corporation tax in order to be able to "optimize" it...

Most startups I know do not, and they benefit (in the future, or via transfer to shareholders) from the inverse taxation on losses.

I felt the same when I ran my business. A lot of rules are designed so that only the big guys can afford to take advantage of them. We also had a situation where the county lured a big company with monstrous tax cuts while the small guys got nothing despite being "job creators" too.

We have a global economy but not a global tax system or a global set of rules. That's the essence of the issue here I think. What also happens is countries upping one another with lower taxes and exceptions to attract big companies hoping to get some (small) benefit from it.

So much of this. This happens everywhere even when it's not in the form of a multi-national tax avoidance scheme. You can tell all you want that it's the fault of the law which it is but that doesn't change the fact the system is like this because these companies and people have over the years have done everything they can to make sure these loopholes exists and these loophole remains including outright bribing where they can get away with it. And for the most part no one individually did it and so you can't event point it out properly.

At least in my country individuals are often in even worst position in terms of taxes. The less capital you have the more you will be taxed seem to be the norm of the world these days.

> But there are these big companies which can afford to create offshore companies/holding just to evade some tax system, and lower their tax rate.

I wonder if there's actually a correlation between how ruthlessly a company evades taxes/cuts other corners and how quickly such a company becomes big enough to enable even more tax evasion/corner-cutting?

Or to put the question simpler: Was the tax evasion there first or did that only start happening after reaching a certain size enabled tax evasion?

Imho there's always opportunities to cheat, not all of them are big but many small ones can still add up to a lead. Most of us just chose not to cheat thus don't even notice these opportunities for what they are.

There's a terrific opportunity here for a financial company that specializes in tax havens for small business. Bundle together ten thousand mom and pop shops, and you have enough resources to do this kind of financial wizardry.

That sounds a bit like the plot from the show Ozark, but there they do it to launder drug money.

Countries do try to compensate for this by introducing specific small business tax rates and special benefits for being locally owned or controlled.

The Canadian example:

"After the general tax reduction, the net tax rate is 15%.

For Canadian-controlled private corporations claiming the small business deduction, the net tax rate is 10.5%."

https://www.canada.ca/en/revenue-agency/services/tax/busines...

"afford to create offshore companies"

You can setup an offshore "shell" company in the virgin islands for $1500. It's not something you have to be a big super rich company to afford.

Think about the people who live paycheck to paycheck, without any savings whatsoever (i.e., most people).

They don't have a spare $1500.

> What annoys me the most is that, as a small company, I can't evade from my country tax system. I pay the taxes. All of them, at full rate.

This is a real problem in the US, too. The corporate tax rate is very high, but there's so many exemptions and deductions that few end up paying the headline rate. There's a lot of variation between businesses in what they pay.

Lowering the tax rate and simplifying the tax code could make it more fair in a revenue-neutral way.

It used to be much higher: https://bradfordtaxinstitute.com/Free_Resources/Federal-Inco...

If companies want access to the best market in the world, they need to pay to be there.

Why do you think you can’t? Have you tried? If you have a business that looks somewhat like Apple’s does (producing goods in China and selling internationally). I don’t think it would be very hard to keep revenue out of the US tax system.

I would guess you could setup an offshore company in a region with zero corporation tax and conduct the majority of international business via this? Moving funds back to the US is trickier, but then it is for Apple too.

While they don't violate the letter of the law, they certainly violate the spirit of it. Minimally, I'd like to see them recognize their unfairly gotten gains and use some order-of-magnitude more of it for philanthropic ends or tax reform lobbying. That would be the classy move. It really bothers me how high regular business and personal effective tax rates are compared to these jokers'.

> I can't evade from my country tax system.

You can however use different tactics to minimize your tax burden which is exactly what Apple is doing.

We need a progressive tax on corporations: if your company has more than X in profit, it is taxed in a higher bracket.

Ideally, should be multiple brackets, with a tax increase on the biggest companies offsetting a tax break on the smaller ones.

Would incentivize companies to break into smaller functional sub-organizations which can compete against each other for the benefit of consumers.

That's why being rich is so amazing - you get to play by a different set of rules. Or, once you're "3rd level rich" - write the rules of the game.

Apple aren't breaking any laws. They, and other of their size, can just ~bribe~ lobby politicians to make special little loopholes for them, loopholes you can't take advantage of, but you can't pay an army of accountants. But, honestly, I can't blame Apple too much here.

We are at a place of our history where giant, global corporations operate outside of any national/political boundary. They have offices everywhere, employees everywhere - it's a nightmare to figure out whom they should even pay taxes to, and how much.

I'm not even close to being Apple-level, but even lowly plebs like myself face similar issues.

I have two passports, but it's a major pain for me to live in place A for more than X months and pay taxes to country C which has an office in D but I'm technically an employee only in office G in region Z - even though it's all the same damn company - again - who gets to tax me? Both countries? One country? No country? Why can't I live in Spain and work for a US company that has European HQ without incredible hassles? And if I could - the US would still like their share of my pie in the form of taxes.

I think a lot of this stems from the simple truth that we are in a new kind of economy, where money and information can flow instantaneously, yet our laws are still bound to archaic nation-state concepts of "physical presence". Which made total sense pre 1950, not so much anymore.

100% agree with the article. When an iPhone is sold in Germany, there is a VAT on that product that definitely goes to the government, right?

So the main question is the corporate tax and not the per unit? Perhaps it would make sense to capture the true tax for in-country sales by adjusting the per unit tax?

It's the customers who pay the VAT, not Apple. That's why electronics bought in US where the sales taxes are generally much lower than VAT rates seem cheaper from the European perspective. A higher VAT also hits more the less privileged and effectively crowds them out of the market. For goods like these you can think of the VAT is 'the price to be able to buy' and corporate tax as 'the price to be able to sell'.

Well, it's more about familiarity with the system than work required to game them. I've met one-man operations paying effectively the same rate as Apple, they just know the legalese well enough to do it on their own.

All companies are supposed to be equals regarding taxes. If a part of them can trick this rule, then it is not fair and must be fixed.

I agree that there is a part of entrepreneurship which include being able to understand the rules and laws and use them efficiently, but all these familiarities used to game the system are only valid if only a minority of the people use them. One people finding this trick is ok, but big companies being able to buy these tricks is another scale.

So what you're saying is as a small business owner you'd like to evade taxes too? Seems like a great startup idea- "offshore accounts for everyone!"

> What annoys me the most is that, as a small company, I can't evade from my country tax system. I pay the taxes. All of them, at full rate.

You're like the farmer whose cow has died and is upset that his neighbor's cow has not died. Direct your annoyance at the government that is oppressing you rather than at other people who are not being oppressed as much.

Is this really that difficult for a small company to evade tax? I think you can do it

One day people will realize it. All taxation is theft.

What taxes does Apple, an American company, owe Germany? Are you paying taxes half way across the world from your place of business?

I don't pay taxes half way across the world because I don't do business there. Apple does. They have employees in Germany and sell their products (including in their own stores). Of course the vast majority of value is not created there but in the US. However, it's not like they pay their full share of taxes there because on paper the value is largely created in a place that conveniently doesn't tax that.

A summary:

Small Business -> Small government tax breaks and benefits

Medium Business -> Token government tax breaks and benefits

Large Business -> Vast government tax breaks and benefits

---

Poor people -> Small government tax breaks and benefits

Middle class -> Token government tax breaks and benefits

The Rich -> Vast government tax breaks and benefits

---

It is quite astonishing that in 2017 that we are still astonished by this.

Apple do pay their taxes just like you for everything they sell in the US. It's what they sell outside of the US that they don't pay, but they do pay in those other countries. The biggest unfair advantage they have against you is if you sell to overseas markets (you're paying US tax, not them) but if your market is US only then Apple isn't paying less than you are.

While I appreciate the sentiment it is time to start taking a more global look at these antics of companies.

I run my own company in the UK and I know for a fact that apple makes a massive amount of money selling in this country.

Now as a small business owner I am taxed at 20% on corporate profit. (19% going forward now due to a tax cut in corporate rates introduced during the last financial year). You then also get taxed on any dividends you pay out to yourself as the owner of that company according to normal income tax rates, (Sure you get a £5000 dividend tax free allowance but after that you are on normal income tax bracket rates).

There is simply NO way for me to change this. I pay my taxes each year diligently, otherwise I end up in jail.

However massive companies that make billion in revenue from countries get to play the tax game and effective pay percentage wise a LOT less than small businesses in the UK while benefiting from the infrastructure provided and paid for by public funds that they contribute very little to. That infrastructure includes the Healthcare and Education system. Both which are under constant stress due to under funding.

I am not for high taxation but I surely am for everyone paying their fare share. The employees working for these companies pay many times more tax on their salaries compared to what the corporation pays on its profits. At some point this vampire squid behaviour of extracting out of a country without helping fund the infrastructure that helped make it be a successful market cannot continue. This behaviour also gives me VERY little hope that AI and Automation will ever lead to the benefit of but a select few. /<rant>

>but they do pay in those other countries

No, they do not. That is, they have optimized their rates so well as to pay next to nothing.

