Apple's Luxembourg Tax Deals

Presto Vivace sends a report from the Australian Financial Review on how Apple uses a holding company based in Luxembourg to avoid taxes on its iTunes revenue. Quoting: The 2011 accounts for iTunes Sàrl [the holding company] give the first inside view of how Apple accounts for its growing earnings from digital content. They are part of a massive leak of Luxembourg tax documents uncovered in an investigation led by the International Consortium of Investigative Journalists. Remarkably, the accounts show Luxembourg has been more effective in extracting tax from iTunes than Ireland has with much larger Apple sales. Turnover for iTunes Sàrl exploded from €353 million ($508 million) in 2009 to €2.05 billion in 2013. Secret appendices to the 2011 accounts break down some of Apple’s costs. It shows that Apple takes a third of iTunes’ revenues as its gross profit margin. The 2011 figures showed that a flat 50 per cent of this gross profit was paid in intercompany charges. (Followup on a similar strategy from Amazon we discussed last week.)

Comments

Simple fix

[Anonymous Coward]

Assign someone at the IRS to figure out what they should be paying, and are dodging, add the cost of doing this estimate, and a 50% penalty on top of both, and tax the portion of the company that IS HERE that amount.

Do this for all tax cheats until this nonsense stops and again whenever it pops back up in perpetuity.

Solved. Ya welcome.

Re:Simple fix

[Presto Vivace]

I think the IRS would need legislation giving them legal authority to do that. Otherwise sounds like an excellent idea.

Re:Simple fix

[slazzy]

You can almost hear the sound of CEOs packing up their suitcases and moving to a warm tax free country taking all future revenues with them... I'm afraid the answer is not that simple.

Re:Simple fix

[pushing-robot]

You *do* pay your state use tax for all those things you order over the Internet, right?

Re:Simple fix

[Anonymous Coward]

This. It is called freedom to move where you are valued.

The US values demagoguery over freedom and tax revenues, and so gets more demagoguery and lower revenues.

Re:Simple fix

[Anonymous Coward]

In which case, watch Apple in the biggest ever inversion. Probably also laying off many of their US based staff.

Think they won't? Go ask IBM, who has inverted their employee locations. Used to be 80% US employees. Now 80% NOT.

Re:Simple fix

[CastrTroy]

I think the only way to tax companies is to tax them on revenues rather than profits. The can always reinvest, shift around, or hide profits, but revenues are a lot harder to hide. I don't get to discount all my operating expenses on my personal income tax, why should a corporation be allowed to do the same. Either don't tax the corporations at all, and increase sales and/or income taxes to make up the difference, or tax corporations in a way that they can't avoid them so easily.

Re:Simple fix

[NoNonAlphaCharsHere]

And by "where you are valued" you mean "where we can get away with the most bad behavior". Like how their manufacturing is in China so they can pay the least and pollute the most.

Re:Simple fix

[bluefoxlucid]

They're paying what they should be paying.

All business done in the US pays US taxes. That is: if iTunes sells $5 million of songs in the US, Apple pays taxes on $5 million of revenue. Simple enough.

At the same time, any US company which sells something to Japan, Germany, France, Britain, and so on also pays taxes on it. If iTunes sells $50 million of songs in Europe, Apple pays $50 million in taxes to the US.

All Apple has done is moved their iTunes operations under another company headquartered in Germany. When iTunes sells $5 million of songs in the US, Apple pays US taxes on $5 million; but when iTunes sells $50 million of songs in Europe, Apple doesn't pay the US shit.

You may notice that the US is trying to tax businesses for doing business in the US, and also tax US businesses for doing business outside the US. US businesses are simply moving their non-US business outside the US, which is where it is anyway.

Re:Simple fix

[bluefoxlucid]

Doesn't work that way. In this case, the US wants to tax a US business on income from US business, but also on income from Japanese business. Instead, the US business moves to Ireland, pays 0.027% taxes on Japanese business, and pays the US taxes on business done in the US--but NOT on business done anywhere else in the world

There is a penalty for being an American business.

Re:Simple fix

[Anonymous Coward]

Generally speaking, yes: http://www.boe.ca.gov/formspubs/pub109/

Re:Simple fix

[therealkevinkretz]

That's nuts. You'd gut businesses with low margins and undertax the ones with high margins.

Re:Simple fix

[Anonymous Coward]

I wonder if you were singing the same song about a few hundred million worth of tax payer dollars Google got away with after the government referbed a large installation and are leasing it for a song and a dance?
 
Typical Slashdont... make up all kinds of fantasy scenarios about punishing one company and applauding another company for getting away with fraud.

Re:Simple fix

[ShanghaiBill]

And by "where you are valued" you mean "where we can get away with the most bad behavior".

Paying only the taxes that you legally required to pay is not "bad behavior". Our tax laws are idiotic. It is silly to blame that on companies that legally minimize their taxes, rather than the politicians that make the laws.

America has one of the highest corporate tax rates in the world, yet because of all the loopholes, we have one of the lowest rates of corporate tax collection. Furthermore, the nature of those loopholes gives a huge incentive for companies to move their headquarters and administrative jobs out of America. If you started from scratch, it would be challenging to design a dumber and more counterproductive tax law. How is that Apple's fault?

Fixing corporate tax law is hard, because it is easy for opponents to demagogue the issue, and claim that lowering rates is a giveaway to evil corporations. The counter argument, that no one actually pays the current rate because of all the loopholes, doesn't fit into a 30 second sound bite.

Re:Simple fix

[ShanghaiBill]

I don't get to discount all my operating expenses on my personal income tax

Yes you do. If you have expenses directly related to generating your income, they are deductible. The law on this is exactly the same for individuals as it is for corporations.

Re:Simple fix

[ShanghaiBill]

You'd gut businesses with low margins

Low margin businesses would all be taxed the same, so they would just pass the cost on to their customers.

... and undertax the ones with high margins.

Good. High margin companies are more productive, and grow faster, producing high paying jobs. Lower taxes will enable them to prosper, and help the entire economy. They would only be "undertaxed" if you consider the current, profit based, tax system to be the natural order of things, rather than a counter-productive job-killing perversion.

Re:Simple fix

[TheTerseOne]

This is exactly what the Medical Device tax - that was a part of Obamacare - does. Taxes Medical Device Manufacturer's top line, not the bottom line.

Re:Simple fix

[rahvin112]

Except of course all those tax free countries don't have any revenue or sales, those all take place in those horrible taxable countries that want real standards of living, infrastructure, a relatively fair legal system and all those things you experience in modern society. I'd love it if all those CEO's and other fuckers that think they don't have any responsibility to contribute to society moved off to those tax free countries, as along as they surrender their citizenship on the way out. Because inevitably when the people of those countries see all that wealth and decide to seize it for themselves those jackasses will come running back to their countries of origin and demand that they be protected by force of arms.

The companies can't move to those tax free jurisdictions at the same time all the revenue comes from the taxable jurisdictions. We've got a stupid loophole that people have put into the tax codes of Europe and America that allow this to happen and the simple solution is to close that loophole not eliminate the taxes. Those companies aren't going anywhere because they won't exist without American and European consumers.

Re:Simple fix

[Anonymous Coward]

This. It is called freedom to move where you are valued.

The US values demagoguery over freedom and tax revenues, and so gets more demagoguery and lower revenues.

That is what they threaten with. The thing is that the CEO doesn't really want to move. And without local presence its harder to influence the politics. Also, without a local office you miss out on the US market.

Or to sum it up, the threat to move elsewhere is nothing but hot air. The answer is, if you don't pay taxes we don't need you here anyway.

Re:Simple fix

[Trailer Trash]

It's worse than that. When you talk about making big evil corporations pay more - well, it ends up being little corporations like mine paying out the nose. 4 or 5 years ago I paid off a debt one year, which of course meant that I had a huge profit since I couldn't expense out the debt payment as I could employee payroll or something. I ended up writing the IRS a check for $12,000 or so. That's a lot of dough for a one man company. I joked at the time that I paid more taxes than Apple.

The next year I had a loss. Knowing that the tax laws allow large corporations to get a refund of prior year taxes when they have a loss I asked my accountant about it. His response was that it would cost far more to file the paperwork than what the refund would be. The loss wasn't huge (and is normal) but would have resulted in a couple grand coming back.

