How to become a profitable company or don't you wish you could dance like this?.

[onoway]

Apple Avoided Billions in Taxes, Congressional Panel Says

 

Even as Apple became the nation’s most profitable technology company, it avoided billions in taxes in the United States and around the world through a web of subsidiaries so complex it spanned continents and surprised experts, a Congressional investigation has found.

Some of these subsidiaries had no employees and were largely run by top officials from the company’s headquarters in Cupertino, Calif., according to Congressional investigators. But by officially locating them in places like Ireland, Apple was able to, in effect, make them stateless – exempt from taxes, record-keeping laws and the need for the subsidiaries to even file tax returns anywhere in the world.

 

In 2011, for example, one subsidiary paid Ireland just one-twentieth of 1 percent in taxes on $22 billion on pretax earnings from various operations; another did not file a corporate tax return anywhere and has paid almost nothing on $30 billion in profits since 2009.

[barmar]

Despite this, they say they're one of the largest taxpayers in the country, paying $6 billion in taxes last year. But they're also one of the biggest tax avoiders -- when they sold $17 billion in bonds a few weeks ago, instead of moving some of their cash back home, the move saved them over $9 billion in taxes.

[blackshoe]

And of course trying to conserve one's capital is okay if one is of the middle class, but clearly immoral if one is rich, or a large corporation. And if it's not illegal for those entities, it ought to be! :rolleyes:

[kenberg]

Tax avoidance is one of the many topics with which I live in happy ignorance. My moral views are somewhat along those that I gather Blackshoe is advocating. Something like: I don't make the rules, but if I can save a bundle by reading the rules carefully and following them inventively, then what's the problem?

 

However. There is a legal concept known as a sham transaction. Back in the days when being married was a substantial tax disadvantage there was a coule that every December got a divorce and every January re-married. They made the serious error of publicizing this. I doubt that the government much cared as long as they kept quiet, but publicizing it made the folks that passed these laws, your Congressman and mine, look like a pack of idiots. The truth hurts, so they went after the couple for having a sham transaction. Maybe this would apply to Apple, but I imagine they have a lot of lawyers who will say "Sham, what sham?".

 

Me? My life? I lead a simple life and i pay my taxes. Works for me.

[paulg]

A foreign perspective can be seen in the BBC Business Editor's article on this - Is Apple's tax avoidance rational? He also raises the question as to how good this for Ireland.

[Vampyr]

In the UK, Google, Starbucks, Amazon and Vodaphone -- just to name a few -- have paid basically no tax, ever, on the billions in profit they make each year.

[barmar]

Apple (and other companies using similar strategies) are probably not doing anything illegal (the tax code allows these savings), so it's more a question of corporate ethics. I'm sure the Apple annual report has a section touting their "community service" activities. Where's their community spirit when it comes to bolstering the US economy by paying their fair share of taxes?

 

Of course, there's a big difference. Apple's budget for community service might be a few million dollars, a fraction of a percent of their budget. The taxes they're saving are in the billions of dollars, a significant chunk of their revenue.

[billw55]

Apple (and other companies using similar strategies) are probably not doing anything illegal (the tax code allows these savings), so it's more a question of corporate ethics. I'm sure the Apple annual report has a section touting their "community service" activities. Where's their community spirit when it comes to bolstering the US economy by paying their fair share of taxes?

 

Of course, there's a big difference. Apple's budget for community service might be a few million dollars, a fraction of a percent of their budget. The taxes they're saving are in the billions of dollars, a significant chunk of their revenue.

This carries the interesting premise that paying taxes bolsters the economy. Is it true? I'm not sure, but it doesn't seem obvious to me.

 

As for their tax obligation, I fully expect them to take every legal step to reduce their tax burden. I certainly do so with my own taxes. For that matter, through mutual funds I sort of own a tiny bit of Apple stock - and I expect them to maximize its value, within the law. If people don't like it, they should change the laws.

[dwar0123]

If people don't like it, they should change the laws.