Incidentally, this is the problem with repatriating those profits to the US: the IRS actually does recognize taxes that have already been paid and will "deduct" (don't know the exact technical mechanism, but that's the gist) the taxes that have already been paid to foreign tax authorities from the taxes due to the US. However, due to the tax "optimization" that's been happening, the actual tax paid is minuscule, and so the tax due on repatriation is substantial.

So what Apple and other US multinationals would prefer is for the "tax already paid" to be a boolean rather than an amount. As in "we already paid 0.00004% tax on this, therefore it is already taxed and the IRS gets nothing", whereas the IRS says "well you paid 0.00004%, so we get (US rate - 0.00004%)".

Of course, the corps call this "double taxation" and rail against it, but in fact double taxation is not happening, or only in that very warped sense.

> It's what they sell outside of the US that they don't pay, but they do pay in those other countries.

Except they don't. The open letter says "What these filings also show is that since 2010, Apple’s foreign-earned income has been taxed at a rate of between 1 and 7 percent" however in Europe most countries have a corporate tax rate around 20% (cf https://en.wikipedia.org/wiki/Tax_rates_in_Europe).

For Germany it looks like Apple is paying at least ten times less taxes than it should.

I am speaking for the tax rate in EU countries, what is quoted in the related article. Regarding revenues in EU countries and moving expenses/royalties between countries to benefit from the lower rates.

I think that the same cases exists in the US, between states themselves (Delaware ?). Where you create companies in multiple states depending on your activity to split your revenues. Again, a small company can't afford such tricks.

Not true. Apple pays on the profits made in the US. The trick is to move the patents overseas and charge a lot to use those patents. Thus the US profits are small but the overseas patent royalties are huge.

Dear Herr Krach, thank you for your letter.

I think you misunderstand how business works.

Apple is a profit seeking corporation. Profits we make, we hope to distribute to our shareholders. Paying taxes is an obligation with which we comply, both to the letter and in spirit. We meet such obligations, but not nilly-willy. Our shareholders would not look kindly upon executives who pay more taxes than necessary.

Avoidance of taxes is not illegal. We even enlist the help of tax offices in many countries, like the Netherlands, Ireland and perhaps some countries internationally deemed 'tax havens'. We pay what through mutual understanding with tax offices worldwide is necessary.

If you conclude that you find tax evasion a problem, this would be a political problem, not one of enterprise. No enterprise would knowingly pay to much and no construct of 'corporate social responsibility' could make paying too much alright. We should seek to minimize cost, and we do.

Governments should fix tax evasion, not corporations. It's not my role to point out the obvious, but if you find the VAT customers pay on our products insufficient and were hoping on a larger slice of our 'foreign income': fix your tax code.

Kind regards, TC ;)

I agree that companies are incentivized to pay the least amount of taxes just as they are incentivized to optimize their operating costs in general. I don't think that this letter denies that Apple has a rational reason for avoiding taxes. And I agree that this problem is best fixed by making tax avoidance structurally impossible. Pressuring market actors to voluntarily take actions they are not incentivized to take is not a reliable solution.

But, Tim Cook himself has framed Apple's tax practices in moral/ethical terms. In doing so, Tim Cook began a discussion about the moral/ethical quality of Apple's tax practices. This letter takes part in that conversation. The letter contributes to that conversation by making the very valid point that the moral quality of Apple's tax practices is very poor, according to Tim Cook's own standards. Regardless of the right solution to the problem, this was something that needed to be stated publicly and was stated well in this letter.

It didn’t need to stated publicly to anybody who understands that businesses (maybe most particularly modern corporations, shareholders and investment firms) act on strategies that they believe will make them the most money with the least risk. I’ve never seen anything change that, especially a blog post.

The same goes for when “Tim Cook frames Apple’s business practices as moral/ethical”. You call this marketing and Tim Cook does it everywhere he goes, Congress or not, all day, every day, because he makes a lot of money for it.

If this letter were run on the front page of NY Times, WaPo, Guardian every day for a week, I cannot imagine could make any discernable difference in the business practices.

Occupy Wall Street, which at least for the most part had it’s finger pointed in the right direction, made no measurable impact on, well, anything. We could speculate some long-shot correlations with fringe left political movements like Bernie Sanders but these things remain certain to be ineffective so long as this letter represents the public’s understanding of the problem.

Dear Tim,

You don't understand how shares work. Shareholders can only benefit from shares in two ways: through speculation about the share price or through dividends. I'm kind of disappointed that I'd have to explain to a man of your stature that money that Apple parks abroad will not benefit the shareholders except in the most indirect ways.

If Apple brought home their overseas funds then it would benefit the US and Apple shareholders in general in two ways:

The taxes paid would go towards infrastructure, education, health care and other items that benefit all people in our society, and by extension also to us shareholders.

Money left over could be used to pay dividends to shareholders or to do tech acquisitions or long term investments in Apple projects which would benefit the shareholders in a more direct fashion.

Having money parked abroad waiting for a tax amnesty that may never happen does not have these positive effects and essentially ties up a lot of Apple capital in ways that are not beneficial to anybody except for the banks that get to lend this money out at prime rates while not paying Apple much of anything.

best regards

> Money left over could be used to pay dividends to shareholders or to do tech acquisitions or long term investments in Apple projects which would benefit the shareholders in a more direct fashion.

This assumption is incorrect in a world where the US is only about 40% of Apple's revenue and slowly dropping (eyeballing from [1], happy to be corrected). If you are going to be investing to grow your revenue outside the US, it makes no sense to repatriate the cash generated there already.

[1] https://www.statista.com/statistics/382175/quarterly-revenue...

Most cash "parked" abroad is being invested in stocks and other financial instruments - and much of it in the US - not kept in a checking bank account. In fact, Apple's "Irish money" is managed by an Apple subsidiary in Reno, Nevada, and is invested in all kinds of assets in the US.

Wow. And then they use the returns here? This sounds like money laundering (even if it technically isn't).

Dear Jacques (i'll stop with the game now ;) - I really emphatise with the social responsibility part of the story. The game Apple is playing with stored cash abroad is abject. Nobody is profiting from that.

But we can agree that it's not the nature of a corporation to pay more taxes than necessary? If people offer you crazy deals: agree. Governments should coordinate not to make crazy offers and perhaps even tit-for-tat those that do.

The social responsibility part is what it is all about. If corporations use their legal and bargaining power to opt-out of the social contract then everybody will lose. There is such a thing as being too big and I firmly believe that most multinationals are no longer playing by the rules in the sense that they violate the spirit of those rules whereever they can by focusing solely on the letter of the rules.

That's a game that may work in the short term but the long term consequences are pretty grave, especially since there seems to be a concentrating effect of such moves where more and more control is ceded to ever fewer companies.

It will be hard enough to maintain a tax base that can keep the lights on in a country as it is with all the change coming our way, creating playing field differences like these between SME's and behemots is going to erode that tax base very quickly.

As an individual person, if a law has a loophole, is it ok to exploit that? Say you found a loophole that allowed you to legally get away with murder, is it now ok to commit murder as long as you comply with the loophole? I would argue that what is right and what is legal are never fully aligned, and that the excuse "it was legal" is not a valid defense for committing immoral acts.

Corporations are social constructs, they are entirely made of people. Those people don't stop having a moral imperative to do right by others just by having an employee badge. Just as we require individuals to remain "decent human beings", regardless of what they can legally get away with, we need corporations to remain "decent social citizens". While it is not illegal to maximize profits through tax evasion, it is anti-social, and therefore we shouldn't encourage or applaud that behavior.

Governments should coordinate not to make crazy offers and perhaps even tit-for-tat those that do.

A preferable alternative would be for customers to consider a company's ethics in their purchasing decisions, and to encourage their peers to do the same. If it became socially unacceptable to have a new iPhone because of Apple's choice to pay such a trivial amount of tax (legal or otherwise, that's besides the point) you can be absolutely certain Apple would quickly stop funnelling money to tax havens, and they'd probably have a big marketing drive about how much they care about paying tax to fund better wages and welfare for soldiers, teachers and nurses too.

Social pressure is far more powerful than governments. It's just harder to 'control'.

That's a quite modern idea, businesses can be socially responsible, but somehow the recent thinking is that they should dodge as much tax as possible because somehow that's their priority.

It's a moral decision to dodge tax, not a requirement that their shareholders can sue over. That's just a (very thin) excuse.

> But we can agree that it's not the nature of a corporation to pay more taxes than necessary?

Nobody wants them to do that. What motives you to lie for a corporation?

> But we can agree that it's not the nature of a corporation to pay more taxes than necessary?

Think Different.

> Having money parked abroad waiting for a tax amnesty that may never happen

Except that, Trump, (who paradoxically hate tech companies) is pushing for this tax amnesty. In that case parking money aboard paid big time for shareholders.

> Money left over could be used to pay dividends to shareholders or to doa tech acquisitions or long term investments in Apple projects which would benefit the shareholders in a more direct fashion.

