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Stiglitz Calls Apple's Profit Reporting In Ireland 'a Fraud' (bloomberg.com)
Jeanna Smialek, and Alex Webb, reporting for Bloomberg: Nobel economist Joseph Stiglitz said U.S. tax law that allows Apple to hold a large amount of cash abroad is "obviously deficient" and called the company's attribution of significant earnings to a comparatively small overseas unit a "fraud." "Our current tax system encourages companies to keep their money abroad, opens up a vast loophole through what is called the transfer-pricing system that allows them not only to keep their money abroad but, effectively, to escape taxation," Stiglitz, who advises Hillary Clinton's presidential campaign, said. Stiglitz was speaking in response to a question about whether policy makers like Clinton and Senator Elizabeth Warren, a Democrat from Massachusetts, could develop a plan to encourage companies like Apple to bring their accumulated foreign earnings back to the U.S. About $215 billion of Apple's total $232 billion in cash is held outside of the country, third-quarter earnings results showed this week.
Apple, Google, Microsoft etc won't let this heinous idea get loose.
What is fraudulent is calming that the government really deserves 39% of a companies earnings. At that rate it is simply theft, to call it a tax is a joke.
That is WAY more than most other countries charge, and is the rate Apple would be required to pay if they decided to bring the money back to the U.S. (important to note as some of the Wormtongue-esque apologists for this theft claim the rate is reduced through deductions - true to an extent, not at all is this case).
"There is more worth loving than we have strength to love." - Brian Jay Stanley
what good are they?
This is the part where advocates step in and claim how it will send these companies fleeing overseas.
Oh, c'mon, I couldn't have been the only one thinking about his cousin Hugo coming in to visit those who are "obviously deficient"...
The time for polite talks is way past.
"Transparent" is a shit show that trades on every stereotype going. A man in drag is NOT a transsexual.
Been that way for a while. It is just that more companies have gone overboard at it.
Double Dutch with Irish Twist was the old way.
It is allowing intellectual property to be WAY over valued that is part of the problem.
Buying something from a subsidiary at way over value, so your expenses are up, and the profit goes to the subsidiary in a tax friendly country is FRAUD.
The reality as always is that corporations pay nothing in tax.
Apple paid seven BILLION dollars in U.S. taxes for just six months ending in March 2015 for example.
As I stated, whatever money Apple moved back to the U.S. would be taxed at the maximum corporate rate and not subject to deductions.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Does your real estate agent take a percentage of your profit?
Does your broker base his fees on your profit?
Does your property tax bill ask what your profit was?
Of course not, so why is the US Government that? The value you get from the government running the military, maintaining safety programs,and building and maintaining our transportation infrastructure isn't based on how much you made last year, it's a fixed cost. Change to a gross receipts tax and every dollar you receive is taxed at a fixed rate. No worries about what is deductable, or what does or doesn't qualify as pre or post tax. Plus it's more easily auditable.
My town uses it and it's pretty fucking straight forward. You put down what you grossed, and you multiply that by between 0.10% and 0.37%. Yes, you read that correctly - our local business tax is ten to thirty-four CENTS for every One Hundred DOLLARS you gross. And, aside from lying on your tax forms, there's no way around it.
Is it just my observation, or are there way too many stupid people in the world?
And Taxed in Ireland.
They should add this to all product labels.
I think I need to quote Inigo Montoya on this one. Because if something is legal, how can it be fraudulent?
I am Slashdot. Are you Slashdot as well?
Apple has stated in the past that if the tax rate were reduced they would pay the tax to bring the cash back to the U.S. - they just consider (rightfully) the current rate to be exorbitant. Note that in the article the amount they want the tax rate reduced to for re-patriation is higher than they pay for taxes in Ireland.
People (and companies) will do the right thing as long as it does not hurt TOO BADLY to do so. Currently moving the money back to the U.S. would be negligent on their part and invite a shareholder lawsuit for blatant stupidity.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Apple also funnels U.S. profits through a Nevada corporation to avoid paying taxes in California and other states.
http://www.nytimes.com/2012/04/29/business/apples-tax-strategy-aims-at-low-tax-states-and-nations.html
Vote. And vote in your mid term election. I'm not going to bother telling you who to vote for. You can figure that out yourself. But our last Congress was made up of ass clowns who got elected because nobody shows up for mid terms. Thick about that.