People (especially on the left) need to realize that raising corporate tax rates will not screw Apple, Google, etc. They have enough money to write the tax laws and they *will* be exempted. It's not only or even mostly Republicans doing that, by the way. It's at best a bipartisan effort and at worst a Democrat effort. If you raise corporate tax rates companies like mine will pay. And it would help the country better if I could spend that money myself or use it to hire someone.

Re:Simple fix

[PraiseBob]

I wish them the best of luck in sales to the good people of Luxembourg, Ireland, and small carribean islands. I'm sure their total revenues after dropping the costly US market will improve tremendously.

Re:Simple fix

[therealkevinkretz]

Yes. It's stupid, even more so when applied to an industry where innovation often means years of low profits and unsuccessful products before a 'hit' that makes them money.

Re:Simple fix

[CastrTroy]

I need food to eat. If I don't eat, I can't generate income. But I can't deduct it on my personal taxes. I also have to get to work, but I can't claim any transportation amounts on my personal taxes. I need to wear clothes to work, often more expensive ones than I would generally wear if I wasn't at work, but I can't deduct the cost of clothes. But a corporation can claim deductions for any expenses whatsoever. There's almost nothing that a business can spend money on that doesn't qualify as a deduction. Whereas for individuals, only a very small percentage of what I spend my money on actually qualifies as a deduction, and most of it isn't related in any way to my employment. Things like medical expenses and charitable donations are tax deductible, but don't really have much relation to me actually generating income.

Re:Simple fix

[therealkevinkretz]

Huh? And those customers would just keep buying the same amount of the low-margin widgets? Of course they wouldn't.

Lower taxes do help companies prosper. But you're making a lot of generalizations about 'high margin' companies and their benefit to justify fucking over the low-margin ones.

Re:Simple fix

[Anonymous Coward]

Yep. Been keeping track of stuff bought online for years now, tallying up the use tax owed in lieu of sales taxes, and paying that along with the state income tax filing.

I took the oath to defend the Constitution against all enemies, including my own bad self from time to time.

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, ...

Re:Simple fix

[Anonymous Coward]

Apple with its actual profits and the amount of taxes it actually pays to the US IRS by no means qualifies as "a penalty for being an American business".

The fact that there is a company in Ireland or Luxembourg with a small office with 2 employees that made 2 billion in income in a year shows they are trying everything they can to exploit the system and avoid taxes in the countries where the money was actually made.

My small landscaping company can not do that and I am the one paying the penalty.

Re:Simple fix

[Anonymous Coward]

We're talking about Corporate tax which is taxed on profit and not revenue.
Apple and others are "profit shifting".
For example, Apple's Luxembourg arm buys the song from the content owner for perhaps $1, they then sell it to Apple US for $2.98, which sells it to the buyer for $2.99.
Apple pays 30%(?) tax on $0.01 in the US instead of $1.99. Apple's Luxembourg arm then pays .02% tax on the $1.98 with the added benefit of the money being moved overseas - always good for the US economy!
If you're talking about $5 million in revenue, that's a lot of profit that the US cannot tax.

Re: Simple fix

[Anonymous Coward]

Says the (probably) lying Anonymous Coward.

Give us some proof that you actually pay use or sales tax on your Internet purchases.

Re:Simple fix

[skegg]

Knowing that the tax laws allow large corporations to get a refund of prior year taxes when they have a loss I asked my accountant about it. His response was that it would cost far more to file the paperwork than what the refund would be.

This here is the real zinger.

Almost everything that these large corporations do which results in them realising such lower effective tax rates -- lower than small businesses, and lower than even lowly paid employees -- is LEGAL, however EXPENSIVE to achieve.

Let's say the professional advice, off-shore entities, and expenses for submitting paperwork to government departments costs a million dollars a year (I plucked that number out of the air): a company would need revenue many times that to make it worth all the effort. So existing laws -- which make such behaviour legal -- favour larger corporations.

It's the same with family trusts in Australia: they're legal financial instruments that "coincidentally" allow people to decimate their income tax obligations. Unfortunately, they're also a little costly to establish and maintain, so only wealthy people end-up using them.

NONE of these laws are by chance ... I believe they're DELIBERATELY DESIGNED to benefit the wealthy.

Re:Simple fix

[Anonymous Coward]

I think the IRS would need legislation giving them legal authority to do that. Otherwise sounds like an excellent idea.

Ha ha ha ha ha ha. Congress is more likely to give Apple (and all the other US tax dodging companies) a pat on the back than to ask what the country is owed. Crook companies, crook Congress.

Re:Simple fix

[poetmatt]

No.

Most manufacturing is in China because it's one of the only places people do it anymore. Low margin items are simply not commonly manufactured in the US and haven't been for probably 30 years.

Re:Simple fix

[faedle]

Yes. ILI Oregon, where it's 0%.

Re:Simple fix

[Dynedain]

You spend money on food regardless if you have any income. Ergo, food expenses are not direct costs associated with your income.

If you have to wear a uniform to your job, and pay for it yourself, then it is certainly tax deductible. Just like travel, meals, etc.

Rule of thumb - if you could do without it when unemployed, but it's required for your *particular* employment, then it's a direct expense that you can probably deduct.

Re:Simple fix

[Anonymous Coward]

They have it. Try any of these bullshit shenanigans with your own C-Corp and enjoy your bend over and take it up the ass audit.

It's the old adage, owe the bank a million dollars and they own you, owe them a billion and you own them.

Re:Simple fix

[N1EY]

I believe that corporate tax receipts in the US are higher than the receipts for corporate tax in Japan. Most other countries have significantly lower collections from corporate income taxes. Most of the other countries do not tax income earned by a corporation in another nation. Why should America penalize the corporations with the imposition of a disadvantage? The European countries have a high amount of taxation as a percentage of overall GDP. This is due to their higher rates of taxation on individual incomes. Those tax schemes are more progressive. Corporate income tax serves as a regressive taxation on the middle class. The middle class would bear more of the burden from any increase in corporate income tax versus the rich. The real problem in the system lies with the offspring of liberal institutions such as Harvard. Those schools mint managers that have no sense of fair play. Look at the article in today's WSJ. The problem with Medicare remains on the shoulders of the Doctors. Is the Doctor really ethical when he or she orders a $2500 panel of tests on an 80 year old man in order to evaluate the patient for illegal drug addiction? Is the said Doctor ethical when this doctor places the order on the chart of every patient over 65? Nothing is wrong with Medicare in such an instance. It is a particular person that is taking advantage of the system. Such people should be punished. People should be punished if they set up structures to create transfer pricing. They should face charges for fraud. This does not mean that a loophole exists. Nor is there a need to change anything in the tax structure.

Re:Simple fix

[lgw]

Customers of Wlamart need those low prices. You don't seem very compassionate towards them in you zeal to give their money to the government (which is what you're explicitly advocating). Perhaps Walmart shoppers aren't the best target for raising federal revenue?

Corporate tax rates are meaningless. The money will eventually be spent somewhere taxable - employee income, or shareholder dividends.

Re:Simple fix

[N1EY]

This principle is dangerous. Most companies do align with each other on ROI and margin. Within two separate industries we could have 10 companies with the same level of gross receipts but wildly different net income amounts. We could actually impose a tax that one of these companies could not bear. Most of the companies would probably have a rate of taxation in excess of the normal range. Such a principle would lead to a tax burden far in excess of the burden held by companies in foreign nations.

Re:Simple fix

[Immerman]

I might agree with you, except for the fact that the large abusive companies are largely responsible for the fact that the tax laws have such huge loopholes in them in the first place. Buying congress is a lot cheaper than paying your fair share of taxes.

Re:Simple fix

[Anonymous Coward]

This is what should happen though. What happens when an Amazon comes along, develops a business, has significant revenue but horrible margins in order to grow. The last decade plus led to horrible taxation levels from that entity - furthermore their jobs they create are pure trash. See Texas and their race to the bottom to attract Amazon, something like $25k per horrible job created and then Amazon they left if I recall. This can happen so easily and yet the company grows, stock holders have "value" growth, and they kill main street, and the _whole_ time there is basically no taxes coming into the national coffers. The fix is simple, tax revenue.

Re:Simple fix

[radarskiy]

In US Federal personal income tax the individual taxpayer can take minimum standard deductions for themselves and dependents, regardless of any other factors, and gets a progressive tax rate.

Re:Simple fix

[Anonymous Coward]

Corporations can do without the dinners, the executive's cars, the private jets, the business class seats, the travel, and, let's face it, a lot of what they spend on office spaces.

