Apple Pays Only 2% Corporate Tax Outside US

New submitter dryriver writes with this snippet from the BBC: "Apple paid only $713m (£445m) Tax in the year to 29 September on foreign pre-tax profits of $36.8bn (£23.0bn), a remarkably low rate of 1.9%. Apple channels much of its business in Europe through a subsidiary in the Republic of Ireland, which has lower corporation tax than Britain. But even Ireland charges 12.5%, compared with Britain's 24%. Apple is the latest company to be identified as paying low rates of overseas tax, following Starbucks, Facebook and Google in recent weeks. It has not been suggested that any of their tax avoidance schemes are illegal. Many multinational companies manage to pay substantially below the official corporation tax rates by using tax havens such as the Caribbean islands."

Comments

Let's hear it for the beancounters

[Kittenman]

As long as it's tax avoidance, rather than tax evasion, nothing illegal in this. Everyone (corporations included) want to pay as little tax as possible. It's the governments job to close the loopholes. It's the beancounters and lawyars jobs to find the new ones.

Re:Let's hear it for the beancounters

[skegg]

You're being ridiculous. These are complex tax issues that cross national borders and therefore require difficult multi-government cooperation.

What next?
You'll expect national governments to conjure up ways to hinder / stop their citizens from downloading copyright material.

Oh wait ...

Re:Let's hear it for the beancounters

[Nemyst]

And yet, if everyone respect the spirit of the law instead of finding holes in the letter of it, we as a society would most likely be a whole lot better off.

Then again, this would require such things as integrity and honesty.

Re:Let's hear it for the beancounters

[Anonymous Coward]

The problem with this is that the more people who play the game honestly, the greater the marginal reward for playing dishonestly.

Re:Let's hear it for the beancounters

[ozmanjusri]

As long as it's tax avoidance, rather than tax evasion, nothing illegal in this. Everyone (corporations included) want to pay as little tax as possible. It's the governments job to close the loopholes.

Yet Apple is a heavy user of the government-provided resources in my country that my taxes pay for, and is one of the organisations with far more frequent access to the very politicians you're suggesting should fix the problem.

Are you suggesting I should be happy about their ability to manipulate the situation so I get to pay for their infrastructure?

Re:Let's hear it for the beancounters

[Yvanhoe]

In France we call it "fiscal optimization", which I find kind of cute : it makes it clear that corporations have an interest in being bad citizens.

The problem is that the solution is seen by many as the enemy of free-trade : it requires to put commercial barriers on tax-havens. As long as international transactions between countries are not taxed to take into account the different weight of different tax rates, you will have tax avoidance.

I don't understand why there is so much resistance to this idea : we are seeing huge border tax when we import anything physical, why couldn't money transfers be taxed similarily? Why is it an idea that only far-left or anti-globalization hippies are heralding?

Re:Let's hear it for the beancounters

[Lumpy]

Sounds like a plan, now how about you explain away the fact that Google, Samsung, LG, Dell, HTC, IBM, Motorola, and Nokia ALL do the exact same thing.

Oh wait... that's not anti apple.... How rude of me.

Re:Let's hear it for the beancounters

[jbolden]

Why is the job of Apple customers to enforce tax law? We have an agency, the IRS whose job it is to enforce tax law. Customers should comfortably buy Apple products and if Apple is guilty they should get their ass nailed to the wall for tax evasion with no interruption in service to anyone but their shareholders who watch a nice chunk of the cash disappear in penalties and fines.

If they haven't broken the law, they law should be changed to make this sort of thing much harder. Again nothing to do with customers.

Re:Let's hear it for the beancounters

[artor3]

It's legal because they pay for it to be.

1. Bribe (sorry, contribute to the campaigns of) legislators.
2. Have them pass laws giving you big tax loopholes at the expense of schools and healthcare and whatnot.
3. Save enough money on you tax bills that it exceeds the cost of the brib...er, campaign contributions.
4. Profit!

No missing step necessary.

Re:Let's hear it for the beancounters

[Anonymous Coward]

Why is Apple in the headline? It should say "U.S. multinationals pay only 2% corporate tax outside the US".

And what's with all the capitals in the headlines? Is there doubt as to which words are nouns?

Re:Let's hear it for the beancounters

[TranquilVoid]

Right, although the more people who behave honestly, the greater the cultural pressure to behave this way there is. That is why you get societies with differing levels of corruption.

Re:Let's hear it for the beancounters

[whisper_jeff]

When you file your taxes at the end of each year, do you take advantage of the tax deductions available to you to reduce your tax burden or do you pay the maximum amount?