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"...Presidential campaign..."
And that's where I stopped reading.
Very strange that the same loophole is used by members of congress to hide their money offshore but only large corporations are being highlighted for taking advantage of the loophole. Anyone ever play the ball and coconut shells game?
The company I work for pays my taxes via income from my paycheque.
It's a totally circular argument. The government collects taxes on the movement of money, not the source.
They can't have their cake and eat it too.
Actually Apple and most other massive companies in the US have been doing exactly that.
The average person however, gets fed a strict diet of cake of a different kind.
-The wise argue that there are few absolutes, the fool argues that there are no probabilities.
I have notice that usually slashdot articles are more negative about apple/microsoft/oracle/ibm than they are for google. FWIW, apple tax rate is 26% vs Google 18%.
People here are actually defending Apple. They don't need your help to defend themselves, they aren't able to stop laughing how they are screwing you guys over.
Good talk!
To protect their wealth. Apple is simply playing by the rules :)
I don't know what he expects when our tax system here is so insanely complicated that even tax professionals admit they can't tell what the law is. Simplify the tax system, remove all deductions, demo/sell all of the IRS offices, etc. The government created its own worst enemy when it decided to try to play economic tycoon with the nations companies, choosing winners and losers with various grants, tax breaks and deductions.
Who pays the corporate tax? The consumer. Where do you think the money comes from? It comes from people that throw money at the corporation to receive goods. It doesn't matter if the person makes $1/year or $1B/year, they pay the same price for the product so they are paying the same tax.
What do you think will happen if corporate taxes increase? Where does that tax money come from? It will come from an increase in prices to pay the tax. You don't think the shareholders (the real owners of the company) are going to pay it (lower dividends, lower share prices) do you? No, prices go up and consumers pay it.
The fairest thing to do is kill corporate taxes completely.
No, I think the ball is clearly in the Republicans corner concerning tax policy. The goal of Democrats is to have government control the spending, not private entities.
First off, that money would benefit America greatly IF it was used domestically to create more facilities, hire more labor, or encourage R&D spending by acquisitions or investment in US companies, or organic R&D spending, etc... etc... so I would propose making the cash import taxable, but giving a write off for spending it domestically, bolstering domestic investment. Paying dividiends or share buyback not included, since the majority of these companies shares are foreign owned.
As far as Apple specifically is concerned, they have had their fare share of bad press on these issues. They do have a valid argument as to why they operate this way: local competition.
When a company in Japan sells goods in Japan, it pays Japanese sales tax. It then pays Japanese income tax on its profits. When Apple does it, it pays Japanese Sales Tax, Japanese income tax (for that entity ( the local Apple subsidiary)), and then American income tax on top of that, three taxes. It minimizes this third tax by diverting the income to Ireland and holding it there. They and everyone else knows that this third tax creates an unfair playing field against global or international companies because domestic ones don't have to pay that transfer costs. If you feel that this tax is fair, every company will eventually build it's headquarters in China, since long term that's where the majority of their income will be generated.
Stiglitz is wrong here.
When Apple does it, it pays Japanese Sales Tax, Japanese income tax (for that entity ( the local Apple subsidiary)), and then American income tax on top of that, three taxes.
The reason they pay American income tax is because the USA provides the infrastructure that allows them to exist in the first place. By "USA", I mean mine, and yours, and everyone else's tax dollars.
If you are suggesting that we should provide the infrastructure for Apple and it's execs to make billions of dollars and not expect them to kick back, you are nuts.
I'm by no means expecting them to go along, tax free. I'm only stating that by paying the agregious tax IN ADDITION to the foreign taxes, they would be disadvantaged in the global market. We should encourage "USA" companies to make sales over seas and return said profits to domestic investment. That's what any country wants.