Yet for them that's deductible expenses, no questions asked. As a matter of fact, a lot of them incur in those expenses because they are tax-deductible.

Re:Simple fix

[Anonymous Coward]

Basically, the US should adopt the .02% tax rate.

Re:Simple fix

[Anonymous Coward]

Find a way in which all American citizens can do the same. Then do it. Let's see how long that works.
How come companies can do it but not citizens?

Re:Simple fix

[ShanghaiBill]

I asked my accountant about it. His response was that it would cost far more to file the paperwork than what the refund would be.

I suggest you get a new accountant. I use Turbotax for Business, which costs less than $200, and it handles carryovers automatically, with just a single click.

Re:Simple fix

[Anonymous Coward]

That was his entire point. A corporation needs computers and desks and an office to do virtually any job these days, but every last cent they spend on those computers is deducted from their taxable revenue. Money required for an individual to exist is taxed; money required for a corporation to exist is deducted.

Re:Simple fix

[mattack2]

IANAL.. but can't you deduct transportation to work if you live farther than X miles away?

Also, if your clothes are more expensive than you would wear otherwise, maybe it counts as a "uniform", and AFAIK, you can deduct the cost of those.

Re:Simple fix

[Anonymous Coward]

"It is silly to blame that on companies that legally minimize their taxes, rather than the politicians that make the laws."

Indeed. Why are you only blaming the companies that lobbied those politicians to create those laws when you should also be blaming the politicians that let themselves be bought out.

Blame both, neither side of that situation is innocent.

Re:Simple fix

[mjwx]

You can almost hear the sound of CEOs packing up their suitcases and moving to a warm tax free country taking all future revenues with them... I'm afraid the answer is not that simple.

You see, it doesn't matter where the CEO's live, it matters where the company does business.

If an arrest warrant for a CEO is put out, that severely limits their travel options to countries that have no extradition treaties with the country in question, so no EU, no US and probably no SE Asia as they seem to roll over for the US whenever offered a treat. That's most of the worlds travel hubs. Meanwhile, ever asset they own in a western county is frozen and probably auctioned off for far less than their actual value.

CEO's and businesses will lose if they want to make push come to shove, they know they will lose hard which is why they're so desperate to get any conflict stopped at the legislative level.

Re:Simple fix

[zippthorne]

You can't deduct your commute, which for many people is the largest cost of having a job...

Re:Simple fix

[ShanghaiBill]

Customers of Wlamart need those low prices.

Walmart would only be taxed on the difference between their sales price and the price they paid their suppliers. Since their margins are lower, they would pay less tax than their competitors. They are also more profitable than most of their competitors, so pay relatively higher taxes under the current system. Walmart (and their customers) would be big winners if we moved to a revenue based tax system.

Re:Simple fix

[drinkypoo]

Our tax laws are idiotic. It is silly to blame that on companies that legally minimize their taxes, rather than the politicians that make the laws.

Nope. The corporations write the laws and then hand them to the politicians alongside a fat bag of cash. Guess you paid too much attention in civics.

Re:Simple fix

[ShanghaiBill]

Yet for them that's deductible expenses, no questions asked.

These are ALSO deductible by individuals. If you use your car for business (other than commuting) then you can deduct the expenses, and a proportionate share of the cost of the car. If a corporate car is used for commuting, then that portion is NOT deducible. Nowhere in the tax code about vehicles does it make a distinction about whether the owner is incorporated. Same for dinners. Same for travel. Same for office space. The rules for corporations and individuals are the same.

Re:Simple fix

[ShanghaiBill]

Money required for an individual to exist is taxed; money required for a corporation to exist is deducted.

That is a silly comparison. Corporations exist primarily to make money. Corporations don't take family vacations to Disneyland. If they spend on something that is not income related, then it is not deductible, and it is treated exactly the same is if an individual had incurred the expense. The rules for deductibilty are exactly the same for corporations as for individuals. It is the expenses that are different. Most individuals don't operate businesses. Of those that do, whether they are a corp or a sole-prop makes NO difference as far as deductibility of expenses (although there may be other tax advantages either way).

Re:Simple fix

[ShanghaiBill]

You can't deduct your commute, which for many people is the largest cost of having a job...

Corporations also cannot deduct commuting expenses. If you are employed by a corporation, and they provide you with a commuting service or subisdy, then they cannot deduct that as an expense, and instead have to report it as a taxable benefit.

Re:Simple fix

[LordLucless]

Then you'll drive every retail industry into the ground.

Say I'm an electronics store. I operate on a profit margin of about 2%, because there's really not that much margin in electronics (or most retail, except the high end). I buy $100,000 worth of stock. I sell that entire volume for $102,000, making myself $2000 profit. I then receive a tax bill based off my revenue of $100,000, instead of my actual income of $2,000.

Re:Simple fix

[Anonymous Coward]

"Corporate income tax serves as a regressive taxation on the middle class." You might need to come up with a bit more justification for that one old chap. You're not making the American mistake of regarding companies as people, are you?

Re: Simple fix

[Anonymous Coward]

Your example is pure shit and should indeed go out of business.

Re:Simple fix

[vux984]

Corporations don't take family vacations to Disneyland.

No, they hire a consultant to go with them, call it a "Team building exercise", and then the whole thing is a deductible training expense.

If they spend on something that is not income related, then it is not deductible

Of course it is. It still reduces their profits. As taxes are on profits, not revenues it reduces their taxes. The business could buy itself a yacht and that would reduces its taxes, then it could maintain the yacht, and keep it at a marina and that would further reduce its taxes.

Then, if the CEO uses the corporate yacht to go fishing then that might be a taxable benefit on his taxes. (So his taxes go up for using the yacht the corporation owns and maintains.) But if the CEO brings a prospective client or vendor fishing with him then the cost of the whole outing is an advertising/marketing expense.

There are ALL kinds of games one can play with corporate finances.

Re: Simple fix

[Anonymous Coward]

It's not a threat, it's happening. People, and companies, are moving. Not just from the USA. You just don't live in the circle that does this. Sorry.

Re: Simple fix

[Anonymous Coward]

That's not what taxing on revenue means. If you tax on revenue you cannot deduct the price of the goods from the supplier. So Walmart would pay tax on the sales, the revenue. And here lies the problem, this is exactly what Apple and Google and Amazon do. They subtract the cost of goods sold, from other corporate divisions, and end up with no profit. The solution is simple. Stop taxing companies - they don't really exist. Tax people. Tax their jobs, tax their income, tax their transactions, tax their purchase, and tax their deaths. Tax them, tax them, tax them. When you're done taxing them, tax them again just to be sure.

Re: Simple fix

[Anonymous Coward]

You do realize that a tax on revenue is a "sales tax". It is regressive and hits the lower income disproportionatly.

Re:Simple fix

[sociocapitalist]

And by "where you are valued" you mean "where we can get away with the most bad behavior".

Paying only the taxes that you legally required to pay is not "bad behavior". Our tax laws are idiotic. It is silly to blame that on companies that legally minimize their taxes, rather than the politicians that make the laws.

America has one of the highest corporate tax rates in the world, yet because of all the loopholes, we have one of the lowest rates of corporate tax collection. Furthermore, the nature of those loopholes gives a huge incentive for companies to move their headquarters and administrative jobs out of America. If you started from scratch, it would be challenging to design a dumber and more counterproductive tax law. How is that Apple's fault?

Fixing corporate tax law is hard, because it is easy for opponents to demagogue the issue, and claim that lowering rates is a giveaway to evil corporations. The counter argument, that no one actually pays the current rate because of all the loopholes, doesn't fit into a 30 second sound bite.

It may be legal to do something and yet not moral. The politicians are at fault, certainly, for the loopholes - and Apple (et al) are also at fault for using them. It is not mutually exclusive.

When the corporations pay no tax, you and I pick up the difference so yes, I blame them for making billions and not paying anything or even receiving benefits. It's like welfare fraud on a larger scale.

With regard to companies moving their headquarters out of a given country - let them. Then tax them even more for doing business as non-resident entities.

Re:Simple fix

[sociocapitalist]

I need food to eat. If I don't eat, I can't generate income. But I can't deduct it on my personal taxes. I also have to get to work, but I can't claim any transportation amounts on my personal taxes. I need to wear clothes to work, often more expensive ones than I would generally wear if I wasn't at work, but I can't deduct the cost of clothes. But a corporation can claim deductions for any expenses whatsoever. There's almost nothing that a business can spend money on that doesn't qualify as a deduction. Whereas for individuals, only a very small percentage of what I spend my money on actually qualifies as a deduction, and most of it isn't related in any way to my employment. Things like medical expenses and charitable donations are tax deductible, but don't really have much relation to me actually generating income.