I don't have an opinion on their tax strategies but the money saved is not sitting in a box waiting for amensty. It is used to fund R&D and acquisitions. Though they can offset or sell the results to an offshore Apple entity so that they pay lower taxes.

> The taxes paid would go towards infrastructure, education, health care and other items that benefit all people in our society, and by extension also to us shareholders.

This assumes, of course, that governments can spend the money as efficiently as Apple.

Tim Cook doesn't always act at the whim of his shareholders, though: http://articles.latimes.com/2014/mar/01/business/la-fi-tn-ap...

> Danhof had spoken earlier in the meeting, criticizing Apple's connection to trade industry groups that believe people are causing global warming. Later, Danhof asked Cook if he would promise to commit to projects that help the environment or fulfill other social justice aims only if they also help Apple's bottom line.

> Cook seemed to be trying not to jump out of his seat.

> "When we work on making our devices accessible by the blind, I don't consider the bloody ROI" (return on investment), Cook said.

> "When I think about doing the right thing," he said, "I don't think about an ROI."

> "If that's a hard line for you," Cook continued, "then you should get out of the stock."

Not all the shareholders oppose it. The image of the company "doing the right thing" would be favorable to its shareholders.

In fact, the same article suggests that apparently many of them agree with Cook:

> "If that's a hard line for you," Cook continued, "then you should get out of the stock."

> As Danhof sat back down, the audience applauded.

I'm not sure what your argument is. Is it (a) that tax avoidance is morally justified, (b) morally justified only in the business context or (c) not of concern, because the business and the moral are two separate contexts?

I think tax avoidance is morally justified. EDIT: Better phrasing - I think tax avoidance is not a moral problem. Laws are a moral problem, and tax avoidance is not against the law. /EDIT

The entity making the tax code (the government) and the entity that collects taxes (the government) are one in the same. If the government wants me, as an individual or business, to pay taxes at a certain rate X, they should write the tax code so that I need to pay taxes at X%.

I don't think it's anyone's moral responsibility to pay a certain percentage in taxes. From a moral perspective, people have different ideas about what percentage they should pay. If I'm a small business owner, I might believe that my contribution of providing employment to 50 people is enough, without having any moral obligation to pay taxes on top of that.

Or, I could be a hugely wealthy investment banker. I make $1mil a year. But I don't feel morally obligated to pay 30% in taxes because every year I give $300,000 dollars to charity instead. Or this one time I made a $500,000 endowment for the arts.

Taxes and morals are too separate to be linked so easily.

The second one: Taxes are not moral for a corporation, they are a cost and a compliance concern. A world where even tax seeking corporations do not hold tax offices to the letter of the law and the deals they make is a lot more messy than one where corporations follow a clear line: min(Tax | Law abiding). Governments should fix this. I would call this the Peter Drucker way of looking at this.

Morality (let's call it CSR) is a corporate concern. All for that. UN-goals etc. I would mainly point to suppliers, environment, customers as options for corporations to act morally within their functioning as a business. Morality-via-tax argument is second order at best. Who knows if the taxes are justly spend?

The argument is that the focus is on the companies when the problem lies within rule-making. We cannot expect entities to obey rules that aren't there, whether these entities are individuals or companies.

The distinction has to be made between what is lawful and what is moral. The law is a system that we all have to comply to (which may or may not be perceived as moral), morals are subjective and built on experience, environment, etc. Laws are often made with current/major moral views in mind.

Tax evasion is clearly perceived as not moral, but it's lawful. We cannot expect companies (or individuals) to obey moral rules, since it's kinda unsolvable (morals being subjective). On the other hand, we can expect them to obey law.

Again, focusing on companies in this case is pointless and unproductive, no matter how shocking it is. Governments like to criticize tax evasion, but they are the only ones who could do something about it. We have to go after them.

I think the argument is stronger than that. It's not that tax avoidance is morally justified, it's that corporations have a fiduciary responsibility as stewards of their shareholders' investment to maximize the return on that investment (within the bounds of what the law allows). That includes reducing costs and, yes, that includes reducing tax burden.

Tax avoidance within the bounds of the law is not just morally justified - it's morally required.

(For the record, I think tax avoidance is a major problem, especially because large corporations end up being the only ones who can afford the accountants, lawyers, and international subsidiaries to facilitate it. Small business ends up getting shafted. But the way to solve it isn't to whine about Apple doing what Apple is supposed to do. The fix is to reform the tax code.)

A) that paying the taxes required of you by the tax code is a proper, moral action.

Does paying more taxes than required by law make you a more moral person or entity? That's a fine debate.

Sometimes I wish I could compartmentalize my decision-making process like this. I can't though. Actions usually have moral implications totally apart from their legality, and these implications seem at least as important as the legal side of things.

In terms of closing tax loopholes: tax loopholes are like vulnerabilities in software. They will always exist despite the best effort of lawmakers (programmers, in this analogy). The difference is that lawyers (hackers) don't go to jail for finding and exploiting loopholes.

In my opinion the root of this problem is the legal profession. The practice of law seems almost irreparably broken to me. Money should not have relevance in a courtroom, but it obviously does, it always has, and it will continue to. I have no clue how to fix this, but I think it's a huge problem in liberal western democracies whether it's patent trolling, Apple/X megacorp employing an army of layers to avoid paying taxes, or Harvey Weinstein/Bill Cosby committing sexual assault/rape over and over again without ever visiting a jail cell.

> Paying taxes is an obligation with which we comply, both to the letter and in spirit.

That is the problem though isn't it? Following the tax code to the letter and not the spirit. E.g. paying internal royalties to companies via Ireland and Cayman is not following the tax laws other than to the letter.

If laws can't be changed to actually extract taxes by the spirit of the law "Sorry facebook we don't like how you transferred royalties to the cayman islands via that double Irish setup, so that'll be $5B for your business in our country please", then we completely failed to make laws.

From a business POV I agree about using every means available to reduce taxes and companies must use every means at their disposal for the sake of their shareholders.

BUT as a small business owner I have no chance to get even remotely to the 1-7% tax rate that apple has, instead I look at my 32,5% tax rate and cannot help feeling angry, because I could really put that difference to very good use.

This practice of international tax scheming only benefits the already big companies, the ones that have the least problems of all entities to actually pay taxes.

Tax evasion IS illegal, tax avoidance is not. That's a legal point that's worth keeping in mind.

Darn, I mixed them up. Fixed it.

Local news in the Netherlands is that our tax office gave Proctor and Gamble a few hundred million dollar tax windfall, by error. I don't look angrily upon P&G. They asked for a deal and got a super sweet one. It's the tax offices that mess this stuff up. One European tax office that coordinates these taxes and ruling could solve a lot. Then the mess would be, which country gains the taxes / profits and all hell in European government rightly ensues..

You can find a loophole that lets you get away with murder, but that doesn't make it any less imoral, or you any less of a murderer.

Dear Mr. Cook,

how you conduct business at home is obviously between you, the American government, and the American people. I said as much in my original letter. But if you're doing business abroad in Germany, it may serve you well to remember that Germany is not a shareholder economy, but a stakeholder [1] economy. Maximizing shareholder profits is not the only thing a corporation is supposed to care about.

As the German Corporate Government Code states, for example: "The Management Board assumes full responsibility for managing the company in the best interests of the company, meaning that it considers the needs of the shareholders, the employees and other stakeholders, with the objective of sustainable value creation." [2]

Obviously, we're talking about largely unenforceable social norms here, though it raises the question as to whether you're really acting within the spirit of the law. More importantly, where social norms are increasingly bypassed and subverted, statutory change tends to follow. For example, corporate tax avoidance mechanisms have revived discussion about the EU's Common Consolidated Corporate Tax Base (CCCTB) [3], which you may find considerably less profitable than your current setup.

Equally obviously, such legislation may not pass. But the more aggressively multinational companies pursue tax avoidance schemes, even if perfectly within the letter of the law, the more support legislators will have for enacting statutes that counter such schemes.

Best regards,

Wolfgang Krach (equally fictitiously)

[1] https://en.wikipedia.org/wiki/Stakeholder_(corporate)

[2] http://www.dcgk.de/en/code/current-version/management-board....

[3] https://ec.europa.eu/taxation_customs/business/company-tax/c...

So, should Apple start selling cigarettes if that raises the profit rate? Perhaps move into prostitution in countries where it is legal?

Legality is a red herring.

Apple could certainly do that. Prostitution is legal in many jurisdication. They can go for any market they want. But in the Peter Drucker-line of the argument, that is a false flag.

This is a nice example of philosophy of law. Usually morality and legality overlap pretty much and follow each other over time. In this case (tax) morality and legality seem to grow apart over time without anyone fixing this. Since governments make the rules, I propose let governments fix the rules.

The aspect of acting responsibly asks firms for something else. Act responsibly within what you (as a firm) normally do. I for one cannot understand the minds of people within the cigarette-industry. The firm I work for invests many billions for customers (insurance) and has a firm line: no guns, no tobacco. I guess no oil is just too hard at the moment, although I have a feeling in a few years things could (should imho!) be different.

Since governments make the rules, I propose let governments fix the rules.