Apple complies with the relevant statutes in every jurisdiction in which they do business, and they report their finances on a regular basis. There is no fraud here, and Stiglitz can go fuck himself.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
in-bed with the Democrats. Some who in the past helped both parties even cut their support from the GOP this year entirely. Remember when Obama campaigned claiming HE would do something about all that offshore cash? Did he do it? hmmmmmmm
Trump's tax plans (on his web site) get rid of lots of tax loopholes, and Trump wants to straighten-out our tax and trade policies so that these businesses are no longer encouraged to outsource all the jobs that used to be done by middle-class Americans and no longer encouraged to hide all their money offshore.
The Democrats, on the other hand, TALK a lot about "income inequality" while never doing anything about it, while being funded by the people who most-benefit from it, and while talking out of both sides of their mouths on tax shelters (The Clinton Foundation is one of them) and the TPP. Today, the DNC stripped a Bernie delegate of his credentials for holding up an anti-TPP sign.
Apple, Google, Microsoft etc won't let this heinous idea get loose.
Actually, all these companies, and many others, are strong advocates of corporate tax reform, even though they would almost certainly pay more tax. Our current system is idiotic. We incentivise companies to keep profits outside America, and to move jobs overseas. We need to stop the extraterritorial taxation (which no other country demands), and we need to align taxes on domestic profits with other countries so companies invest here.
But there is too much pandering and populism from both parties for these problems to be fixed. My company has offices in San Jose, California, and Shanghai, China. We are adding several employees this year, and whether Donald or Hillary wins, I think you can guess where those jobs will be created (hint: not in California).
The reason they pay American income tax is because the USA provides the infrastructure that allows them to exist in the first place.
No. This is wrong. If an American company designs a product in France, manufactures it in China, and sells it in Germany, they pay tax on that sale, despite using no American infrastructure. If they re-incorporate in Ireland, they avoid the tax, despite no change in infrastructure use. If they manufacture in America but pay an "IP license fee" to their Cayman Island subsidiary, then they can pay no tax despite using American infrastructure. Corporate income tax is in no way correlated with infrastructure use.
The idea Apple doesn't pay enough US taxes to cover any possible use of US infrastructure beggars belief - the company paid over eight billion in 2014 alone. Apple pays US taxes on all US sales - what Stiglitz is saying is somehow Apple should pay US taxes on profits from European sales.
When a device is made in China and shipped to and sold in Germany, what US infrastructure is Apple using that needs to be supported with additional billions of dollars every year? Yes, there are some companies that do shady things like sell IP to subsidiaries and then pay huge fees to use their own IP, shifting US profits to the subsidiaries. But Apple is in a small subset of US corporations that doesn't play those kinds of accounting games.
Were I Tim Cook I'd move Apple to Ireland just to hear idiots like Stiglitz try to explain why Apple should still pay US taxes on every penny it makes everywhere.
Somehow I don't think you're an accountant. Or someone who's ever worked in international sales.
The tax calculation is rather more complicated than you're suggesting. That's why the WTO exists.
Simple. Just use the transfer pricing as a basis for determining the value of their patents, trademarks and copyrights.
Want to sell a fake iPhone? That'll cost you $0.25 in damages, please.
They may need to start reporting their income as having been earned in China (where they do sell quite a few units). Which government do you think will cooperate with the US more fully in case of fraud investigations? China or Ireland?
Any guest worker system is indistinguishable from indentured servitude.
The reason they pay American income tax is because the USA provides the infrastructure that allows them to exist in the first place. By "USA", I mean mine, and yours, and everyone else's tax dollars.
This is a fucking lie.
States around the nation re-pave roads next to Senators' houses every year because they want a smooth ride, and because if they don't the money will go to waste.
Why aren't those bridges being rebuilt?
Because "Shovel Ready Jobs" money can't be diverted there. And because the morons running things are so dumb that they intentionally violate federal law to spend money locally on products far more expensive than they could get from elsewhere...throughout the US.
Not all that long ago...infrastructure actually was built by private entities--sometimes freely and opened to the public.
Some of the very largest streets in the US--highways even--began by farmers dragging blades over the land to flatten it to get food to market, then cities' residents deciding to extend those throughways.
Apple et. al. create the production which generates revenues to let the government (which has lawlessly taken-over functions it has no business performing so terribly and inefficiently for local back-scratching) build that infrastructure.
