Tim Cook tells Congress why Apple won’t move $100 billion back home

Note - my answer to that is very, very quickly you would find that successful US companies re-incorporating in other countries, in much the same way wealthy Americans will sometimes give up their US citizenship.

First of all, when Apple pays income tax in most countries, they will receive tax offset credit in USA so they don't have to pay tax twice on same profit.

But Apple doesn't even do this. The whole point of having Irish subsidiary is to give it intellectual property which is the real money maker here.

What happens then is quite simple. Subsidiary company in Ireland is charging Apple in other countries huge licensing fees. In fact, so huge that it amounts to 100 billion dollars. Licensing fees are tax deductible so Apple is basically avoiding paying corporate tax all over the world because licensing fees and royalties eat up all the profit.

Of course, Apple as a group of entities is making billions in profit but as far as overseas tax authorities (Australian Tax Office, UK Revenue & Customs etc) are concerned, Apple is barely breaking even therefore is not paying its fair share of tax.

Obviously this whole scheme comes at cost. All these billions are basically stuck somewhere in Ireland and can't be used. They just sit there and earn interest.

Eventually money will have to come to America. How? Irish subsidiary will pay dividends to parent company Apple Inc. At that point all these billions in profits will get finally taxed at ~35% by IRS.

Congress is just asking Apple when they are going to bring to USA all those profits and what's the point of deferring it. Apple is saying, we will bring it when you lower our tax rate. They are basically blackmailing the government.

edit: I was wrong by saying Apple doesn't pay corporate tax in USA. I modified my comment to reflect what I have learned from comments bellow.

Any royalty for patent, trademark, design and copyright licenses should be deducted in the country where the patent is awarded, not where the owner of the patent happens to be situated. This way all the shenanigans would come to an end.

As a European, I am quite appalled that Apple almost doesn't pay tax in Europe either. Apple's European profits are compareable to their American profits, http://investor.apple.com/secfiling.cfm?filingID=1193125-11-....

Apple is competing with European businesses for customers and through European patent and trademark rights Apple is awarded competitive advantages in the European market. Not paying tax is another advantage. So what if the research is done in America? The European patents and trademarks apply in Europe. Let them pay tax income tax on American profits in America, on Irish profits in Ireland, German profits in Germany.

Hence smaller (lean?) countries will exploit this, it only makes sense to exploit this.

Since the great depression, corporate shares of taxes has been steadily falling. One can only speculate where it might lead.

2011 USA Taxes:

Total corporate tax: 200.8 Billion.

Personal income tax: 1.1 Trillion.

http://www.npr.org/blogs/money/2012/04/13/150441259/what-ame...

Edit: I would appreciate it if someone told me what I said was incorrect or wrong in anyway.

[1] I realize that companies pay separately, or use private collection in many cases. It's just an example of a company using a resource that can be (and in some cases is) paid for by taxes.

1) For publicity reasons, to make the public believe corporations are held accountable

2) To extort some lobbying money from Apple

http://gigaom.com/2013/05/23/apple-in-political-crosshairs-i...