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Tim Cook Calls Apple's Tax Questions 'Political Crap' (cbsnews.com)
nerdyalien writes: Apple CEO Tim Cook dismissed as "total political crap" the notion that the tech giant was avoiding taxes. Cook's remarks, made on CBS' 60 Minutes show, come amid a debate in the United States over corporations avoiding taxes through techniques such as so-called inversion deals, where a company redomiciles its tax base to another country. Apple holds $181.1 billion in offshore profits, more than any other U.S. company, and would owe an estimated $59.2 billion in taxes if it tried to bring the money back to the U.S., a recent study based on SEC filings showed. The current tax code was made for the industrial age, and not the "digital age," Cook said.
What I don't understand about countries like the UK allowing this to happen is not the simple equation of lost tax revenues but the fact that a UK company that wants to compete with Apple or one of the other companies not paying taxes can't. Basically the UK is asking its companies to pay huge taxes and then compete against companies that don't.
This means that Apple can operate in most of the world's major economies without having to pay 20-40% of its profits to the governments. The local companies often do. Minimally this gives the tax avoiding companies that much more to dump into marketing, research, etc while still returning a healthy profit to their shareholders.
So when looking at the losses, the UK Germany and so on, should not just look at the lost taxes but the lost benefits of having the next Facebook, Apple, Google, etc be born in their countries. What is Google worth to the US beyond simple corporate tax revenues? I suspect that at first blush that having a Google in your country would be worth a shocking amount.
I actually like an arguement made before the Australian Royal Commission into tax avoidances many years ago. I think it was one of the Packers who said something along the lines of, "We have a moral and legal obligation to pay the government as little tax as possible. We will always pay the minimum required. If you want us to pay more tax then change the laws." (paraphrased since I can't find the actual quote).
Which is all quite true. I myself don't donate anything to the government and I do everything within my legal power to minimise the tax I pay. Corporations are no different and if you want to tax them then you need to close the loopholes that allow a company to operate in your country without paying tax. But good luck getting anyone to do that as the business groups then complain and say you'll drive away business with your "high" tax.
No they do not pay taxes where they earn the profits.
They cheat by transferring the profits to countries with low taxes. It's disgusting behaviour.
Look up transfer pricing and weep,
"Cats like plain crisps"
Why should Apple or any other corporation get all the benefits of a developed nation including limited liability and patents when they're doing their level best to avoid paying for those benefits? If they want to play these tax avoidance games they should have those benefits withdrawn.
Apple's tax arrangements have been in place for over 30 years, they are hardly new. It is also pays more US tax than any other company.
Essentially they have subsidiaries in low tax countries ( Ireland and Singapore) that control the buy price of the international sales in the other non-US countries their kit is sold in. This is commonly called transfer pricing.
This effectively holds international profits in low tax foreign locations.
Apple doesn't do the next logical step in financial engineering, which is to move the companies IP to a zero tax location , and license it back to the other subsidiaries , at a rate that simply transfers all profit to a zero tax location (eg Bahamas) . Many companies do take this extra step.
Part of the goal of companies in doing this is that the US is almost unique , in that it taxes the profits on foreign sales, after they have been taxed in the country of sale. Very few other countries do this. Most countries don't double tax like this.
This legal situation with US tax law encourages the kinds of thing Apple has done for over a quarter century, as well as far worse. It encourages companies to minimize tax earns in foreign countries, and minimize the fraction of profits they bring back to the US. It's an everybody loses outcome, the country stuff is sold in has its corporate income tax takings reduced, and the funds are never repatriated to the US, living in limbo offshore, reducing US government tax income as well.
If the US adopted tax law consistent with most other countries, there would not be a double taxation incentive to avoid the return of funds early on international sales to the US.
Tax money is your money too. So less tax for companies means more tax for you. And I'd rather have more expensive iPhones than higher taxes, because if I don't buy iPhones, why should I pay more taxes so that others can get cheaper iPhones.
Actually who pay the taxes doesn't matter much, however big companies doing tax avoidance are unfair. Smaller, local companies still get to pay full tax, effectively paying for others trickery.
