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

[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

[hairyfeet]

The problem is it has become like the days of the old west, remember the old westerns how the bandits would head for the Mexican border and once they were across not worry about shit because all the border mess kept the rangers from giving chase?

Well now with electronic banking you can do that on a planetary scale in seconds. NO country can "close the loopholes" as another suggested because we are not talking about the laws of ONE country, we are talking about the laws of ALL countries as they can bounce a billion dollars through a dozen nation s in less than a second.

Never forget the words of Thomas Jefferson, who tried to warn us of the dangers of mercantilism: "Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gains." In the end they don't care if the economy of their "home" country collapses, they can have their funds moved in seconds and have offices in dozens of countries. There is no loyalty or patriotism to country, just profits.

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

[jbolden]

Of course there is something they can do. Its even in the constitution a Letter of Marque. We simply indicate a list of countries that follow a multi national tax treaty. Money kept anywhere else is considered fair game. That is we will not enforce property rights from that countries banks, so anyone working for a Cayman islands bank can rip off their customers, legally deposit the money in the US, pay about 1/3rd in taxes and keep the rest forever.

Companies will find it mighty uncomfortable once the people who work in the tax havens have such lucrative options.

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

[AK Marc]

I like to point out that I was in the top 10% of wage earners in the US (the very bottom of that range), and I paid 10% in federal income tax. Between property tax on multiple properties, mortgage interest (it's financially beneficial if you can buy a house outright to take out the longest term loan possible at the lowest possible rate and invest your money in stocks, because the tax breaks on the interest make the cost of the loan lower than face-value), health and education deductions, my taxable income was significantly lowered. Anyone who makes enough can afford to "mask" income in untaxed or lower-taxed schemes.

It isn't tax evasion. It isn't really even tax avoidance. The rules are generally not "loopholes" but deliberate social grooming, detailed by Congress, to encourage certain behaviors (marriage, kids, home ownership). It isn't gaming the system, but being gamed by the system. We'd be better off if all deductions were eliminated. All the artificial pressures would be gone.

Re:Let's hear it for the beancounters

[vivian]

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. Therefore, with lower tax rates, there would be a lower marginal reward per tax payer for dodging the system.

The problem is, right now, the biggest and richest corporations and individuals can escape a large chunk of the tax that they are supposed to be paying, so more has to be paid by middle and lower level tax payers to make up the shortfall.

Re:Let's hear it for the beancounters

[jelizondo]

As pointed out by tragedy above, the IRS holds that any earnings by an American citizen are taxable, regardless of where they were made.

There is a mechanism provided to account for taxes paid to the government of the country you are working in, but (there is always a but) that country has to have signed a tax treaty with U.S.

I know of two people (one spent 20 years in the U.S. Air Force, the other 20 years in the U.S. Navy) who have renounced their U.S. citizenship over taxes, because after retiring they decided to move to a country that doesn't have a tax treaty with the U.S.

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

Re:Let's hear it for the beancounters

[arkhan_jg]

NO country can "close the loopholes" as another suggested because we are not talking about the laws of ONE country, we are talking about the laws of ALL countries as they can bounce a billion dollars through a dozen nation s in less than a second.

Alas yes. What Apple (and google, and many other companies) are using is the 'dutch sandwich' or 'double irish'.

The end goal is to get the money to a 'parent' company in say, bermuda or the cayman islands - the carribbean islands generally have very low tax rates - often zero - and more importantly, special tax status in Europe because of their colonial history.

But you can't transfer money tax free from most european nations to the carribbean any more, because that loophole has been closed in the last few years in most places. So you first transfer it to a 'parent company' in the netherlands, as transfers within the EU are generally allowed and tax free. Then, since the netherlands DOES allow you to transfer it to the carribbean tax free, you transfer it to the 'parent company' in say, Bermuda. So now you have almost all your profits being channeled to the netherlands, and then the carribbean tax free. Corporation taxes are only applied in the final destination, and surprise, they're zero rated. So now you have billions of pounds/euros slowly accumulating in offshore accounts, pretty much tax free and entirely legal. The 'parent companies' in the netherlands and carribbean are merely holding shells with a lawyers office - one building in Grand Cayman has 18,000 US companies registered at it.

