How Ireland Got Apple's $9 Billion Australian Profit

elphie007 writes "An investigation by The Australian Financial Review has discovered how from 2002 to 2013, Apple has shifted approximately $AU8.9 billion of revenue generated in Australia to Ireland, via Singapore. The article states that last year alone, Apple Australia paid only $AU88.5 million in tax, or 0.044% of estimated potential tax liabilities. What's more, the Australian Tax Office has agreed that this arrangement is acceptable under Australian law."

Comments

Don't be so harsh

[hcs_$reboot]

Apple probably used Apple Maps to locate the tax office.

Re:Don't be so harsh

[lsatenstein]

Apple probably used Apple Maps to locate the tax office.

Is acceptable legally, through loopholes in the law the same as morally acceptable?

If I was Australia, I know what I would do.

Ireland got it ?

[Anonymous Coward]

Was this actually paid to Ireland as tax ? It sounds unlikely.

Re:Ireland got it ?

[Anonymous Coward]

Quote: Apple Sales International extracts the bulk of Apple’s huge profits on sales outside the United States, which it claims as payments for intellectual property and intangibles. But the Irish-domiciled company has never filed its financial returns with the Companies Registrations Office in Dublin.

It initially filed accounts for its parent company, Apple Operations International, which receives funds only from dividend payments and gives limited visibility into how Apple shifts profits. Since 2003 Apple Sales International has filed no financial reports at all in Ireland.

Nope... money is moved and NO tax is paid....

Re:Ireland got it ?

[cheesybagel]

http://en.wikipedia.org/wiki/D...

Ireland uses territorial taxation, and hence does not levy taxes on income booked at subsidiaries of Irish companies that are outside of the state. In the late 1980s, Apple Inc. was among the pioneers in creating this tax structure.

I guess not. They just siphon all the profits using Hollywood accounting over imaginary property to Ireland and stash them in Bermuda.

Re:Ireland got it ?

[Anonymous Coward]

Apple are scum.

You should be ashamed if you buy their products.

You should be VERY ashamed if you work for them.

Re:Ireland got it ?

[jythie]

Be prepared to be ashamed for things you do buy then. Apple tends to get singled out for some reason, but the things it gets criticized for are the norm, any transnational that is not doing them is just hurting itself and becoming less competitive. This is something that can only be fixed if the rules change in a way that effect all the companies, not something that public shaming of individual ones can help.

Re:Ireland got it ?

[StrangeBrew]

Maybe save the shame for the governments that refuse to fix these loopholes. Most refuse to do it because their politicians have direct or indirect ties to companies that would be negatively affected. The big Canadian example was Prime Minister Paul Martin and his family's company Canadian Steamship Lines, that avoided paying Canadian Taxes by running the ships under 'Flags of Convenience'. This wasn't illegal, but that doesn't mean it shouldn't be. And before the biased far left pipes in, I have no doubts Harper also has ties to many companies that wouldn't be happy with him were he to change the tax laws.

Re:Ireland got it ?

[Half-pint HAL]

As another poster commented -- it doesn't mean much in the abstract. Make an example of a well-known company, and people can relate to it better.

Re:Ireland got it ?

[Anonymous Coward]

Its dumb unknowledgeable fucks like you that make comments like that. What does legal tax practices have to do with what is morally correct. Maybe if people in general in the US weren't so morally fucked at having the latest and greatest gadgets at any expense (yeah you know a 8 year in Singapore working slave labor) then these tax structures wouldn't exist. Maybe North America wouldn't have moved its manufacturing and assembly base offshore. But that's life. Deal with it or better yet don't buy anyone's products anymore unless they made entirely here. Good luck buying your next waffle maker for 200 USD vs the 14 bucks at Walmart right?

Re:Ireland got it ?

[guruevi]

Lol, as if any other companies are any better. Microsoft has been doing this for far longer than Apple, so has Amazon, Cisco, Dell, Dropbox, eBay, EMC, Facebook, Google, HP, IBM, Intel, LinkedIn, Logitech, Oracle, PayPal, Twitter and a number of other companies.

Re:Ireland got it ?

[alexander_686]

The territorial taxation remark is off point. Everybody except the US (and a few very small countries) use territorial taxation. The US uses domical for taxation which is not compatible. Congress has passed a bunch of kludges to “fix” the problem but it causes major headaches. Half of the issues that surround US multinationals are due to this. It would be much more rational if we jointed the rest of the world with residential taxation.

As for the Double Dutch and other tactics – it kind of boils down to incompatible tax law which results in exploits. Bad logic and bad programming will get you every time.

Re:Ireland got it ?

[Anonymous Coward]

How can shifting income not be a sham transaction and thus fraud? It shouldn't be theoretically possible

Re:Ireland got it ?

[alexander_686]

It is a requirement of international business – and in theory it must be done. Look up transfer pricing.

I will use Toyota as a good, solid concert example. Toyota Inc. designs a car, Toyota Japan builds the powertrain which it sells to Toyota USA, which builds and sells the car. The car generates $1,000. Quick – how do you divide the profit? If Toyota wants to pay Japanese corporate tax they increase the price that they sell the powertrain to the US, shifting profits to Japan. Or if they want to pay US corporate taxes they drop the price.

There are principles to guide how the profit should be shared but there are large subjective areas.

Re:Ireland got it ?

[Archangel Michael]

Of course you're right. This is one of the reasons I drum the "all taxes are regressive". The rich can and will avoid as much tax liability, often quite legally (like this), while the poor and middle class cannot, because they do not have the resources. If you could spend 100 to save 1000 in taxes, wouldn't you?

There is a fix for this, a transfer tax, rather than an income tax. Tax money leaving your country. The easiest avoidance of these taxes is to keep the money in country, helping the country's economy. If money NEEDS to leave, then it provides an incentive to bring jobs home and use the resources of your own country.

Re:Ireland got it ?

[Archangel Michael]

I've said, and will continue to say that we should not be imposing Taxes on things that we should be encouraging, like income. We should be taxing the things we want to curtail. Taxing income is downright EVIL, as it is a disincentive to actually working, which is only overcome by most people's need to better their lives.

How about instead of taxing income, you tax money being transferred out of state/country?

Re:Ireland got it ?

[ebno-10db]

What does legal tax practices have to do with what is morally correct.

Nothing. That was the GP's complaint.

Re:Ireland got it ?

[alexander_686]

How about instead of taxing income, you tax money being transferred out of state/country?

Because that would discourage free trade and international investment – it would tend to be even more distorting and inefficient than an income tax. Industries would tend to be local, smaller, and less efficient. And why would people want to invest abroad knowing that their income would be taxed when it comes back to them.

The US already kind of does this. As one of the kludges to handle the resident / domical issue money left abroad is not taxed. This has led to some weird situations which non-US companies avoid.

As to taxes being evil – that is a different kettle of fish. We can debate what type of levels of taxes there should be. My principle point is that the US use of dominical instead of residence / territory is highly inefficient and distortive. If we are going to have a corporate income tax then we should have the best one out there – which means using residence / territory like the rest of the world.

Side note - I have seen studies that corporate taxes under ~15% have a low to no impact on future investments.

Re:Ireland got it ?

[spacec0w]

It's actually interesting to me to think that if *all* taxes could be collected, then how much fairer they could become. And how much this would affected the average salaried worker.

Re:Ireland got it ?

[Archangel Michael]

So, you admit that taxes discourage things. So, by your own admission, taxing Income discourages earning income. And you favor that over people / corporations in foreign lands? why?

My proposal has no effect on anything other than money leaving a country in foreign trade, and that is a good thing, as it encourages investment at home vs abroad, jobs and industry at home vs abroad.

Re:Ireland got it ?

[JoeMerchant]

If rules like this didn't exist, think of all the tax accountants and lawyers who would be out of work.

Re:Ireland got it ?

[alexander_686]

How would tax movement of money encourage domestic investment? Why would I want to build a domestic plant for export knowing that the plant’s revenues (not profits) will be taxed? Why would a foreign company bother investing in a domestic plant knowing revenue being sent home will be taxed?
Well, yes. The point of a good tax policy is to extract the money needed with the least amount of pain – but what makes you think that the pain associated with your tax would be less than that of a corporate income tax?

I will point out there have been huge gains in efficiencies because of greater world integration which would be reversed under your tax regime. Currently, trade is about 25% of the US GNP. In Europe it is even higher. I suspect that to be revenue natural that your tax would be the greater disincentive to invest then a corporate income tax. For example would you want to pay a 20% tax on an investment that return 8% or a 30% tax on a investment that returned 10%?

By the way, I am not a huge fan of a corporate income tax, partly for the reasons you suggested. I will point again to studies that a low corporate income tax does not discourage investment and I do think they should pay some taxes for the advantages and privileges that corporate ownership has (i.e. limited liability). But this all comes down to my belief that corporate taxes should be low and simple – not nonexistent.

For trade as a percentage of GNP,

http://data.worldbank.org/indi...

Apple / Google / etc

[mrspoonsi]

Your tax time cometh, the world has your eye now.

Re:Apple / Google / etc

[SJHillman]

I'm not sure that makes any sense. The article is about how this was a perfectly legitimate tax strategy. And if the world has their eye, that means Apple/Google/etc are watching everything... not the other way around.

Re:Apple / Google / etc

[Anonymous Coward]

all these companies pay 30% to 40% of their TOTAL PROFITS as taxes around the world. its in their financial statements that they file
the problem with US Tax law and other countries is they want to tax the entire worldwide profits and not just profits in that one country making it very real that a worldwide corporation will have to pay more than 100% of profits as taxes. like in russia

Re:Apple / Google / etc

[Sponge Bath]

...Apple/Google/etc are watching everything

Do you doubt Apple's accountants and lawyers are watching the taxing policies in all countries to minimize their tax burden? iSeeYou.

Re:Apple / Google / etc

[cheesybagel]

You don't have 'profits' if you had the 'expense' of paying royalties on imaginary property (IP) that is actually 'owned' by an offshore subsidiary of yours. That's what's happening.

Re:Apple / Google / etc

[CastrTroy]

Why is perhaps why businesses should get taxed on income (aka revenue) like the rest of the tax payers. If I was only taxed on what I couldn't end up spending at the end of the year, I'd have to pay a lot less tax. Actually, I'd make sure that I spent almost all my money (on things that will appreciate in value), which is what businesses end up doing to get around paying taxes.

Re:Apple / Google / etc

[Anonymous Coward]

Not quite, but it's a cool thing to imagine.

Re: Apple / Google / etc

[Anonymous Coward]

You are just getting that. My how tight the binders.

Re:Apple / Google / etc

[thaylin]

Umm, you should read the article. It does not say 30%, it says 4%. In fact the word, or number 30 is not mentioned in the article at all.

The company is not tax resident in any jurisdiction ... The average tax rate for all jurisdictions in which it operates is approximately 4 per cent.”

But

In its ASIC filings the company reported pre-tax earnings outside the US of $US4 billion in 2009 and calculated that 4 per cent tax would be $US160 million. The accounts show the actual tax paid was only $US3.65 million.

Also

They pay no US tax either because US law disregards where a company is managed and only looks at where a company is legally registered.

Re: Apple / Google / etc

[Anonymous Coward]

Here is one that don't get it. No they do no pay what a mom and pop local company would pay. A mom and pop pays close to 10% in the states. Any multi national that pays that should find another politician to bribe. They are getting the shaft for what they are paying, and remember you are talking profit,profit comes after taxes and bribes are paid.

Re:Apple / Google / etc

[es330td]

Why is perhaps why businesses should get taxed on income (aka revenue) like the rest of the tax payers.

Nothing would destroy the world economy faster than this staggeringly short sighted idea. A typical grocery store averages about 2% profit on sales. If, for example, a store pays $2.00 for a gallon of milk that it sells at $2.05 any tax that takes more than $0.05 make said grocer unable to restock his dairy case. How long exactly do you expect any store to remain in business under those terms?

Re:Apple / Google / etc

[alexander_686]

That is not how it works.

Under your scheme, GM and Google would pay about the same amount in taxes because they have about the same amount in revenue, even though Google’s profits are much higher. Besides, I would be hard pressed to think of a example where a corporation could spend money to decrease profits? Pay out more to employees? That would be picked up in income taxes. Spend more on capital improvements? That would be on the asset side, not the income side – no effect on profits. Overpay their suppliers?

Re:Apple / Google / etc

[PortHaven]

Perfectly legal....not perfectly ethical. There is a difference.

Re:Apple / Google / etc

[PortHaven]

No they don't GE, barely pays any taxes. Many of these companies bring in billions and pay very very little taxes on their income.

Re:Apple / Google / etc

[PortHaven]

That's 30% of profit, but loop holes allow companies to eliminate profit from their revenues. So you'll have a $100 million in revenue, but use loopholes to reduce your net profit to only $5 million, and sure you may pay 30% on that $5 million. But it should of been paid on the entire $100 million.

If I could file taxes like a corporation, writing off my lease/loan payment of my buildings, my vehicles, deducting my utility costs, and many other incidentals. The result is, that I could pay myself a mere stipend of $250/month (my spending account allotment) and you could tax me at 50%, but on $3,000 net profit I'd pay $1,500. Which is a heck of a lot less than what I presently pay for taxes on my revenue.

Re:Apple / Google / etc

[CastrTroy]

Well, perhaps the tax rate wouldn't have to be so high, but it could still be based on income. Maybe 0.5% or lower. Maybe grocery stores would have to raise their prices a bit to pay the tax, but that would affect all grocery stores, so they would all raise prices accordingly.

Re:Apple / Google / etc

[es330td]

Most businesses lose money their first few years. Under the current system they pay no taxes until they make a profit (and burn off their carried losses.) Under a "tax every incoming dollar" plan, even at only a minimal amount businesses on an already shaky footing would be even less likely to make it.

Re:Apple / Google / etc

[nephilimsd]

Or, you know, you could tax profits. Like we already do for the rest of society. That's why individuals have "write-offs" that reduce their tax burden. Spending money on acts that want to be encouraged (restocking the dairy, donating to charity, etc) reduces the taxable income by the amount spent. In this argument, only $.05 would be taxable per gallon of milk sold. That means that given a 20% tax bracket (most of the U.S.), the price would need to be raised to $2.06 to break even. Not exactly a major hardship.

Re:Apple / Google / etc

[nephilimsd]

This was meant for one post down. Sorry.

Re:Apple / Google / etc

[JoeMerchant]

I don't know where you shop... my grocery store sells a gallon of milk for anywhere from $3.79 (same price as a gallon of premium gas), to upwards of $6, if you'd rather not have hormone, steroid and antibiotic enhanced cows excreting your beverage.

