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

Re:Simple fix

[pushing-robot]

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

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: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

[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.