Take it away from the bastards so we can actually prosecute people damn it.
'If corporations are legal 'persons' making profit'
But they aren't. They are a legal entity owned by shareholders who have invested money in the hope of getting a return. When shareholder receive dividends they pay tax on those dividends. Therefore potentially a company pays tax twice on its income - as itself and as its shareholders.
This matters because companies can be financed by their shareholders - whose income stream is variable, dependent on a company's profits - or by bonds or bank loans, which do not allow this control, instead the company pays a fixed rate of interest. THAT payment is before the company has paid tax on its profits. This has problematic consequences: if a person wants to receive income from a company, he's likely to to do better to buy a bond, which is only taxed once, rather than a share. There is thus a tax advantage to borrowing over shareholders' funds. This is destabilising; a company can stop dividend payments when its profits fall, but must keep on paying its bond and loans.
Bottom line: it is totally legitimate to tax the income that people receive from firms. It is irrational to tax firms' profits directly. Unfortunately this is hard to explain, and our democracies don't like what is hard to explain.
Saloomy.
Oh,you mean even more tax breaks etc for corps with a dreadful record of doing the utmost they can to lie,bribe etc etc everyone and anyone they can to avoid/evade or gain breaks that other,usually smaller corps or individuals can only dream about..
That sounds like a really good idea,reward them for what is basicaly criminal behaviour,not force them to onshore the money,hit them for the 35% tax due and then hit them with huge great fines of another 50% of the original off shored amounts,just to teach them not to do it again,the USA might have enough to rebuild so.e of its vital infrastructure then,remembering that a huge amount would just vanish through the usual corruption,over pricing,theft etc that your country,along with many others,including mine,the UK,is riddled with..
They want to bring it back for the purpose of taxing it. The current capital gains tax here is 23.8%. The income tax around 45% including state and federal, and "Obamacare" add-ons. They want more tax, not more investment. Where it is not it is providing more investment with minimal taxation. In order to use it in the USA where they want they have been taking out massive loans, about $70B against those assets in various currencies, to invest the loan proceeds in the USA which is legal without taxation. The cost of course is the massive interest they pay on an absolute basis, if not a relative basis. That is a cost.
The good news from all this is Apple has learned to bypass wacky US Federal tax laws to be able to invest MORE in the USA than they otherwise could. That's a win isn't it? More taxation is a lose, right? What side are you on?
JJ
I couldn't have said it better my self, companies shouldn't have to pay domestic tax on foreign, developed, manufactured, and sold goods. The solution is simple just have an import tax on licensing fees and other methods companies use to get profits out of the country tax free. The other solution which will never happen is to adopt Fair Tax.
Knowledge = Power
P= W/t
t=Money
Money = Work/Knowledge so the less you know the more you make
And that can be explained so easily?
The idea that an idea in accounting can be explained simply is part of the reason why Trump gets taken seriously by the stupid. They've been told they have a right to understand. No - a lot of them are too stupid to understand a complex line of logic. So they dismiss it. And sulk.
If an American company designs a product in France
Apple didn't design a product overseas. They designed it here. All of the R&D happened in the USA. All of their staff lives and works in the USA (and all of their staff uses the USA's infrastructure).
companies shouldn't have to pay domestic tax on foreign, developed, manufactured, and sold goods
Well, maybe. Does this apply to Apple? Did Apple wholly design and manufacture this product overseas using no resources in the USA? Of course not. Not even close. Almost all of Apple's engineering is in the USA.
Emphasis on *could*. Sure, she *could*. *Will* she? Probably not.
Apple et. al. create the production which generates revenues to let the government (which has lawlessly taken-over functions it has no business performing so terribly and inefficiently for local back-scratching) build that infrastructure.
What came first? Apple or the US Government and the infrastructure? Are we to believe that Cupertino was a barren rock before Apple got here? It was Apple's taxes that allowed Silicon Valley to grow from a desert? The employees of Apple? Did Apple go back in time and fund the institutions that educated them?
No, I think the ball is clearly in the Republicans corner concerning tax policy. The goal of Democrats is to have government control the spending, not private entities.