It is true that the overall margin in a grocery store is around 1 to 2%, but that gallon of milk has a whole lot more than 2% profit in it. Cost of goods run closer to 50%, which is why the stores can run unlimited Buy One / Get One Free sales all the time - they're not losing money on those items, just not making as much as they normally do. When you factor in costs of real-estate, taxes, electricity, labor, spoilage, breakage and theft - that's when the margins come down to 1-2%.

So, does this article mean that my local grocery store can merge with a couple of overseas grocery stores, they can all shuffle profits around, dodge taxes, and lower the cost of my grocery bill by 10% while still making more money? Maybe. But, then, those other businesses that still do pay taxes will have to pay more to support the existing services, you know, like roads to get to the stores.

Re: Apple / Google / etc

[Anonymous Coward]

That's bollocks. Profits for grocers is typically 40-100%. Higher for larger chains they have their own supply mechanisms.

At Anyrate, the tax would be passed through as higher grocery prices.

But we aren't talking about the local green grocer that is paying their taxes.
There are multinationals that are using loopholes to pay negligible taxes, and are basically leeches sticking the blood out of society.

The Australian government is in the process of conducting a firesale for public assets, whereas these taxes would prevent this from happening.

If it wasn't happening in the usa, perhaps the usa wouldn't be making headlines every month for hitting their debt ceiling, and the usa could actually afford medicaid, better education, better roads?

Either way, the only taxes that would be collected would be on the money that was generated inside the country.

Re:Apple / Google / etc

[david_thornley]

You are taxed on the same basis as businesses, on money earned minus the cost of earning that money. The difference is that you have to spend a considerable amount of money on things that you'd spend it on even if you didn't have to earn money, unlike a business.

Re:Apple / Google / etc

[mjwx]

Why is perhaps why businesses should get taxed on income (aka revenue) like the rest of the tax payers.

Nothing would destroy the world economy faster than this staggeringly short sighted idea. A typical grocery store averages about 2% profit on sales. If, for example, a store pays $2.00 for a gallon of milk that it sells at $2.05 any tax that takes more than $0.05 make said grocer unable to restock his dairy case. How long exactly do you expect any store to remain in business under those terms?

Technically, wages are all profit anyway.

As much as I'd love to be able to offset my living expenses against my tax it would just lead to massive abuse as people and keep toys just to write them off on tax instead of investing money which would only drive up the prices of the toys I want. I can already offset some of my expenses on tax, but that's limited for good reason.

Also most places in the world have a sales tax, which is a flat tax on most if not all sales (I.E. Australia excepts essential items like milk from sale tax).

Re:Apple / Google / etc

[shutdown -p now]

Some US states actually do have a gross receipts tax, which is kinda like that, and the economy seems to be doing fine regardless.

Re:Apple / Google / etc

[mattack2]

So you pay more tax than you have to? Why?

Re:Apple / Google / etc

[bingoUV]

Technically, wages are all profit anyway

No. Doing a job can have expenses - travelling to workplace, buying/maintaining tools, eating right to enable one to work etc.

Many countries have a "standard deduction" from salaries that are exempted from tax for this reason.

Good

[Anonymous Coward]

This is good news, finally a precedent can be set where goods sold in a country is where the taxes will be paid. This could be tricky with e-commerce (internet sales) but this is a very good thing.

Re:Good

[SJHillman]

I don't know what summary or article you read, but it concludes that the minimal paying of taxes using this strategy is perfectly legal under both Australian and Irish law. The only precedent is that... business can continue as usual.

Remember Legal != Moral

[serviscope_minor]

Remember moral != Legal, so just because they were able to cheat, doesn't mean they should. Also, they were under no legal or moral obligation to play silly buggers in order to cheat the Austrailians out of tax.

and yes it's cheating because they get to use all of the resources that Aus provides to allow business to make money the pay for almost none of it. That makes them little more than freeloading scum.

Re:Remember Legal != Moral

[Anonymous Coward]

The Australian government makes the rules and the tax office implements them.

It seems Apple have complied with the rules.

If a majority of Australians are unhappy with what has happened, the correct response is to change the rules.

Re:Remember Legal != Moral

[gbjbaanb]

the answer is simply to change the law, stop any tax-sharing agreements with foreign governments that allow super-low rates of tax, or refuse to recognise any "head office" that is little more than a postbox.

I mean, if the government (not just Aus) said "We agree with tax sharing but the tax rate here is 20% (or whatever) then we will recognise the tax paid by Apple Investment Holdings (Bermuda) Ltd at 1%, but we still charge the remaining 19% to the company's revenues made here".

The head office thing can be dealt with just like the EU 1995 directive that was applied to banks after the collapse of the BCCI bank - their HQ has to be in the same place as their registered office. (this is not so they can avoid tax, more that they can be effectively regulated, but I guess it wouldn't hurt WRT tax).

Re:Remember Legal != Moral

[SJHillman]

It's not cheating if the ones making the rules (The Aussie government) says it's perfectly legal.

Re:Remember Legal != Moral

[Alomex]

That makes them little more than freeloading scum.

You are correct. So did MItt Romney when he took advantage of a loophole in the law to move over $100 megabucks to a tax shelter in the Bahamas.

This is all perfectly legal, just like tax breaks and welfare is perfectly legal for people who are poor.

Which of these two did he choose to highlight as immoral? The poor person of course, not Apple's or his own immoral behavior.

Re:Remember Legal != Moral

[Anonymous Coward]

They have a legal and (I would argue) moral obligation to their shareholders. Now, given Tim's comments this week re ecological initiatives I'd say they're doing a good job of informing their shareholders of what they can expect from Apple stock. Setting up office in Ireland (which is pretty infamous as a tax haven) is another signal to shareholders that Apple intends to increase profits by playing with taxes.

The way they have played with taxes is legal.

If you want to talk about how we got into the situation where ANY company can behave in such an (and I do agree with you here) immoral way then we have to look at the global tax structure, which is a fucking mess.

Re:Remember Legal != Moral

[AmiMoJo]

It's worse because they claim to be a moral organization. Investors were told that environmental considerations come before profit, for example. Just not social considerations, apparently.

Re:Remember Legal != Moral

[causality]

It's not cheating if the ones making the rules (The Aussie government) says it's perfectly legal.

It makes me wonder exactly when and how those rules got onto the law books, how they were sponsored, and what relationship the supporting politicians had with the major corporations of that time.

There are lots of ways to cheat that are legally legitimate.

Re:Remember Legal != Moral

[Anonymous Coward]

US law says that the directors have a fiduciary duty to shareholders. So if the directors don't look after Apples money in a way that maximises the return to Apple shareholders then they can be personally liable.

So the way the law if written Apple pretty much have a requirement to behave in this way. The only way you could look at it so they don't, is if the PR consequences leads to lots of people not buying Apple goods, in which case it may be better to pay the tax and avoid the PR disaster. But only because this maximises the return to Apple shareholders.

Re:Remember Legal != Moral

[interkin3tic]

Companies don't have a moral obligation to make every possible cent for their shareholders that they can, nor would a moral obligation to their shareholders trump a moral obligation to society. With morals, there are few absolutes.

I agree that the thing to focus on is the tax structure, but this seems like a good example to illustrate how it is messed up. So we ARE talking about that.

Re:Remember Legal != Moral

[locofungus]

The laws are reasonable - they allow costs to be offset when calculating profits.

The problem occurs because
A can sell to B at cost who can sell to C at the price that C finally sells for and the only person making any profit is B.

Perhaps the market is very competitive, A cannot sell above cost. C cannot buy at below the price B will sell at. (obviously in the real world A and C would need to make some profit but it's not inconceivable that A and C are working with margins of less that 5% while B is working with a 40% margin.)

Or perhaps A, B and C are all subsidiary companies of the same parent. It's still possible that A and C are in a very competitive market, or it's possible that the company is artificially moving profits to where they would prefer them to be.

Re:Remember Legal != Moral

[Anonymous Coward]

"US law says that the directors have a fiduciary duty to shareholders. So if the directors don't look after Apples money in a way that maximises the return to Apple shareholders then they can be personally liable."

Please cite the relevant law stating that companies are legally required to maximize shareholder profit.

Hint: There is no such law and no such requirement exists.

I really, really wish people would STOP repeating this lie.

Re:Remember Legal != Moral

[Anonymous Coward]

"They have a legal and (I would argue) moral obligation to their shareholders."

Repeat after me: there is no legal requirement for companies to maximize shareholder profit. There is no law stating that companies are obligated to maximize profit.

You know, folks trot out that "legal duty to maximize profits!!!" line time and time again, and yet not ONCE have I ever seen the statute given. When asked for a citation, I never get one. Why? Because no such law exists! Stop spouting this nonsense.

captcha: outraged. I'm outraged educated people keep spreading this lie of a legal duty to maximize profits.

Re:Remember Legal != Moral

[Lord Lemur]

Further, this initial dispute was over the moral requirement, not any imagined legal requirement. Can we discuss ontopic. I'm really intrested in the rational behind the moral obligation of a corporation to maximize shareholder value above all else.

Re:Remember Legal != Moral

[Anonymous Coward]

> freeloading scum

It's funny how the 1% pay 99% of the taxes but they are the freeloading scum and not the people leeching off the rich to pay for schools, etc.

Re:Remember Legal != Moral

[Anonymous Coward]

Taxes aren't theft. They are a nessacary market ineffiency at worst. Taxes are part of the social contract, things cost money, we all pay for things.

Re:Remember Legal != Moral

[pla]

It's worse because they claim to be a moral organization. Investors were told that environmental considerations come before profit, for example. Just not social considerations, apparently.

Believe it or not, the rich tend to care more about environmental issues than the poor. It might feel good to say you recycle to "save the planet", but when you can't see a single tree from your 3rd story apartment in downtown slumville, the whole idea amounts to a mere abstraction. When, however, you spend one of your three months of vacation cruising the Caribbean on your private yacht, you very directly and tangibly experience environmental changes caused by human activities.

Rich people don't, however, visit the slums when at all possible, so let the poor eat cake.

Re:Remember Legal != Moral

[Anonymous Coward]

You're starting from the presumption that the revenue belongs to government instead of the company. The governments job is set the rules of the tax game. The company's job is to use those rules to play the game the best i can. I'm saying it a bit in-artfully, but Learned Hand explained it well when he wrote:

                      Anyone 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."

I'm not taking issue with the idea that apple should pay tax -- no doubt taxes are "the price we pay for civilized society". But, I've yet to see a government tax code that a reasonable person can comprehend. According to a little CNN money quiz, the 2012 US tax code is "now nearly 74,000 pages long. That's about 185 times longer than it was in 1913, when the code was 400 pages". Over 4 million words (that's 8 copies of War and Peace! I know we're talking about New Zeland and Ireland, but their tax codes are complex as well.

This really seams like a failing on the part of the governments, not Apple.

Re:Remember Legal != Moral

[thaylin]

except in practice they are going beyond the offsetting costs when calculating profits. An Irish shell company has no costs, its subsidiary has no real cost to license the products, other than an arbitrary number made up for the purpose of making the shell game legitimate. Make it so the costs paid to parent companies, or companies owned by a parent company are not considered costs.

Re:Remember Legal != Moral

[Anonymous Coward]

So you voluntarily pay more in taxes than you're required to by law? You don't take advantage of any legal tax deductions when filing your taxes?

You are a special human being.

Re:Remember Legal != Moral

[thaylin]

Fiduciary just means they have to take care, not maximize a return.

Re:Remember Legal != Moral

[Anonymous Coward]

I love this angle. Its the most hilarious outlook on taxes ever. I wonder exactly what kind of world they envisage.

Re:Remember Legal != Moral

[thaylin]

But I bet you would still want a military to protect you, but without taxes would you like slave labor?

Re:Remember Legal != Moral

[thaylin]

Citation please?

This article shows that they make, as an average, 20% of the income and pay 20% of the taxes, http://www.ctj.org/pdf/taxday2...

of course that is generally speaking, not specifically speaking. Meaning that those who dodge the taxes in this way are paying lower than that, making them freeloading scum, while the part of the group paying more are making up for their freeloading.

Re:Remember Legal != Moral

[FriendlyLurker]

The Australian government makes the rules and the tax office implements them.

It seems Apple have complied with the rules.

If a majority of Australians are unhappy with what has happened, the correct response is to change the rules.

You are correct, however corporate media will spin this on behalf of the corrupt/immoral politicians that serve large corporations and keep the citizens in the ignorance. Lots of fuzzy warm feel good sound bites like "trade deals allowing tax breaks to foreign companies are good for our farmers", "allow us to grow our export industry" etc etc despite little actual evidence after decades of such deals being in place. Australians are particularly at risk of the corporate media chamber given that Murdoch Media empire has around 70% of the market last I heard, with the runners-up mostly echoing the same spin and propaganda,

Many Australians are big on their "buy Australian"/logo marketing for locally made products. It must be frustrating when your own corrupt politicians go out of their way to offshore as much corporate profit as possible, offsetting any gains that might have been made encouraging local industries...

Re:Remember Legal != Moral

[guruevi]

I think legal = moral, heck I do things that I believe are moral that may be considered illegal in some parts of the world. If you've ever downloaded music or movies, if you've even linked to a site you did not own copyrights to, you may have done something illegal regardless of how much people it helped. If you're gay, if you have sex without being married, if you smoke pot, if you drink alcohol, all those things are immoral or illegal in some communities.

Your definition of morality should not imply that I am limited in my freedoms to do with my stuff what I want to do with it. If I made enough money that shifting it around through Switzerland would help me keep that money, I would do it, you would do it and almost anyone, personal or business that has the money to staff an accountant and a branch in another part of the world does this.

Re:Remember Legal != Moral

[SuperKendall]

How exactly is the Australian military protecting Apple, and does Apple's portion of protection rack... er, money come to more than the 8+ Million AUS that Apple DOES pay in taxes already?

Re:Remember Legal != Moral

[alexander_686]

No, the law is pretty clear. Management has a fiduciary duty to manage the companies’ assets for the owners – that is the shareholders. The sections range from SEC rulings, state fraud laws, national insider trading rules, etc. CEOs can’t (or at least shouldn’t) just give money away to people they like.

That being said, there is a huge amount of discretion when applying the law. Starbucks getting bad press in England due to laws – it makes a “voluntary” contribution as a marketing ploy.

Re:Remember Legal != Moral

[alexander_686]

Hmmnm – that is a interesting idea. Since environmental protection is the most important thing why stop with the shareholder’s profits? Raid the worker’s pension funds and skip paying taxes. Or maybe just shut down production? Of course this leaves the question as what is important – CO2 reduction, water quality, processing of hazardous waste. Can I dump a lot of hazadus waste into the local river if it drops my CO2 footprint to zero?

Or, here is a different idea – we as a society could pass laws on what is and is not acceptable practices to the environment.

Re:Remember Legal != Moral

[alexander_686]

When would “taking care” not mean “maximizing return”? And I would like the answer in a total return context – that is on a risk adjusted basis.