Let's not ignore that, generally speaking, corporations that commit crimes pay money and people who commit crimes go to prison.

Bribery on a scale large enough to sound painful but which the corporations write off a a risk and cost of doing business.

Re:Simple fix

[sociocapitalist]

They're paying what they should be paying.

All business done in the US pays US taxes. That is: if iTunes sells $5 million of songs in the US, Apple pays taxes on $5 million of revenue. Simple enough.

At the same time, any US company which sells something to Japan, Germany, France, Britain, and so on also pays taxes on it. If iTunes sells $50 million of songs in Europe, Apple pays $50 million in taxes to the US.

All Apple has done is moved their iTunes operations under another company headquartered in Germany. When iTunes sells $5 million of songs in the US, Apple pays US taxes on $5 million; but when iTunes sells $50 million of songs in Europe, Apple doesn't pay the US shit.

You may notice that the US is trying to tax businesses for doing business in the US, and also tax US businesses for doing business outside the US. US businesses are simply moving their non-US business outside the US, which is where it is anyway.

Companies don't pay tax on their revenue, they pay it on their profit.

Let me summarize the situation for you, as you seem to have completely misunderstood:

Apple, Amazon and other companies make huge profits in countries (like the US) and then, using licensing payments to subsidiaries in low or no tax jurisdictions like Luxembourg, shift all the profit to where it's not taxable, thus legally avoiding paying any income tax on the profits they made as those profits have just been erased by these supposed licencing fees.

If a real person tried to do this they would go to prison for tax evasion as one cannot just create new copies of oneself as corporations do in order to shift money from one jurisdiction to another.

So yes, you are right that it's simple, and no, you are wrong in that they are not paying at all what they should be paying.

Re: Simple fix

[Anonymous Coward]

Yes I do. Look, the poor still are able to take advantage of lots of government services - that we need to be able to fund. Medicaid, SocSec, Welfare, Schools, PreSchools, and more that we don't adequately fund. The simple fact of the matter is that our nation, right now and for a long time, doesn't have adequate income for the spending we partake in. Simplifying the tax code to bring to light all dodges makes things easier to fix. Yes its a lot like a sales tax - but guess what? It puts the tax directly at the source of use! Seems fair. Our nation has no national interest in all of us putting our shoulders into the plow to improve our plight. Long gone are the stirring speeches of great leaders who inspire us all to new levels of grandeur.

Re:Simple fix

[Plumpaquatsch]

I wish them the best of luck in sales to the good people of Luxembourg, Ireland, and small carribean islands. I'm sure their total revenues after dropping the costly US market will improve tremendously.

And the US will do just fine without the billions of dollars Apple pays.

You are of course aware that Apple does pay billions in taxes in the US every year?

Re:Simple fix

[Anonymous Coward]

Except there is no evidence to support the lower taxes help people/companies prosper mantra we constantly hear. Taxes were significantly higher 50 years ago during periods of both growth and stagnation. Warren Buffet was right when he said taxes (high or low) don't dictate how companies invest.

Re:Simple fix

[NewYork]

Buffett's secretary Bosanek pays a tax rate of 35.8 percent of income, while Buffett pays a rate at 17.4 percent on profit.
http://news.yahoo.com/warren-buffett-secretary-talk-taxes-221442297--abc-news.html

Re:Simple fix

[bluefoxlucid]

That's hollywood accounting. :|

An Apple a day

[Anonymous Coward]

Will make the Tax Man go away. However, the doctor is calling more often.

Shame, shame!

[pushing-robot]

Then again, I'd have less sympathy for them if avoiding paying taxes wasn't a universal pastime for corporations and individuals alike.

Re:Shame, shame!

[chfriley]

So you pay more than you are legally obligated to pay? That is great of you. How much extra do you pay?

Re:Shame, shame!

[bluefoxlucid]

Actually, it's a sensible behavior. America taxes 39% to corporations regardless of where they earn profit: an American HQ company pays 39% on everything it sells in China and Japan. In most other developed nations, it's different: a German company selling cars in the US pays taxes to the US on the profits from its US sales, but pays no taxes to Germany on those profits; it does pay German taxes on profits made from selling cars in Germany.

Americans are essentially crying about American companies not wanting to make $10 million selling to Britain, pay Britain $2.5 million in taxes, and then pay America $3.9 million in taxes; instead, these companies want to have a British arm headquarters, make $10 million in Britain, and pay $2.5 million to Britain and NOTHING to America.

Re:Shame, shame!

[therealkevinkretz]

When there are legal means to, why wouldn't you (unless you think you're not paying enough)?

Re:Shame, shame!

[Charliemopps]

Then again, I'd have less sympathy for them if avoiding paying taxes wasn't a universal pastime for corporations and individuals alike.

Apple introduced this sort of tax dodge and everyone else followed. Not that anyone else is less guilty, but Apple certainly lead the way.

That said, I have no animosity towards those that avoid taxes given what our government inevitably ends up using the money for.

Re:Shame, shame!

[Anonymous Coward]

Why don't all corporations get to pay zero taxes then? Why only those who can afford a horde of lawyers? Or do you think that the system is great as it is?

Re:Shame, shame!

[Anonymous Coward]

That couldn't be farther or further from the truth. The Irish Sandwich and Double Dutch were in existance long before Apple made any real money. PACCAR, Ford, and dozens of multi-nationals have been using these, or similar techniques, for almost as long as multi-nationals have existed.

Re:Shame, shame!

[Anonymous Coward]

That couldn't be farther or further from the truth. The Irish Sandwich and Double Dutch were in existance long before Apple made any real money. PACCAR, Ford, and dozens of multi-nationals have been using these, or similar techniques, for almost as long as multi-nationals have existed.

Stop ruining his Apple mashing with 'facts'.

Re:Shame, shame!

[pushing-robot]

Fascinating. More evidence that my universe intersects an alternate universe in which Apple invented everything.

Re:Shame, shame!

[Anonymous Coward]

And it *especially* makes sense when you consider that these companies have a presence in *dozens* of countries.
Let's pretend for a moment that the US can (in practice) tax money earned by a company with a US presence *regardless* of where that money was earned.
If the US can do so, then so can *any* other country.

The company earns $10 million in profits.
The US taxes it $3.9 million. (39%)
The Brits tax it $2.5 million. (25%)
India taxes it $1.0 million. (10%)
The EU taxes it $2.0 million. (20%)
China taxes it $2.0 million. (20%)

That's just 5 tax jurisdictions, and the company has been taxed $11.4 million on $10.0 million in revenue. (an effective tax rate of 114%)

Re:Shame, shame!

[Savage-Rabbit]

Actually, it's a sensible behavior. America taxes 39% to corporations regardless of where they earn profit: an American HQ company pays 39% on everything it sells in China and Japan. In most other developed nations, it's different: a German company selling cars in the US pays taxes to the US on the profits from its US sales, but pays no taxes to Germany on those profits; it does pay German taxes on profits made from selling cars in Germany.

Americans are essentially crying about American companies not wanting to make $10 million selling to Britain, pay Britain $2.5 million in taxes, and then pay America $3.9 million in taxes; instead, these companies want to have a British arm headquarters, make $10 million in Britain, and pay $2.5 million to Britain and NOTHING to America.

Actually, by what I have been hearing lately they want to have a British operation doing their European business so they'll be in the EU common market, then they want to route all their $10 million of product sales though a shell company in Luxembourg where they make a secret tax agreement with the authorities to pay taxes of less than 1% while nominally paying the much higher Luxembourg corporate tax and VAT. There are many other variations on this, licence fees, internal loans, etc... but they all boil down to the same thing: you pay no tax. Eric Schmidt may claimed to be very proud of his companies tax structure, IIRC he even called tax avoidance 'capitalism'. I understand the desire of companies and private individuals to minimise their tax bills and that you can over-tax both companies as well as the unwashed masses. However, it pisses me off in a big way how these corporate bozos like Schmidt consider themselves entitled to using infrastructure and services bought and paid for by tax revenue but also consider themselves entitled to not contribute a dime to this infrastructure and the services that enable them to do business in the first place. The state confiscates over a third of my income as taxes and every time I buy something, import something or use a public service they leech some more with VAT, customs fees and miscellaneous other charges while Eric Schmidt and his company hardly pay anything at all. I do not have the option of doing a Irish Sandwich, a Double Dutch or a Luxembourg Flip to reduce my tax bill to zero and if the blood hounds at the tax office want to roast these corporate weasels on a rotisserie over an open flame then all I have to say to that is 'do you guys need any more wood'???'