But you cannot pick
Well they have been.
They take their profits in Ireland to avoid taxes. They build their products in Asia to avoid the EPA, OSHA, NLRP, EEOC, et al. They get to pick their preferred rules on both ends. Yay "free" trade.
Tim is ordinarily so smooth it's creepy; words like "crap" are outliers in his vocabularly. He messed up a little here. But no worries. They'll have him say we need to "do something" about LGBT rights or "do something" about the climate and all will be well again.
Maw! Fire up the karma burner!
Some people actually seem to believe that "Corporations run at whatever profit, period", and would like to imply that those corporations owe nothing to the society they are based in.
Of course that's total nonsense as a moment's reflection will show.
Corporations aren't islands. They are built on a solid foundation provided by society, embedded in that society, fed and protected by that society. In Apple's case that would be the US. They owe that society for all the things they cannot do or provide for themselves but are only too happy to take for granted.
An educated workforce, the ideas that they built their business on (more often than not based on government or semi-government research at some stage), a legal system that grants them all kinds of rights (contract rights, property rights, copyrights, patents) and protects them if and when those rights are infringed on (both nationally and internationally), a huge part of their market (no company can exist without clients affluent enough to purchase its products/services), a culture in which their products are valued (what's Apple's market share in India?), an ecosystem of suppliers and service-providers, a reliable currency, network and communication infrastructure, roads, ports, transport, housing for its operations and its workforce, etc. etc..
The bill that society at large presents to them for all that vital infrastructure is known as "Tax". And, companies being companies, would rather minimize that bill any way they can.
CEO's for example are paid to help their company increase its revenue and reduce expense. The issue of what's fair or reasonable never even comes up. Any anything that increases profitability (and doesn't result in said CEO being convicted and/or jailed) goes. Companies have no responsibility for anything whatsoever except their bottom line. Of course they understand that they can't do without the society they are rooted in. Only, as with any supplier, they try to talk the price down. Even if that hurts the society they are so busy benefiting from. That doesn't make them "immoral", but it does make them firmly "a-moral".
It is in that light that we should view their comments about "Tax being just political bs.". It's their job to say that; it's in their interest to say that; they're paid to say that. So that's what they say. They might even believe that (a job requirement perhaps?). They couldn't be less concerned with considerations as to whether that's true, reasonable, or fair.
The sad and risible fact is that there still are Americans (not being CEO's) who haven't spotted these simple facts and actually lend credence to rah-rah-taxes-are-a-waste sloganeering.
"Taxing them more simply means higher prices for all the customers. That would be us, not them. If they keep prices the same, it means less investment by them in jobs, or higher prices for us, period. "
Euhhh... nope, this isn't the case, you can read it in the topic's brief: "Apple holds $181.1 billion in offshore profits". That is, Apple holds $181.1 billion that neither goes to jobs, nor R&D, nor nothing: it's just money sitting in a bank, which means you just could tax Apple $181.1 billion and they still shouldn't need to fire any employee, nor close any R&D program, nor rise its products' prices in the least.
Of course, I'm not saying we should tax any company for whatever their net profits are, nor that my "plain" explanation is quite naive, just that doing so wouldn't be the hell you are purporting. You also say "At any rate, a tax on them is simply a tax on the customers in the end" which, in fact, it isn't: any company making more than "fair" profit can indeed lower it (i.e. because of increased taxes) without touching their price tags. All they need is having competition which feels comfortable with that lower profit level.
Taxing them more simply means higher prices for all the customers. That would be us, not them.
I see this misconception bandied about freely often by people who are attempting to sell a line of bullshit, and that's precisely what this is. The first sentence is fine. Yes, taxing them more means higher prices for the customers. The second sentence is cockery. When you make the corporations pay taxes, we only pay more for those goods when we buy those goods. I can easily choose not to purchase Apple hardware — in fact, I have never bought any of it new, and haven't owned a Mac in almost a decade — and then I do not pay those taxes. Only the people who buy the products do. That is why taxing the corporations is the absolute best solution in every way; the costs of paying the taxes are baked into the corporation's products and services, and then only their customers have to pay. So in fact, your conclusion is diametrically opposed to the truth; taxing the corporations is the only way that the taxes aren't paid by "us", meaning We The People. Instead, the corporations are only paid for by "them", meaning the people who buy the products. Trying to lump all of The People together in cases where that clearly does not make sense is a logical fallacy, and you're trying to sell us a line of bullshit.