Re:Remember Legal != Moral

[thaylin]

If you are "taking care" of your neighbors kids do you have to "maximize" the effect? Do you have to feed them the best foods, only let him sleep on the best mattresses, take them to the best doctors?

No, you are only required to ensure that, within the best of your ability, he leaves as he enters, not that he leaves better then he entered.

Re:Remember Legal != Moral

[thaylin]

First of all it seems the statement was in general, not just AUS, which would make your statement overly specific, however it seems that you are saying that apple has no assets in the country that would need protecting...

Re:Remember Legal != Moral

[CrimsonAvenger]

so just because they were able to cheat, doesn't mean they should.

So, how did they "cheat", exactly? By not paying any more tax than they were legally liable for?

Also, they were under no legal or moral obligation to play silly buggers in order to cheat the Austrailians out of tax.

Nor were they under any legal or moral obligation to pay extra taxes to Australia.

It always amazes me that so many people seem to think that anyone (corporation or individual) should pay more taxes than they're legally obligated to. Especially since I have the sneaking feeling that the people in question don't send their own government a bunch more taxes than they are legally obligated for.

Re:Remember Legal != Moral

[SuperKendall]

however it seems that you are saying that apple has no assets in the country that would need protecting...

I did not say that at all. I said, does Apple's share o fthe assets in Aus. really cost more than $8 million AUS to protect or otherwise assist. I really doubt that it does. That's how much Apple is paying in taxes, so it seems reasonable to me.

Re:Remember Legal != Moral

[Half-pint HAL]

Yes, the fake cost centre trick, also used as a VAT (sales tax) dodge by Amazon Europe. If I order something from Amazon, I'm buying from Amazon Europe in Luxembourg (I think) -- I am in the UK. Amazon Europe "outsources" "fulfilment" of orders to subsidiary companies. My nearest fulfilment centre is an Amazon UK one 35 miles from my home. But I'm not buying from them, oh no. I'm buying from a company in Luxembourg that never touches the stock. Nice.

Starbucks have a good scam going -- they mandate that all shops must use official Starbucks coffee that's so expensive it sucks all of the profits out of the local companies and draws it all into Switzerland. Not sure if the coffee is ever landed in Switzerland or not.

Re:Remember Legal != Moral

[alexander_686]

I am confused. You are stating that under constrained resources you are expected to act as a prudent man would, neither feeding the kid caviar to letting the kid fend for themselves in the back yard – See Prudent Man Rule – just like I am suggesting?

Of course, management is held to a higher standard because they are professionals and should act like one - with diligence, wisdom, and experience. Investors give their money to management because they want their money to grow (is a risk / return contest). If this were not the case they would just keep it under their matters.

Or maybe you are confusing maximizing profits with some stylized idea of management trying to make a quick buck in casino style?

Re:Remember Legal != Moral

[AmiMoJo]

I think what they mean is that they are admitting they didn't create a watertight taxation system and there is currently no rule blocking this kind of abuse. It's hard to see why Australia wouldn't fix this because it's not like Apple is going to exit the country if they do. Or maybe they will, but there are plenty of other people making computers and phones and tablets, maybe even Australian companies.

Re:Remember Legal != Moral

[thaylin]

Except that is a strawman.. the OP claimed that ALL taxes are theft, even that 8m, therefore in his mind that should not have been paid either. If you are going to consider that paid you also have to consider all the other services they get for that 8m.

Re:Remember Legal != Moral

[thaylin]

I think you are confused... First you are using an extreme version of your rule. Nothing in the rule says that they have to maximize the results, only that they take care of it as they would take care of their own money. Secondly you dont invest in a company, outside the IPO, after that you are investing in the stock of the company, not the company itself. If I buy a share of MSFT the corporation get $0.00~ of it, so you are not actually investing in the company..

Re:Remember Legal != Moral

[Anonymous Coward]

Eaton Corp, a US based company, shifted it's headquarters to Ireland in the last 18 months so that they could do the same sort of thing. Taxing corporations is madness. The corporate tax rate should be zero! Tax instead the shareholders more, after they get the profits. The government would get the same amount of money, and the shareholders would have to move to foreign countries to avoid it. Enough of them would want to keep their US citizenship and not move away, so it would be worth while. We can argue about a "Loyalty Penalty" later.

Re:Remember Legal != Moral

[Anonymous Coward]

It is not that simple since separate corporations are involved.

Apple is not actually making "profit" in Australia because they are paying the Irish company a fee. This fee shows up as an expense for the Australian company.

So to capture the tax as suggested, Australia would have to tax the Irish company on its profits simply for doing business with an Australian company. So imagine the consequence of such a rule, whereby any company who ever did business or sold something to Australia suddenly had to also file Australian tax returns and profits.

Every online company would suddenly have to report to the Australian tax department. It would be a nightmare.

Perhaps they could craft the law to exclude small players and narrow it down to revenues greater than x amount (where x is quite large), but it is still not without issue.

Re:Remember Legal != Moral

[pnutjam]

There plenty of poor that live outside of slumville and even that guy doesn't want the only tree on his block killed by corrosive rain, or the river that runs through the city stinking of chemicals and unsafe to eat from. The rich can move their asses to a pristine area if they or their industry needs to fark up one spot they don't tend to care that much.

But far be it from me to burst your bubble of paternalistic safety.

Re:Remember Legal != Moral

[WestCoastBogeyMan]

It's both legal and moral. Since Apple is a publicly traded company (and many Australians own Apple shares), they have a LEGAL responsibility to maximize a shareholders return on investment. Simple as that. Like someone else has said, as long as what they do with their income is LEGAL, I say go ahead. If people don't like it - change the laws. Don't piss and moan because someone is *NOT* breaking the law. In any way.

Re:Remember Legal != Moral

[Anonymous Coward]

And just for readers' edification. That is actually how it works for Americans abroad. If your income while living abroad puts you in the 25% American tax bracket but only in the 15% tax bracket of your foreign country of residence, you owe that 10% difference to the IRS.

Re: Remember Legal != Moral

[apc512599]

When I was a little boy, I used to pray every night for a new bicycle. Then I realised, the Lord, in his wisdom, doesn't work that way. So I just stole one and asked Him to forgive me.- Emo Philips.

Re:Remember Legal != Moral

[microbox]

19% to the company's revenues made here

Here is the problem. profits == revenues minus costs. A certain Japanese car company used to import cars from the mother company at retail price, and then resell them at retail price. Lots of revenue, but huge on paper losses. The money was made by the importing company. If there were a simple solution, then it would be applied already.

One reason why I like GST is that it is so simple, so such a pain in the neck to avoid, although I'm sure some super-rich do a pretty good job. Maybe instead of taxing companies, they should pay directly for the services they use, although I have no idea to what extent that would be possible. It would certainly be a political no-starter.

Re:Remember Legal != Moral

[nosfucious]

Small players don't do business multi-national (mostly).

Actually, I think it would be much easier just to change the tax law to ignore related party transactions. So, if one company owned or had a beneficial stake in another, or common board membership, or had a board membership that was majorly composed of staff of the other company, that first company could not claim (1) fees for use of IP, (2) interest, (3) management charges, or (4) other imaginary charges from the second. Any charges for physical goods would have to be declared and the legal onus would be on the supplying party (overseas) to prove the cost of goods is realistic. Open, audit able books, so no hiding tax or bank accounts in tax havens.

If the the transaction is between unrelated companies, then charges are fully deductible.

Businesses are free to trade with whoever they want. But there becomes less of an incentive to implement transfer pricing. You could still do it, but both the buyer and the seller would have to agree to be fully accountable.

Problem solved.

(P.S. Rupert Murdoch owns the media in Oz, so don't expect to find the Herald-Scum or any like publications inciting the masses to rise up over this issue.)

Re:Remember Legal != Moral

[microbox]

Actually, the government makes the rules in consultation with courts. So expensive tax lawyers issue interpretations of tax law (usually ridiculously optimistic), and they become defacto interpretations of the law until the ATO (tax office) takes the company to court over a legal interpretation. The company essentially cannot get in trouble, because they were following legal advice. It is a game of cat and mouse, with the odds stacked against the ATO.

Also, when people talk about cheating behaviour... then it is important to distinguish between what is legal and what is moral. If you think everything legal is also moral, then things like slavery and Jim Crow are automagically moral because the state says so. Furthermore, it would have been immoral for American colonists to rise about against the crown, simply because it was illegal.

Re:Remember Legal != Moral

[microbox]

You're missing the role of courts and lawyers in the interpretation of the law. There are many avenues to get around annoying rules without recourse to sponsoring politicians -- which really isn't a big problem in Australia.

Re:Remember Legal != Moral

[microbox]

Which of these two did he choose to highlight as immoral? The poor person of course, not Apple's or his own immoral behavior.

While I agree with you substantively, I would like to point out that there is no shortage of people who will point to Apple's behaviour and highlight it as immoral.

Re:Remember Legal != Moral

[microbox]

Just not social considerations, apparently.

I believe Cook is brand building, but also believes that environmental hatred is a legitimate threat to america.

Re:Remember Legal != Moral

[pla]

But far be it from me to burst your bubble of paternalistic safety.

WOW did you misread the tone of my post - I'd humbly suggest re-reading my last sentence to set up the rest (but the joke wouldn't have worked with that line first, sooo...). :)

Re:Remember Legal != Moral

[Anonymous Coward]

The simple way to fix taxes is

Taxable Profits = Local Revenue x Maximum Margin of Local Company or Any Parent (or child) Company or Related Company that a majority of earnings go.) There is basically no way around this and basically means, if you sell locally and profit you pay local taxes.

Re:Remember Legal != Moral

[Kalriath]

Yup. Here in NZ, all Apple purchases are from Apple Australia, Google sales are from Google Ireland, and Microsoft sales are from Microsoft Singapore. All three of these companies have local subsidiaries that refuse to do business with local companies.

Re:Remember Legal != Moral

[Kalriath]

That is true about fiduciary duty. However, there is still no legal requirement to maximise profits at all costs - this is a lie that is constantly trotted out. The fiduciary obligation of a company is generally detailed in its constitution (or other formative document) - for example in NZ there are companies whose constitutions explicitly state that they may on occasion make decisions that are not in the best interests of the company OR shareholders, where it will benefit only tribes of indigenous people.

Basically, a company's obligation is to state upfront how they manage funds (e.g. in their prospectus), and it's your responsibility to Do Your Own Research.

Re:Remember Legal != Moral

[Kalriath]

No, no they do not have a legal responsibility to maximise ROI. They only have a legal responsibility to not piss away the money they have, and to manage it in the way they say they do in the company's formation documents.

Re:Remember Legal != Moral

[EuclideanSilence]

Yes, little more than freeloading scum. As opposed to all the government employed military welfare, government paid teaching unions, government quota taxi drivers, government guaranteed student loan payed university staff, government paid arrest-you-for-smoking-marijuana workers... Instead paying attention to the mooching class actually spending this tax money, and call the ones who work to earn it "freeloading scum".

Re:Remember Legal != Moral

[mjwx]

Remember moral != Legal, so just because they were able to cheat, doesn't mean they should. Also, they were under no legal or moral obligation to play silly buggers in order to cheat the Austrailians out of tax.

and yes it's cheating because they get to use all of the resources that Aus provides to allow business to make money the pay for almost none of it. That makes them little more than freeloading scum.

This.

Australian media tycoon Kerry Packer once said "Of course I am minimising my tax. And if anybody in this country doesn't minimise their tax, they want their heads read" and I agree with Packer on this one. Whether or not you agree with how the govt is spending tax money, you've got to have rocks in your head for not trying to minimise your tax.

However there is a huge difference between tax minimisation (I.E. deductions, amortisations and re-investment) and tax evasion (I.E. moving profit overseas), Apple is doing the latter (and probably the former too, but its only the latter that concerns us).

And the ATO (Australian Tax Office) is picking on Apple because their a high profile target and a powerful target. If the ATO is successful against Apple it will scare other companies into not defying the ATO.

Re:Remember Legal != Moral

[Anonymous Coward]

Investors were told that environmental considerations come before profit, for example.

You are misrepresenting it.

"If you only want me to make things, make decisions that have a clear ROI, then you should get out of the stock,"

It does not say that ROI is not considered at all.

Re:Remember Legal != Moral

[Anonymous Coward]

Lobbying... it's a hell of a drug!

edit: Well this is funny the captcha read "embezzle", seems somewhat suiting

Re:Remember Legal != Moral

[bingoUV]

Make it so the costs paid to parent companies, or companies owned by a parent company are not considered costs

But Australia has not "made it" so. They are fine with whatever they have made it, if they weren't fine they would have changed it. I don't see anything wrong.

Re:Remember Legal != Moral

[alexander_686]

What I am exposing is very much standard orthodoxy and hardly radical, standard business admiration 101 stuff. When you delegate authority to management, a lawyer, or a doctor they are supposed to work for your best interests. Nothing says they have to be your slaves, be 100%, or give you gold plated services for free. On the they just can’t coast.

As for investment – we are getting into semantics here – maybe with the words new verse exchange.. If I own 1 share of stock does that mean I do not own a sliver of that company? And why would Bill Gates every take Microsoft public if he could not sell his interest, and why would anybody every buy unless they knew they could sell on?

Re:Remember Legal != Moral

[alexander_686]

I am not familiar with the NZ example, However I would tend to be skeptical. I think things work best when there are clear goals, incentives, and lines of authority. Without that things become muddy. This year we shaft the owners, next year we shaft the Moi, and nobody can tell if anybody is doing anything useful because we are always tossing out measuring stick for another. The examples that I am familiar with tend to perform at a subpar level. There is a core of highly competent and motivated insiders or a sugary daddy on the outside, things go well for a couple of years (or decades), interest falls, and the whole thing falls apart.

On the other hand I can think of many examples that do work – Co-ops and other mutual companies, foundations and non-profits that own for profit business, etc. But those work because each part is trying to maximize it’s potential (either for profit, charitable gain, or whatever) and as such has a clear goal.

Nationalism, move over for Corporatism

[Anonymous Coward]

Corporations are simply larger and more powerful than national governments. Their yearly turnover is larger, and they use this financial power to generate more money by bending or just ignoring the rules of governments.

But think of The Economy!

Only Faire!

[Anonymous Coward]

The prices for Apple gear in Australia are too high so better to move this to Ireland. Come on Ollies! Stop complaining about American gear prices! Faire is faire.

But why wouldn't they?

[tcopeland]

If you got $500 from writing a tech article, would you rather pay $200 of it in taxes or $2?

Also, doesn't Apple have a duty to shareholders to cough up as little in taxes as legally possible?

Re:But why wouldn't they?