Re:Shame, shame!

[Anonymous Coward]

Fascinating. More evidence that my universe intersects an alternate universe in which Apple invented everything.

That harmonies well with this universe where Apple is to blame for everything.

Re:Shame, shame!

[LynnwoodRooster]

The point is that only the US demands to tax on all revenues and profits made world-wide; no other G23/first and second world country does this. They all tax just profits earned in-country, since the company pays taxes on profits realized elsewhere.

Re:Shame, shame!

[aussie_a]

What do you mean by "legally obligated to pay"?

Do you mean that you declare all of the tax deductions that you can without having to provide evidence? For example in Australia you can declare traveling expenses up to X dollars without having to provide any proof whatsoever (expenses over X dollars require that you keep receipts in the event that your audited). would be paying the exact same amount even if I didn't use it for work purposes.

Now legally your not allowed to declare those traveling expenses without actually incurring them. However there is 0 chance you'll get caught because the tax man doesn't require you to provide proof as long as you remain below a certain threshold. So do you consider lying about those tax deductions to be "legal"? Is refusing to lie about them "paying more than your legally obligated to pay"?

What about expenses that you claim are for work? For example I'm required to have a working internet connection so that I can provide remote assistance in the event an emergency happens. Now I could try to claim that my internet connection is therefore a work expense, except the truth is that I would have that internet connection no matter what and I could just walk 10 minutes down the road and actually enter the building physically to deal with any issues. Morally my wage is not impacted by using my internet connection for work. Legally, I might be able to get away with claiming a percentage for tax purposes.

Re:Shame, shame!

[Anonymous Coward]

Infrastructure is a very small part of government spending. Even a 1% tax probably covers most of the infrastructure use by a company.

Re:Shame, shame!

[MrL0G1C]

26 U.S. Code  882 - Tax on income of foreign corporations connected with United States business

So, can anyone tell me why this does not apply?

Why do countries allow tax avoidance anyway, the only difference between tax avoidance and tax evasion is a couple of fictitious legal documents.

It is time that the tax man gets to decide whether these fictitious external companies are actually part and parcel of the same company and were merely created for the purpose of tax avoidance/evasion.

Re:Shame, shame!

[gstoddart]

Why do countries allow tax avoidance anyway

Follow the money to the lobbyists who bribed the politicians who wrote the loop holes and ask the corporations who paid for it.

Now, realize those same damned politicians who passed the law probably have off-shore accounts to do the exact same thing.

The system has been rigged so that the wealthy and corporations have way to skirt around tax law that the rest of us do not.

You really think all those millionaire politicians aren't doing tax avoidance? Or that they don't own companies which do this? Do you really think the politicians want too much scrutiny of this issue?

It is time that the tax man gets to decide whether these fictitious external companies are actually part and parcel of the same company and were merely created for the purpose of tax avoidance/evasion.

You must be some kind of communist.

Avoiding taxes is as American as apple pie. Won't someone think of the shareholders and the executive bonuses? How are they supposed to maintain those two if they actually paid taxes?

The system is inherently corrupt, and kept that way by the people who benefit from it.

Re:Shame, shame!

[Plumpaquatsch]

Why don't all corporations get to pay zero taxes then? Why only those who can afford a horde of lawyers? Or do you think that the system is great as it is?

Apart from the obvious "Which corporations get to pay zero taxes" - if you pay less taxes than it costs to pay the lawyers that make you pay "no" taxes, doing so would be stupid.

Re:Shame, shame!

[LynnwoodRooster]

That statute applies. The difference is that the profits taxed under that statute are NOT taxed in their company's home country. If you're a UK or German company, and pay taxes under that US statute on some of your profits, you don't also pay taxes in the UK or Germany on those profits. Now, if you are a US company, and you pay taxes in Germany or the UK on some of your profits, you ALSO pay taxes in the US on those profits. Thus the reason to go Double Irish or Double Dutch.

Re:Shame, shame!

[LynnwoodRooster]

The system has been rigged so that the wealthy and corporations have way to skirt around tax law that the rest of us do not

False. About $1500 to set up a Hong Kong LLC, and about $800 a year to maintain it. Profits earned overseas are then not taxed until you repatriate them to the US. And HK will not tax your profits as long as you don't do the work within Hong Kong. So a great way to defer your taxation until you decide you want to pay it. And quite cheap, too - it doesn't take much in the way of profit (as a personal consultant) to save $800 in taxation...

Re:Shame, shame!

[bluefoxlucid]

Actually, by what I have been hearing lately they want to have a British operation doing their European business so they'll be in the EU common market, then they want to route all their $10 million of product sales though a shell company in Luxembourg where they make a secret tax agreement with the authorities to pay taxes of less than 1% while nominally paying the much higher Luxembourg corporate tax and VAT.

Which doesn't work, because walking into a country and selling products or services subjects you to that country's taxes. The moment they set foot in France or China and perform a business operation, that operation is taxed by France or China. If their HQ is in the US, their Chinese and French operations are taxed in China AND in the US.

If you didn't pay taxes on business performed within a country, foreign services would always be less expensive than local services.

Good for them

[Anonymous Coward]

If the company is acting within the letter of the law (and it appears they are) then I don't see the problem.

The governments of this world are more corrupt than any corporation and I, for one, will continue to pay as few taxes as possible to avoid my money being used to fund sports teams, military campaigns and other boondoggles that politicians will use to gild their own wallets and power bases with.

Re:Good for them

[skegg]

Up until about a decade or so ago in Australia, some clever private individuals established companies and worked their 9 - 5 job through the company, enjoying much lower tax rates and other such benefits of corporate law (shifting losses to other years, etc).

The Australian Tax Office stepped-in and declared if you look like a private individual, walk like a private individual and quack like a private individual ... you're a private individual and will pay tax at the appropriate rate. You'll also receive a fine for trying to be clever.

So clearly, the government is able to crack down on those who try to be clever and follow the LETTER of the law but not the SPIRIT of the law. Unfortunately, the government is very SELECTIVE when deciding where to act.

Re:Good for them

[Anonymous Coward]

And?

What IS the SPIRIT of the law? Why does the Australian Tax Office interpret tax law as corporate entities must be more than one person when, obviously, the law makes no such distinction?

It's OBVIOUS to me that the government doesn't "crack down" on clever people - and why do you want to punish people for being clever? Are you not supporting the Australian Tax Office for being "clever" for reinterpreting law to take more money?

Is it the people's fault for trying to keep more of what THEY earned or is it the governments fault for SPENDING more than it takes in?

Oh no no... corporations and clever people are evil... but government is always heroic and good and as nothing at all to do with people... or corporations... or business... or money...

Re:Good for them

[LordLucless]

Up until about a decade or so ago in Australia, some clever private individuals established companies and worked their 9 - 5 job through the company, enjoying much lower tax rates and other such benefits of corporate law (shifting losses to other years, etc).

The Australian Tax Office stepped-in and declared if you look like a private individual, walk like a private individual and quack like a private individual ... you're a private individual and will pay tax at the appropriate rate. You'll also receive a fine for trying to be clever.

This isn't the way I remember it - unless we're remembering different things. From what I recall, companies were forcing their employees to get a business number, and hiring them as contractors so as to avoid paying for entitlements like superannuation, holidays, etc. The Fair Work Ombudsman slapped them down.

In any case, you'll pay more tax as a company than you will as an individual - you will pay corporate tax on your company's profits, and then personal income tax in all money that you receive from your company. If you spend corporate money as if it was your own to dodge tax, then ASIC will want to have a long, hard talk with you, regardless of what the ATO does.

Re:Good for them

[aussie_a]

I'd prefer a world where we as a society demanded that everyone follow the spirit of the law and publicly punished those who refused to. I realise we don't live in such a world, but I'm not going to say "I don't see the problem" for people doing the legal thing rather than the moral thing.

Re:Good for them

[Anonymous Coward]

In any case, you'll pay more tax as a company than you will as an individual - you will pay corporate tax on your company's profits, and then personal income tax in all money that you receive from your company. If you spend corporate money as if it was your own to dodge tax, then ASIC will want to have a long, hard talk with you, regardless of what the ATO does.