I agree. Which means that opinion pieces (what ought) cannot be argued against using legal arguments (what is).

I completely agree that it's naive to expect big corporations to selflessly pay more taxes. It's never going to work.

But it's not really up to individual countries' tax code either. The problem is that you have a global race to the bottom with these companies, they'll move to the countries with the lowest tax rates. See the current competition for which city will end up hosting Amazon's new complex.

At the very least the solution has to come from the European Union. We need to figure out a better to unify our tax codes and retaliate against multinationals that don't pay their fair share of taxes. We need to stop this competition between member states that leaves all of us poorer in the end.

I'm sure the EU is capable of coercing Apple and friends into paying more taxes, as long as it's united. This is clearly not the case at the moment and that's the problem SZ should work on, not begging foreign multinationals to please pay more taxes.

Apple is the largest corporation in the world by market cap. It does not find itself drifting like a plastic bag in the wind. Apple spends over $5m per year on lobbyists. A sum that no regular business would be able to afford - a form of influence on government that is fundamentally exclusively available to megacorporations like Apple. That's in the US alone where Apple already has extremely favourable tax conditions.

Apple is not guilty of tax avoidance, Apple is guilty of paying legislators to change laws in a way that is fundamentally incompatible with democracy. At a time when the US Federal government is running a deficit Apple's lobbying spending has reached record highs and legislation to reduce corporate taxes are proposing record low rates.

Land of the expensive, home of silent CEO hiding from questions about dodgy tax affairs.

"Evasion of taxes is not illegal"

Yes. Yes it is.

I wanted to say the same thing. It is.

As consumers, we can use the market to pressure companies into paying a fairer amount of tax. As voters, we can use the government. As wealthy citizens, we can do both.

How does this fit into other areas where Apple brands itself as going beyond what is merely not illegal, and sets a high bar for itself?

> Paying taxes is an obligation with which we comply, both to the letter and in spirit.

No. You're following it to the letter only, and that's the problem.

> Governments should fix tax evasion, not corporations.

Globalization has ensured that multinational corporations cannot be dealt with by national governments. You know it well, since you worked hard for decades to make it so, Timmy.

There's maybe an interesting illustration here of the difference between morals ("do the right thing") and ethics ("follow the rules"). A lot of people like to emphasize that they've "acted ethically", knowing that people will misunderstand that as "I did the right thing" when they actually mean "I did everything I could technically get away with".

No ethics does not mean just following the rules

The definition is "moral principles that govern a person's behaviour or the conducting of an activity"

A LE person is not ethical because they follow the rules - to use a DnD Trope

While I do agree with the point that "govs should fix taxes, not corporations"... Still.

It's a fact that (at least in the EU where I live) the majority of tax burden ends up on small companies - mom & pop shops, little bakeries etc. Who simply can't afford these global tax avoidance tricks (or can't use them because they're "local")

Not that this is wrong or right, just a fact you can't argue with. I run a small software shop in the EU (4 ppl) I know what I'm talking about.

So I live in Poland and it's not really a secret that small companies can and do optimize their taxes by registering in the UK (mostly self-employed professionals) or Czech Republic (small companies / family businesses). It's not like you can avoid taxes, but the difference for a self-employed programmer is non-trivial, like getting a 13th monthly salary every year. The Czech deal is done mostly for simpler tax code and better handling of car-related costs. I've seen many luxury cars on the roads with CZ license plates recently and I can guarantee it's not because a sudden influx of Czech tourists :) There are probably more schemes I am not aware of, but these two are popular enough that you get tons of adsense ads when looking for them (i.e. there are companies / accountants specializing in setting this up).

Is that setup legal over there? It is not in the EU countries I know about; the UK company would be seen as a defacto company in the country you actually reside and do the work (Poland for instance), unless;

If you don't mind travelling then you can, very cheaply, pay very little to no tax being a small company. In many countries it is legal to do so.

Yes, I know the UK drill... But how do you hire someone in Poland being a UK company? I thought that's not possible

Why would it not be possible? To my understanding that is pretty much what the EU is about.

> The European Single Market, Internal Market or Common Market is a single market which seeks to guarantee the free movement of goods, capital, services, and labour – the "four freedoms" – within the European Union (EU). https://en.m.wikipedia.org/wiki/European_Single_Market

There are many Poles employed in the UK, so there has to be a way. It may get tricky when these workers do not live in the UK, but on the other hand there are many foreign companies operating in Poland and hiring people here.

As I said the UK setup is mostly used for self-employment, so when you need a team mate they are most likely incorporated as well (either in Poland or the UK), so you just sign a B2B contract.

I'd like to see some specific examples of tax avoidance tricks that Apple are using. There are a few mentions of how the "techniques aren't affordable for small business", but what are the techniques?

Basically they suck profits into Ireland, by stating in other EU countries that they will pay corporate taxes there; then in Ireland through "IP licensing fees" they paid all the money into a company that was declared not resident on the island for tax purposes, and was basically stateless - so not taxed. That company would then send this money to the various Caribbean shells they use as safes, when necessary, or just hang on it.

When the EU told Ireland to stop this behaviour, Apple was pushed to declare a location for that stateless company; they picked one of the UK Channel Islands, a crown dependency with no taxes, and started funneling money through that. In the process, they got another special deal from the Irish government to keep a chunk of "IP ownership capital" on the island, which resulted in a much lower rate of tax on that money than they would have otherwise had to pay (but ever-so-slightly higher than if they had just put everything in Guernsey, so they could save a bit of face).

Part of the scheme is to have a special deal with the government of Ireland (if you share the view of the European Commission) or to have a corporate structure located in Ireland but at the same time not be a tax resident in Ireland (view of the Ireland government). In 2010 Ireland also added a new law which partially forbids this, except for all existing companies such as apple.

I have nothing against companies minimising their taxes in legal ways. I understand the various incentives at play, and it makes quite some sense - all parties concerned appear to be acting predictably.

However: I do take issue with companies minimising their tax in ways that are not legal, but appear legal unless discovered.

I haven't the time or knowledge of various countries' tax laws to discover which is the case in this round of leaks, and unfortunately it seems the above two views are conflated in all the articles on the subject I have so far read. It'd be great if this caused some illegally hidden/minimised/shuffled/moved profits to be taxed appropriately, but it is all too easy to covet the rich man's "hidden wealth" and proclaim his methods "cheating" without knowing whether they were simply the same as you claiming your dry cleaning.

p.s. The adult in me suspects that is (as with most things) isn't a black and white issue; that the line between "legal tax minimisation" and "only legal so long as you don't find out about this part you have no way of finding out about" is both bent and blurry.

In the UK, for example, you have to register any tax avoidance scheme that you're using (as an individual at least).

If the HMRC then look into that tax scheme and deem it against the rules, you pay the tax, but without penalty.

As I understand it, if you don't register the scheme and you are found to be using the previously grey-area avoidance scheme, then you get done for tax evasion.

That's how it's supposed to work at least, but companies seem to get sweetheart deals in these circumstances.

I'm super curious about how this works in practice. What's the bar something has to meet before being reported? Do decisions made about how to do accounting count? How about decisions when filling out tax forms? (US example: itemizing deductions vs taking the standard deduction).

In Mexico, people don’t finish their houses and leave rebar coming out the roof to pay less tax. In Vietnam, the houses are really thin because property taxes are based on width. For an American company selling things overseas, they’re going to setup in Ireland or wherever else because the laws make it advantageous. All these decisions are functions of the laws written, so if they want to complain and write open letters, it should be to lawmakers, not the heads of companies operating logically.

> In Vietnam, the houses are really thin because property taxes are based on width.

Really? Interesting. Can anyone explain how taxing the width of the house was established?

It's similar in many places in Europe, where you see houses laid out like this:

http://c8.alamy.com/comp/F56ABW/old-and-narrow-houses-in-str...

Your property size, and subsequent taxes were decided based on how much of the road you took up, ie the width of the house. This practice dates back surprisingly far (1500s?)

Wow! I always wondered why properties in Vietnam were so thin! Makes sense - give people incentives to build "thin" buildings and they'll build thin buildings!

The point about Apple hiring best graduates who got their education mostly free of charge cause of all the tax payers really shift my mind about the whole tax-avoidance thing.

It goes both ways, the hired graduates also benefit from this relationship: a salary used to live and buy goods, and incidentally pay taxes.

To be clear, the taxes paid by employees are their taxes, that they'd be paying if they worked for another company or set up their own business.

Obviously there is some effect from Apple being an employer in increasing the overall employment rate, but there's a reason Apple needs local employees to hawk it's products. If they weren't employing and selling locally, some other company would be employing those people and taking Apple's market share.

Are there any statistics about how much of the value produced by professionals abroad actually flows back to the country of origin? Intuitively, I would say it is very little because why would you return once you live in much more privileged circumstances.

Yes but the moral burden is not on Apple, it's on those graduates. If you got your education for free and now you make a fat salary from Apple, it's your job to give back. Not Apple's.

Why is the burden not on both? Both Apple and the graduates are profiting from the subsidised education.