For the sake of moving this conversation along a little faster, rather than wait for your reply, I'll make the assumption that you do take advantage of the tax deductions that are available to you to reduce your tax burden (because, well, anyone who doesn't is simply an idiot). Why is it ok for you to reduce your tax burden and not ok for Apple (*)? Or are you just ticked off that they are better at it than you/your accountant? I mean, really - if you could legally pay 2% taxes, are you trying to tell anyone here that you wouldn't? Are you seriously trying to tell anyone that your sense of honesty and integrity would stop you from taking advantage of legal tax deductions?

*I love how this is a story about Apple yet EVERY SINGLE COMPANY does this - it's just a question of how good the company's accountants are at finding all available tax deductions to maximize the payments but EVERY SINGLE COMPANY does this to one degree or another. But let's rage against Apple because that's cool and hip and that generates page views...

Re:Let's hear it for the beancounters

[Muros]

Free trade (here, trade with low regulation and zero tariffs and trade barriers) is the obvious way

Your plan to fix an obvious lack of regulation is deregulation?

Re:Let's hear it for the beancounters

[TheLink]

If I understand it correctly it would mean that Apple (as a company) won't pay any taxes at all.

And the rich could probably avoid being taxed on some stuff by attending more company promotional and marketing events. You'll still get them on private dinners at expensive restaurants etc, but not on the big ticket items - yachts, planes, maybe even property (Disney won't have to pay tax on Disneyland, the tax is just on the people buying the tickets right?).

Re:Let's hear it for the beancounters

[Solandri]

I disagree - if more corporations were playing the game honestly, and actually shouldering their share of the tax burden, the overall tax rates could be lower, and regular citizens who can't escape tax as easily, could pay less.

No they wouldn't pay less. Money is just a representation of productivity. The only source of productivity is people. Consequently, if the government wishes to take 30% of the country's productivity (GDP) via taxes, that means the income which goes into people's pockets represents only 70% of the productivity they generated regardless of where you extract the taxes. Unless there's an increase in productivity, if the government is taking 30%, then the amount the people have to spend for themselves is 70%. Where there 30% comes from is irrelevant.

Say there are just two types of taxes - corporate taxes and personal income taxes. First consider a case where there are no corporate taxes and the government gets all its revenue from personal income taxes. The guy who makes $50k/yr pays $15k/yr in taxes, and has $35k/yr to spend by himself.

Now say the people get upset that corporations "aren't paying their fair share," and government reallocates taxes so that its 30% of GDP comes entirely from corporate taxes. That is, there are no personal income taxes. Do you think the guy who used to make $50k and paid $15k in taxes now suddenly has $50k to spend? Nope. To pay for the corporate taxes, the guy's employer has to drop his salary to $35k/yr. Or they have to raise their prices, meaning that the $50k the guy takes home can now only buy as much as $35k used to buy when he was paying $15k in personal income taxes. Or some combination of the two. (A third alternative - fix wages and prices while increasing corporate taxes - would result in widespread bankruptcies and a dead economy.)

There's no free lunch. If the government takes 30%, that leaves 70% for the people regardless of whether the government takes the 30% directly from the people, or indirectly via the corporations the people work at and buy from.

"But what about the rich guys who own the corporations!?!?" you ask? Having wealth in the corporation gets them nothing (unless they're breaking laws and secretly embezzling, or using corporate assets as if they were personal property). For the corporate wealth to benefit them personally, they have to take an income from the company. And that income will be taxed via the personal income tax. If you think rich corporate executives and owners are making too much money, simply raise the tax rate on higher incomes and eliminate the many tax breaks (e.g. capital gains tax rate), deductions, and loopholes they enjoy.

Shifting taxes to corporations doesn't increase the purchasing power of the people. You can justify corporate taxes as a means to discourage certain behaviors (e.g. middlemen are discouraged by a 10% VAT because instead of a 1% arbitrage being sufficient justification for a flip, suddenly you now need an 11% arbitrage to justify it). Or because the paperwork for a corporate tax is easier and it allows you to collect the tax revenue at less cost. But you can't justify them as a way of giving people more spending power - it just doesn't work that way.

Having so many taxes (income, corporate, sales, property, excise, etc) is a really inefficient way to collect government revenue. It just creates excess bureaucracy and paperwork. Except for a few cases where taxes are used to discourage certain behaviors (e.g. fuel and property taxes), we'd really be better served by having just one tax. I think making it just one big personal income tax would make the most sense since that's the only way to implement a progressive tax system. And it would let everyone see exactly how big government is relative to the economy instead of hiding it in taxes they never see. But if you want to count corporations as "legal persons" and foist a personal income tax on them, I d

Re:Let's hear it for the beancounters

[Americano]

You see, individuals have a hard time over money earned outside the U.S., corporations get to keep it.

