Slashdot Mirror
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.)
You *do* pay your state use tax for all those things you order over the Internet, right?
How can I believe you when you tell me what I don't want to hear?
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.
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.
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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.
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.
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.
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
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.
Anthropic principle: We see the universe the way it is because if it were different we would not be here to see it.
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.