First off, that money would benefit America greatly IF it was used domestically to create more facilities, hire more labor, or encourage R&D spending by acquisitions or investment in US companies, or organic R&D spending, etc... etc... so I would propose making the cash import taxable, but giving a write off for spending it domestically, bolstering domestic investment. Paying dividiends or share buyback not included, since the majority of these companies shares are foreign owned.
Unfortunately, changing the policy isn't going to produce a net gain. There isn't going to be any significant additional money to spend. The Stiglitz proposal is pure smoke and mirrors. Every extra dollar the corporations end up paying will come out of somebody else's pocket. People will lose jobs, work will move overseas, US stockholders will lose money, foreign competitors will take money away from US citizens, consumers will have to pay more (patent and copyright and so forth ensure that ideal market economic theory will not determine prices: inflation will simply happen a little faster). People on the bottom of the economic ladder will be hurt the most, which makes these a very selfish and short-sighted policy proposal.
The net effect is even bigger government having to spend even more to take care of the poor, and more shrinkage of the middle class.
I'm sure Stiglitz knows all this, but this an election year, and truth is the first casualty of seeking power.
We already have an individual income tax, the key is just to make it more effective. In practice, there are so many loopholes that the actual taxes more closely resemble a flat tax system for many of the folks in upper level of wealth (which is NOT at all the same thing as being in the upper tax brackets).
The right thing to do is take the 2700+ pages of the US tax code, and get it down to a simple system in 50 pages, well written so any educated adult can understand it. While they're at it, they can make capital gains progressive (perhaps after some reasonable subtraction for inflation). Get rid of the huge amounts of overhead caused by the complexity of the current code, and tons of genuine loopholes (as opposed to this fabricated one), and then you don't have to worry about increasing taxes: the government will make a lot more money because the loopholes will be closed, and businesses will make more money due to having less overhead, which also will produce more tax income.
The more complex the legal system is, the harder it becomes to justify even routine activities of lawyers, since unneeded complexity creates artificial demand and hence involves ethical conflict of interest: the mere presence of that complexity creates ethics problems. Over the long term, this inevitably makes a legal system massively unethical - exactly what the USA has today. Tax law is a good place to start fixing things.
If Congress want to support things, let them pay for them directly instead of manipulating the tax code.
Of course, since associations of lawyers routinely donate huge amounts of money to the Democrats (campaign contributions) to ensure reform of the legal system doesn't happen, it probably won't.
Apple didn't design a product overseas. They designed it here.
You are missing the point. It doesn't matter where the work was done. The tax due to America is the same.
(and all of their staff uses the USA's infrastructure).
That is irrelevant. The tax is the same.
Stop assuming that the tax laws make sense.
You are missing the point. It doesn't matter where the work was done. The tax due to America is the same.
Obviously folks here are not discussing tax law but what makes logical sense. Do try to keep up.
I hope it makes the points I was trying to make clearer.
http://www.economist.com/news/...
No - I am NOT trying to reduce the burden of taxation on capital - I entirely agree that it is appropriate to tax it, and the present mess over capital gains and all the rest is a disaster. But this is about the damaging distortions that taxing equity investment more harshly than loans does, and it is a problem. Unfortunately the correct solution - increasing taxation on loan payments by companies - would rightly be seen as discouraging investment.
How we get round the perception that companies should be taxed twice - as themselves and as their shareholders - is a clear and persistent problem which the ignorance of the 'Occupy' movements ignore. Capitalism works and does bring benefits to the poorest - as the record of the decline in poverty in China clearly indicates. The free trade that has accompanied this has left victims in the west, and it's their pain that Trump and Hillary are both channelling in a depressing outbreak of selfishness at the present time.
Should 'capital' be taxed more? Certainly dead capital - such as land investments and housing for rent should (nb - I write as a residential landlord!), and the abolition of tax relief on mortgage interest payments is one of the great achievement of the British government over the past 40 years - the US should do likewise. But 'real' investment that creates productive, long term jobs? There's the challenge; if you hit that too hard growth WILL stop...
[I used the word 'potentially' in my earlier post because a lot of tax avoidance is about getting past this sort of mess of taxation. However it's not as available to little people]