Great, we've established that corporate revenues and personal income is treated differently. This is a feature, not a bug.

The point of the article was not, "Apple is cheating the US by only paying 2% to Ireland and nothing to the US." The point of the article was "Apple's paying a REALLY LOW tax rate to European governments on its revenues earned in Europe."

Now, please explain for us dim unwashed masses exactly why you think the US government has any right to a "fair share" of taxes earned by European corporations doing business in Europe, when those revenues are never funneled back to an American holding company? Apple, Inc. pays income taxes on its US revenues to the US government - should the European countries also be able to line up and demand a "fair share" of that tax bill?

Interestingly, Apple shows more integrity and less scumbaggishness than many other companies:

Where Apple does differ from other companies is that it sets aside a portion of the foreign profits, marking them as subject to U.S. taxes sometime in the future.

When Apple reports quarterly results, it records that portion of the taxes as a liability, which is subtracted from its profits even though it hasn't actually paid the taxes.

Tax experts say the company could easily eliminate these "phantom" tax obligations. That would boost Apple's profits for the past three years by as much $10.5 billion, according to calculations by The Associated Press reported in July.

Now, that same article DOES go on to say that they're also lobbying for other ways to eliminate this "phantom" tax - but again, this is where we come back to it being the government's responsibility to write a sensible tax code that doesn't leave companies "guessing" about what constitutes a fair share. Fix the tax code if you feel you're not getting enough money out of them. Don't blame them for adhering to the tax code as written, and not handing over more than they're being asked to.

Re:Perhaps...

[Anonymous Coward]

Like the Caribbean islands that the rich and big business, including Mitt Romney, use to avoid paying taxes. And look how it works! Antigua is flush flush flush!!! with jobs. Tax havens are always equated with job havens. Tons of jobs there.

I can only assume we don't cut taxes to Caribbean levels because we don't have enough workers here to handle the avalanche of jobs that absolutely for sure and must follow.

Re:Sprit of the law is also using legal tax breaks

[AK Marc]

What makes you think we would be better off with more money in government, famous for wasting it on things like $600 toilet seats or unused airports named after congressmen?

The two choices are a $600 toilet seat and $600 in taxes, or a $600 toilet seat and $600 in debt. Oh, and since we haven't paid off any debt since the 1950s or so, so by the time you pay back that borrowed $600, you've paid $2400 in taxes for the $600 toilet seat. So, $600 for the toilet seat or $2400 for the toilet seat? Which do you prefer.

Race to the bottom

[catchblue22]

And yet, if everyone respect the spirit of the law instead of finding holes in the letter of it, we as a society would most likely be a whole lot better off.

Then again, this would require such things as integrity and honesty.

The simple fact is that once barriers to capital flow across national borders were torn down, the modern social state was doomed. When money flows across borders with little restriction, organizations whose implicit purpose is to maximize profit will shift their resources to countries with the lowest possible tax rates. This creates a race to the bottom in terms of tax rates, especially when large organizations that are capable of physically or financially moving from country to country move large percentages of their wealth away from countries like the US.

I have begun to realize that right wing countries seem to do well economically largely because they have reduced their tax rates below that of other less right wing countries. This brings a temporary influx wealth and a temporary economic boost. However if the tax rates do not continue to decline, large organizations will again begin to leave, bringing large deficits and economic decline.

Let me emphasize this: I believe right wing economic policies work (temporarily) because lower tax rates bring an influx of capital, and NOT primarily because of the inherent efficiency of the private sector in managing resources. I believe that the claimed "efficiencies" of private corporations, and the claimed "inefficiencies" of government organizations are highly overstated.

The implication of this is that if we as a society wish to have the amenities of a great civilization, then we will have to find a way to restrict the flow of capital across borders. Otherwise, we will be doomed to an asymptotic descent towards a minimum level of civilization. The gap between rich and poor will continue to increase, and, seemingly paradoxically, the economy will slowly grind towards a halt, as the pool of middle class consumers evaporates.

Re:Sprit of the law is also using legal tax breaks

[Dahamma]

SOOOO sick of the stupid toilet seat argument.

Do you know that toilet seat was custom designed and manufactured to fit in the bathroom of a US Air Force bomber? When you custom design and manufacture a couple hundred toilet seats, yes, they are going to cost $600. I bet the toilet seat on the space shuttle cost 100x that...

And please now bring up the $400 hammer. That one that was custom designed to work on repairs in a submarine without creating enough noise to be detected by sonar. Such a waste! But not as much as would have been wasted if a $1B nuclear submarine was detected because of a loud hammer.

Bug surprise, sometimes context matters.