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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.)
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.
Anthropic principle: We see the universe the way it is because if it were different we would not be here to see it.
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 ..."
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
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.