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Apple Paid $0 In Taxes To New Zealand, Despite Sales of $4.2 Billion (nzherald.co.nz)
Apple paid no income tax to New Zealand's Inland Revenue Department for the last 10 years, according to an article shared by sit1963nz, prompting calls for the company to "do the right thing" even from some American-based Apple users. From the New Zealand Herald:
Bryan Chaffin of The Mac Observer, an Apple community blog site founded in 1998...wrote that Apple was the largest taxpayer in the United States, but 'pays next to nothing in most parts of the world... [L]ocal taxes matter. Roads matter. Schools matter. Housing authorities matter. Health care matters. Regulation enforcement matters. All of the things that support civil society matter. Apple's profits are made possible by that civil society, and the company should contribute its fair share.'"
Apple's accounts "show apparent income tax payments of $37 million," according to an earlier article, "but a close reading shows this sum was actually sent abroad to the Australian Tax Office, an arrangement that has been in place since at least 2007. Had Apple reported the same healthy profit margin in New Zealand as it did for its operations globally it would have paid $356 million in taxes over the period."
"It is absolutely extraordinary that they are able to get away with paying zero tax in this country," said Green Party co-leader James Shaw. "I really like Apple products -- they're incredibly innovative -- but it looks like their tax department is even more innovative than their product designers."
Apple's accounts "show apparent income tax payments of $37 million," according to an earlier article, "but a close reading shows this sum was actually sent abroad to the Australian Tax Office, an arrangement that has been in place since at least 2007. Had Apple reported the same healthy profit margin in New Zealand as it did for its operations globally it would have paid $356 million in taxes over the period."
"It is absolutely extraordinary that they are able to get away with paying zero tax in this country," said Green Party co-leader James Shaw. "I really like Apple products -- they're incredibly innovative -- but it looks like their tax department is even more innovative than their product designers."
"but it looks like their tax department is even more innovative than their product designers."
That's their job. Change your laws.
People always complain about this sort of thing, but you know most individuals would use legal tax "loop-holes" to avoid paying taxes if they could (and many wealthy people come close). Apple and all the other zero-tax paying companies are not non-profits, they're in it for the money. If people are upset about all this, perhaps our elected representatives can change the laws? Seriously, if it's legal, what of it? Like I said, most people would do the same if they could...
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The VAT tax rate on that $4.2 billion is 15%. New Zealand made a lot of money off those iphone sales.
"Apple almost certainly paid sales tax."
It seems that NZ GST, although collected by the seller, is considered to be paid by the consumer.
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This is a basic problem with corporate income tax: everyone in the world feels they are entitled to their "fair share". Corporate tax itself is a kind of double taxation: a corporation is made up of people who pay income tax. In addition, there is sales tax paid on all goods sold in a given country. I imagine a great deal of sales tax has been paid on Apple products in New Zealand, money the government wouldn't have if Apple didn't sell products there.
The problem with corporate income tax is that it is always possible for a mutlinational corporation to shift its profits to whichever country offers the lowest tax rate, unfairly enriching that one country. The best solution is probably to get rid of corporate income tax altogether, and make up the difference with sales taxes. (After all, the cost of corporate taxes are passed along to the consumers anyway.) This way, there's no arguing about who is entitled to the tax money: it's paid by the consumer wherever the sale takes place. This isn't the first time corporate taxes have caused problems: remember the court battle in which the E.U. argued that Apple owed more taxes to the Irish government, despite the fact that the Irish government didn't even want those revenues? This is the kind of absurdity that results from corporate taxes.
If I can be modded down for being a troll, can I be modded up for being an orc, or a balrog?
How is this modded insightful when it is the opposite?
Firstly Apple would have paid ZERO sales tax, because that isn't how the sales tax system in NZ works. Apple only has to remit the sales taxes that its customers have paid. It receives an input tax credit for all purchases in NZ that it makes. In essence this means that the net sales tax paid by a company is zero. Its customers are who have paid it.
As for your assertion that they shouldn't pay tax because they are just an importer, if another company imported apple products THEY would be paying corporate tax.
Apple NZ is the entity that is making the money. But it is using licensing fees to shift it's profits to another locale. That profit shifting is where governments are getting upset. And understandably so.
And your example of NZ sheep is also flawed, because this type of profit shifting can only work when you are a multinational. Those NZ farmers you use in your example will be selling their sheep to an exporter, that exporter will be selling them to a US importer and the US importer will be selling them to the final customer. That US importer will be paying US corporate tax. The ONLY way that they wouldn't be is if the whole network is owned by one company and they were charging some "sheep IP licensing fee" from a low tax country.
This is insane. A country has the power to make laws. New Zealand has laws and agreements in place that ALLOW this. Then, the same government whines if these agreements are used by companies.