Unless Apple are running a break-even charity they are making money on each employee - which I would guess is due to a combination of the employees skill (gained in some way through this "free" education) and the business as a whole. In what way is there no obligation on Apple the company to pay back to society? One of the whole points of being a full time employee (as opposed to contracting under your own company) - is that the company pays taxes on your behalf to the state.

They do, in income tax.

Bullshit.

> The point about Apple hiring best graduates who got their education mostly free of charge cause of all the tax payers really shift my mind about the whole tax-avoidance thing.

Yes, that's true, but another angle is, that when the corporation profits are very high, let's say $40B yearly, then at 20% profit tax they should pay $5B. And that looks like a too high, government didn't spend nearly that much on providing stuff to Apple, per year (it's like $500K per one employee per year, if the company has 10K employes, for example).

You don't just pay taxes to get back the same amount. Taxes also include redistribution of wealth. In the US, a significant amount pays for social welfare and health insurance for the poor and elderly. That companies with healthy profit margins pay for this appears fairer than if it's just paid by small companies.

> "I guess the trouble was that we didn't have any self-admitted proletarians. Everyone was a temporarily embarrassed capitalist."

> - John Steinbeck

Reading some of the comments here which rationalize, justify, and even defend corporal behaviours such as Apple's nauseate me. How (and why) can you, YOU as a mere individual (or the owner of a small start-up if you'd like to think that way) who pays taxes for nearly every single transaction, can justify these kinds of "tax optimizations"?

Speaking from experience, this is how things (countries, organisations, etc.) corrupt: when people start rationalising (and then justifying) the behaviour of those who are breaking the rules and sitting at the top. The corruption happens when ordinary people looks above and thinks that "I would probably do the same, why would one obey the rules where it can be evaded?". Since everyone except those at the very bottom is above some others, corruption spreads like a bushfire and everyone starts breaking the rules s/he can.

It would be naive to think that only top 500 companies evading tax. Those at the scale of Apple break the rules at their own scale, and smaller ones break it at a smaller scale. Whilst, here I am in the UK, have to pay 10 GBP for a pack of 20 cigarettes because of the taxes.

It is so, so important to our social contract that everyone plays by the same set of rules.

Right now, I think that a lot of people (such as small business owners who will never employ an army of offshore tax lawyers) are realizing that this is not the case.

Hopefully this disillusionment will be a vehicle for positive change, but the past and present provide abundant evidence that there are tyrants and charlatans aplenty waiting to capture the popular anger and turn it to their own purposes.

It is in all of our interests - from the richest to the poorest - to keep this from happening.

We need to return to the lesson of the Progressive Era. There is an alternative to chaos, and it is to build a society in which the average person can justifiably say that the system works for them, too, and not only for the wealthiest.

"Such “tax optimization” – albeit legal – is only possible because specialized law firms such as Appleby devise complex company structures inaccessible to most other firms"

Maybe governments should simplify their own tax rules. Then you wouldn't need specialised law firms and simpler tax systems are harder to bypass.

To add, there is nothing 'moral' about tax - you have no choice but to pay what you're legally obligated to pay. Given the lack of choice in the matter, since when did it become a crime to do what you need to do to stay within the law?

In these situations they always say, "everything we did was legal". But the problem is that powerful individuals and companies get to make the rules. They have lobbying power and a legal budget that allows them to influence the rules themselves. They get to decide what is legal, and use the legality as a shield.

"Everything Adolf Hitler did in Germany was Legal"

The government makes the rules. The problem is that the government is made of politicians and they are by definition open to corruption (lobbying, contributions, etc). Those campaigns cost and administration salaries are not that big.

The solution? Reduce the government's power and you take away the incentive of the whole sick system.

The tax rules were simple.

Multi-nationals create mass webs of offshore companies to move money round outside of their primary tax jurisdiction and then bring it back sans-taxiation if they had just done the simple straight forward thing.

Multinationals made the situation complex to get around simple tax rules. So the tax rules were expanded to try and keep up.

And thus it is a never ending race with ever increasing complexity of tax law.

Yet somehow I think you would bitterly oppose a move to principle based tax law (as opposed to rules based) which is the only way of actually simplifying tax law and putting all companies of an even level footing.

> Maybe governments should simplify their own tax rules

I can't see that happening. Tax policy is used by most governments as a fine grained tool for all forms of signalling. Not just economic either: alcohol, tobacco, fuel, renewables etc. all use the tax systems to promote social change.

It's also quite handy for deflection i.e. if your economy's not doing as well as you'd want in an election cycle, blame the elites. Hell of a lot easier than actually making any real change as that's too hard to do without pissing off voters.

Tax policy needs to be recognised as a social issue.

If politicians are using the complexity as a tool then it stands to reason that the only ones that can efficiently navigate the resulting convoluting mess is the wealthy.

It puts the less wealthy at a disadvantage and if the masses start calling for change then the only reasonable solution is to simplify legislation.

I wonder if you could prove something like Arrows theorem for taxes. Who knows if it's even possible to design a tax system, with the properties we want, without enabling cheating?

Or maybe it's only possible if all countries in the world agree on a tax code. But what are the chances of that?

The situation is much closer to the Prisoner's Dilemma. You're asking sovereign states to collude on a bidding war. How to establish optimal collusion?

should people who make enough money to hire an accountant be punished? because i'm sure they'll avoid/reduce some taxes?

If your accountant was structuring your finances so it appeared your income came from countries other than where you worked, then yes, he should probably be punished.

Hiring an accountant should not be a crime. Especially not while tax laws are so horrendously archaic.

However, look at countries that have flat-rate taxes [1]. They are much harder to skirt and the level compliance tends to be higher.

[1] https://en.wikipedia.org/wiki/Flat_tax

The problem is that we have a government body that can be bought and influenced by the private sector. If government powers were limited in scope, there would be no incentives for lobbying.

It's perverted that companies reach a point where it's more profitable to lobby or find ways around laws rather than continuing to spend on production or other business costs.

No, the problem is that the price of something is hard to estimate with tech. Apple, like everyone else, make use of transfer pricing tricks. They don't book profit in one country because the subsidiary there had to pay license fee to use the apple brand. The prices for that are obviously carefully chosen to minimise tax. But for a tax authority to dispute that and come up with a better value of the right to use the Apple brand is close to impossible. With manufactured products you have an idea what a product or brand is worth. But for the iPhone it's not clear what amount of the price accrues to the Apple brand.

I don't get why people think paying more taxes is "moral". There are a lot of things the government spends on that I don't agree with...and I'm sure I'm not alone on this.

I would be happy if we were paying taxes on a level playing field - but we're not. That is the "moral" part of it for me. How that money is spent is another argument.

Why should any company pay taxes on profit?

I think that corporate taxes shouldn't exist _at all_ as they are merely an abstraction over sales taxes, income taxes, or capital gains taxes.

It’s the hypocrisy that the richest and most profitable corporation doesn’t have to pay tax while the rest of us do.

Actually what is moral (according to utilitarianism) is to avoid as many taxes as possible and then donate as much money to efficient charity. A lot of first-world government interventions are inefficient human-welfare-wise, mainly because they focus on problems within their own country.

That's what it's like being in a democracy and living in a society. Maybe you'd prefer to live in an anarcho-libertarian state but many people seem to enjoy benefits of a modern democratic society with all its safety nets.

There are ways to work around that to a certain extent though, for instance you can donate to nonprofits for causes you care for and get a tax rebate. That effectively means that you decide where that share of the taxes gets invested personally.

But beyond that there's not much you can do, you'll never have a government you 100% agree with on all subjects, at some point you have to accept to compromise and vote for the representatives that best represent your viewpoint and interests. Or leave I guess.

People usually feel (don't think) that it's moral for OTHERS to pay more taxes. They also feel (don't think) that's moral for themselves to pay less. It's called socialism.

Well, i feel its moral for me to pay all my taxes, and even though i also give money to charity, i don't use this fact to reduce my taxes, because i feel a lot of people need this money way more than me. This is socialism.

Are there parts of Gov spending that you agree on? How about: - Public Safety? - Roads? - Education? Do you want to keep those? Who should pay for this if no-one pays taxes?

This sounds similar to what Amazon are doing with their latest HQ: making states compete each other over what advantages Amazon would get if it opened its HQ there [1]. I'm terrified by the power big companies have over our government.

[1] https://youtu.be/8bl19RoR7lc?t=2m52s

As an Irish citizen, I feel embarrassed by the way we have dealt with Apple (and other behemoth corps). We simultaneously gave these organisations "free parking" and a "get out of jail free card".

I don't blame Apple for taking advantage though. I would.

That free parking increased Ireland's economy by nearly six fold in a mere 25 years. It took Ireland from a second tier economy, to a first tier economic power ($300b in GDP with a mere 4.7m people). From sub $15,000 GDP per capita in 1993, to surpassing the US in GDP per capita at $62,000.

You can tell it's the large foreign corporations causing it, because of the big gap between the growth in domestic income and the headline GDP figure. However those companies still employ a lot of people and pay taxes Ireland otherwise wouldn't have.

