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Web of Tax Shelters Saved Apple Billions, Inquiry Finds
mspohr writes with news that Apple might be in a bit of hot water over its policy of offshoring revenues to favorable tax jurisdictions. Only they take it a step further, from the article: "Apple relied on a 'complex web of offshore entities' and U.S. tax loopholes to avoid paying billions of dollars in U.S. taxes on $44 billion in offshore income over the past four years ... The maker of iPhones and iPads used at least three foreign subsidiaries that it claims are not 'tax resident in any nation' to help it avoid paying billions in 'otherwise taxable offshore income,' the Senate Permanent Subcommittee on Investigations said in a statement yesterday."
...Apple isn't the only one that does this.
Taxes are for little people. They aren't for the rich or corporations. Taxes are for you and small-business, not for people and corporations that can hire the best people who know the best methods of tax avoidance (legal) and tax evasion (it's only illegal if you get caught).
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BMO
If everything legally permissible is deemed morally acceptable then humanity is doomed.
So all government is evil?
There are plenty of places on the planet with ineffective/nonexistent government. They are all hellholes.
Please move to one of them.
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BMO
If what they did is legal, so what? I take every tax deduction I can legally find, why shouldn't Apple?
Because the world is changing and it's no longer socially acceptable to just pay what's legal, it's considered inappropriate to pay less than what people would consider to be a fair amount. If you're paying $1 of tax on $1000 of earnings because you've cleverly nested your business assets overseas in a complex web of tax avoidance schemes, then most people would consider that unfair, even if it is legal.
Tax avoidance (NB not the same thing as tax evasion) was once considered socially acceptable. Of late there's been a swing the other way and national governments are now putting pressure on organisations to pay their fair share of tax (as opposed to just their legal obligation). Companies that don't conform get "outed" in the media. This bad publicity can cause the companies involved to suffer a punishment of a loss in revenue - the public are less likely to do business with companies they see as not paying their fare share of tax.
Sort of like an extortion racket, except it's okay because it's the government doing it :p
If these foreign subsidiaries aren't "tax resident in any nation", are they protected by the laws of any nation? It seems odd that a company can exist and be recognized as an entity that can hold property without being incorporated in a recognized nation. Can't we just take their stuff and see who they turn to for the protection of law?
Why not link to their answer as well?
http://images.apple.com/pr/pdf/Apple_Testimony_to_PSI.pdf
“Apple does not move its intellectual property into offshore tax havens and use it to sell products back into the US in order to avoid US tax; it does not use revolving loans from foreign subsidiaries to fund its domestic operations; it does not hold money on a Caribbean island; and it does not have a bank account in the Cayman Islands. Apple has substantial foreign cash because it sells the majority of its products outside the US. International operations accounted for 61% of Apple’s revenue last year and two-thirds of its revenue last quarter. These foreign earnings are taxed in the jurisdiction where they are earned (“foreign, post-tax income”).”
It isn't just that tax avoidance has lost favor. It's that most people have come to the realization (I think) that big money interests work with legislators, whether obviously or covertly, to see to it such loopholes and 'special perks' exist in the first place. It's like playing poker and stacking the deck in your favor every time. It isn't hard to see how that puts the corporations on the 'wrong side' and how it comes off as unfair in most people's minds.
If the perception was that big money does not have a hand in the creation of laws and receives the same "bad treatment" everyone else does, then I imagine you'd see tax avoidance come back into favor.
I do not have a problem with them not paying more than they are legally required to, but only to a certain extent. And that extent is when they start pumping money into lobbyists and political donations to KEEP those laws unfairly in their favor. If businesses stay out of politics, then they cannot be blamed when they get advantages from it. But, when they essentially buy our politicians and laws, I have a lot less tolerance for the "I was just following the law" excuse.
For example, I had a big problem with Mitt Romney's tax rate, but not necessarily because it was low. The rate was so low because there is a preferential tax rate for carried interest. I had a problem with it because he was on owner of Bain Capital and they had spent millions of dollars lobbying Washington to keep "carried interest" at a preferential rate. When you have bought and paid for a law, then you become responsible for whether it is fair or not.
Judging by the deficit... I'm gonna go ahead and disagree with you.
"Hot lesbian witches! It's fucking genius!"
Define morally acceptable. I find that companies literally sucking money out of the economy, then letting it sit, thereby starving the economy of capital, thereby adding to high unemployment, lower wages, less benefits, less job security, less public services, etc... is pretty bad for society. But maybe things that are bad for the overall society are still considered morally acceptable. ... But I digress, they're re not breaking any laws... Then again, I'm sure they spent loads of money to lobby to make our current system of laws beneficial to them. They used their huge pocketbook to game the system to make their pocketbook massive!