No, the money you receive from your company won't be part of the company's profits. So only you pay taxes on that

50% premium

[Anonymous Coward]

Note also that Apple add a 50% premium to most of their products outside of the U.S. Well on form for an American company, where profits and margins are the first priority.

There is no simple fix

[sjbe]

Assign someone at the IRS to figure out what they should be paying, and are dodging, add the cost of doing this estimate, and a 50% penalty on top of both, and tax the portion of the company that IS HERE that amount.

The IRS cannot do anything about perfectly legal activities. While reprehensible I have very little doubt that Apple (and others like them) have an army of tax experts ensuring that everything they do is 100% legal and that the IRS cannot do a thing about it. The problem is in the tax laws have more loopholes than shotgunned swiss cheese. That is the fault of Congress and no one else.

I don't have a problem with your proposal in principle but I'm pretty sure the IRS doesn't have the authority to do what you propose either.

Re:There is no simple fix

[Obfuscant]

The problem is in the tax laws have more loopholes than shotgunned swiss cheese. That is the fault of Congress and no one else.

That's the fault of congress and the people who elected them. If you want to talk about eliminating all the "loopholes" that the current income tax laws have built in, you'll need to survive the onslaught from just about every person in the US, from those who are taking the mortgage exemption, all the way down to those who get earned income credit.

Those "loopholes" exist because the government thought it should use taxes as a way of social engineering. That means if someone thinks that solar energy needs a helping hand in the market but doesn't want to hand over a few billion to a company that will go bankrupt in a year, they enact a tax credit for people who buy solar stuff. Or trade in a "clunker". Or do any of a number of things they wouldn't otherwise do. And yes, sometime in the distant past, someone in congress decided it was good to help people who otherwise couldn't afford it to buy a house, so they added mortgage payments to the list of deductions.

... but I'm pretty sure the IRS doesn't have the authority to do what you propose either.

They don't, and I don't want them to have it. Can you imagine the "social engineering" if the IRS had the authority to determine what someone "should" be paying in taxes and could go after them for that amount? Can you imagine the effect on business if they had the authority, on a whim, to go through every account in a company to decide what the company "should" be paying? It would certainly take more than a "someone", it would take an army of them.

Re:There is no simple fix

[mjwx]

They don't, and I don't want them to have it. Can you imagine the "social engineering" if the IRS had the authority to determine what someone "should" be paying in taxes and could go after them for that amount? Can you imagine the effect on business if they had the authority, on a whim, to go through every account in a company to decide what the company "should" be paying?

Yes, personal tax rates would lower as tax corporations are meant to pay replaces that revenue.

With lower personal taxes, we have more disposable income, more disposable income means that more people are buying more things, which means the companies selling those things are making more money. Sorry if this doesn't fit in with your nebulous threat.

Like all new ideas, it will be a huge shock when implemented, then settle down to lower levels as the new status quo.

Re:There is no simple fix

[mattack2]

Mortgage *interest* deduction, not mortgage *payment*. Oh, I wish it were the latter.

(Actually, I wish they'd all go away, including the ones that I benefit from... I'd gladly get rid of the mortgage interest deduction, if you get rid of all of the other deductions/credits.)

Re:There is no simple fix

[Anonymous Coward]

Yes, personal tax rates would lower as tax corporations are meant to pay replaces that revenue.

Government spending will be increased as corporations will pay more tax (or leave the country). There is no incentive for the government to lower personal taxes when they manage to extract more money from corporations.

Re:There is no simple fix

[Obfuscant]

Yes, personal tax rates would lower as tax corporations are meant to pay replaces that revenue.

If they were meant to pay it, the law would require it. If the law doesn't require it, then it is what you think they should pay, not what they are meant to pay.

And using the IRS to get companies to pay what you think they should pay is a bad precedent and bad law. It won't reduce personal income taxes because taxation is not and will never be a zero sum game. There are too many examples of this to believe that you've never seen it yourself, but here's two just from the city level here: we're still paying a "transportation maintenance fee" on our water bills to fix a stretch of road that the contractor screwed up, long after that stretch of road has been fixed. We're also paying a fee (in name only, really a tax) to fund the bus system, and our other taxes did not go down when this cost was moved from the general fund, they simply found other things to spend the money on.

Sorry if this doesn't fit in with your nebulous threat.

Yes, the fiction you propose doesn't fit with my "nebulous" threat. Have you not seen the use of the IRS as a political tool already? Why do you imagine a task force with the intent of getting companies to pay what they "should", instead of what they are legally obligated to, pay would do to the private sector? You think it would be good for them because of trickle down. Or trickle around, so to speak.

Like all new ideas, it will be a huge shock when implemented, then settle down to lower levels as the new status quo.

Yes, and like all bad ideas, the new status quo would be much worse than the existing status quo. You think companies have incentive now to move foreign operations out to foreign countries? Wait until you sic the IRS on them because you don't they are paying what they should, even if what they are paying is the legally required amount.

Re:There is no simple fix

[Obfuscant]

I'd gladly get rid of the mortgage interest deduction, too, now that I've paid off my mortgage.

I am rather hesitant to do it, though, because there are people who have made critical life decisions based on the (implied) promise that mortgage interest would be deductible, just as there are many many people who have made long-term decisions based on the promise of social security keeps me from calling for the abolishment of that system.

You should keep in mind before you ask for all deductions to be eliminated -- everyone who pays taxes paying even more in taxes isn't a reasonable goal for tax reform.

Re:There is no simple fix

[mattack2]

I would say phase out rather than abolish Social Security. Obviously the math has to be worked out, but let people opt out of it at anytime (possibly with a tax credit), but cut it off for a certain age and younger... Similar to how I think companies shouldn't be able to retroactively change pensions, but can change it for new hires.

This just in: psychopath is psychopathic

[NoNonAlphaCharsHere]

Until we get away from the definitions that:

1) a corporation exists only to increase shareholder value
2) it is managements "fiduciary responsibility" to only "increase shareholder value", i.e. make the most profits possible
3) a corporation is a legal person, with all of the rights but none of the moral compunctions

We are going to have corporations that act by definition as psychopaths: amoral, antisocial, remorseless, uncaring, uninhibited, greedy and evil. They will act as unlawfully as they are permitted to.

Re:This just in: psychopath is psychopathic

[Anonymous Coward]

Actually 3) is the problem, I can't incorporate in Luxembourg or Bahamas. Corporations have more rights than individuals, this is backwards.

Re:This just in: psychopath is psychopathic

[tomhath]

I can't incorporate in Luxembourg or Bahamas.

"Legal Person" just means the group of people who own the corporation can enter into contracts and other financial transactions jointly, same as in individual. You can form a corporation in Luxembourg or Bahamas and do business there, or you could (presumably) become a citizen of either. I don't see the problem.

Re:This just in: psychopath is psychopathic

[Obfuscant]

3) a corporation is a legal person, with all of the rights but none of the moral compunctions

Hyperbole much? No, not even hyperbole. There is a huge body of corporate law. Worrying that the people in a corporation have the same rights they have without one, and then claiming that they have none of the "moral compunctions" (I assume you mean "legal responsibility", since "moral compunction" isn't a mandate for anyone) is just silly.

They will act as unlawfully as they are permitted to.

Just as you will find people who do the same thing. It is not a requirement for either.

Re:This just in: psychopath is psychopathic

[Anonymous Coward]

As a big douche bag MBA that all you guys seem to hate, I gotta tell you that your #'s 1 and 2 are wrong. The primary fiduciary responsibility of management is the continued survival of the company, preferably making some level of profit. Within that frame, we'd do our best to maximize the return our investors received. Also, a corporation is useful to increase "stakeholder" (I hate that fucking newer buzzword) value, but it's primary and most important use is limited liability.

On #3, corporate personhood is fucking bullshit but that's not really new or contrary to what you said.

Re:This just in: psychopath is psychopathic

[Anonymous Coward]

... Until we get away from the definitions that:

Corporations can vote via their cheque-books and can choose their regulating body, the corruption will continue and democracy will devolve into a plutocracy.

Saying someone has a limited responsibility (even to government and citizens) is not the problem, although the very concept is problematic. The problem is continuing the dogma that 'a corporation is a person'. The flaws (eg. "too big to fail/jail") in this delusion are multiplying.

Re:This just in: psychopath is psychopathic

[jawtheshark]

I am a citizen of Luxembourg and I don't get these advantage and I have a tax rate of 39% together with my wife. I also know small business owners here and they don't get to play these games either.