Huge companies like: Mylan, Alkermes, Medtronic, Allergan, Johnson Controls, Accenture, Intel, Google, Apple, etc. would have likely not set up shop there if not for the tax policies. One can say, in response to that: fine, let them leave, we're better off -- except the Irish economy would get cut in half if you pushed them out by raising corporate taxes significantly, poverty would increase dramatically, unemployment would skyrocket.

Apple and these other companies pay taxes in Ireland due to a duty to his shareholders. Ireland improves its economy 6 fold by undercutting all other EU countries on tax rates. And other countries are what, fucked out of tax money?

GDP doesn't tell us much in the case of Ireland, because these huge companies only invest very little in the country, as is typical for a tax haven. If you look at GNP, the gross national product, the actual gains for the people in Ireland are much lower. Have a look at GDP[1] and GNP[0] numbers per inhabitant for Europe: Where for most european countries both numbers are about the same, for Ireland there's a difference of over 30%. Much of Irelands GDP growth didn't result in more income for the people.

[0] = https://en.wikipedia.org/wiki/List_of_sovereign_states_in_Eu... [1] = https://en.wikipedia.org/wiki/List_of_sovereign_states_in_Eu...

GDP per capita doesn't seem like the best metric to track the growth of "Ireland's Economy" if it doesn't translate into more jobs/taxes/etc. though. Would you happen to know whether these development incentives have actually befitted the Irish people?

And that's the problem: if the tax law changes to be more "fair", Ireland gets screwed. Like you said, the Irish government is fighting the EU decision to give them more taxes because if companies were forced to do that they might leave Ireland.

jobs go away -> expeds go away.

I fear that Mr. Krach does not understand corporation tax.

Comparing profits from sales in a particular country to corporation tax paid in that country by a foreign company makes absolutely no sense.

Apple's tax avoidance schemes are in place to avoid US taxes, not German taxes or taxes elsewhere in the world outside the US.

I think Mr. Krach is right that global corporations do not pay their fair share towards global infrastructure and education. But the reason for that is not tax avoidance. The reason is that corporation tax, as it is structured today, is unfit for porpose in a globalised economy.

Corporation tax is based on the assumption that companies primarily use the public infrastructure of the country where they are incorporated. But for global corporations this assumption is incorrect.

So Mr. Krach is barking up the wrong tree, unless his main concern is US tax take. He should call on politicians to change the way in which global corporations are taxed.

Yes to this: "corporation tax, as it is structured today, is unfit for purpose in a globalised economy".

Where Apple sold its computers is well-defined, you can count each one and tax it. Where their employees work is also well-defined, they have desks, and beds.

Where they made their profits simply isn't well-defined. How much was due to the software (California), the marketing (let's say London), the assembly (China), the logistics (in between)? These question don't have sharp answers. Sure, Apple's accounting guys write down some numbers. But once you attempt to tax them, you discover that they have great freedom in what column they write those numbers in.

I increasingly think the correct corporate profit tax rate is zero. Tax the goods they sell. Tax the salaries they pay. Tax the capital gains when shareholders sell, if you must. These things all involve actual people and take place in particular countries. The rest is an abstraction.

> In Germany, Apple is estimated (you don’t publish the exact figures) to have generated revenues in the billions last year – of which it paid 25 million euros in taxes.

I assume that Apple paid 20% German VAT on those billions, as well as paid taxes on the salaries of the Germans it employed, and probably several other taxes such as environmental tax on packaging. The article raises an important issue but it's disingenuous to focus just on the profit tax, which is a highly malleable number in the hands of an accomplished accountant.

But since they do focus on profit tax, they should have made it clear why profit on a phone designed in the US and built in China should fall to Germany, and they fail to do that.

On thing I wonder about all these proponents for Apple to voluntarily pay more taxes: do they themselves pay more taxes than strictly required of them?

I mean do they not take advantage of that child exemption? Do they not deduce that mortgage? Those medical costs? That college tuition? Those business expenses? Do they decide to voluntarily add at least 1% to their income tax bracket?

Do they practice what they preach?

There is a world of difference in the moral intent of claiming tax credit that the government itself publicises in order to help the people in their society and the likes of "Double Irish" tax schemes. It saddens me that this argument is always rolled out. As a global population (not thinking about individual countries, however unrealistic) - it depresses me that people try to justify these blatant abuses of legislation.

Honestly this point is so obvious but I hadn't thought of it myself.

Genuine question. Are there actual large, profitable companies which are tax responsible? I.e. companies that follow ethical accounting practices to minimise their tax and none of the dodgy off-shoring stuff

As the "editor-in-chief of the Süddeutsche Zeitung, Germany’s leading daily", why not do something?

I don't mean complain, that's already happening, I mean actually do something.

For example, ban all Apple products from the paper. Lobby the German government to ban all Apple products until Apple pay a sufficient amount of tax. Use the paper's influence to get people to stop using Apple's services. That sort of something.

If not, then why not? Is it possibly that you don't really care? It's just a fun story that helps circulation a bit. Or, maybe, that you don't believe that you'll get much support and having a campaign that fails is bad for circulation?

Possibly it's because this would have a direct negative effect on you and yours and, well, we wouldn't want that.

Personally, I'm fine if you don't do anything but complain as protecting your circulation and your convenience is a perfectly reasonable thing.

But don't be surprised that nothing changes.

> For example, ban all Apple products from the paper. Lobby the German government to ban all Apple products until Apple pay a sufficient amount of tax. Use the paper's influence to get people to stop using Apple's services. That sort of something.

Not sure if they even issue company phones. But if, that's maybe 100 iphones. And how should they lobby a government to ban iPhones? As official phones they're not used anyway (for security reasons) and the state has no say in what people use privately. Boycotts almost never work.

> As official phones they're not used

I mean lobby for the ban on the sale of Apple products in Germany. As in, make it illegal to sell Apple products. And if you really want to put the cat amongst the pigeons, make it illegal to buy them.

> Boycotts almost never work

They absolutely can if they're popular enough. And they can in Germany too. If you don't believe me, check out the Shell boycott. And that wasn't officially sanctioned. I think it's reasonable to expect that a 40% reduction in sales in a market as important as Germany would cause Apple to think seriously about its position.

Now, I'm not suggesting for a second that a ban on Apple, or even a boycott, would occur let alone be successful. But that's kind of my point. No-one's going to call for it because it's just not important to anyone. It's posturing.

I have a simple solution:

Create a business which behaves and acts the same way as Appleby but for small enterprise of lets say 30k revenues a year only. You provide the service on a almost non profitable way to attract the vast majority of enterprises in this revenue sector. Ultimately, governments will see the effect of lost taxes and act accordingly.

I think the real issue is that taxing corporations is the wrong approach. Companies don't and really can't pay taxes. The burden of the tax always falls on some individual or group of individuals, not the company. When try and tax a company they can pass on the cost of that tax in one of 3 ways. They can pass it on to shareholders in the form of lower dividends. They can pass it on to customers in the form of higher prices, or they can pass it on to workers in the form of lower wages. Several CBO studies have show that it is workers who bear the primary burden of the tax. Which I think is probably the exact opposite outcome of what people who argue for corporate taxation want. However, it makes perfect sense why it is that way. The shareholders are never going to agree to pay the tax in the form of lower dividends. The company has limited ability to raise prices in many cases without losing customers, so the easiest way for them to pay the tax is to reduce the total wages that they pay out. Taxing corporations is nonsensical. Some individual is always going to end up paying the tax.

> since 2010, Apple’s foreign-earned income has been taxed at a rate of between 1 and 7 percent. Mr. Cook, do you believe this comports with the “moral responsibility” you have advocated?

No, he doesn't believe that. He also doesn't care about "moral responsibility". He's the CEO of a mega-corporation. He cares about world dominance, competition, and profits.

It's completely useless to appeal to CEOs' moral sense; they probably don't have one and even if they do, they don't let it run their lives.

> Such “tax optimization” – albeit legal...

That's the whole problem. What would be useful would be to make laws that force corporations to pay proper taxes, and then ruthlessly enforce them.

Shame can help a little, maybe, but laws first.

I think we can bitch all we like and nothing will happen. International taxation is complicated and part of a multinational's business model revolves around exploiting that for shareholder gain.

What this points to is that we need a new global trade and taxation agreement for handling this. But the policy makers don't want that because they benefit from it.

Ergo, it'll always be like this.

At best you can add additional sales tax for non-resident companies at the point of sale to kill their bottom line. But no one will do that because the government will be the target of the abuse from the consumer.

Countries can unilaterally have taxes based on the share of total company profit generated in the country, rather than just profit in the country.

That doesn't prevent companies from moving all profit generation out of all countries but the lowest taxed.

Your tone is very negative, but such is the subject you state the truth. There is no incentive to build a tax world government.

There seems to be a similar arrangement in the makings when it comes to trade agreements. If the EU showed one thing, its that you cant form a multinational entity by unifying trade laws alone.

This is why the EU thinks about introducing a revenue based tax for tech companies. Cheating on profits is easy, cheating on revenues is close to impossible.

People said the same about slavery. Change _is_ possible, but it requires a lot of patience.