TL;DR: It's good when taxes are baked into the prices of products, because then only the people who purchase those products have to pay for the taxes, as opposed to the situation where you permit corporations to avoid taxes, and then the middle class has to bear the majority of the tax burden directly even when they are frugal.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
No, jackass, transfer pricing is a reaction to thievery. You apparently truly believe that i should be a slave to the government for half of my life because I'm successful.
You have to be a slave to the government for half of your life because corporations are permitted to avoid taxation in this manner. If the corporations paid their tax burden and didn't manage to shift profits to other countries, then you wouldn't have to pay nearly so much to maintain the system that they're profiting from far more than you are, and then not paying to maintain.
I'm willing to pay my share, but I pay 37 people's share.
Then you should be against corporate tax avoidance, not in favor of it. The corporations are the only ones who can afford to get laws passed, and if they had to pay the taxes, then they would pursue efficiency in our government. They don't, so they don't give a shit.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
tl;dr version: If the market would bear a higher price, they'd already be charging it.
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
Every humongous company does this. They pay internally (using pricing mechanisms which they can set arbitrarily internally as well) between branches all over the world, and handle 'profit' where it's least taxed. IKEA, for example, have this down to an art. I forget how it works exactly, but I believe it is a non-profit in the Netherlands, which gets charged by the other branches for the distribution of saleable goods leading to an exact zero profit. You try to sell your house to a child for an arbitrary price and you'll have the taxman pulling you inside out - big companies do the same trick on a routine basis. And get rewarded for it. Tim Cook is talking out of his ass.
Religion is what happens when nature strikes and groupthink goes wrong.
Taxing them more simply means higher prices for all the customers.
Well that's simply horseshit. Paying their taxes increases their costs. Apple make a lot of profit, so paying taxes would reduce that profit. Profit is used for a lot of things; salary increases (rarely), growing the business by investing in new product designs, more staff etc etc, put in the bank for a rainy day, or paid to the shareholders in dividends or via share buy-back schemes.
Apple has stupendous amounts of past profit stashed away as cash reserves in offshore banks, because it doesn't have anything else it can think of to do with it.
Increasing prices to pay their taxes, rather than take a slightly smaller profit makes no sense, because their revenues already far outstrip costs. If a higher price would be more profitable for them (vs decreasing sales), they'd already be charging it.
Apple, like Google, Vodafone, Amazon and any number of multinationals pay hardly any tax in the countries that buy their products. They make their revenue from western countries, but use complex arrangements with shell corporations, intra-company loans, licence payments etc so that those profits are then recorded in 0-tax tiny countries. Thus much higher profits - which ultimately largely end up going to the shareholders (which of course, includes the CEO and other top management). The shareholders are largely already the wealthy, because they're the only ones able to use their money to invest in large amounts of shares instead of you know, buying stuff to live on. Even if the money doesn't go directly out in dividends, it's used to increase the share prices, which has the same effect.
So instead of paying for the infrastructure they use in western countries, for the social safety nets their workers have in europe etc, for the educations their workers get, by paying the pitiful amounts of tax rates they actually should - they divert them to offshore holdings and they end up making the already rich richer.
It's incredibly regressive. In addition, smaller national companies can't pull the same tricks, have lower profits to invest in growing their business, and is a good part of the reason the big multinationals got so big in the first place and displace smaller companies from the marketplace. Who, incidentally, also pay better wages on average.
UK corporation tax rate is 18%, hardly extortionate for the amount they benefit from selling in the UK. And hardly any of the multinationals actually pay anything like that rate, many pay nothing at all - meaning us working stiffs have to pick up the difference to pay for the NHS, roads, police, firemen, social security, pensions etc etc etc, all of which have been under heavy pressure precisely because the government isn't getting enough taxes in to pay for our already thinly stretched services.