Time for Apple to leave the US?

[Anonymous Coward]

US corporate tax rate is among the highest in the world.

Maybe it is time for Apple to consider moving outside the United States?

Re:Time for Apple to leave the US?

[jcr]

Speaking as an AAPL shareholder, I'd love to see them re-incorporate in the Bahamas.

-jcr

Apple is the highest tax payer

[Anonymous Coward]

Apple is the highest tax payer in the US at I think the number is 6 or 7 billion in taxes a year at 30 some percent! Apple isn't the only company using the loop holes, all companies do it!!

Re:Apple is the highest tax payer

[aussie_a]

No, not all companies do it. Most companies in fact don't do it. Only those who are big enough to afford to do it get to do it. The rest of them are stuck paying more (comparative to their earnings) than all of the successful companies.

No worries. Slaves will pay.

[Bar666Bar]

Nothing to worry about. They are way to fix it tax short falls. We just need to motivate 299 million slaves in USA
- retirement age increased up to 75
- 60 hours work weeks
- higher gasoline prices
- more money poured into security forces
etc.
Just use your imagination.

Re:No worries. Slaves will pay.

[Anonymous Coward]

... retirement age increased up to 75

You think a labourer can haul bricks at 65 years-old? What about a 70 year-old cop with a gun trying to chase someone? Or a 70 year-old surgeon doing micro-surgery? The latter employees have probably saved for a 30-year retirement. The labourer didn't. After 35 years of hauling brick he will have forgotten all study skills too, so first he needs to go to school to learn how to go to school. Then he needs to get training that he can pay back in the remaining 20 years of his working life. Plus a wage that will pay his college debt and for 15 years of retirement once he's 75.

The fact is; we need people after 55 to die as quickly as possible. They haven't paid for their own retirement and the younger generation can't pay for overpriced drugs to to keep them alive.

Yeah, keep on dreaming.

[Bar666Bar]

It just happened be on vacation in Luxembourg with truck loads of money.

Re:Yeah, keep on dreaming.

[bluefoxlucid]

I have no idea what this is referring to, as it's not contextually related to anything I said.

These are criminal activities

[Bar666Bar]

Playing games and finding loopholes to hurt America is very criminal.

Re:These are criminal activities

[CurryCamel]

No its not.
Especially if you are a Luxembourg-based company.

Re:These are criminal activities

[Anonymous Coward]

Loopholes aren't illegal. You guys act like these are cheats in a video game. "Loophole" is modern newspeak for "I don't think they should get tax breaks for [insert claus]"

Re:These are criminal activities

[Anonymous Coward]

"Criminal", in this context, means "makes me feel butthurt." Try to keep up. People and especially corporations (who are also people, right?) should just do the right thing, voluntarily. If they just did that, then we wouldn't even need government, and therefore wouldn't need taxes. If only we would all just put down the remote and go outside and build the highway system or something, while singing folk songs.

Can Luxemborg enforce the IP rights?

[140Mandak262Jamuna]

What would happen if the government of USA declares, "look guys, we are broke. You are not paying taxes to us anyway. So when it comes to patent law enforcement, you contact the people who collect taxes from you to enforce your IP rights. We are not going to spend our resources to enforce your rights, when you are not paying taxes to us ..."

Re:Can Luxemborg enforce the IP rights?

[Anonymous Coward]

Apple et al dont have any EU patents worth anything as US software patents are not valid anywhere but the USA,
US patents mean nothing to the rest of the world unless they want to sell a product in USA, not interested in the USA market ? then copy and replicate away

Re:Can Luxemborg enforce the IP rights?

[Impy the Impiuos Imp]

The government of the USA is the largest spending thing. Ever.

Under Obama we passed 1943 in adjusted spending per person, the height of WWII, where we were engaged in a major war on two fronts and building one major warship a week.

So, no. Fuck your "dire straits" bleat.

Re:Can Luxemborg enforce the IP rights?

[LordLucless]

Then everyone says: "Hey look, the USA is ignoring international patent treaties. I guess we're not bound by them any more either." China sends the USA a gift basket.

Re:Can Luxemborg enforce the IP rights?

[manu0601]

The government of the USA is the largest spending thing. Ever.

During a crisis, everyone lower expenses, and the economy enter a vicious slow down cycle. The government is the only actor able to act counter-cyclically. By maintaining expenses, it can restart activity. Hence it is not surprising we see a peak of government expenses these years. Remove it and things will get really ugly. See Greece, Spain, Portugal, Italy, and now even Germany and France.

Re:Can Luxemborg enforce the IP rights?

[tlhIngan]

During a crisis, everyone lower expenses, and the economy enter a vicious slow down cycle. The government is the only actor able to act counter-cyclically. By maintaining expenses, it can restart activity. Hence it is not surprising we see a peak of government expenses these years. Remove it and things will get really ugly. See Greece, Spain, Portugal, Italy, and now even Germany and France.

See Great Depression.

That was one the chief reasons the Great Depression happened - economic activity slows down, and the government spending slows down. Which causes people to be out of work and they stop spending, which slows down activity even more. And then you spiral down until someone wakes up and decides to spend massive amounts of money.

An economy works when money is moving through it. If money stops moving, that's when economic failure happens. A slow down means money slows down its movement through the economy which results in problems.

It's why deflation is not a good thing (it slows down the economy because people save), slight inflation is desirable (under 2% or so), and massive inflation is horrible (because it results in people not being able to spend their money, slowing down the economy).

If you want to see why people are angry at the 1%, it's because those people generally hoard money - they don't want to spend, and the same goes with multinational corporations. They're just not big spenders, which means they're artificially slowing down the economy.

The economy works when money moves. Savings is a vehicle in which you store money for spending later and is a good thing (you're banking economic activity). But hoarding money which is acquiring money without spending it harms the economy.

Re:Can Luxemborg enforce the IP rights?

[manu0601]

It's why deflation is not a good thing (it slows down the economy because people save), slight inflation is desirable (under 2% or so), and massive inflation is horrible (because it results in people not being able to spend their money, slowing down the economy).

I agree but the "inflation below 2%" rule is not always appropriate. France knew a huge economic growth with 10-15% inflation rate until the beginning of the eighties, and today it is unable to perform with 3-5% (European treaties mandates 3%, and now 0.5%, something France will never achieve without destroying itself)

Re:Can Luxemborg enforce the IP rights?

[gstoddart]

You do realize that many of the people elected to the government of the US have interests in companies which do these exact same tax dodges, probably directly have off-shore accounts for themselves, and have precisely ZERO interest in changing things ... right?

Find me 10 millionaire politicians. I'll bet they all personally hide taxes this way, and own (or are affiliated with) a company which does this.

There is no way in hell this would ever happen.

You cannot rely on the integrity of people who benefit from a scheme like this to police a scheme like this.

Never gonna happen.

thats the beauty of a free market

[Anonymous Coward]

someone else will simply take their place and fill the demand

that's how free market capitalism works

unfortunately the USA is a fascist country

Is Tax Avoidance Necessary for Success?

[Jodka]

Tax avoidance schemes are remarkably common among large successful coporations. Other successful U.S. tech companies exploit the "Double Irish With a Dutch Sandwich" loophole. Ikea pays almost no tax by incorporating in Holland and exploiting its permissive rules for non-profits.

Which raises two questions:

- Are tax rates so high that it is necessary to engage in complicated tax avoidance schemes in western democracies to be successful in business?

- Is it best that companies do avoid taxes? Do we trust Larry Page, Sergey Brin, Vinod Khosla and Bill Gates to invest efficiently for the betterment of society more than we trust Harry Reid, Nancy Pelosi, Barack Obama and Hillary Clinton? And I would ask the same of the Republican counterparts of those politicians. Though that the comparison is somewhat unfair to Republican politicians because it is their objective to reduce the concentration of wealth under their own control by shrinking government, regardless of the political persuasions of those who would benefit from that dispersal of wealth. I have never understood why, for those who believe wealth is dirty, that its transfer to the political class is somehow purifying.

   

Re:Is Tax Avoidance Necessary for Success?

[dkf]

Though that the comparison is somewhat unfair to Republican politicians because it is their objective to reduce the concentration of wealth under their own control by shrinking government, regardless of the political persuasions of those who would benefit from that dispersal of wealth.

When push comes to shove, when it comes down to actual votes, do they really work to do such a reduction, or do they just claim to do that for the purposes of propaganda?