Problem is, it was not a lot of patience what ended slavery in the US, it was a lot of violence.

Also, they make it sound like Cook could do anything.

If he would, the shareholders would simply replace him.

Exactly.

Australia taxes shareholders instead of companies. Companies pay tax on paper, but it gets refunded to their shareholders when they pay dividends, and those dividends are taxed like any other income.

If other developed countries did the same, these problems might be easier to manage. Investors could still get bigger dividends from these transfer pricing rorts, but they would have to hand them back as income tax at home, and the rorts might stop being worthwhile.

It seems like a lot of people here are looking for "the" root of the problem, as though there is one person or small group of people or laws that could fix the whole mess. The truth is that we are pretty much all complicit in small ways that add up, and that complicity generally takes the same form: I want a little more for myself, and have a convenient blind spot when it comes to ways in which systems and processes help bias things in my favor.

Elsewhere it's been pointed out that there's no (non-arbitrary) way to distinguish a "tax loophole" from a "tax code." It's sort of an "I know it when I see it" thing. But how many of us have the courage to stand up and say "hey, this is unfair for others" vs "hey, this is unfair for me"?

Until that happens, this kind of thing will continue in a variety of forms that may seem unrelated but profoundly aren't. But something inside us is scared of giving up any ground.

So what's the solution?

Well, meditation and psychedelics are showing tremendous promise in awakening the sort of "universal empathy" and profound sense of fundamental safety and security that can shift the balance.

We can't get on that train fast enough.

There is a question in that letter which I wonder if it is intended as a threat. I might just be misguided. But asking about the questions asked about 'credible opposition party' and 'movement that may replace the current government'... I think Tim Cook (and others in his tax bracket) might see such a question coming from a media outlet as a bit of a threat. The general public think of the rich as simply normal people with way more money and power. They have no concept of how differently they relate to the world, governments, etc. They've got no idea that once you get beyond a few million dollars, once you've surpassed whatever an individual would reasonably ever need... you start planning for your family. When you get to a billion? Then you start planning for your legacy. You don't think "what will make me some money this week" or "month" or "year". You think on the scale of centuries. And you fully intend your dynasty (for some reason all rich come to fetishize bloodlines and draw irrational conclusions about the superiority of their genetics, likely a psychological defense mechanism against a sort of survivors guilt born out of all their compatriots they've seen fall/destroyed) to outlast flimsy flash-in-the-pan happenings of history like the rise and fall of currencies or redrawing of national boundaries.

When people talk about things like a large movement to automation, or things like Apple having a value greater than the GDP of nations, and things like that... they don't tend to follow through and consider things like... people have fought very, very large wars and killed many, many people over sums smaller. Those who think it isn't a game are only those expendable enough to be fodder for it.

"The iPhone not only changed the world, it did so faster than virtually any other technological innovation in history."

This seems a little over the top.

OK could someone explain to me why people in US would be complaining about evil Apple or any other major US company ? It's not owned by some evil rich dude largest Apple shareholder is Vanguard second Blackrock and so on. It's owned by you it creates value for your pension I'd rather trust Tim Cook than Donald Trump with my pension $.

>> Did you want to make zero-tax status a precondition for establishing tax residency there? What gives you the right to do so?

This is a pretty twisted way of publicly shaming someone for just asking. They have all the right to put whatever condition on any country they want. Any country has the right to not accept their conditions.

If the intent of the author is to publicly shame Apple and paint them as being somehow culpable for the poor conditions of the said countries, then its not working. There are jobs that Apple bring to these countries that kick start their economies. Again, its not for nothing that countries _agree_ with their pre-conditions.

The other argument presented here is that smaller companies don't get to play by these rules. Again, they can. Just that there is no incentive for a country to not tax smaller companies.

Bottom line: Apple brings more to the countries than just its taxes, and that's why the countries are fine with their special tax status.

For people talking about how the solution is to fix the tax code: the problem is not the tax code or the rates. Even if the tax rate was 2%, these people wouldn't pay it.

I feel the problem is much deeper than that - the fact that Tim Cook, and others, do not see it as "fair" to pay for the use of public facilities and services. That they fail to grasp the notion that by helping a nation create better, more educated, healthier citizens will effectively improve their bottom line in the future. That levelling the playing field creates more customers for their businesses. Unfortunately you can't put that on a quarterly profit report, so let's just make more and more money and screw everything else. That's not success. That's a virus in economical form, slowly killing the host.

At the core of many of these tax avoidance schemes is wholly owned subsidiaries making intra-group loans that are treated differently in different tax jurisdictions.

Imagne there is subsidiary X & Y in jurisdiction. In jurisdiction A the parent company declares those two subsidiaries should be considered a single entity, in jurisdiction C the parent company declares they should be considered separate.

This allows intra-group loans between those two subsidiaries (and other subsidiaries outside jurisdiction C) to appear and disappear from the accounting as necessary for the purpose of tax avaoidance.

Whilst the declared company structures are perfectly legal in jurisdiction A and C the fact that the parent company has declared different corporate structure for the same entities is deeply suspicious as an activity.

At the end of the article "Apple bills itself as a transparent company." . This is news to me. The Apple is famously (infamously) secretive.

Tim Cook is doing the job shareholders hired him for. Most boards would replace him if he made no effort to minimize taxes. It's the fault of the system that collects taxes, not Apple. If a system wants to govern and collect taxes it shouldn't rely on companies to donate more than they're legally obliged. Fix your laws, Germany, EU.

I cannot count the number of times I've heard the word "Legal" in the news in the last few days. As in "everything we do is legal". What's implied is therefore ... I can do it. What I understand is : therefore... change the 'fing law. And make it very public who is blocking this change of laws. Any country such as isle of Man or Ireland can have its own laws. My country has a system where infrastructure is build from transactions. You don't want it, you cannot have access to its customers. simple on principle. Some laws can be bent to avoid it ? change them. Have issues changing them ? Please explain them clearly. Act on those & iterate.

I don't care about a lot of political subject, would it be inequality, welfare, immigration, racism, etc.

But tax havens seem like a huge threat, and my favorite subject of opinion of all, and they are a big source of problem in how the economy is unfair and how any country's budget is unbalanced. Weirdly, libertarians will defend the existence of tax havens.

I'm really happy to see that some political actors are finally advancing on that subject. Even in terms of geopolitics, it will be delicate, but I don't care, this is the largest abscess to burst, and it's crazy it's not a bigger issue and that it took such a long time. It's really time that this gets fixed.

Is there a sort of international tax agency (hopefully with the proverbial teeth) like there is the World Trade Organization [0] (WTO) for trade or Interpol [1] for policing?

With my colloquial/urban-legend-style understanding of the fear of being audited for taxes in both Canada and the US, I would be mildly entertained if I ever heard that the "Global IRS" was auditing a multinational corporation.

[0] https://en.wikipedia.org/wiki/WTO [1] https://en.wikipedia.org/wiki/Interpol

ELI5: why Wolfgang Krach needed the paradise papers to write this letter? Are paradise papers just an information leak that don't contribute to solving any problem? Except obviously when you can find plain corruption based on these papers.

Perhaps you missed these parts towards the end of this letter:

"But what unsettles me the most is the way in which Apple instructed a law firm to obtain an “official assurance of tax exemption” from the government of a country."

and

"And what understanding of democracy are we supposed to discern from the question you had this law firm ask? The one about whether the country had a “credible opposition party” or “movement that may replace the current government?” Were you trying to ensure that you would be able to retain tax-free status even after elections or a change in government?"

I don't find this strange when you are looking for a long term tax strategy and trying to reduce the involved risks.

For example, when Intel invests in chip plants there are big discussions about tax privileges [1]. I know this is different because it doesn't involve a big R&D but it is natural to big company plans.

[1] https://www.reuters.com/article/us-israel-intel-plant/israel...

Let people protect their finance in peace.

If I earn money by creating a good product that consumers love I have the right to do whatever I wish with this money.

Socialism is evil. Let people be free to use their wealth for the benefit of society by producing more, donating, and so on. Why the hell would I want to give money to politicians to generate war and tragedy? It is a shame so many socialists try to destroy California and whatever is left of free-market in America.

Apple and the like are just being “smart businessmen” as our current tax evading president once said. I never really minded paying taxes. Sure, I was upset sometimes when I learned how some of it is spent. After Trump said that, I made it my duty to pay as little taxes as possible to the federal gov’t. The US election taught me that a total morally banktrupt asshole can win the presidency of the United States and flaunt his disgraceful behavior, I might as else enjoy what he enjoys.

Whose torch are these media co's carrying? I'm not so quick to swallow a newspaper editor's moral indignation about taxes. Much ado about symptoms, not so much a cause.

Our governments waste so much money, even Apple's lost taxes are a drop in the bucket. Should we all join in crying about that loss? We know 90% of it would go to military and corrupt, partisan, spending.

I say spank the news media along with the government, for being partners in the inertia. At least Apple innovates.

> Many of these institutions of higher education are entirely or partially funded with taxpayer money.