Congress needs to mount an investigation to find the batch of idiots who wrote these tax laws which allow corporations to do this!
If Slashdot were chemistry it would look like this:Cadaverine
Nobody has shown that what Apple has done shouldn't be morally acceptable.
Jobs/Woz grew up in the USA, they were educated there and used the resources/facilities/opportunities of the USA to earn their fortunes. Many of those resources/facilities/opportunities were provided using taxpayer money.
Not giving back to the young people growing up today is morally acceptable to you?
No sig today...
Yes, the best thing to do with a guard dog is to mistreat it and starve it. That will never backfire.
Fanatically anti-fanatical
What seems unfair is the US government attempting to lay a claim to revenues that were generated by Apple's related entity in another country.
You're not an accountant, are you? Ask a decent accountant what profits were made and what expenses were incurred by your operations in country X, and he'll ask what you want them to be. There are endless games that can be played, like transfer pricing. And what about the profits that Apple claims were generated outside of any country. Does Apple have significant operations on ships in international waters? From the NYT article:
Congressional investigators found that some of Apple’s subsidiaries had no employees and were largely run by top officials from the company’s headquarters in Cupertino, Calif. But by officially locating them in places like Ireland, Apple was able to, in effect, make them stateless — exempt from taxes, record-keeping laws and the need for the subsidiaries to even file tax returns anywhere in the world.
The point of the scrutiny is to shine enough light on the loophole that there will be political will to close it without just the usual one-sided "they are raising taxes!!!".
Last I checked, Apple doesn't write the laws. They don't even spend that much money lobbying. In fact, it is Congress that writes the laws.
Apple is huge, highly profitable, highly visible, and probably the US company with the single highest net favorable opinion among voters... If you want to make a splash, you start at the top. In case it's not obvious, the point of these hearings is not to actually find out how/why Apple or any other company does what they do (congress has no problem knowing all of that), it is to raise visibility so that there is political will that can be capitalized upon to change the tax code.
Yes, there are real reasons for this. It a standards and compatibility issue.
Most of the world works on a country of source for corporate tax. You make a profit in country Y, you pay Y’s taxes. Now, when you are doing business in X and Y it can be hard to determine how to split the profit – and thus the taxes – between X or Y. It is subjective even under the best conditions. But there is still a compatibility issue between different countries tax codes which smart tax lawyers can figure out how to exploit.
The US works on a country of domical approach. If you make a profit in Y, you will pay US taxes. IIRC, back in the 70s when corporate taxes were high in both Europe and America, companies could be taxed $110 for every $100 in profit – because both America and the European country was demanding full taxes paid.
The US could have fixed this by moving the world standard. But that would have been rational – like going to metric. So instead we put in a lot of dodgy loopholes and tax credits so it would not look like we were giving big corps a tax break.
The answer is that America should move to the world standard of taxation by source.
Corporations are in no way legally (nor, in many cases ethically) responsible to maximize their bottom line. Many companies (Ben and Jerry's as a common example) consider themselves ethically bound to take huge swaths of cash from their bottom line and give to the community and good causes, even if there's no possible hope of ROI.
The oft-cited Ford v. Dodge basically says that a company can't go out of its way to screw over the shareholders. There is a huge space of good acts between "legally required to maximize profits at all costs" and "screwing the shareholders."
That's just nature at work..survival, I get mine first, etc. Nothing moral or immoral about it, just a fact of life my friend. Human nature since day one.
Ahh yes, just like it's human nature to go pick dollars off the dollar tree and spend them as they see fit.
Wait, what? You say dollars don't grow on trees? You say that dollars are created by the government, and only have value because they're backed by the government that created them? Pfft. That's stupid. Next you'll try to tell me that some of those dollars need to go back into that system to help support it, so that it can continue to back them and give them value.
Idiots. The fed can print money for the government forever, it doesn't need me to give MY hard-earned dollars back. I got mine, and fuck everybody else. I'm an island who doesn't need anyone or anything.
Except the police. Those guys have to protect my dollars. And the justice system, obviously. And roads, too, because they help the police get around and help me get to my job where I earn those dollars. Maybe water and sewage as well. Also, food inspectors and regulations would be good, because who wants to get sick and die from buying tainted food? Maybe also some sort of people who vet drugs to make sure they're safe. I'm sure there are 1 or 2 other really small things that I'm forgetting. But that's it! Anybody who thinks the "government" should do any single thing beyond what I think is correct is a damned socialist out to destroy my freedom and STEAL my hard-earned dollars at GUN POINT! (well, figuratively. And I know I said the police were necessary, and that they should obviously have guns, but when they're used to force me to do something I don't like? Oppression!)
--Jeremy
Jesus was a liberal