Then all you need to do is wait for a tax amnesty*, and you can 'inshore' the money in huge quantities. Or since pretty much everyone is doing it, you transfer the money from one company to another without ever leaving the carribbean. Hell, half the time you don't even have to leave the building. The bank of course is all electronic, and many of them are only available for outside companies. There are entire legions of legal firms and accounting firms and banks all set up to use this 'dutch sandwich' route it's so popular.

* the US has regular tax amnesties, which allow companies to bring money back on-shore legally for a special one-off low tax rate - the government's argument is it's better to collect some tax than no tax if it continues to live in Grand Cayman.

The starting point is often Ireland; since they have low taxes compared to the rest of the EU, they're a good place to put the actual company and what few people you actually employ inside the EU. So what few taxes that are unavoidable they do pay are at a lower rate of about 10%, instead of the 20% or higher elsewhere in the EU.

Luxembourg is popular for other reasons - they have a VAT rate of 15%, but many things are zero or low rated at 3%. In the EU, you only pay VAT once, in the originating country. So if you order something from France or Germany in the UK, you pay local VAT; and because of the EU free trade laws, you don't pay any import duty or UK VAT (if you import from outside the EU, you pay VAT plus any import duties at the border) so that means if you're selling 'things' inside the EU instead of services, you can pay the Luxembourg VAT rate. Amazon, for example, is based in Luxembourg for all their EU operations. They actually pay 3% VAT for ebooks, but charge the same price as other UK based sellers (which have to pay 20% VAT) - Amazon just get to keep the 17% difference. Or use it to undercut prices on a few headline books, to hook people into buying Kindles. They then pull a dutch sandwich on the corporate profits; what little they do pay goes to luxembourg. The UK sees virtually no taxes at all, as the physical warehouses are counted as merely a 'distribution network' - in effect, an extension of the postal system. The actual goods in them belong to the holding company in luxembourg on paper, and that's who you buy from on the website. So It doesn't actually matter if you buy from Amazon UK, or DE, or FR - they're all just local language versions of the

Re:No Corporate Taxes

[rtaylor]

Why would anybody have a personal income when they can just register a company to buy them what they want?

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:Race to the bottom

[catchblue22]

Overstated inefficiency of government organizations? I see we have never worked for one. I have. The difference between government and business is night and day. Breathtaking inefficiency, in areas I would never have considered inefficiency could exist. Seriously, it's quite creative.

And your single experience makes your argument completely true? I do not doubt the existence of government inefficiency. I have seen it. But I have also seen inefficiency in private corporations, especially when they enjoy a monopoly position. And I have seen very efficient government run organizations. My assertion wasn't that governments are always efficient, but instead that their inefficiencies are often overstated.

A good example is in the health care sector. By any objective standard, the private US healthcare system is highly inefficient. Healthcare in the US costs more per person than almost anywhere else in the world. And yet broad spectrum health outcomes are very poor. In addition, US healthcare doesn't cover a shockingly large percentage of the population. Contrast this with countries with public healthcare systems. Norway and Canada are excellent examples. They manage to cover the vast majority of the population, while their costs per person are far lower than in the US. And broad spectrum health outcomes in these countries are far better than in the US.

The difference is actually fairly simple to understand. In the US, the "institutional purpose" of healthcare companies is to make a profit. That's it. Their goal is not to make people healthy, but to earn a profit. And because the healthcare industry is an inherent monopoly or oligarchy, they use their power and dominant positions to overcharge people and/or deny them coverage. In doing this, they are merely fulfilling their "institutional purpose".

Contrast this with well run public healthcare systems. In such systems, the "institutional purpose" is to make people more healthy. Doctors are always taught to have this goal, and take the Hippocratic Oath, even in the US. The difference though is that in well run public healthcare systems, the managers above the doctors also share the desire to improve people's health, while in the US, improving people's health is secondary to the goal of maximizing shareholder return.

There are successful private systems elsewhere in the world (Switzerland for example), but even in Switzerland, the government has its boot on the throat of healthcare companies. They are simply not allowed to misbehave, as they are in the US. The inherent problem, which most of a right wing bent seem to ignore is that of monopoly. There are some industries that cannot possibly have real competition. And when you have a private monopoly, it the worst of all possible worlds. Monopolistic companies can behave as they want with impunity. If competitors arise, they buy them out or use their power to crush them. Customer choice is limited, and thus so is customer power.

I find the ideological division and characterization of private efficiency and public inefficiency is intellectually lazy, and ignores the subtleties of the complex real world. Ideologies are crutches for those who don't wish to really think.

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.