[SJHillman]

I'd rather claim a loss on writing the article and get a $200 refund on top of keeping my $500. But sadly, I don't live in Hollywood so I can't do that.

Re:But why wouldn't they?

[Anonymous Coward]

If you got $500 from writing a tech article, would you rather pay $200 of it in taxes or $2?

0.044% of $500 is $0.22. No wonder you don't find it immoral if you don't know multiplication.

Re: But why wouldn't they?

[O('_')O_Bush]

No, no more than they have a duty to do anything else immoral ( like slave labor in China or dumping waste in some poor country with few environmental regulations ) to boost profits. Their duty to shareholders comes after acting ethically.

And it is unethical. If only those wealthy enough to set up shell corporations and make imaginary tax evasion schemes can participate in evading taxes, but those that can't are forced in the burden of taxation, despite the expectation of the law to be that every company or entity be taxed.

If you accept that there is a duty for all to be subject to the same tax law, which I think we all do (regardless your perspective of tax evasion), then abusing a loophole to keep from paying taxes violates Kant's FUL, and is therefore also logically unethical if you follow Kantian ethics. For Utilitarians, I am sure you could make the argument that the tax evaded dollars serve the evaders far less than the good taxation does for Australia, but I don't follow that regime.

Re:But why wouldn't they?

[Anonymous Coward]

Profits are not compensation for effort. Profits are what you get owning shares. The equivalent would be if I made 500 $ because YOU wrote the article in Australia. How much value does ownership bring in to the equation? In a world where Jobs is the mega innovator, its all about the share-holders.

Re:But why wouldn't they?

[Anonymous Coward]

If you got $500 from writing a tech article, would you rather pay $200 of it in taxes or $2?

Also, doesn't Apple have a duty to shareholders to cough up as little in taxes as legally possible?

Is it fair that John Q Taxpayer pays $200 in tax out of $500 that he ears while Corporation X pays $2 because they can hire a bunch of banksters and legal weasels and lobbyists to make themselves effectively exempt from taxes? Is it fair that John Q Taxpayer gets to bail out multinationals and banks while the multinational corporations and banks pay next to no taxes? What these bozos are doing is morally wrong. I know that doesn't mean much to a business oriented person such as yourself, but a lot of people think these corporate assholes deserve to be roasted on a spit for not pulling their weight and I can't say I blame them.

Re:But why wouldn't they?

[SJHillman]

Because math and morality and directly related...

Re:But why wouldn't they?

[Anonymous Coward]

What I want to know is why isn't Apple liable for US taxes here?

If I leave the country and go work in another one, all money I make is still taxable by the US federal government. Why the fuck should Apple be exempt?

Re:But why wouldn't they?

[Anonymous Coward]

Not directly related, but they are related via rational thinking.

Re:But why wouldn't they?

[Anne Thwacks]

Why the fuck should Apple be exempt?

Because they are Apple. No other reason needed.

Re:But why wouldn't they?

[smallfries]

Also, doesn't Apple have a duty to shareholders to cough up as little in taxes as legally possible?

You should trying asking that to Tim Cook at a shareholders meeting and see what kind of response you get. Last time he was described as "visibly angry".

Re: But why wouldn't they?

[Alomex]

Actually several legal systems disallow loopholes. That is, when the intent of the law is clear and any normal person could see that the loophole was a missing case in what was meant to be an exhaustive list, then the loophole doesn't apply.

On the other hand one can have a "to the letter" legal system which results in bills 5,000 pages long that still can be abused by anyone employing a sufficiently resourceful lawyer. This seems to be the preferred choice in the USA and several other countries but it doesn't have to be that way.

Re:But why wouldn't they?

[JaredOfEuropa]

Companies are essentially amoral (not the same as immoral!); it's a bit naive to claim that Apple has a moral obligation to pay taxes if they have a legal way to avoid it. You could even argue that they have a duty to their stakeholders (stockholders, employees and customers) to minimize the tax they pay, so they can increase share value, are able to pay higher wages (ha ha...), and lower prices.

The way to fix this is legislation, not a moral appeal. The problem I have with the current tax situation is that these loopholes only get profitable at a certain level because they are not cheap: your $500 and them some will be spent on lawyer and accountant fees if you go for the tax loophole. Large corporations end up paying next to no tax, while small companies pay the full bill. I looked into such a loophole a while ago for a company reporting a yearly profit of around $120k, and the tax benefit did outweigh the costs...but only because this company could make a convincing case for "paying" their holding company for a license on intellectual property. Companies who provide simple goods or services have far fewer options... if my corporate tax ended up at .044% of profits, I'd be a happy man.

Re: But why wouldn't they?

[Anonymous Coward]

Trickle down taxes...

Re:But why wouldn't they?

[Anonymous Coward]

No. Please stop propagating this bullshit "legally must maximize profit". There is no such law. The only thing the Board is legally responsible for is the promotion of the company.

        this supposed imperative to “maximize” a company’s share price has no foundation in history or in law. Nor is there any empirical evidence that it makes the economy or the society better off. What began in the 1970s and ’80s as a useful corrective to self-satisfied managerial mediocrity has become a corrupting, self-interested dogma peddled by finance professors, money managers and over-compensated corporate executives.

And:

        There are no statutes that put the shareholder at the top of the corporate priority list. In most states, corporations can be formed for any lawful purpose. Cornell University law professor Lynn Stout has been looking for years for a corporate charter that even mentions maximizing profits or share price. She hasn’t found one.

        Nor does the law require, as many believe, that executives and directors owe a special fiduciary duty to shareholders. The fiduciary duty, in fact, is owed simply to the corporation, which is owned by no one, just as you and I are owned by no one — we are all “persons” in the eyes of the law. Shareholders, however, have a contractual claim to the “residual value” of the corporation once all its other obligations have been satisfied — and even then directors are given wide latitude to make whatever use of that residual value they choose, as long they’re not stealing it for themselves.

Re:But why wouldn't they?

[guruevi]

Some creative accounting never hurt anyone. Pay yourself a salary of $700/article and then claim a loss.

Re:But why wouldn't they?

[number6x]

Boards and directors due legally have a fiduciary responsibility to share holders. This is covered under countless laws like Sarbane Oxley and many others. This is, in a nutshell, a responsibility to report earnings and expenses completely and acurately. If the company is losing money or making money or just breaking even, the officers and leaders of the company are supposed to follow accepted accounting practices to record and report these things.

You are correct that there is no legal responsibility to maximize profits, but there are legal responsibilities that are fiduciary in nature.

In the US there are state and federal laws that do lay out fiduciary responsibilities for corporations, businesses, and companies. These legal responsibilities have almost nothing to due with what is happening here. They are kind of like laws that require you to drive responsibly when you get a driver's license. There are no laws requiring you to maximise your gas mileage, or to extend the life of your car as long as possible. These things may benefit you as an individual, but they are not legally required.

What this basically boils down to is that Apple is, technically, making almost no profit in Australia and so it pays almost no taxes in Australia. The 'profit' is taken elswhere.

As a hypothetical example, imagine a software company headquartered in California, Utah or Washington state USA. Imagine buyers of the software that live in Brisbane or Sydney Australia. Then imagine a magical Island that charges almost 0% tax on profits.

The hypothetical US software companies will set up subsidaries in Australia and in the magical island. The US software companies will transfer all of the intellectual property rights to the magical Island subsidiary. So the magical Island is the 'owner' of the software rights. The Australian purchaser pays $100.00 AU for a unit of software. The Australian subsidiary records $100.00 AU as net income. Of course the Australian subsidiary purchases the software from the magicle Isle and pays $99.99 Au for it. So the AU subsidiary makes 1 AU cent profit, and is only liable for taxes on that profit.

The software is made, under contract, in the US. The magical Island pays the US company $0.10 US for each unit. It costs the US company $0.09 US to make, so they also make very little taxable profit.

Where is the profit? Seemingly it is in the magical Island. However, what is magical about this island is its tax laws. The laws only require corporations there to pay taxes on sales that happen there!, so the Australian sale does not count towards taxable profits on the magical Island.

All of this is perfectly legal and acceptable under the laws of the countries involved. The reason Austrailia was able to follow the money and figure this out is because these companies are not skirting the law and are fulfilling their legally mandated fiduciary responsibilities. They follow standard accounting practices and record all of these things accurately as required by law.

Re:But why wouldn't they?

[Anonymous Coward]

Why should a corporation pay any tax at all? Slashdot group think says corporations aren't people. If corporations aren't people then they should pay no taxes.

Re:But why wouldn't they?

[PortHaven]

Because they never bring the money "back" into the U.S. If they did, they'd get hit with taxes. But keeping offshore let's them store it untaxed.

Re:But why wouldn't they?

[Anonymous Coward]

There is nothing rational about morality dumbass; it is by definition non-rational, just as rationality is by definition amoral.

They are two different methods of determining a course of action, just as science and philosophy are two different methods for answering questions.

Re:But why wouldn't they?

[Anonymous Coward]

Then you pay income tax on $700, which if you have a decent income, is at a higher marginal tax rate than company tax.

Re:But why wouldn't they?

[Anonymous Coward]

What the hell are you talking about?

Creative accounting skews economic productivity metrics, causing massive inefficiencies and misplanning in the global economy which hurts everyone. That the harm is complex and non-obvious like the link between data center bloat and lung disease doesn't make it any less real.

Re: But why wouldn't they?

[bingoUV]

Ok, so you enlighten everyone about the exact amount of taxes Apple should pay.

They didn't "cheat".

[Impy the Impiuos Imp]

Assuming they didn't violate any laws, they aren't "cheating". Go talk to your legislator if you are upset. People enjoy keeping money hey earn.

Also, this type of article should be filed under Slashdot/NPR, as it's about harping on certain political agendas -- let's gather together and reinforce our anger/banding-together memes. AKA politics as intended.

Re:They didn't "cheat".

[causality]

let's gather together and reinforce our anger/banding-together memes. AKA politics as intended.

It depends on whether the audience has the maturity to read about an event without automatically getting upset about it. Sadly, most Americans have been conditioned by repeated example to do the opposite. This is highly desirable from the standpoint of the media, because irritated emotions tend to shut down critical thinking.

Re:They didn't "cheat".

[PortHaven]

Wrong, they cheat by paying millions to buy our elected officials to pass laws that let them legally cheat.

This is akin to paying off the referee. Sure, there were no calls against you. But there should of been.

Re:They didn't "cheat".

[PPH]

Go talk to your legislator if you are upset.

I can't afford to. According to the Supreme Court, campaign contributions are free speech. I spend all my speech feeding my kids and paying my mortgage this month.

What about DTAs?

[Anonymous Coward]

... or 0.044% of estimated potential tax liabilities ...

Double-taxation arrangements mean that a company pays X% tax in Australia and (Z-X)% tax to the foreign country. The idea is that X should be a significant fraction of Z. Otherwise, our politicians have once again given foreigners more rights than voting citizens possess.

With friends like these who needs enemies?

[140Mandak262Jamuna]

Australia, Ireland, Singapore etc are supposedly allies of the USA. Two bit countries like Cayman Islands and Lichtenstein help MNCs to shift money around, allow corrupt despots of third world countries to launder their ill gotten money through corruption. They also let MNCs to dodge taxes. Countries like Pakistan and Saudi Arabia are our allies in war against terror.

How long can this go on? Every one from the rich 0.1% of Americans, MNCs, two bit countries, supposed allies are all taking pot shots at America in every which way they can. It is time for the Atlas to shrug. The Atlas is not some super duper individual super achiever. It is the middle class of America that is the only one paying their taxes, and supplying canon fodder.

Re:With friends like these who needs enemies?

[Pinky's Brain]

Australia is the one getting fucked here ... Australia has a trade surplus AND a current account deficit, they're a colony not a country.

At least the USA gets shit for free, you've been running a trade deficit for 4 decades.

Re:With friends like these who needs enemies?

[Anonymous Coward]

Remember all the Tax Havens are protectorates or territories of the UK, France and the USA. So please stop bitching about how third-world countries suck the poor middle-class USA workers dry and take a bit of introspection. Most of the money laundry operations come from those big names you take pride from (Exxon, Apple, Google, etc). FATF enforces many policies on developing countries, but they deliberately oversee their funding member's dark operations.

Re:With friends like these who needs enemies?

[SJHillman]

I think Ireland would have something to say about being called a territory of the UK.

Re:With friends like these who needs enemies?

[the eric conspiracy]

Free? Have you seen our defense budget? Spent mostly to defend our trading partners.....

Re:With friends like these who needs enemies?

[Anonymous Coward]

I think Ireland would have something to say about being called a territory of the UK.

The island of Ireland together with England, Wales and Scotland are the bitches of the US of A.
To be politically correct let's call them quasi-colonies.

Re:With friends like these who needs enemies?

[Kalriath]

Dafuq are you on about? It's spent mostly to acquire natural resources on behalf of ExxonMobil, Shell, BP, etc. 99% of those trading partners that you haven't invaded would be surprised to hear that you're defending them, mostly because you aren't.

Happens here in the U.S. too..

[isa-kuruption]

These companies have been doing this for years... Facebook, Apple, Google, etc. There has been news story after news story about this, and yet the same people who complain that the "super rich" and "big" corporations don't pay their fair share of taxes, are the same people who are shifting their tax burden outside of the United States to Ireland or Jamaica or wherever else they can get away with cheaper taxes.

And to make it even more silly, the people who do the biggest complaining about individuals and corporations not paying their fair share are either the Liberal-Progressive CEOs, COOs, and other executives at this big technology firms, or it's the minions that constantly and mindlessly buy their products or use their services which allows them to collect all this money to just shift their tax burden to another country.

Re:Happens here in the U.S. too..

[gbjbaanb]

to be fair its a bit more complex than that, the rich do get stung for tax. In the UK you can see the proportion of taxation based on income bands. The top 50% pay 90% of the tax take, the top 5% earners pay 47.9% of the total tax.

Its eye opening how much the wealthier pay towards society compared to the poor. Now I don't mind that so much, except that the super-wealthy tend to have far too much compared to the rest of the population, and the general disparity between income is far to great nowadays, but to criticise the wealthier half of the population because the poor think the rich should pay more is a bit uninformed and a bit selfish.

Still, we need to get rid of these loopholes, make tax simpler, much simpler, and apply it to everyone.

Re:Happens here in the U.S. too..

[Electricity Likes Me]

No the problem is the wealthy are constantly arguing visibly and publicly that the poor are stealing from them, and that they should be allowed to opt out of supporting anyone. For things like food and medicine. Because it the super-wealthy are just so upset at looking at that big tax number on paper (they are not affected in any literal fashion whatsoever - if they were, they'd be middle class...who also are frequently on the list of "people who should pay more" from the super-wealthy).

Re:Happens here in the U.S. too..

[Tom]

Exactly.