If I make a rule in my house, where anybody coming in can take a candy per person, I should not complain about a greedy family of 36 shows up and takes 36 candies. I can change the rules, adjust them, fix them, but definitely not whinge about it.
Those laws are made to please the politician's rich friends -- as well as the politicians themselves -- so that they can move their assets and income to countries with stupidly low rates (Ireland, Caribbean, etc.). If you don't want this to happen, change the laws. If you can't change the laws without upsetting your rich friends, put up and shut up.
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I would love that. Couple it with counting capital gains and dividends as income.
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All of the things that support civil society matter. Apple's profits are made possible by that civil society, and the company should contribute its fair share.'"
Apple (and every other company) does contribute. They product fabulous products at prices customers are very willing to pay. That means there's a substantial consumer surplus captured by Kiwis. That's Apple's contribution to New Zealand society.
(Side note. I don't remember where I read this so I can't cite it. A study showed that most of the value created by companies is captured by customers. Apple may be worth zillions but if you add up how much people would have been willing to pay for their products, it's something like 10 to 20 times higher.)
Remember also, Apple doesn't ultimately pay taxes. It just collects taxes and writes the check. Ultimately the burden of the tax falls on Apple's customers (through higher prices), employees (through lower wages), and investors (through lower profits). I'm guessing most of them don't live in New Zealand.
We do have Goods and Services tax, which Apples customers pay. Apple paid no tax.
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So where is your proof that New Zealand firms operating in the USA do not pay US taxes ?
If Apple does not want to pay taxes on profits like other businesses then perhaps an import duty on Apple gear is warranted, currently there is none.
Sales taxes are paid by the consumer, they are not based on business profits, they are collected and passed on by the retailer.
So for example if I buy an Apple computer at Harvey Normans, Harvey Normans passes on the sales tax to the IRD, not Apple.
Another approach could be
If Apple wants the protection of the laws here in New Zealand then it should pay taxes to enjoy of the benefits of citizenship
If it does not want to pay taxes, then it places its self outside of the laws, so for example they would have no patent or copyright protection in NZ.
Currently corporates have all the benefits of a country and don't pay any of the costs.
As for WHY apple should pay taxes.
Lets assume YOU are in business, and at the end of each year you have $1 Million in profits, and from this you pay $300,000 in taxes. Those taxes are used for roading, infrastructure, the legal system, etc etc etc, i.e. all the things from a civil society you benefit from.
Now Apple comes along, they are "outside" you country, then enjoy ALL the benefits of roads etc etc etc that you do, but they don't pay taxes, so in real terms they are $300,000 better off each year than you, money they can put in the bank for a rainy day.
We have a housing crisis, and business down turn, things are rough and you have to close down. Apple on the other hand has a huge stock pile of cash so they can ride out the rough times (because they did not pay taxes), so they remain in business where by you loose your business and your house.
THAT is why corporates should be expected to pay taxes, so they compete on a fair and equal basis with those local companies who can not dodge the taxes.
Or to put in in an American setting, if a Chinese firm is able to dodge taxes and use that tax advantage to put an American company out of business causing people to loose their lively hoods and houses, do you STILL think it is fair the Chinese firm pays no taxes.
If people are upset about all this, perhaps our elected representatives can change the laws?
The problem with this is that these companies have an army of lawyers trying to find holes in whatever laws are passed. They can find these holes faster than laws can be patched because governments have to tread carefully to make sure new laws do not accidentally penalize companies who are behaving themselves. The only way I can see governments defeating this is by giving themselves far more discretionary taxation power to target individual companies than they currently have and that can lead to abuse of that power if we are not careful.
First off, in NZ it's called "GST" (Goods and Services Tax), which is similar to what the US calls "Sales Tax" and what other countries call "VAT".
Apple indeed would not pay any GST here because Apple is not the final retailer*. The final retailer would collect the GST from the sales of Apple goods and pay it directly to the IRD. Wholesale sales of the goods from Apple to the end retailer are GST exempt provided that they are sold to a GST registered business for the purpose of resale would would account for pretty much *all* of Apple's sales in NZ.
* As far as I'm aware there are no "Apple stores" in NZ, all of Apple's products are sold through other 3rd-party retailers here. Even if there were an Apple store it likely would not be directly owned by the same Apple NZ corporation that this article references.
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Sales taxes are regressive. They hurt the poor and middle class and help the rich. That's because the working class spend most or all of their money on survival.
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I enjoy private roads, the public roads I have to suffer through. There is no question at all that nothing should be public, especially power companies, education, roads, health care, even military. Military in the hands of government is the cause of all the wars and humanitarian disasters through thousands of years, history cannot be more obvious if you bother to look at it.
You can't handle the truth.
New Zealand has a population of 4.471 million. $4.2 billion / 4.471 million = $939 per capita spent on Apple products.
China has a population of 1.357 billion. Apple's annual revenue in China was $48.5 billion, or $36 per capita.