Re:Is Tax Avoidance Necessary for Success?

[LordLucless]

Are tax rates so high that it is necessary to engage in complicated tax avoidance schemes in western democracies to be successful in business?

When you get to international scale, tax is just like everything else; it's a competitive market. Once they have the size to make it feasible, corporations will go to whatever country offers them the best benefits for the least money, just the same as corporations inside the US shop around from state to state looking for the best tax deal.

It's no different to what happened in Soviet Russia with individuals, really. Those that were the most productive, and earning the most money, were those "taxed" the most. They didn't like that, so they left the country. Faced with the mass exodus of their most valuable citizens, the USSR made it illegal to leave. We're just seeing the US government go through the same cycle. Rather than control its own massive spending on military campaigns and welfare, the US is trying to squeeze more and more income out of their tax base, and their tax base is leaving the country. All this crying about "tax avoidance" is just the first step in trying to compel them to stay.

Re:Is Tax Avoidance Necessary for Success?

[giorgist]

So as voters do we trust those that represent us or do we trust those whose products we buy to run our country. Should we have government tax the wealthy and spend on social schemes or should we let the wealthy choose where to spend the money ? Its about effectively channeling societies resources.

Re:Is Tax Avoidance Necessary for Success?

[MrL0G1C]

Are tax rates so high...

No, the tax is on profits so why are you even asking this question?

Is it best that companies do avoid taxes?

Counter question is: Do gov't services need to be paid for?

Why are you asking such stupid questions?

Republicans shrink gov't! When did they last do that? I don't see what the Democrat/Republican duopoly has to do with the issue of corp's paying taxes.

If companies don't wish to pay taxes in country X then they shouldn't have employees, services or products in country X.

Companies that don't pay tax should not get the use of the roads, emergency services etc.

Summary and excerpt are inconsistent

[Anonymous Coward]

Come one, people. The summary and the excerpt from the article aren't even consistent. We're talking the first and 4th sentences here. It shouldn't be that hard to post an internally consistent article here!

...how Apple uses a holding company based in Luxembourg to avoid taxes on its iTunes revenue.

...Luxembourg has been more effective in extracting tax from iTunes...

Glad to hear it.

[jcr]

Every Dollar or Euro Apple keeps away from the tax man is a dollar that doesn't increase government's power to cause bloody mayhem.

-jcr

These are criminal activities

[Anonymous Coward]

Please point to the law that makes it "very criminal" (or even criminal *at all*) to pay everything you owe in taxes, and not a penny more.

Re:APPLE JUST STICKING IT TO THE MAN !!

[Impy the Impiuos Imp]

No. Someone fleeing you ramming it up their ass is not, in turn, ramming it up your ass.

or delete 500,000 pages of tax law. Or not be gree

[raymorris]

There are two root causes here. First, the US federal government has massively abused it's constitutional authority to "collect taxes" and written hundreds of thousands of pages of "tax" law about what you can and can't do. With such a tangled mess of law, it's unavoidable that there will be huge loopholes. All of those loopholes would go away with a simple tax law - you pay x%, period.

Some of the largest corporations in world are getting millions of dollars of tax payer cash to pay for the FOR-PROFIT power plants, due to refundable tax credits for renewable energy. Refundable means they can pay a NEGATIVE tax rate. If the feds stopped abusing the power to tax in a million different ways, we wouldn't end up with all of these loopholes.

The other underlying problem is something that most every other country has figured out. Only this US has this particular problem. If something is made in Germany, by German workers, and sold in German stores to German consumers, which country is trying to tax that? The USA! It's no wonder that German companies don't want to pay US taxes on sales in Germany. Apple is a multinational- they are just as much a German company as they are a US company.

A radical thought about US corporate taxes...

[LynnwoodRooster]

Why not eliminate them altogether? They are about 10% of the total revenues of the US Government. So why not just eliminate them altogether? Here's my thinking...

Eliminate the corporate tax in the US altogether. Every company based in the US will suddenly exist in the greatest tax haven in the world. All companies world-wide will want to rush to the US to shelter their own incomes from their home countries. Lots of new revenue/assets flow to the US - as well as lots of jobs. How do those jobs come? Simple - if you want to incorporate within the US, then a certain percentage of all your jobs must be located within the US. You want to relocate from the UK or Luxembourg? Then, say, 20% of your workforce must be located in the US. That's tens of millions of new jobs coming to the US.

I bet taxes from funds spent inside the US (via personal consumption of the new jobs and spending related to construction and expansion) would more than offset the loss of corporate income tax. And we'd have more people working (rather than having nearly 100 million of working age sitting on the sidelines in the current economy). Not to mention the BEST way to raise wages is via competition - more jobs than people, which means more income for workers.

So little revenue gained from corporate taxes in the US, so eliminate them and turn that to the strength to draw all worldwide corporations into the US. And win from the economic benefits of their local spending and hiring.

Re:or delete 500,000 pages of tax law. Or not be g

[Anonymous Coward]

that mess of tax law was pretty much written by corporations to favor themselves and hurt their competitors. now we see why those that play the game shouldn't write the rules. we should just have a set of rules for everyone. no deductions or credits or rebates it's just what it is.

Nice anti apple spin

[Bender Unit 22]

It is nice anti-apple spin. This case is so much more than just Apple and you had to go and kill an even more important story, just for some apple bashing.
http://www.icij.org/project/lu...

Leak source?

[manu0601]

Do we know anything about the leak source?

America Single Tax system

[Anonymous Coward]

Wow, Even Europe didn't yet manage to harmonize tax systems and America already has single one! Amazing!

...for Barry Bonds asterisk values of "should"

[sethstorm]

They're paying what they should be paying.

Only with such structured evasion.

Yes, evasion in a manner that the IRS would do well to re-evaluate. No, it's not on the same level as what one might do with a regular tax return.

You may notice that the US is trying to tax businesses for doing business in the US, and also tax US businesses for doing business outside the US. US businesses are simply moving their non-US business outside the US, which is where it is anyway.

The problem occurs when US operations are made to look like non-US operations, creating a very harmful free-rider situation. They are getting US protections and services without the requisite revenue paid to the US.

In addition, it is the only effective way to pursue structured revenue, especially when the US has a few world-leading departments under the DoD to help.

Re:...for Barry Bonds asterisk values of "should"

[bluefoxlucid]

If a non-US business comes into the US and sells a product or service, they're legally required to pay taxes on it. You can't reach across the border, exchange money, and then run away with your profits; the tax man expects you to file your activities, or else you're a smuggling ring.

Apple's creative accounting != your 1040.

[sethstorm]

Creative accounting and structuring implies an actively hostile posture towards the IRS as opposed to getting the last dollar out of your 1040.

You're doing it for the extra dollar, with negligible free-rider problems
Apple's doing it with the intent of having its cake and eating it, which creates a large free-rider problem.

Then fix that.

[sethstorm]

First option:
Turn up the heat on the countries that aid and abet such evasion, such that they end up quitting the practice voluntarily. Offer to exchange information on theirs to gain wider cooperation.

Second option:
If cooperation cannot be attained, then take governmental action within the IRS to penalize such activity (as far as they can go). That doesn't mean taking a page out of Nixon or Obama, but to use any legal and Constitutionally approved means to stop the evasion.

Third option:
Start playing hardball through other legal means in other governmental entities. Their tax structure and obstinacy is enough justification. Offer large tax cuts that have a condition of taking a visible penalty or reward for tax structures.

Final (if nothing else at all works and something must be done) option:
The DoD does something outside of the US and K Street won't know the full implications until the public has a need to know.

Top Secret!

[Plumpaquatsch]

"Secret appendices to the 2011 accounts break down some of Apple’s costs. It shows that Apple takes a third of iTunes’ revenues as its gross profit margin. "

Actually, it's 30% - the "secret" 30% everybody keeps whining about.

BREAKING BLUES ....

[Anonymous Coward]

APPARENTLY prosecutors ARE ABOUT TO CHARGE JUNCKER, THE CURRENT EU PRESIDENT AND FORMER LUXEMBOURGE FINANCE AND THEN PRIME MINISTER FOR 19 YEARS FOR CRIMINAL TAX FRAUD AND OBSTRUCTION OF JUSTICE !!!!

it would be a first but then again the enormous amount of tax fraud and VAT elusion is STAGGERING !

STAY POSTED IN THE NEXT FEW DAYS

Solution

[NewYork]

https://www.change.org/p/barac...