I hate paying taxes as much as everyone, but I'm not super-rich, so I don't have options to avoid it. Once you go above a certain income class, your tax burden drops, in both relative and absolute values, because you can make use of loopholes that normal people can't.

Corporations are the worst of it all. As they can split up, merge and do other trickery that physical humans can't, they can exploit the system to the maximum effect. And since everyone else does it, they almost have a duty to do so, because otherwise their shareholders will grill them about it.

The problem is that the tax systems allow this, which is caused by countries competing against each other to attract corporations. Which, if you are able to see it for a moment from outside the pot in which you're slowly being boiled, is quite insane and perverted.

As long as the countries of the world readily sell out to corporations and super-rich, nothing will change. Only when they realize that (at least yet) they have the tanks and the guns and the corporations don't and maybe the power-relationship should be the other way around, and then work together to fight the parasites, this will stop. All it needs would be a world-wide agreement to, say, leverage a fixed % of revenue from every corporation, no exceptions, no loopholes, no special deals.

Re:Happens here in the U.S. too..

[Xarvh]

Yes, 5% top earners pay 47.9% of the taxes, but which percentage of the country's wealth do they own?

Re:Happens here in the U.S. too..

[purpledinoz]

If the top 5% have 80% of the wealth, shouldn't they be contributing 80% of the tax base. Or am I missing something here?

Re:Happens here in the U.S. too..

[gbjbaanb]

because taxing people on what they have is difficult - how much is your stuff actually worth? That's why we tax it when it is used in a transaction, bought or sold.

So we tax them on income, and the top earners pay more proportionately than the poor. Beats me why the rich don't want a flat-rate tax implemented.

Dual Citizenship

[RedEars]

If I were a dual citizen [Ireland/USA] could I shift all my income earned in the US to my Irish self and pay no taxes? After all, my Irish self needs lots of whiskey money.

Re:Dual Citizenship

[Anonymous Coward]

Actually, the U.S. is one of the few countries who claim the right to tax income of its citizens, no matter in what country it was earned.

Re:Dual Citizenship

[SJHillman]

The US also claims the right to prosecute its citizens for crimes committed in other countries... even if it wasn't a crime in the country it was committed.

Re:Dual Citizenship

[Anonymous Coward]

With almost a $100,000 tax credit, though.

Re:Dual Citizenship

[Anonymous Coward]

So a corporation can attain the rights of the individual but the individual cannot exploit the rights of a corporation. Got it. Business as usual. There's a lesson in there somewhere... and a potential legal wish that I could incorporate myself.

Re:Dual Citizenship

[Cimexus]

Which, given the weak USD and the fact that many US citizens file jointly in a dual-income family, doesn't go very far. In places where the cost of living (and salaries) are a lot higher than in America, $100k USD equivalent isn't that much for a family ... very standard middle class.

Re:Dual Citizenship

[mjwx]

Actually, the U.S. is one of the few countries who claim the right to tax income of its citizens, no matter in what country it was earned.

Also, doesn't the disallow dual citizenship?

Australian/Irish dual citizenship would be a better example and here if you're earning a wage in Australia or living in Australia but earning a wage overseas you have to pay tax. But if you are an Australian citizen living overseas and earning overseas, the ATO cant touch you.

It is also illegal for a corporation to try to move their profit overseas. Even if a loophole is legal, the ATO will still take them to court and the intent of Apple will come into play. Also the loophole will likely be closed as a result of the case.

Re:Dual Citizenship

[Anonymous Coward]

So does Australia, for some crimes (the only one I know of is kiddy fiddling), if, I assume, you're an Australian citizen and ALL income, if you are an Australian Resident (which has a legal meaning in Australian tax law, you don't need to be a citizen to be taxed).

Get rid of income taxes

[Anonymous Coward]

The whole idea of taxing income creates this whole issue. If you would stop taxing income, and instead use solely consumption taxes collected at the point of sale (i.e. sales tax) you would eliminate the problem completely.

No need to report income to the government, and in fact, no annual tax income tax forms at all. No rent-seeking behavior of crooks... er.. lobbyists to for special income tax breaks.

Plus, it encourages saving since savings will only be taxes when you spend them.

Re:Get rid of income taxes

[Pinky's Brain]

With the value of labour dropping through the floor due to automation, globalization and peak consumption that would just be a one way ticket to feudalism ... well unless you have some kind of progressive consumption tax.

Sounds Familiar?

[Anonymous Coward]

Sounds exactly (at least, effectively) like the tax loop-holes in the United States, and, it wouldn't be a surprise, if they were created by the same class of politicians (with similar tax-rates avoided).

Take that back!

[drainbramage]

I regularly see George Sorros and Warren Buffet at those Obama Soirees.
You know they are only there to help stave off the influence of those tax avoiding small government wackos.

Math..

[Anonymous Coward]

Speaking of being bad at math: If 88.5M = 0.044% then 1% = 2011M, or 2B, and 100% = 200B.

How can Apple be liable for 200B tax on 9B revenue?

Re:Math..

[bondsbw]

Looks about right to me.

--
Verizon account executive

Re:Math..

[Anonymous Coward]

Speaking of being bad at reading comprehension:

Last year Apple reported pretax earnings in Australia of only $88.5 million after it sent an estimated $2 billion of income from its Australian sales to Ireland via Singapore

How do you get from that to 88.5M in taxes?
So, how much taxes *did* Apple Australia pay? the article doesn't say.

So... where's that 0.044% figure come from? Apple Sales International in Ireland.

Apple Sales International has reported more than $US100 billion ($112 billion) of profits in the last five years. Its accounts show it has paid less than 50c in tax on every $1000 of income.

The gain for Ireland?

[bayankaran]

What's the gain for Ireland?
I am sure they don't see much of the offloaded offshore profits.
So what does Ireland gain - other than may be few employees manning a registered office and may be a miniscule percent of the funds?
Is it a case of something is better than nothing?

Re:The gain for Ireland?

[slapout]

Free iPhones for life?

Re:The gain for Ireland?

[rhazz]

Ireland has corporate taxes, they are just MUCH lower than most other developed countries. So Ireland gains by taxing these corporations. It is extremely lucrative for Ireland because they get billions in tax dollars from the shell company that only has a few employees. The social cost to Ireland is nil compared to the tax revenue, but quite the opposite for Australia.

Re:The gain for Ireland?

[the eric conspiracy]

> What's the gain for Ireland?

Seems like they get to host $9B. Now consider the mechanics of fractional reserve banking.....

Re:The gain for Ireland?

[Anonymous Coward]

Ireland and the Netherlands need to stop doing this shit, they fuck over all the other countries in the EU. When is the EU finally going to take care of this bullshit?

Re:The gain for Ireland?

[f()rK()_Bomb]

Apple employees over 4,000 employees in Ireland. The large companies with bases here are also here for our educational talent, as well as the taxes. The taxes bring them here and the employees keep them here. That was the whole idea behind introducing the low taxes (they are around 10%) in the 80s. Its the reason we are not a bunch of peasant farmers any more. We are very much a knowledge economy these days.

Re:The gain for Ireland?

[Anonymous Coward]

Ireland as a whole? Not much.
A handful of corrupt politicians that keep such laws on the books? A whole fucking lot.

Re:The gain for Ireland?

[f()rK()_Bomb]

They are looking into it. The loopholes are the problem, not the actual taxes themselves. And one them has already been closed. http://www.independent.ie/busi...

Re:The gain for Ireland?

[timeOday]

Exactly, Ireland did not "get" 9 billion as the headline claims. The number of extra jobs created by this in Ireland is a handful at most.

The only prize in the race to the bottom is just a smidgen of grease and crumbs, like when the peanut butter is empty.

Re:The gain for Ireland?

[geekoid]

yes they did. The banks in Ireland can now use this money to make more money by lending it out.

Re:The gain for Ireland?

[f()rK()_Bomb]

Yes, absolutely, Ireland did not get 9 billion. Corporate tax revenue is more like 4 billion per year. This is creating more than a handful of jobs though. 4000 jobs from apple, 500 jobs from facebook, 2000 jobs from google, 1000 jobs from amazon, etc. Those are the ones I know off the top of my head and they are all growing.

Re:The gain for Ireland?

[timeOday]

I realize that Apple has an actual presence in Ireland, with employees who do things, and get paid. But this story is about something else - using a secret deal in Singapore to book sales in Australia as profits in Ireland. It is those transactions, specifically, that I was referring to.

Re:The gain for Ireland?

[f()rK()_Bomb]

But you talked about there only being a handful of jobs? :S I'm confused

Re:The gain for Ireland?

[Anonymous Coward]

they are around 10%

... Apple Sales International, the secretive Irish company ...

Apple Sales International has reported more than $US100 billion ($112 billion) of profits in the last five years. Its accounts show it has paid less than 50c in tax on every $1000 of income.

Last time I checked, 0.5/1000 wasn't 10%

Re:The gain for Ireland?

[f()rK()_Bomb]

Yes, those are the loopholes. That is the problem, not the taxes. One of those loopholes has already been closed.

Re:The gain for Ireland?

[rhazz]

I'm sure Apple's Irish divisions have great talent and produce great output, but I bet that those 4,000 employees do not work for the specific Apple subsidiary that is claiming the global profits. Even if it's the same company, claiming all the global revenues there is still a gross misrepresentation of Apple's business since 4000 employees would only account for 5% of Apple's global work force (60% are based in the US). I also believe in Apple's case specifically, they don't even pay the normal Irish corporate tax rates due to some other loopholes or agreements. Forbes has a good write-up on it that is way over my head.

Re:The gain for Ireland?

[mjwx]

Ireland has corporate taxes, they are just MUCH lower than most other developed countries. So Ireland gains by taxing these corporations. It is extremely lucrative for Ireland because they get billions in tax dollars from the shell company that only has a few employees. The social cost to Ireland is nil compared to the tax revenue, but quite the opposite for Australia.

Erm...

You do know that Ireland's economy is up the shitter and they're relying on handouts from the EU right?

So this isn't working out good for Ireland either.

Am I being incredibly stupid here...

[Anonymous Coward]

because i have been in the past.

"last year alone, Apple Australia paid only $AU88.5 million in tax, or 0.044% of estimated potential tax liabilities"

implying that Apple Australia made $AU200 billion last year?

Re:Am I being incredibly stupid here...

[Chrisq]

because i have been in the past.

"last year alone, Apple Australia paid only $AU88.5 million in tax, or 0.044% of estimated potential tax liabilities"

implying that Apple Australia made $AU200 billion last year?

Yes you made a mistake. You correctly calculate (88.5 * 0.044) * 100 million or about 200 billion. What you forget though is that this is the tax liability - not their profit. Since the corporate tax rate in Australia is 30% this means their profit was 200 billion / 30 * 100 or 667 billion odd.

Apple is not a charity

[MadCow42]

Apple - nor any corporation - is not a charity. It's not their job to pay more taxes than they legally have to. Their job is specifically the opposite - generate as much value for shareholders as they can.

Any company that pays more than they have to by law should be questioned, or the shareholders should revolt. Actually... I can't think of any example of one that does, intentionally at least.

So - the issue is NOT with Apple - TFS even says that the Australian tax office agrees this is all above board - but the issue is with their tax system. It's structured to allow that, intentionally or not. There are all kinds of tax incentives in the world, and they're all there to encourage the right mix of business development and growth that the region needs. Essentially, tax is used as an incentive to offset the disadvantages that would otherwise naturally be there (labor cost, non-ideal locations, skill levels, etc.).

Don't be mad at Apple... EVERY company does this. Haters be hat'n, I guess. :)

Re:Apple is not a charity

[Anonymous Coward]

Your argument is entirely arbitrary, it's also tired, old, and in some ways just outright wrong.

Unless something changes the inevitable situation is that tax-paying companies go bust because they're out-competed by tax-avoiding companies and the only companies left in a country become the tax-avoiding ones that don't pay tax anyway. Given that at that point a country ceases to function because it collapses and hence no longer remains a market for said tax-avoiding companies making them suffer too in the long run. This is clearly not a good situation for all shareholders - it's harmful to long term ones.

I can think of any number of companies that pay more tax than is required by law if you factor tax avoidance in - Costa Coffee in the UK is paying it's full tax rate which is why it makes it hard to compete with the tax-dodging Starbucks but then I do live in the UK and it does seem to be American companies that are the worst offenders at tax avoidance, so maybe if you live in the US you do live in such a culture but I guess it fits well with the hefty portion of American society that is simply highly fucking selfish.

This fantasy that it's all above board, that if companies do it it's okay because the shareholders say so is utter bollocks, from executive pay to tax avoidance, many shareholders are entirely against it, but they either invest indirectly through investment funds who are part of the great financial circle jerk and support the status quo or they're too small a shareholder to matter as all the massive tax dodging institutional investors hold the shares, and guess what massive tax dodging institutional investors are likely to support? tax dodging funnily enough. Some share structures are set up such that shareholders don't even really get a say.

I don't understand why some people defend this shit, these are the companies whose trucks ruin the roads you pay for, the companies who take advantage of the protection of the police force you fund - they're taking your money and giving nothing back, why do you enjoy that? do you self-harm as well or something? Is it a masochist thing? or are you just deluded in thinking that maybe if you defend these sorts of practices that one day they'll invite you into their special little club and you too can have more money than you know what to do with? It's fascinating how easy it is for them to brainwash people like you to do their bidding whilst you get nothing in return. Do you really enjoy being such a puppet? do you really enjoy the fact that you personally are losing out because of these people? Next time you see a pothole in the road and wonder why it's not fixed, or find your kid doesn't have decent new textbooks at school then consider that it's because some company didn't pay their expected level of tax. But that's okay right? because you support that.

Re:Apple is not a charity

[NoImNotNineVolt]

Don't be mad at Apple... EVERY company does this.

Don't be mad at the Steubenville rapists... EVERY rapist does this.

Re:Apple is not a charity

[dwpro]

When you say something as generic as "generating value" then paying sufficient taxes could be considered an investment in the solvency of your target market. Any number of rationalizations could be made in either direction. You are correct though that the problem is not with Apple though, it's the citizens fault for not requiring a modicum of fairness in the tax code or at the very least shaming and boycotting corporations who are leeching.

Your "hater" phrasing does actually piss me off. Would you say that about your corporate friend you brought to dinner who doesn't leave a tip at a restaurant because it's not legally required? Since we've decided to co-exist with these financial constructs having human like qualities, it's time we started enforcing social norms on them so they can learn how to be a bit less autistic.

Re:Apple is not a charity

[AmiMoJo]

Tim Cook recently told a shareholder that Apple would put environmental concerns before profit. Are you saying that Apple should be questioned or the shareholders should revolt over that?

Being hipsters is part of the Apple image so addressing environmental concerns could come under their PR budget. We just need to convince hipsters that paying tax is cool.