Europe has a population of 743 million. Apple's Europe revenue was $49.95 billion. Or $67 per capita.
Japan has a population of 127 million. Apple's Japan revenue was $16.92 billion. or $133 per capita.
The U.S. has a population of 319 million. Apple's revenue in the Americas was $86.62 billion. Even if you attribute 100% of that to the U.S., that only works out to $272 per capita.
So either New Zealanders absolutely love buying Apple products by nearly an order of magnitude more than the rest of the developed world, or the $4.2 billion figure is somehow exaggerated.
I've lived in NZ for a number of years now and I used to read the NZ Herald, Stuff.co.nz and other publications in this group.
To say they are anti-Apple partisan is an understatement. It's just hateful bile, and industrial propaganda.
Any comments I posted under their articles were being either blocked or deleted if I said anything pro-Apple or contradicted their anti-Apple editorial.
Apple is a US company. Yes it sells into NZ and the NZ government collects the standard 15% on all Apple's sales.
I'm at a loss to understand why sales of $4.2B should be taxed for anything else but sales tax?
If NZ wants more money then they should look at imposing import tax on electronic goods.
Singling out a single company isn't right.
NO, it should be based on how much money they take in from the consumers
That is a "sales tax" (GST in NZ), which Apple already collects on their sales in NZ.
When TFA says Apple pays "$0 in taxes" they mean Apple pays "$0 in taxes after you subtract all the taxes (GST, payroll, excise tax, etc) that they DO pay."
There are lots of comments above that range from what amounts to victim-blaming (Don't like the result? Then change the laws.) to tax education (Apple merely collects the VAT for the government, but the customer is considered to have paid it.) to hysterical outrage (kill them kill them kill them ... oh, wait, maybe that was a different thread).
In my country (USA), we have non-profit and for-profit entities, as they are commonly called. The non-profits include entities that can have considerable land wealth, like universities. Two of our most famous universities, MIT and Harvard, jointly own over half of the land in Cambridge, Massachusetts, the city where they are located. Neither of them are legally required to pay state property tax, because of their non-profit status (let's overlook for the moment that state and federal tax exempt status are related but technically separate things). But they also both benefit greatly from the surrounding city and its services, so they BOTH pay tens of millions of dollars to the city; such that are called "payment in lieu of tax" so that they retain their non-profit status. I don't know if they are paying the same amount as they would if they had for-profit status.
There is no legal requirement for them to do so. Indeed, there is a clear legal position that has been created, the not-for-profit status, in order to provide them a clear and explicit means to NOT pay, as their mission is considered important to the well-being of society. But they make payments ANYWAY. It is a moral obligation. It is also not entirely altruistic, as without these payments, the social environment around the universities would deteriorate significantly. You want nice things like infrastructure, emergency services, primary and secondary education, democracy? You gotta pay for them.
There is no fundamental reason that Apple, despite there being a legal path to avoid taxes no matter how complicated, could not make contributions to each and every country in which they sell products while still making embarrassingly immense profits. I bet some sharp-penciled tax attorneys would even find a way to make such contributions tax deductable. Apple would rid themselves of the negative press, get a nice write-off, and the countries (here, NZ) would benefit as well.
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LOL paying taxes on taxes. That is just funny.
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I think that 4.2 billion dollar figure is over 10 years, which would make it $93.90 per capita. Much more reasonable figure then.
It doesn't matter who pays the tax. It's the end user in all cases. Whether Apple sells it's phone $1000 and pays the govt $150 or sells its phone $850 and the user pays the govt $150 makes no difference other than semantically.
You are talking about tax incidence. But you forgot about an important detail. Companies cannot always simply pass on any taxes. Just because the government assigns a particular tax rate to my company doesn't necessarily mean I can raise prices to compensate. The reasons for this vary but usually it is because of competitive pressures. So in many cases the company ends up eating some percentage of the cost and their profits are lower. It's unclear if this would apply in Apple's case but it is clear that Apple cannot simply charge any amount they want. At some point the price gets high enough that people will seek out alternatives which is why Android has huge market share despite modest profits. In the long run (years) all prices are variable but for shorter periods of time there often are constraints on pricing power.
But if a company can manage to (legally) dodge all taxes that can be a huge competitive advantage in pricing power. It allows them to sell a product for less money than would otherwise be possible, even if it is a premium product with a fat margin.
There are plenty of other taxes aside from income tax. It's a bit frustrating to see how quickly "no income tax" gets transmuted to "no tax". Surely Apple is paying a lot of other taxes in NZ besides income tax. Not sales tax, as already discussed, except on purchases made by Apple in NZ. Property tax, etc.
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I'm not ignorant to anything you just said. "Long term" is one year. Whoopdiedoo. I can't imagine why you think a big tax on capital gains wouldn't serve as an incentive to leave your money in the tax-free corporate entity (i.e. long-term investment).
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