Slashdot Mirror
How Apple Sidesteps Billions In Global Taxes
An anonymous reader writes "An article at the NY Times explains the how the most profitable tech company in the world becomes even more profitable by finding ways to avoid or minimize taxes. Quoting: 'Apple's headquarters are in Cupertino, Calif. By putting an office in Reno, just 200 miles away, to collect and invest the company's profits, Apple sidesteps state income taxes on some of those gains. California's corporate tax rate is 8.84 percent. Nevada's? Zero. ... As it has in Nevada, Apple has created subsidiaries in low-tax places like Ireland, the Netherlands, Luxembourg and the British Virgin Islands — some little more than a letterbox or an anonymous office — that help cut the taxes it pays around the world. ... Without such tactics, Apple's federal tax bill in the United States most likely would have been $2.4 billion higher last year, according to a recent study (PDF) by a former Treasury Department economist, Martin A. Sullivan. As it stands, the company paid cash taxes of $3.3 billion around the world on its reported profits of $34.2 billion last year, a tax rate of 9.8 percent."
Wake up. Almost all corporations do this. HP does this. IBM does this. Dell does this. It's not called 'hating America,' it's called 'loopholes.' If you were beholden to shareholders and you were in charge of a corporation, you would do it too, I bet. And if not...you would never be in charge of a corporation for long.
For your security, this post has been encrypted with ROT-13, twice.
Hate the game indeed. The whole system is rigged to favor the fat cats. Obama's "job czar"??? Jeff Immelt, as CEO of General Electric, has orchestrated a situation where one of the largest employers in the US and generator of billions in profits pays a pittance (if anything at all) in US corporate taxes.
Republican...Democrat....they're all for sale to the highest bidder. And people just wink at that while the media waves their hands about who Kim Kardashian is blowing this week. zzzzzzzzzz.....
You can take a loan against the value of your stock. This is not income, and is not taxable.
In many cases, the interest paid on that loan is tax deductible. If structured correctly you may never even make a payment, the interest is simply added to the principle (it is still tax deductible). When the time comes you sign over the stock (not selling it, mind you!) to the lender, having exchanged the stock for real property and taking years of tax deductions on the supposed interest -still without paying any taxes.
Its shady, but not illegal. Loopholes exist for the rich to take advantage of.
"You want to know how to help your kids? Leave them the fuck alone." -George Carlin
Many disagree with that ethic. In fact, in the landmark case for tax avoidance, here's what they had to say:
"[A]nyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes.
Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible.Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands: Taxes are enforced exactions, not voluntary contributions.
To demand more in the name of morals is mere cant."
Most of the loopholes require a lot of money or assets.
It's kind of hard to live off of cash you borrowed against your stock holdings if your stock holdings are worth less than your living expenses.
And moving your money to an off-shore tax haven only makes sense if your tax savings would be larger than the accountant's fees you'd have to pay to do so, plus the amount of the risk of any changes in the tax code here or there.
Sounds very high.
30 of 280 Fortune 500 companies paid no federal tax in 2008-10; 26 of those paid no federal tax in 2008-11; 24 paid less than 4% federal tax in 2011 alone; 15 paid 0% or less
Apple doesn't even make the list...
What part of "a well regulated militia" do you not understand?
You're ignoring the entire lifecycle. There is no free lunch (as those who borrowed against their homes based on inflated real estate valuations discovered).
Eventually you owe the money you borrowed even if you got a good interest rate because you provided good collateral.
If you had cash laying around when you originally borrowed the money, likely you would have used that instead of borrowing money. Obviously, though, if you can get, on a post tax basis, a better risk adjusted ROI on that cash than the interest rate on your loan, you should invest that cash instead -- in which case, it's not "cash" anymore available to repay the loan.
When it comes time to pay your loan, you therefore need to liquidate some assets to make the repayment - then, if you made any gains, you owe taxes. If you lost money, you would have been better off selling that asset earlier and generated some cash so you didn't need to borrow (as much) money in the first place.
If the stock you used as collateral goes down enough, you may need to repay the loans immediately - indeed, in some circumstances, the entity who made the loan has the right to sell the collateral to recoup what you owe if you don't come up with additional collateral on demand.That sale of course will, if the collateral has appreciated since you bought it, result in taxation.
The "dodge" you describe is really just leverage -- which can backfire.
Why is there an "insightful" mod and why isn't it "-1"? If I wanted insight, I wouldn't be reading
You typically own capital gains tax on your gain in the collateral that was forfeited - just as if you sold the collateral and used the proceeds to pay off the loan. See, for example, this (specifically, the section entitled 6. Question: “What happens if I default on the loan?” or “What are the tax consequences?”) for what happens in one case of such loans.
If you really believe things work the way you describe, I suggest you check with qualified tax advisers before acting on those beliefs.
Why is there an "insightful" mod and why isn't it "-1"? If I wanted insight, I wouldn't be reading
There is also the joy of dealing with the probate and lawyers to sort it all out. They take a big chunk of it and the State (as in the 50 states) wants a piece of the action too.
Let me explain why that isn't a good idea. Corporations are given rights under the law, not as entities themselves, but as an extension of the collective rights of the individuals that it is composed of. A corporation is formed by a group of individuals agreeing to pool resources to achieve a goal. So let's take a look at how that can play out.
You have a right to say "Screw the Government." So does your best friend. If you pool resources to say it (e.g. you make a sign, he drives you to city hall), you both still have that right. If you agree formally to do the same, you still have the same rights. 1,000,000 people signing an agreement that they have joined the "Screw Government Organization" to send 1,000 of them to DC to protest doesn't diminish the right. Forming a group to sell "Screw Government" bumper stickers doesn't reduce the group's rights to less than that of any individual. Forming a group that sells indy band bumpers stickers, and the occasional political bumper sticker, doesn't diminish the collective rights. Calling the group a corporation doesn't change things either. The name, size, profit motivation, etc do not change anything.
An so on. The basic rule is the rights of individuals can be exercised collectively. One name for this phenomena is "Corporations are people." Not a person. Though for simplicity, it's treated like a person. Because the rights of a person and the rights of a group are the same. For example, a person can own property and so can a group.
Ok, there are some exceptions. For instance, while a person can hold office, a group cannot. Same with a vote. Some rights do not scale and can't be collective. But most can.
So now look at your suggestion. How much can you restrict the rights of a collection of people without restricting the rights of individuals? Pretty difficult. Not something to be done lightly.
Steve Jobs, in fact any director of a limited company, had/has a legal obligation to maximise shareholder value. Paying taxes is not maximising shareholder value.
It's unlikely, but possible, that a failure by Apple's board to put in place appropriate tax management strategies in accordance with the normal practice of the tech industry could be grounds for a lawsuit by an Apple shareholder.
Certainly the accountants involved in Apple's financial management would be considered negligent if they failed to alert the board of the possible strategies for reducing tax liabilities. And then the board could be considered negligent if they failed to implement those strategies.
Companies are not required to be good citizens. Companies are required to make as much money as possible for their shareholders.
Business/App ideas are like arseholes: everyone's got one, they're mostly shit, but very rarely they contain a diamond