Re:Apple is not a charity

[Anonymous Coward]

Haters be hat'n

Re:Apple is not a charity

[Anonymous Coward]

In Australia we don't tip.

Generally. It isn't that we *don't* tip, but it is usually at most a couple of dollars (the change left over from a broken note).

There is no "percentage" that we pay.

(as an example, at a dinner with some friends the other night on our $172 AUD bill we left a tip of $3 aud - it could have easily been $8 aud, but we had a $5 note!)

No one thinks less of us for it, because we have a livable minimum wage. Also, we generally get pretty good service. (as a foil for the "tips mean people work harder!!" argument).

US Patriotism

[no-body]

Totally missing on those $-addicts.
Seems to come with their genetics.
Not even sure if the word "patriotism" is the right term here. Maybe patriotism is including to cheat in taxes.
Nevertheless, people hate the taxman because they distrust the receivers - government.
So, it's an ingrained fad to reduce tax payments as much as possible.
Stash it away in Grand Cayman, Switzerland and hope you don't get caught. That's the smaller guys.
The larger whales in this game are doing it legally by feeding part of their stash to "friends" who implement "good rules" for them and don't touch their undertakings.
And there we have it... maximize $$ at any price to the top of the pyramid.

Is the school/university system with all the financial burdens on the future of participants and inequality a consequence of this? Maybe, who knows...

Let's Out-Ireland Ireland

[rally2xs]

Hey, I've got an idea. Lets pass the Fair Tax. The Fair Tax abolishes all income taxes, and replaces it with a consumption tax on new goods for sale, and services. Businesses do not pay the consumption tax. So, all that money flowing into Ireland from the world's tax scams would instead come to the USA, and end up investing in American business, and eradicating things like unemployment and poverty. Yes, we can do this, just pass the Fair Tax. Repeal the 16th Amendment while we're at it, and make federal income taxes impossible forever.

Re:Let's Out-Ireland Ireland

[johnsie]

The US economy requires imports and exports to grow. Keep flipping off other countries and you will very quickly find that your "Fair" Tax only alienates the US economy and causes massive drop in exports. Anti American sentiment around the world is already quite high.

Re:Let's Out-Ireland Ireland

[geekoid]

It would destroy the middle class, increase the wealth gap, cripple trades, and we would take a steep hit in revenue.

What the fair tax doesn't take into account the difference in percentage basic needs to get along in society the rich have compared to everyone else.
And other issues as well, but I suspect anyone who thing the fair tax is a good idea probably wouldn't understand them. Not that the are necessarily stupid, but that they haven't learned to thin about the details of things and impact.

Re:Let's Out-Ireland Ireland

[Overzeetop]

So this "fair" tax - it takes all the money we give to corporations and lets them keep it. And in return, for every dollar we give to corporations for private jets, seven and eight figure CxO benefit packages, and lavish corporate offices, we also get to give a percentage extra to the federal government?

How about this: a gross receipts tax. Instead of charging you EXTRA when you SPEND (which hampers spending and, hence, the economy), you kick in a percentage to the general welfare (in the constitutional sense) every time you RECEIVE money.

Re:Let's Out-Ireland Ireland

[Anonymous Coward]

Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness:

Re:Let's Out-Ireland Ireland

[rally2xs]

What are you talking about? We import tons of stuff, and that might be somewhat diminished, as we have had a fairly nasty trade deficit for a very long time. As for exports, those would definitely increase, as much of the embedded income tax, that businesses currently pay when they manufacture things in the USA, would be abolished. The Europeans have the good sense to remove the VAT taxes that are applied to their manufactured goods when they leave their ports for the USA, but we continue to ship out our products with a heavy burden of the highest corporate income taxes on the planet making them more expensive. The Fair Tax would fix that, and dramatically increase our exports since their prices would dramatically decrease, maybe as much as 11% - 18%.

And so, in order to not PO other countries, we should continue with 47 million people in poverty and a high unemployment rate? The Fair Tax would fix that, dramatically increase manufacturing in this country, (and decrease global warming gasses since we would do our manufacturing with natural gas, rather than as China does it, with coal) and thus provide jobs for anyone that wants one. We have a record 93 million people not in the work force, the worst situation in history, and the reason is that most of our manufacturing jobs have left the USA for lower-corporate-taxed places, which is now anywhere else other than the USA. The middle class would be increased dramatically, as people go back to work, in manufacturing, one of the only 3 real sources of wealth along with mining and agriculture, and fix our unemployment problem. Want to see great lakes freighters take iron ore from Duluth to Cleveland to be manufactured in Pittsburgh again, this time with shale gas from WVa and Ohio, instead of being exported to be made into steel overseas and then shipped back to us as an import? I do. We can get our economy back with the Fair Tax.

Re:Let's Out-Ireland Ireland

[rally2xs]

It would rescue the middle class, by creating jobs for absolutely everyone that wants one. The reason for the wealth gap is that the middle class wages fall because there are far fewer jobs than there are people to do them, so those people compete with each other and "bid": those jobs down to the minimum wage. If we pass the Fair Tax, there will be a massive building of factories from both domestic investment and foreigners investing here to build things at the newest, bestest manufacturing tax haven on the planet. That will cause a labor shortage in short order, as industry rapidly outstrips the available help they can hire, and the wages will skyrocket. The middle class will be rapidly increased, and prosperity will be restored to the USA.

From Wikipedia: " Bill Archer, former head of the House Ways and Means Committee, asked Princeton University Econometrics to survey 500 European and Asian companies regarding the effect on their business decisions if the United States enacted the FairTax. 400 of those companies stated they would build their next plant in the United States, and 100 companies said they would move their corporate headquarters to the United States.[63] " That is in the Wikipedia entry for the Fair Tax. So, that shows that foreign investment is ready to build factories here. Our economy would be revitalized, and once again the envy of the world.

Not sure what you're trying to say by referencing the Dunning-Kruger effect, but I say that factory work is such that you do not need a college education to be an electrician, milwright, pipe fitter, boiler operator, or most other jobs in a factory. That is what will open up employment to much of the 47 million that are in poverty now for lack of work. The Fair Tax will fix that.

Re:Let's Out-Ireland Ireland

[rally2xs]

What companies would do by not having to pay income taxes is to lower their product prices to attempt to capture market share and therefore increase profits. That would be a good thing for the American people, since American-manufactured goods would rise little in price after the Fair Tax is applied, but foreign goods, whose prices would not decrease at all, would get more expensive. This would create a bias to cause industry to manufacture here, rather than overseas, which is good for the American people.

What is your problem with well-paid CEOs? At the time of the GM bankruptcy, the CEO's salary was $10M, and they were manufacturing 10 million cars. What's wrong with the CEO getting $1 / car? Would you not buy it if GM paid its CEO $15M and the car's price rose by 50 cents? And if the CEO's salary were instead divided amongst the laborers, we know that it takes about 33 labor hours for a Detroit factory to build a car, so you're going to divide that $1.00 or $1.50 into 33 hours and raise the laborers' wages by 3 - 5 cents? How does that help the working class?

No, what helps the working class is to incentivize job creation, which is what the Fair Tax would do like no other method. Factories would be built to the extent that a labor shortage would be created. Fair Tax researchers believe that we would have a 3% unemployment rate within 2 years, which is full employment. Then we can start employing immigrants, and increase the tax base while making more prosperity for more people.

Re:Let's Out-Ireland Ireland

[rally2xs]

And by the way, I forgot to address this, the Fair Tax DOES take into account this basic fact that the poor spend more of their money on just existing. The Fair Tax has a mechanism called the Prebate, that pays EVERY citizen (not illegal aliens, tho) an amount of money every month that will pay for the Fair Tax on goods purchased up to the poverty level. That is, if you're a single person and the poverty level is $11,000, the gov't is going to send you the Fair Tax's 23% of $11,000, or $2.530, in monthly installments of $210.83. IOW, the poor pay $0 Fair Tax. And, the Fair Tax is the ONLY truly progressive tax ever proposed, since someone making twice the poverty level would be paying half the Fair Tax rate, someone making 3X the poverty level would be paying 2/3rds the Fair Tax rate, someone making 4X the poverty level would be paying 3/4 of the Fair Tax rate, etc.

In contrast, the proposed "flat tax" is anything but flat, since it does NOT eliminate the the payroll taxes of 15.3%. So, after an exemption for low income, a person begins paying the flat tax of 17%, added to the payroll tax of 15.3%, for a total of 32.3%. To add insult to injury, the payroll taxes stop taxing at $118K, so the CEO making $10M essentially pays 17%, while the middle classer at $75K pays close to 32%. That's a regressive tax, period.

Re:Let's Out-Ireland Ireland

[SleazyRidr]

I did the math on this a while ago (it's on a /. comment so you might be able to find it...) Basically a 25% sales tax will allow you to eliminate income tax, pay everyone in the country a poverty-line income and stop deficit spending.

Re:Let's Out-Ireland Ireland

[Hognoxious]

What is your problem with well-paid CEOs? At the time of the GM bankruptcy, the CEO's salary was $10M

I think you answered the question yourself.

Re:Let's Out-Ireland Ireland

[rally2xs]

So? What's wrong with that? Does it harm anyone?

Re:Let's Out-Ireland Ireland

[Kalriath]

Physically no, but economically, very much yes. Companies going bankrupt results in layoffs (more unemployed people), defaults (more suppliers not getting paid for deliveries they've made), and the flow on effects of layoffs and defaults.

Let me guess... you're a Ron Paul supporter?

Re:Let's Out-Ireland Ireland

[rally2xs]

You seriously think the company went bankrupt because they were paying their CEO $10M? Remember, that's $1 / car.

Or could it be the 25 MPG CAFE that, when enacted, the perpetrators in Washington actually said that it would probably bankrupt the Detroit companies? That couldn't have had anything to do with it?

Or in couldn't have been because of the 35% corporate tax rate that they were paying, 2nd highest on the planet at the time, only 2nd to Japan? That couldn't have been it?

And if the CEO were to receive instead $500K / yr, would GM have gotten as knowledgeable and adept a CEO as they had, or would they have gotten a far less experienced person that could only command a $500K salary, because those that were more skilled were pulling down millions of dollars in other large corporations? Maybe GM would have gone bankrupt _sooner_ than they did if they paid their CEO cheaply.

One more time, who does the $10M salary harm? I don't accept it as a reason for the bankruptcy.

Re:Let's Out-Ireland Ireland

[rally2xs]

Not Ron Paul, he's too isolationist for me. Rand Paul would be OK, tho.

Re:Let's Out-Ireland Ireland

[Kalriath]

I don't think you'll find that Hognoxious was claiming at all that the salary was the reason for the bankruptcy. I think you'll find that he was claiming that with the company going bankrupt, odds are that the CEO wasn't worth what he was being paid. Many a company in the hands of competent management has been brought back from the brink of the abyss, and I don't think you'll find anyone arguing against those people being paid a fair amount (e.g. Air New Zealand, once bankrupted and salvaged by government intervention, now turns over close to $200m in profit per year - the CEO gets about $1.9m per year. By contrast Qantas, now quarter of a billion in the red, pays their CEO $5m per year),

The norm: we NEED to shame them.

[Anonymous Coward]

Yes, I agree, things do have to change.

BUT people will NOT take notice until you DO start shaming individual companies.

That's how change happens.

Just throwing up your hands and saying, "Oh well, it's the norm. It's got to change." Means nothing to people; which means you are not going to get the political class to do something about it. They'll just keep things the way they are because people won't notice.

People have to get outraged. They have to see INDIVIDUAL companies and INDIVIDUALS who don't pay taxes because of BS like this: see the Forbes 400 for many of the folks who legally dodge taxes because they made up the rules.

So we NEED to shame Apple, Google, GE, HP, IBM, and every other golbal mega corp that shifts profits around the World to avoid taxes. We need people like Warren Buffet to say, "Hey look, my secretary has a higher effective tax rate than I do."

And this bullshit of "well if Buffet doesn't like it, then he can pay more on his own!" doesn't cut it because there are HUNDREDS of other billionaires and centi-millionaires who are getting away it.

We NEED 1950s income taxes again - adjusted for inflation, of course.

Re:The norm: we NEED to shame them.

[Anonymous Coward]

We need people like Warren Buffet to say, "Hey look, my secretary has a higher effective tax rate than I do."

Except Warren Buffet will pay more in total taxes per year than his secretary will pay in her life time.

Re:The norm: we NEED to shame them.

[servies]

I would happily pay twice his tax if I get his money...

Re:The norm: we NEED to shame them.

[AlphaWolf_HK]

This practice actually has a name, it's called transfer pricing, and the government was about to crack down on it (I believe some time back in 2007) and a bunch of companies simply threatened to move overseas if it happened. And quite honestly, in order for them to remain competitive with other foreign companies, they would HAVE to do exactly that. That is, even if they didn't move overseas, their operating costs would be so high that they'd eventually be driven out of business anyways.

Re:The norm: we NEED to shame them.

[JoeMerchant]

Taxes adjust themselves for inflation, they are a percentage of ______.

However, the taxes will need to be adjusted for the additional services provided by government today, as compared to 60 years ago.

Re:The norm: we NEED to shame them.

[AdamThor]

It is true that companies will demand things of the government, and threaten to leave if they don't get them. And it seems like governments are routinely screwed in this fashion.

Governments need to respond with import duties on the products of companies like this.

A trade war with another country is destructive and expensive, and quickly tangles up uninvolved parties. But a set of punitive taxes on the output of a company is targeted. Government needs a stick to hold over the head of multinational corporations.

Re:The norm: we NEED to shame them.

[AlphaWolf_HK]

No, that wouldn't work at all. All that does is put the domestic economy at a big disadvantage. People who ask for trade barriers don't understand that domestic production and imports rise and fall with one another. This is why Smoot-Hawley was so destructive on the economy; the politicians thought it would be a genius idea, and while it did slow imports, it also did the same to domestic production, which ultimately lead to the 20% unemployment. The stock market crash alone had little to do with that (the numbers post-crash were about what they are now until Smoot-Hawley passed, then it took a huge nose-dive.)

Trade wars are neither destructive or expensive unless either party starts adding either trade barriers like you just suggested or trade subsidies. Comparative advantage actually tends to work out as a mutual advantage. You are effectively arguing in favor of a monopoly by claiming the opposite.

Re:The norm: we NEED to shame them.

[AdamThor]

Yeah, but comparing it to tariffs against other _countries_ isn't accurate. It would be a tariff against a _company_. So would it accelerate into some sort of trade war? I'm not enough of an economist to say for sure, but it's not like Apple could start taxing American products in retaliation...

Re:The norm: we NEED to shame them.

[Anonymous Coward]

You say this as if it's a bad thing.

I really don't understand the mindset that tries to make the people that can least afford it pay a higher percentage of their income, often times cutting into their non disposable income (if they even have any) in order to be 'fair'.