Companies in the 50's and 60's used to include social responsibility for their workforce and their communities as part of their thinking - they knew that having customers able to afford their products was a good thing for them in the long run. Now it's all about maximising share price in the shortest possible time, and screw the long term, the workforce, the customer and anyone other than the very richest.
Remember kids, it's all fun and games until someone commits wholesale galactic genocide.
Except they don't "owe" it. They pay 100% of the taxes they owe. If you feel they should OWE more, then stop voting for people that keep giving them more ways to pay less taxes.
If you could cut your tax bill in half and didn't, you would simply be stupid, if Apple does it, they are criminals.
You have to be a slave to the government for half of your life because corporations are permitted to avoid taxation in this manner. If the corporations paid their tax burden and didn't manage to shift profits to other countries, then you wouldn't have to pay nearly so much to maintain the system that they're profiting from far more than you are, and then not paying to maintain.
Perhaps one of the most unsustainable concepts ever invented is corporate offshoring of profits to avoid taxation, while at the same time supply siders demanding pay levels so low as to require the average employee to require government assistance just to live.
Which always leads to the question of how much we can reduce the pay of the "Overpaid American Worker" until we get to the point that is considered proper? And will still allow the same person to buy the shit that is being produced. One of the most bitched up aspects regarding what people who call themselves Capitalists these days have is a complete lack of understanding that they make more money when they have more customers, who are more likely to buy the stuff they are selling if they have money to buy it.
It doesn't take a capitalist, socialist, libertarian, communist, Democrat or Republican, or any other ideology to figure this out. It only takes some really basic math, and not much more.
The shepherds did so well protecting the flock that the sheep no longer believed that wolves existed.
You have it wrong. If you are saying you have to work 1/2 your life because of taxes (which you claim are being withheld by companies) and i say no its the Government. Its swelled up in size and now wastes way more money by being such a beheamoth.
Yes, that is because we have permitted corporations to dodge taxes. Make the corporations bear the tax burden, and you'll see that situation cleaned up in a hot second.
Take this BS education system. More s-ent than anywhere with terrible results. Then they suckered in whole generations with the EVERYONE MUST got to college.
I personally want to live amongst a more educated populace. You may think that's wasted money, but you can readily see what the alternative looks like in the midwest, where most of the welfare mouths are. Most of them are white, and most of them either stopped before college, or didn't even finish high school. Maybe that money isn't wasted after all. But corporations are spending money to influence education in ways that will profit them, and they don't have to pay for the results, so what do they care? So once again, you make the corporations pay the tax bill, and they will take care of the inefficiencies.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
There is a huge tax problem in the US. There is an 80,000 page tax code, where 79,500(1) are favoritism, cronyism, and the results of bribery. Yeah, Apple should probably be paying more, but given the current tax code they are working within the law. You don't have to like it, but if that was not the case people would be in jail for tax evasion (especially given the amount of money we are discussing).
Not only does all this favoritism mean that companies like Apple legally pay a fraction of what small businesses pay, but there is something worse afoot. Namely, that there is a massive economy built on top of this pile of corruption. I laugh when I hear people talk about flat tax or "fixing" the tax code because they ignore that the US has at least 50Billion dollars a year relying on our current corrupt tax system.
A flat tax, or even corrections to make the tax code fair, are going to put massive numbers of CPAs, Attorneys, and Accountants out of work. The few people leaving from the IRS that you hear about on rare occasions is quite frankly peanuts. Where does everyone employed by H&R Block, Quickbooks, Kiplingers, and thousands of Law firms work if we fix the tax code? Those are some high paying jobs too, so lots of middle class income requires them to be there or they take a massive hit as well.
While I absolutely want fairness, if shitty laws are on the books why is it wrong to follow the law exactly? We need to fix it, but it's not like waving a magic wand or voting for "that guy/gal" will fix the problems. I'll get off my soap box.
(1) Giving 500 pages for title, cover page, index, and boasting by writers
-The wise argue that there are few absolutes, the fool argues that there are no probabilities.