It is my understanding that every time we attempt to change the relevant corporate tax laws, the right goes nuts about how unfair it is to tax the job creators. Generally after having their campaign funds bolstered by millions from the companies that are saving billions.

 

Millions they use to brain wash half the country into thinking that taxing the rich is un-American.

[barmar]

The problem with changing the tax laws is that many of these so-called "loopholes" are there for a good reason. For instance, it's not fair to make someone pay taxes twice on the same income; so if they earn income in a foreign country, and they pay taxes to that country, we don't make them pay tax on it here as well. So how do we keep companies like Apple from sheltering huge proportions of their income, without screwing everyone else, and without making the tax laws even more complicated than they already are?

[Cyberyeti]

The problem with changing the tax laws is that many of these so-called "loopholes" are there for a good reason. For instance, it's not fair to make someone pay taxes twice on the same income; so if they earn income in a foreign country, and they pay taxes to that country, we don't make them pay tax on it here as well. So how do we keep companies like Apple from sheltering huge proportions of their income, without screwing everyone else, and without making the tax laws even more complicated than they already are?

You insist they pay at least n% on their income, so if they only pay 2% in some tax haven, they pay n-2% to the US. This would probably get all the income back onshore.

[PassedOut]

You insist they pay at least n% on their income, so if they only pay 2% in some tax haven, they pay n-2% to the US. This would probably get all the income back onshore.

I understand your point, but income would not be a good basis for that calculation.

[Codo]

If the solution would be so easy that we can find it here, it had been found.

[Cyberyeti]

I understand your point, but income would not be a good basis for that calculation.

OK, I used income im a bad way, I meant net income ie. profit.

[blackshoe]

Income in the US has been taxed for less than half the history of this country, and it was extremely controversial right up to 1913 when the 16th Amendment went into effect (there were earlier attempts to establish an income tax; they were defeated).

[barmar]

Heard something interesting about this on NPR this morning.

 

After WWII, the US government was helping European countries reconstruct themselves. We wrote a report for Ireland, recommending actions they could take. One idea, but with the comment that it probably wasn't very applicable to that country, was to use tax breaks to encourage foreign companies to set up shop in Ireland. They took this advice, and that provision is what Apple is taking advantage of to shelter much of their money. Hoist on our own petard! It's kind of like the tax version of the Taliban fighting us with weapons we sold them back when Russia was invading Afghanistan.

 

What makes it worse is that Apple is apparently not paying taxes on this money to EITHER country. The money is held by an Irish subsidiary, but the subsidiary has no actual operations, and Irish tax laws exempt companies with no operations in the country. Meanwhile, US tax laws apparently exempt income earned by foreign subsidiaries, as long as it isn't transferred back to the parent company.

[FM75]

Income in the US has been taxed for less than half the history of this country, and it was extremely controversial right up to 1913 when the 16th Amendment went into effect (there were earlier attempts to establish an income tax; they were defeated).

 

Correct. Passing that amendment was a prelude to prohibition. Before that the US government derived hefty revenues from a tax on alcohol. The income was relatively minimal, but did not go away, or get reduced when the 21st Amendment was passed.

 

Since then the "loopholes" have served many purposes, not the least of which is to buy votes through indirect payments (graduated income taxes) as a perfect example. For that matter, even a percentage tax is inequitable, if you consider that we should all share equally in the country's defense and those things which the framers of the Constitution intended for the Federal government.

 

 

"Before the modern personal income tax in 1913, Uncle Sam relied mainly on customs duties and liquor taxation. From 1870 through 1912 receipts from these two taxes alone accounted for more than two-thirds of federal revenues (and in many years accounted for more than 75 percent). Liquor taxes trailed only customs duties as the largest single source of revenue during the half-century preceding the modern income tax, with liquor taxes accounting for about a third of federal revenues.

 

Yes, we were able to maintain both a standing army and a standing navy at the time! What was Al Capone's conviction? Yes, that would be right - tax evasion - he did not report the income on the illegal imports of alchohol which could no longer be taxed.