This is a tell. I should have seen it coming. Another "you didn't build the ROADS!" guilt trip. As if a big part of the rationale behind all government-funded activities (wealth redistribution) was to promote the importance and preservation of the state, not what the citizens couldn't do for themselves. The same goes for the "freedom isn't free" bullshit. A "security" argument could have just as easily been substituted for the "education" argument. Citizens all around the world are paying double for this self-aggrandizing propaganda, some with a mountain of subsidized student loans, others with their lives.

The fundamental goals of government (that I think that most people could get on board with) are to provide law and order, and if it has the resources, promote the general welfare. If the welfare is being promoted and increasing by other means, why do we need the state to continue that role? The pie is growing in the form of a piece of technology that is improving your life, and the private sector doing more, more efficiently. Just because the guy next door struck it rich in some risky investment or startup doesn't mean you were made worse off or will be made worse off. The sooner we can stop flirting with that flawed, quick-fix socialist thinking, the better off we'll all be.

Great letter that is part of a great movement right now. It's not just Apple, but they're an easy target and rightly so. It has to start somewhere.

I'm confident they're doing their usual 'wait for a week' until we get a reply.

And then I hope, just like with the ecological issues after the Greenpeace accusations, Apple will finally start doing the right thing and pay rather than trying to escape.

- A happy Apple user

There are a sea of lawyers, accountants, investment bankers et al., using the best intelligence the marketplace has to offer, to move money around the world for corporations in a game of (don't) whack-a-mole. Until these guys get a kick in the teeth and some semblance of honor, the game will go on because it pays top tier compensation. Scoundrels.

Not to be a jerk, but I do not agree that Apple makes outstanding products any longer.

In particular the quality of UX has decline rapidly since jobs' decline. Have you looked at the stopwatch app for example? Where did the seconds go? Milliseconds?

There are many many more things like this that have changed for the worse. And their hardware has always been sub par afaik.

Tim Cook could be sued by Apple shareholders if he _didn’t_ pursue the most efficient organization for tax purposes. It’s actually his legal responsibility - not some evil thing he’s doing because he is a heartless capitalist.

If you don’t like what Apple is doing, don’t blame Apple. Blame government, and use the power you do have to make change happen.

Y'all should hate the game not the players, c'mon. -50 Cent

(ie. Pass bad laws/tolerate bad governments, get bad results.)

The article is mis-addressed. If the goal is to change something and not just pointlessly grandstand, it should be addressed to the lawmakers who wrote the laws that make this legal. Nobody should be required to pay more taxes than the laws tell them to. Anything else is frivolous and arbitrary.

You can’t blame the people taking advantage of the loops holes, you have to blame the countries which allow it, and then stop them, thus putting all business owners on a level playing field. They are driven by capitalism and money, they aren’t going to not do it for moral reasons.

This guys seem to know nothing about economics. A company can be enticed with tax exemptions to setup shop there and in return help the count in many ways. The tip of the iceberg is employment, talent generation and the surrounding areas where the office is placed.

I am a bit confused what does sales in a given jurisdiction have to do with amount of taxes payed on profits in that jurisdiction? Apple does same thing every german company in US is doing e.g. shifting money flows in such a way as to optimize profits.

There is significant trade imbalance between US and Germany as in Germany exports 2X more goods to US so if laws would be passed that make you pay taxes on profits proportional to sales in a given jurisdiction Germany would suffer greatly.

It is funny to see that here in Dublin there are so many homeless people. Almost one in every street. This tax evasion is not the direct responsible but it is another symptom of this 2-speed society in which inequality separates citizens.

Would it be possible to create a "Tax evasion as a service" where one can buy shares, and said company will offshore the pool of money allowing individuals to get benefits of big corporate tax?

A lot of the responses here are missing the point. It's not that Apple must behave morally with regards to taxes, and not just legally.

It's that Apple claims to behave morally, and doesn't.

here is what the average American does not know...read?

US collects $2.5 trillion in corp taxes...guess how much revenue is earned by US corps? $27Trillion...US corp effective tax rate tan is exactly 10%...contrasty that with China where the effective tax rate for corps counting corruption is at somewhat 45%...

Somewhere there is something wrong with US corp claiming they need lower taxes when they cannot increase the number of those hired..at leas that was the former social contract they were operating under when getting those lobbyist tax breaks in the first place.

David Mitchell on Tax Avoidance: https://www.youtube.com/watch?v=m2q-Csk-ktc

Makes some good points.

Working link in the UK: https://youtu.be/xc8epam4NyY

If we want the rich to pay more taxes, it would be simpler to just raise taxes on the rich individuals. Things get more complicated when you try to tax an abstraction (a corporation).

Everybody else has already long since figured that out of course and are cutting their corporate income tax rates significantly, while half the political sphere in the US is still arguing about taxing corporations more.

Meanwhile, in Sweden: 22% statutory corporate income tax rate; Finland: 20%; Denmark: 24.5%; Norway 27%. Those horrible socialists!

But you have to look at the effective rate after deductions, which are very significant in the US.

https://en.wikipedia.org/wiki/Stockholm_syndrome

people avoid tax all the time, when VAT goes up do you buy that new TV or do you wait for the next budget. of if it's a laptop do you wait to buy it at duty free?

Even though I don't believe that articles like this would make the slightest bit of difference, I sincerely admire the sentiment of people who write them.

Want to prevent this ? Use your ultimate weapon, your wallet. Start boycotting Apple products (all other companies that appeared in the leak such as Nike).

Income tax is hard to collect. Sales tax is regressive.

Solution: sales tax with lump-sum redistribution to make it progressive. Forget income tax.

But then you just buy from overseas. Or if you have many land-borders like Germany, you just drive across a border.

Import tariffs are possible, set to equal the sales tax. Enforcement for large corporations will be relatively easy. I'm not worried about individuals.

By how much would the country's tax income increase, percentage wise, if all these companies started paying full tax?

What is Apple's effective tax-rate, world-wide (for, e.g., 2016)? I've not seen this spelled out anywhere, yet.

Hacker News Staff: can you please publish stats on how many of the comments on this thread are posted from Apple devices?

This paper seem to be made to stir stuff up amongst people who thinks this is a simple matter

Apple is, by US law, required to maximize their profits for its investors.

I'm not religious, but I agree with the sentiment: "Thou shalt not covet." Rather than drag on Apple maybe we should be figuring out how everyone can lower their taxes.

i think pressure should also come from apple ( and google and amazon..) employees. They work for an objectively "bad behaving" company, they should tell their management that they're not ok with it.

> Apple bills itself as a transparent company.

lolwut? Secretiveness is kind of their thing.

All I want is a world with a single flat tax, is that too much to ask?

Is there anyone here who is enough of an expert to propose changes to the U.S. tax code that would actually get rid of all of the tricks that multinationals play to avoid taxes? Or knows of where to find such a thing. I have responded in subthreads to at least 3 people who think they are but curious if there is anyone out there with actual expertise on the topic.

My sense is that it's easy to feel that the solution to the problem is simple (like this xkcd: https://xkcd.com/793/) when in fact it is tremendously complicated: perhaps even intractable. It may be that it there is a sort of Godelian way of always finding a loophole given the emergent complexity of the interactions between the tax codes of ~200 different countries, many of which are incentivized to have a lax tax code to promote local job growth.

I wonder, does the author pay more taxes than he legally owes to.

70% downvotes on /r/apple, posted 17h ago.

Tax revenues, not profits on all listed companies

John Oliver did a piece on this last Sunday: https://youtu.be/8bl19RoR7lc

No comment. - Best regards, Tim Cook

Why do we expect Apple to be altruistic instead of expecting governments to have sensible tax policy?

apparently that xtra $ isnt quiete reaching their IOS 11 team in constructive ways.

As Long as tax’s remain high, they will be avoided. Raising taxes on the 1% or raising corporate taxes on businesses it only going to make the issue worse.

America probably wouldn’t need such high tax if it didn’t have such a terrible government system.

That really hurt to read. What I get from this article is: "I use apple products every day and now I feel bad for using them. But I won't stop anyways because who cares really. Please do anything to make your company less profitable so I can feel better again."

You obviously misread it. Try again.

Read again DoctorPenguin, you might understand the message this time.

Got to chuckle when articles like this appear. Essentially it means this:

I paid my taxes, you haven't. Translated it means ( in my opinion): I got robbed, but you didn't get robbed, and I feel envious of you.

Taxes are an extortion by the government and it is fair game that anyone should try and evade it legally or otherwise. Extortion cannot be justified even if some of the money is used to deliver useful services to the people who have to part with the money.

Summary: people get the government that they deserve.

Let me guess. You're in favour of private healthcare, private security, private education, and no social safety net. In short, nothing to aid social mobility, and nothing to restrain powerful people who have gained the upper hand.

You know, to some of us, that libertarian utopia sounds like a fucking nightmare.

>You know, to some of us, that libertarian utopia sounds like a fucking nightmare.

Correct, nobody is obliged to help you. What a sense of entitlement!

So your only option is go ahead ask your government to arm twist rich people into funding your healthcare etc. ( and the rich includes the ones that have both legitimately and illegitimately obtained wealth).

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