Ethics are not universal

[sjbe]

Their duty to shareholders comes after acting ethically.

I agree in principle but the problem with that argument is that it is easy to disagree about what is ethical. Many people see no ethical problem whatsoever with polluting or discrimination or tax avoidance or all sorts of other damaging/problematic behavior. Hell, a lot of people think it is downright heroic to stick it to the tax man. The usual argument for allowing pollution is that it is more ethical to allow pollution than to lose jobs. It might be a poor argument but many people honestly believe that it is the most ethical thing to do. Heck, sometimes there are bigger issues than ethics. I can say all sorts of hateful, wrong and unethical things but my right to free speech is considered more important. Ethics alone (too) often aren't enough of an argument.

Now you and I probably agree that Apple's tax avoidance is probably unethical as far as most of us are concerned and certainly in violation of the spirit of the law if not the letter. On the other hand if the government really wants to collect that revenue they can easily do so with some legislation. The fact that the government allows these loopholes to remain open speaks volumes about the priorities of those in power.

Tim Cook is a tax hypocrite

[sjbe]

You should trying asking that to Tim Cook at a shareholders meeting and see what kind of response you get. Last time he was described as "visibly angry".

Whatever. This is the same guy that bluntly told congress they were wrong to try to collect more tax from Apple. He talks about social responsibility but he only means it if someone else has to pay for it.

Is duty to society duty to shareholders?

[sjbe]

it's a bit naive to claim that Apple has a moral obligation to pay taxes if they have a legal way to avoid it.

It's not naive at all. They can have both a (perceived) moral obligation to pay and a legal way to avoid paying. The one does not preclude the other. The ability to do something about it is a separate issue. The question is whether their duty to society trumps their duty to their shareholders.

The way to fix this is legislation, not a moral appeal.

Bingo. Exactly correct. And the fact that such legislation has not been passed says everything you need to know about our elected officials and their priorities.

Perfectly legitimate

[Anonymous Coward]

This is how it works: billionaires go to their bitches in Congress and tell them to change the law to help them.

Therefore, shit that would be completely illegal for us peons, is now legal for them.

QED.

It's only legitimate because they made it so.

We can't do that because we are not the 0.01%.

That's where a lot of the outrage over the rich come from: they rig the game to help themselves at the expense of the rest of us.

There is a reason why the middle class is disappearing the US.

Looking the home buying data yesterday, housing is being driven by cash buyers: hedge funds.

We are becoming a renter nation. And when a person with a solid job and decent middle class pay cannot afford a house, you just see that the American dream is dead.

Re:Perfectly legitimate

[Kalriath]

Meanwhile, you get relentless articles in the papers from "thinkers" telling you that people need to get over their hangups, that there's nothing wrong with renting a home your entire life, and that you shouldn't worry about owning your own home.

Remember Legal also != IMMORAL

[SuperKendall]

so just because they were able to cheat

By definition what they are doing is not "cheating" if the tax department says it is legal.

As much as you and people like you want to paint Apple with the Evil brush, what Apple is doing is sound AND ethical . There's nothing wrong with shifting profits around in the way Apple is doing it, not legally OR morally.

Re:Remember Legal also != IMMORAL

[Zalbik]

what Apple is doing is sound AND ethical .

Only if you have a pretty odd ethical code, IMHO.

Some of us believe that corporations (like citizens) should have an ethical obligation to pay tax to the country they use the infrastructure of.

Apple gets the advantages of Australia's infrastructure, but does not pay for it.

IMHO, this is as unethical as using the WIFI connection of your 80-year old neighbor cause she didn't know how to set up the security correctly. Just because a loophole exists, doesn't mean it's ethical to use it.

Re:Remember Legal also != IMMORAL

[mattack2]

Only if you have a pretty odd ethical code, IMHO.

No, our ethical code is to pay the taxes we owe. Why isn't following the law to pay minimum required fine?

random audio ads on /.

[xednieht]

Why the FUUUUUUCK does audio randomly start playing on ads on /. who is the fucking imbecile that thought it would be a good idea to annoy the FUCK out of people. Fuck you moron, Fuck you moron, FUCK YOU MORON! Yes i'm mad bro.

Re:random audio ads on /.

[geekoid]

Someone got caught goofing off on slashdot when they where suppose to be working...

Re:random audio ads on /.

[SleazyRidr]

Isn't that what we all do here?

Re:random audio ads on /.

[rally2xs]

No, I'm retired...

Yes.

[Anonymous Coward]

"So you voluntarily pay more in taxes than you're required to by law?"

Yes

"You don't take advantage of any legal tax deductions when filing your taxes?"

No.

And for the same reason: It would cost me more in getting an accountant to get the tax breaks than it would save me in tax because I earn so little. So I don't bother.

And many people don't know what taxes or benefits they can have (and many of the pooorest do not ask for it, even if they know they are allowed it, because of the social stigma and the idea that "others have it worse, lets leave the money for the more deserving", which doens't exist much among the rich, but does among the non-desperate poor.

they didn't break the law

[geekoid]

but that doesn't mean they aren't a bad actor.

Hopefully AU will change their regulatory law to stop this sort of greedy crap.
The US as well..also, well, everywhere else.

That's a pretty moronic take

[SuperKendall]

He talks about social responsibility but he only means it if someone else has to pay for it.

No, Apple pays plenty (far more than any other company) for monitoring and reports on suppliers, for bonus to overseas workers that only Apple gives, for higher labor costs because they will not allow workers to be over-worked.

What does not make any sense is to pour MORE money into a giant engine of inefficiency that just wastes it. Why would anyone but a handful of government workers be better off if Apple paid more taxes? Instead Apple is in fact putting that money to good use in bringing production to the U.S. and other worker quality of life improvements - again, benefits to workers that every other company is utterly ignoring.

Which is why

[Overzeetop]

This whole idea of paying taxes on "profits" is silly. If governments wanted to get taxes, they'd switch to gross receipts tax. Of course, their corporate masters won't let them, but that's a whole different problem.

Re:Which is why

[Anonymous Coward]

So, business A has very thin profit margins due to the type of industry and competition. Business B has much higher profit margins due to a new industry and lack of competition.

A has revenue of $100 and expenses of $95
B has revenue of $50 and expenses of $30

Corporate tax rate is currently about 34%. Obviously the rate would need to be much, much lower if on gross receipts instead of profit. Let's say they lower it to 10%

A has net income of $100 - $95 - $10 = -5
B has net income of $50 - $30 - $5 = +15

Why exactly is A getting penalized because it is in a competitive industry with thin profit margins?

Re:Which is why

[rally2xs]

The fallacy is in taxing business at all. Businesses don't pay taxes, they collect them from others, who are their customers when they raise their prices to get the money to pay the taxes, their employees when they deny them raises in order to have to have the money to pay the taxes, and their shareholders when they reduce dividends to have enough money to pay the taxes. We need to stop taxing businesses, because businesses are simply tools that Americans use to generate income. Business taxes are like taxing your hammer, it doesn't make sense. Tax instead the things that people buy. It throws the burden of taxation more on the wealthy, because they buy more things, and they be the least harmed, because they are wealthy.

Re:Which is why

[Anonymous Coward]

That's a truly idiotic idea. An iron ore mine is very much less profitable than a car manufacturer, which is less profitable than Apple. That doesn't mean that iron ore mines are less vital to the economy than Apple (in fact, the opposite is true). If you tax gross receipts, you would have to have an even more complex tax schedule that sets different tax rates based on typical P/R ratios for that line of business, or you would put foundation sector companies out of business, as they don't have the P/R of leading edge manufacturers. Even if you had a golden regulator who correctly regulated sector-specific tax schedules, you would still be unfairly penalising less competitive businesses, and it would have even more of a monopolising effect than today's existing market regulations create.

Re:Which is why

[sydbarrett74]

It throws the burden of taxation more on the wealthy, because they buy more things, and they be the least harmed, because they are wealthy.

Erm, no . If Bill Gates is a million times wealthier than me, do you think he buys a million times more automobiles? He does consume more than I do, but nowhere near in proportion to his greater overall wealth. You're committing a fallacy of composition. The wealthy may consume 10 or 100 times more, but the bulk of the difference in income and wealth are locked up in bonds and offshore accounts. This stuff gets passed onto their progeny, creating a de facto dynastic ruling class.

Two mistakes you made

[SuperKendall]

What I want to know is why isn't Apple liable for US taxes here?

They are, they pay a lot of U.S. taxes.

If I leave the country and go work in another one, all money I make is still taxable by the US federal government

No, only after a certain amount (almost $100k) is it taxable.

Our point is...

[PortHaven]

Government has a duty and responsibility to ensure that they are paying more like $40-$60.

Frankly, force corporations to be taxed on a W2. Hey, Citizens United, corporations are people, right? So use the same W2. And those corporations will in fact pay 1000x in taxes than what they currently pay.

Why did you mix the market there?

[Anonymous Coward]

First you claimed about the top 50%, then you talked about the top 5%.

Why did you mix the market for how much was earned vs how much was taxed?

Is it because the top 5% earn more than 47.9% of the income?

...Apple tends to get singled out for some reason

[tlambert]

...Apple tends to get singled out for some reason

Advertising on column inches. A story about Apple gets more views than a story about some other company.

It's the same reason we keep hearing about "Google busses" being stopped, even though one of them actually belonged to Intuit; reporting it as a Google bus sold more ads per column inch than reporting it as an "Intuit bus" would have.

Right....moron...

[PortHaven]

What we're saying is that the LAWS need to be re-written so that they can no longer legally pay such a low amount of taxes. And we are sharing this as an example of how extremely poor the laws are, and what a crappy job our government is doing in it's role.

And in Apple's case, they're in very gray territory. Creating a subsidiary company, and then charging it from another subsidiary company and insane license agreement. If it can be successfully argued that those charges are unrealistic (ie: no other company would pay even close to the declared charges) than it in fact becomes fraudulent.

It is akin to me taking an old coat, painting a quick picture on the back, taking it to Goodwill and exclaiming that it was worth $5,000 due to the art. And then claiming a $5,000 deduction on my taxes for my donation. If that $5,000 is an unreasonable value, than it is fraudulent. And I wager that the amount Apple is cross-billing between its subsidiaries would, if investigated show to be a fraudulent estimate of value. And thus in fact MAKE THIS AN ILLEGAL ACTIVITY.

If our governments would prosecute.

Re:Right....moron...

[MadCow42]

Great... then prosecute them.

If you can't, then it's legal.

If you don't like it, change the law. More specifically, if the taxpayers (and politicians) in that area don't like it, then they should change the law. Otherwise, what's the fucking story here?

Re:Right....moron...

[Anonymous Coward]

http://www.oecd.org/ctp/beps.htm

I couldn't be stuffed going to lmgtfy, so here's a good first hit.

TL:DR, guvmints are aware, they are discussing what to do, as MOST OF THEM have to agree for anything any single gov. does will fail unless most of them (G20, OECD, etc.) do the same thing at the same time.

I'm aware of my government prosecuting, and winning. And losing. It's currently legal what most companies are doing, and that's the problem. It's legal, tax offices can't do anything to people obeying the law (and companies are people, remember).

So you like to subsidize Apple?

[sjbe]

No, Apple pays plenty (far more than any other company) for monitoring and reports on suppliers, for bonus to overseas workers that only Apple gives, for higher labor costs because they will not allow workers to be over-worked.

"Far more"? Demonstrable nonsense. There are plenty of companies that actually have their own facilities in China (and elsewhere) and I assure you that doing that costs FAR more than what Apple pays to "inspect" their suppliers. I've been to China and visited plants for companies like Emerson Electric which has over 10 plants in China. Apple sending over a few inspectors and "demanding" that they not overwork their workers (which BTW they still do) is hardly what I consider socially responsible. And Apple only instituted those inspections after getting a lot of bad press for their earlier lack of giving a crap. When you have to be shamed into bad behavior you aren't being responsible.

What does not make any sense is to pour MORE money into a giant engine of inefficiency that just wastes it.

Ahh, yes. The old stupid saw that all taxes are just wasted money. It's a completely nonsensical and ideological argument made by people who don't want to actually consider the actual economics involved but would rather engage in soundbite arguments. Taxes are necessary for any society and much of it demonstrably serves the public interest. Yes there is waste but it does not follow that all taxes are bad because of that fact. Furthermore since the US government falls further into debt each year, letting Apple off the hook on taxes merely makes the burden on you and me just that much greater. If you want to argue that we should reduce spending I'll agree with you but until we do everyone (including Apple) needs to pay their share. Do you enjoy subsidizing Apple? I sure don't appreciate it.

Why would anyone but a handful of government workers be better off if Apple paid more taxes?

Have you seen the size of the US debt? Are you really so daft as to thing that Apple dodging taxes has no effect on you and me?

Re:So you like to subsidize Apple?

[SuperKendall]

There are plenty of companies that actually have their own facilities in China (and elsewhere) and I assure you that doing that costs FAR more than what Apple pays to "inspect" their suppliers.

Name one. You work for one of the slavers.

Apple sending over a few inspectors

It's a lot more than a few, and it's constant. AND it's published. Where can I look at Emerson's reports? Thought so.

The old stupid saw that all taxes are just wasted money.

What's more stupid is to realize how true it's become.

Taxes are useful - up to a point. But we long ago crossed the point where they are NOT useful, they are just feeding large political systems that produce nothing of value. Schools are suffering not from lack of money, but lack of people who care or have to care.

Have you seen the size of the US debt?

Yes, made far worse by large bloated government organizations that spend 2x whatever you give them. Raising taxes will only INCREASE debt the way the current system is organized. I know you can't see that, you remain so willfully ignorant to the reality of what money and power do - but that is the truth.

I'll let you have the last response since this is not a debate, just you laying out the groundwork for having to disclaim any connection with your Slashdot userID in years to come...

Re:So you like to subsidize Apple?

[sjbe]

Name one. You work for one of the slavers.

I did name one and you have no idea who I work for. (It isn't Emerson or anyone affiliated with them)

It's a lot more than a few, and it's constant. AND it's published. Where can I look at Emerson's reports? Thought so.

Look at Emerson's published financial statements. You have to dig a little but the cost of their China operations is in there.

Taxes are useful - up to a point. But we long ago crossed the point where they are NOT useful, they are just feeding large political systems that produce nothing of value.

Nice little content free soundbite with no evidence whatsoever to back it up. Turn off Fox News for a while. You might find it refreshing.

Schools are suffering not from lack of money, but lack of people who care or have to care.

If you believe that you clearly do not work in a school. I do get a small portion of my pay from a school system. Any claim that schools are flush with money is demonstrably absurd. If you think that the people who work in schools "don't care" then you don't actually know any of them. Tell the teachers who spend their own money to buy school supplies for their students and who work 12+ hour days that they don't care to their face sometime and let me know how that goes for you.