A flat (not flat rate) tax would get my vote. Divide up the budget by the population and send everyone a bill for a proportional share. Then when a politician runs and advocates a program, people would know how much money it was actually going to cost them.

Set the income tax rate for corporations at 0%. That will bring not only the money home, which could then be invested here, but would bring jobs as well. If the business needs regulation, charge a direct fee suitable to the level of money spent to regulate it.

User fees could replace things that the government wants to do for the benefit of the few.

[kenberg]

Heard something interesting about this on NPR this morning.

 

After WWII, the US government was helping European countries reconstruct themselves. We wrote a report for Ireland, recommending actions they could take. One idea, but with the comment that it probably wasn't very applicable to that country, was to use tax breaks to encourage foreign companies to set up shop in Ireland. They took this advice, and that provision is what Apple is taking advantage of to shelter much of their money. Hoist on our own petard! It's kind of like the tax version of the Taliban fighting us with weapons we sold them back when Russia was invading Afghanistan.

 

What makes it worse is that Apple is apparently not paying taxes on this money to EITHER country. The money is held by an Irish subsidiary, but the subsidiary has no actual operations, and Irish tax laws exempt companies with no operations in the country. Meanwhile, US tax laws apparently exempt income earned by foreign subsidiaries, as long as it isn't transferred back to the parent company.

 

This is far from the first time I read about these schemes and say, in my usual articulate way, "Huh?"

 

Money goes to the Irish subsidiary. It cannot come back to the U.S. or we tax it, and it can't be used in "actual operations" in Ireland or they tax it. So it sits there? Do they just go over from time to time to look at it?

 

I have never been able to follow money laundering either. And when I was taking undergraduate econ I could never understand how the Federal Reserve could cure recessions by doing whatever it is that they do. Oh wait, maybe there was a reason that I could not make sense of that.

 

At any rate, I am clearly too dumb to understand how to shelter profits, launder money or cure recessions. But then the folks who designed this structure didn't seem to grasp the implications either, and unlike me, it was their job to do so.

[mike777]

Apple Avoided Billions in Taxes, Congressional Panel Says

 

Even as Apple became the nation’s most profitable technology company, it avoided billions in taxes in the United States and around the world through a web of subsidiaries so complex it spanned continents and surprised experts, a Congressional investigation has found.

Some of these subsidiaries had no employees and were largely run by top officials from the company’s headquarters in Cupertino, Calif., according to Congressional investigators. But by officially locating them in places like Ireland, Apple was able to, in effect, make them stateless – exempt from taxes, record-keeping laws and the need for the subsidiaries to even file tax returns anywhere in the world.

 

In 2011, for example, one subsidiary paid Ireland just one-twentieth of 1 percent in taxes on $22 billion on pretax earnings from various operations; another did not file a corporate tax return anywhere and has paid almost nothing on $30 billion in profits since 2009.

 

 

apple owners have lost billions and billions in value...not sure the latest number but think roughly 250 billion.

 

 

1) for some reason people think huge company owners cannot lose

2) apple owners lose roughly 250 billion...more than most.....

 

 

guys yet again you seem to be blind to the bigger picture...not a few million or billions in taxes....

[akwoo]

For that matter, even a percentage tax is inequitable, if you consider that we should all share equally in the country's defense and those things which the framers of the Constitution intended for the Federal government.

 

I disagree with this statement.

 

A rich person certainly has far more to lose if the United States is conquered than a poor person. An extremely poor person might even be better off, since he or she might gain more than lose from theft or looting during the inevitable period of disorder. If you want to consider the possibility of being killed, let me point out that compensatory damages in civil suits for wrongful death depend in part on the expected future income of the person who died.

 

Many people tend to forget that, in most states in the early Republic, one had to own a certain amount of property (in some states, specifically an amount of land) to vote. Also, property taxes (which people with more property (usually land) pay more of) provided much of the funding for local and state governments, and indirectly (since some of the federal budget came from direct levies on states) for the federal government. The argument I outlined above (combined with an economy where most wealth was in the form of land rather than capital) is precisely the one the Founding Fathers (and the English philosophers they got many of their ideas from) used to justify both property taxes and restriction of the franchise to property owners.

[akwoo]

This is far from the first time I read about these schemes and say, in my usual articulate way, "Huh?"

 

Money goes to the Irish subsidiary. It cannot come back to the U.S. or we tax it, and it can't be used in "actual operations" in Ireland or they tax it. So it sits there? Do they just go over from time to time to look at it?

 

I can explain this one.

 

Basically, Apple wants to have some savings, either a big chunk of emergency cash, or perhaps some money to possibly fund an acquisition fairly far in the future.

 

If they keep the savings in the US, then they have to pay tax on it right now, and hence they have less money earning interest.

 

If they keep the savings in Ireland, they don't have to pay tax on it right now. More money is earning compounded interest. Even when they bring the money back and have to pay tax on it then, they will have more money.

 

It's the same principle with putting money into a traditional IRA. It's better to pay tax later rather than sooner, because paying later means you can earn compounded interest in the meantime.

 

For a simple calculation, let's say Apple has profits of $100000, they can earn 1.33% interest, and tax is 25%.

 

If the money is kept in the US, they pay $25000 in tax right away. They put $75000 in the bank. Effectively, they get 1% interest a year (since 25% of the interest is also taxed). After 20 years, they have $91514

 

If the money is kept in Ireland, they can put $100000 in the bank, and they get 1.33% interest a year. After 20 years, they have $130245 in the bank. Now to actually use the money, they have to bring it back to the US and pay the 25% tax. But then they still have $97684 to use, which is somewhat significantly more than $91514

[helene_t]

If the solution would be so easy that we can find it here, it had been found.

I don't think that is necessarily so. It is quite possible that the solution is widely known except that it is infeasible for political reasons.

[Zelandakh]

I disagree with this statement.

It is worse than this. You also make it pointless for millions of Americans to go to work, since their tax liability is more than their nett income. So they either become a burden on the State or emigrate to a country where the tax rules are more sensible. Sometimes, people just do not think through the ideas they are proposing. The result of this change would be bad for almost everyone.

[kenberg]

I can explain this one.

 

 

I imagine it is something like what you say, only probably a good deal more complex. I was listening slightly to NPR yesterday, but paying more attentin to my driving so I am not completely sure of what I heard. They were talking about how money gets sheltered in islands, in particular in Manhattan Island. Apparently it is not even necessary to have the money be in Ireland. You put the money in a bank in Manhattan, somehow have it be money for the Irish branch, and then it escapes tax in both the U.S. and Ireland. As mentioned, I was driving and did not catch it all but it sounded as if this Irish money could in fact be used for business purposes in the U.S. and still escape taxation. This would no doubt be better than just drawing interest.

 

It all appears to be the sort of thing that if I did it, I would either lose my shirt or end up in jail. Or both. The money involved has to be sufficient to warrant hiring a bunch of lawyers and tax advisers who make a good living finding ways to bend a law to an unintended result. This isn't illegal, maybe not even particularly immoral although "he was really good at dodging taxes" is not the obit I would look forward to (not that I am looking forward to my obit in any form).

 

Should Congress do something about this? Yes, I suppose so, but I can't say I have a lot of faith in the choices they would make. The people who understand this best are not in Congress. Nor are they designing better computers. or doing anything else that is at all socially beneficial. They are out making a buck being clever with tax law.

 

What else is new?

[billw55]

A flat (not flat rate) tax would get my vote. Divide up the budget by the population and send everyone a bill for a proportional share. Then when a politician runs and advocates a program, people would know how much money it was actually going to cost them.

I don't even know what to say about this. Tens of millions of people would be awash in tax debt far greater than their income. Not only would this be grossly unjust, it would also totally fail as a revenue collection plan, because so much would go unpaid because people don't have it.

 

In fact this is so stupid I can hardly believe you are serious. If not, that is some top notch trolling, well done!