Yes, made far worse by large bloated government organizations that spend 2x whatever you give them. Raising taxes will only INCREASE debt the way the current system is organized.

Nobody is "raising taxes" unless you are one of those tea party idiots who thinks that any increase in revenue = a tax increase. The debt already exists and has to be dealt with. There is NO way it is going to go away through cutting spending alone no matter how much some might wish it so. Apple (and other companies) are engaged in the morally reprehensible act of dodging taxes and sticking you and me with the bill. If you are ok with that then how about you pay my tax bill too?

I'll let you have the last response since this is not a debate, just you laying out the groundwork for having to disclaim any connection with your Slashdot userID in years to come...

Kiss my ass troll.

88.5 million is 0.044%?

[DavenH]

That would put its potential tax liability at $201B. 4.4% seems more likely.

Taxpayers subsidizing Apple

[sjbe]

No, the law is pretty clear. Management has a fiduciary duty to manage the companies’ assets for the owners – that is the shareholders.

That is legally correct but just remember that by making that argument you are essentially subsidizing Apple. The US government runs a deficit and by Apple weaseling out of taxes via legal loopholes they are placing the burden of that unpaid tax on you and me. They might be legally allowed to do what they are doing but the people paying the price for it is the citizenry. We have to make up the difference for taxes that go unpaid by Apple, legally or otherwise. I find it reprehensible that our government has failed to close these loopholes given the budget deficit.

CEOs can’t (or at least shouldn’t) just give money away to people they like.

What exactly do you think a charitable contribution is then if not giving away money to people they like? Charity does not improve the cash position of the company a bit. It doesn't matter if you are paying the tax man or a charity - the money is still spent on something that won't bring in a dime of revenue to the company.

Re:Taxpayers subsidizing Apple

[alexander_686]

I am not making a argument about subsiding apple, and if you reread your comment you will see why. You are suggesting that people in a highly competitive environment play nice and give back a fair amount in taxes (which is subjective) to the correct government (another subjective call) while their competitors don’t. No – your second point is the correct answer – close the loopholes.

As for charity, that is a hot topic in corporate governance. Should a CEO be able to give your money (i.e. the company’s money) to charities he likes? I can point to many examples of abuse. In reality, I will point out that most charitable giving is from the corporate’s marketing office, which makes me wonder how charitable the giving is.

Re:Taxpayers subsidizing Apple

[sjbe]

You are suggesting that people in a highly competitive environment play nice and give back a fair amount in taxes (which is subjective) to the correct government (another subjective call) while their competitors don’t

I'm suggesting nothing of the sort. Companies are run as amoral entities. I fully expect a company to push their behavior to the limits of the law. The morality of that however is different from the legality and the people who run these companies are fully aware of what they are doing. If company management is directing their organizations to engage in widespread tax avoidance to the detriment of the rest of the taxpaying public, then that is a problem. The behavior should be condemned by the taxpaying public and the loopholes should be closed as soon as possible. They certainly are violating the spirit of the law if not the letter and that quite simply is not something I can condone. I do not appreciate being left to pick up the tab.

If anyone makes the argument that Apple's tax avoidance is ok because it is legal then they are de-facto arguing that we as taxpayers should subsidize Apple. If we do not believe that Apple should be paying so high a tax burden then the laws should be changed to reflect that but it clearly is not the intent of the laws as written. Apple (and others) are simply weaseling out of taxes the ought to be paying even if they legally aren't required to.

Re:Taxpayers subsidizing Apple

[alexander_686]

I don’t think we are that far apart. I am going to assume that we both think that Apple’s corporate tax rate is too low. There are 2 solutions.

There is the bottom up solution where Apple voluntarily increases the taxes it pays to a fair level, but that raises 2 questions. First, what is a fair level? I would say something in the 5 to 10% range. I am going to guess you would suggest something higher, but it really does not matter. The “fair rate” is subjectively decision. This is particuallary true in Apple’s case where they need to split the profits between different states, where each state/society is going to have different concept of fairness. (Is a personal income tax more or less fair then a corporate tax, VAT, etc. High taxes and high services, or low taxes and low services. etc.) Second, why would one company chose a higher level of voluntary contributions then its competitors? Why would it choose to gimp itself? It would not be a stable situation and tax revenue would fall. I understand the moral appeal but I can’t endorse a system that has subjective and unstable values to underpin the morality of the tax code. I don’t think it is workable.

Then there is the top down, where we close the loopholes. I think on this issue we are much closer.

Re:Taxpayers subsidizing Apple

[sjbe]

I am going to assume that we both think that Apple’s corporate tax rate is too low.

They certainly are paying less than the statutory rate so yes I believe they are paying less than they ought to be paying.

There is the bottom up solution where Apple voluntarily increases the taxes it pays to a fair level, but that raises 2 questions. First, what is a fair level?

"Fair" is probably the wrong way to look at it since it is a C-Corp. A fair rate would probably be something equivalent to what the shareholders would pay if it were an S-Corp where the shareholders have to pay for the profits of the company because a C-Corp is really taxed twice. However I don't pretend to know and don't think it is relevant what a "fair" rate is for a C-Corp at least in relation to this conversation. I think Apple should be paying whatever the statutory rate is without any devious loopholes. If the statutory rate is too high for US firms to compete (it might very well be) then that is a separate issue which needs to be dealt with. However, given Apple's cash position and the rate at which it is growing I don't see that as an actual problem for them. They are generating cash faster than they can invest it and paying the statutory rate wouldn't change that situation.

Second, why would one company chose a higher level of voluntary contributions then its competitors?

They won't so it's a moot question. However Apple is building up cash faster than they can profitably invest it to grow the company. That means that Apple could pay MUCH higher taxes without handicapping themselves in any meaningful way. (Google and Microsoft are in the same boat) They would be making less profit but not less than they appear to need to grow the business and provide a reasonable return for shareholders. I'm an accountant and I simply do not see how Apple's ability to compete would be impeded in any way by paying a greater tax burden.

The taxpayers are not Apples sugardaddy

[sjbe]

Apple - nor any corporation - is not a charity. It's not their job to pay more taxes than they legally have to. Their job is specifically the opposite - generate as much value for shareholders as they can.

That is true. However you need to finish the thought. If Apple is not paying taxes then someone else has to pick up the tab because those government expenses didn't just magically vanish. That person is rest of the taxpaying public. Do you think it should be OK for Apple to avoid paying taxes and stick you with the bill even if they aren't breaking any laws by doing so? Given the size of our budget deficit I don't really appreciate having my future robbed from me so a company with $160 Billion in cash can get a smaller tax bill.

Any company that pays more than they have to by law should be questioned, or the shareholders should revolt.

And any company that pays less than they ought to should be questioned or the taxpayers should revolt.

So your argument is essentially "don't hate the player, hate the game"? Yeah, that's a pretty shitty argument when sleazy guys make it to justify their bad behavior towards women and it isn't any better here.

Re:The taxpayers are not Apples sugardaddy

[number17]

Do you think it should be OK for Apple to avoid paying taxes and stick you with the bill even if they aren't breaking any laws by doing so?

The bill is for copyright and patent protection. I bet they would clamoring to pay their taxes if they didnt receive those benefits.

Re:The taxpayers are not Apples sugardaddy

[MadCow42]

No, I'm not arguing that Apple shouldn't be paying more taxes. Not just Apple, but many large, profitable companies that don't pay much or any tax should pay more.

However, the problem is NOT WITH APPLE. It's with the laws that let them do this. Fix the damn laws, don't blame the companies that use the current laws to ensure they do THEIR job properly (i.e. make money).

Cherry picked altruism

[sjbe]

Tim Cook recently told a shareholder that Apple would put environmental concerns before profit. Are you saying that Apple should be questioned or the shareholders should revolt over that?

He said “When we work on making our devices accessible by the blind, I don’t consider the bloody ROI. If you want me to do things only for ROI reasons, you should get out of this stock.” Now to be perfectly frank he's being a little disingenuous here and cherry picking when he's going to consider ROI and when he isn't. I also think it is kind of ridiculous that a company that makes more than half their money from the iPhone and iPad which is close to useless to a blind person uses that as an example of corporate altruism. When he chooses to take advantage of tax loopholes he isn't doing it for altruistic reasons, he is doing it to maximize ROI by sticking the US taxpayer with a larger share of the cost of the government.

Re:Cherry picked altruism

[Kalriath]

I very much doubt Tim Cook is the person that makes those kinds of decisions. It's likely more in the CFO's realm than the CEO.

Subsidies for the Rich raise Tax on the Rest

[WillAffleckUW]

And you wonder why our societies are hollowing out?

Look, the Rich don't pay taxes like you and me.

Well, actually, it's just you. I use a lot of the things I learned from tax lawyers and tax accountants running a large estate so that I pay about what Bill Gates pays.

Stop subsidizing them. They won't love you more and they won't change their investments in your favor.

I think you missed your own point...

[Anonymous Coward]

So lets examine the statement "...the top 5% earners pay 47.9% of the total tax." The two key terms here are "top 5%" and "total tax". In the US the top 5% of earners earn in excess of 90% of the income. The term "total tax" implies total tax revenue. Assuming a simmilar distribution of wealth, if they are earning 90+% of the income they should be paying 90+% of the total tax revenue not a paltry 48%. Given this data I would say they are escaping close to 45% of their tax burden and "stealing" it from the lower earners. You have defealted your own arguement that criticizing the wealthy is selfish or uninformed with your own data.

Read Again

[SuperKendall]

Only if you have a pretty odd ethical code, IMHO.

No, it's pretty sound. Pay some taxes but not more than is reasonable.

Why does that strike a moral pang in your heart?

If the taxes were 100% of all earnings would you claim they should be paid?

There obviously is some value for which taxes are too high. It's too grey a line to claim anyone is crossing it unless they pay zero, and sometimes not even then (but, Apple does not pay zero taxes anywhere).

Some of us believe that corporations (like citizens) should have an ethical obligation to pay tax to the country they use the infrastructure of.

Apple does pay taxes in every country. They pay taxes in the U.S. They pay taxes in Australia. They pay taxes in Ireland. They just move where some of the income is declared in a way that the countries involved agree is correct. So how is Apple shorting Australia when they pay more in taxes than they consume in services?

In any worldwide company, it can make a lot of sense to shift where income is declared. If a device is assembled in a different country with parts made by still other countries, why does it make sense that 100% of the profit from every device sold in Australia is declared in Australia?

IMHO, this is as unethical as using the WIFI connection of your 80-year old neighbor cause she didn't know how to set up the security correctly.

That's unethical because you are literally stealing from her bandwidth cap, outbound connection speed, and potentially getting her in trouble if you are using any illegal torrents. But Apple is stealing from no-one. If even the Australia tax people don't think Apple is, what gives YOU the right to claim Apple is stealing just by shifting where some income is declared?

Tax Corps Based on the CItizenship of Their Owners

[scruffy]

Really, the "location" of these mega-corporations is a sham.

Instead, figure out (or estimate) what percentage of the shares are owned by US residents. Multiply that percentage times the corporation's profit times the corporate tax rate and that is what they should pay.

Note: Any public corporation knows who are the immediate owners, so that they can send out shareholder info. However, a shareholder might be another corporation which is owned by other corporations, etc. Hence, the need to estimate (along with following the money as much as possible).

Wonder really?

[Anonymous Coward]

Duh huh? What? You really don't understand who the politicians and lawyers work for well it the guy with the money. That was is and will always be true.

The real deal.

[Anonymous Coward]

Actually many wealthy realize that the poor in fact support them. Those who do not are not worthy of the name human.

More to it than that.

[Anonymous Coward]

Apple pays 1.9% in the US. The shell game is well known and documented. Yes you too can set up dummy corporations is the appropriate jurisdictions and if you wealth and income can make the overhead acceptable pay almost no tax whatsoever! But yes your Dutch / Irish shells can effectively expatriate earnings. For individuals the use of anything more than a good tax accountant can do is frivolous. A good tax accountant and proper management can leave you almost tax free. I am not an expert and this is a complex game. Get competent advice. I think citizenship has little to do with billions of dollars.

A few employees?

[Anonymous Coward]

There's more than a few employees, there's 4500 and a production line.

Apple is stateless

[ras]

The entity receiving the money is known as a stateless organisation. It's controlled by Apple, obviously.

How does an organisation become stateless? They take advantage of different of residency in different jurisdictions. For example, country A may say you are based in A if your headquarters are there. Country B may say you are a country B organisation if your board meets there. Country C may say a company is comes under its laws if the bulk of its board are residents there.

One way to be stateless that that situation is to have your headquarters in country B, and have your board meet in country A.

This is what the entity Apple transfers the money too does, so it isn't under the control of any country's laws. It is perfectly legal, of course.

This loophole won't be around for much longer. All that is needed to fix it is the various countries get the respective laws consistent. Doing that is on the agenda for the G20 meeting in September.

$88.5 million *earnings* not $88.5 million tax

[MattCC]

The /. item claims "The article states that last year alone, Apple Australia paid only $AU88.5 million in tax ..." but that is incorrect. The article states "Last year Apple reported pretax earnings in Australia of only $88.5 million ..."

Actually Ireland is just a scape goat.

[Anonymous Coward]

Actually Ireland is always the scape goat in this corporate money laundering scheme. Most of these companies actually exploit a gap in law that allows them to send it to Bermuda which has 0% tax.

Corporations can't feel shame

[Anonymous Coward]

Contrary to what SCOTUS thinks, corporations are not people; they can not feel shame. And the people running them have a legal obligation to maximize shareholder value, which means not throwing away money they don't have to.

jythie was right: the only way this is going to change is to fix the broken tax law.

Can't we all do the same?

[Anonymous Coward]

What about creating a company that hires everyone who wants to and everyone would become a consultant that other companies would hire.
This company would take care about paying your salary (well maybe not as such) providing that you work, and would manage to get rid - or at least try - of taxes being in Ireland? Would that work? That would be a way to force governments to make better laws!!!

Julien

Re:Is duty to society duty to shareholders?

[bingoUV]

Ok, all you moral appeal people commenting in this story have failed to come up with the "moral" tax amount a company should pay. Why is that? You want to try?

An APPL Shareholder says YAY!!!

[Anonymous Coward]

As an APPL shareholder, I expect Apple to do everything within its legal power to minimize its tax burden, just like all other corporations and most individuals do.

Ireland did not, this is a disingenuous story.

[Anonymous Coward]

The fact that Irelands national debt would be paid by this, determines that this is a liehttp://beta.slashdot.org/story/199043#notooltip

You are an idiot

[Anonymous Coward]

Ireland does not get billions, Ireland gets 0%. We do not tax business done in other countries. Other countries whose tax laws are allowing this. Look to your leaders for they are idiots.