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Democrat and Republican lambasted Apple for working the system in a way they said was unfair, if not unpatriotic.

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  • User profile image
    ScanIAm

    , evildictait​or wrote

    *snip*

    Well firstly, it's Lenin, not Stalin.

    Yeah, but to be honest, they're always so airbrushed...:

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  • User profile image
    Bass

    , evildictait​or wrote

     whether it is acceptable for companies like Apple to push $30bn of their US profits into a company with no employees in order to avoid paying taxes on any of it to any government.

    Yes.

    But, I was specifically responding to this though:

    When companies like Apple fail to pay taxes to the US, the deficit increases.

    As if Apple started paying taxes it would make any real difference in the grand scheme of things. The answer is: no. Technology devalues human labor and any economic system that distributes resources based on the value of human labor is thus destined to fail under any circumstance.

    Which is maybe a slightly different argument than Lenin-Marxism, which was developed in a society with far less automation.

  • User profile image
    Bass

    F**k offshore accounts and moving money around. You can totally avoid paying corporation taxes simply by not registering one in the first place.

  • User profile image
    ScanIAm

    Well, there's that.  Corporations are a way to manage risk and that is a clever way of saying "I won't go to jail if my corporation commits a crime for me". 

    Perhaps a solution would be that all corporate assets must be resolved down to the individual for tax purposes each year to avoid this kind of shenanigans.

  • User profile image
    Bass

    , ScanIAm wrote

    Well, there's that.  Corporations are a way to manage risk and that is a clever way of saying "I won't go to jail if my corporation commits a crime for me". 

    LLC.

    , ScanIAm wrote

    Perhaps a solution would be that all corporate assets must be resolved down to the individual for tax purposes each year to avoid this kind of shenanigans.

    Yup. You are taxed (via the 1099-DIV form) when you derive personal income from a corporation's profits.

  • User profile image
    Ray7

    , evildictait​or wrote

    *snip*

    It paid sales tax (i.e. VAT) in the United States. It paid no corporation tax on profits in the United States.

    Right, you're really going to have to start actually attaching references for some of this stuff. Apple paid $6billion in corporation tax for 2012. It's in their accounts and they have stated it on record. Cook repeated it again at the hearing and they did not dispute it.

    I've included the actual quote because your Bing-Foo is seriously lacking:

    "In fiscal 2012 we paid $6 billion in federal corporate income taxes, which is 1 out of every 40 dollars in corporate income taxes collected by the U.S. government,"

    So let's get this absolutely clear: when Apple's CEO, CFO, COO and their audited accounts say that they paid $6billion in corporation tax, and you say that they did not, we should believe ... you? The person lobbing accusations of tax evasion anonymously from behind a Channel9 account?

    No one said that Apple Inc. has nobody employed in Ireland. Apple Inc is entirely legit. It has US staff, and Irish staff, and does real things.

    The concern is with Apple Operations International - not Apple Inc. AOI employs no staff by its own admission under oath to congress.

    *snip*

    The profits were not taxed. If you know otherwise, please post their tax return to congress. I'm sure they would be interested to know.

    As has already been shown, the congressional enquiry is already working with a lot of incorrect information; this is no different. Cook has already explained top the senate that Apple does not funnel profits out to Ireland from the US. If you think he's lying then send him a note. AOI was set up years ago so that Apple could take operate more easily and reap the tax advantages of the local currency. It's pretty much what every company has done since before Apple was incorporated.

    *snip*

    I think you have a serious problem understanding how money works.

    And you don't seem to understand the difference between 'evasion' and 'avoidance'.

    If government income goes up, then either the government can reduce income from other sources (i.e. give you a tax break), can spend more money elsewhere (i.e. give you more services for the same taxes) or can pay down the deficit (which otherwise you and your children are going to have to pay back).

    Governments are a rat's nest of overspending and inefficiency. If you think that corporation's overpaying their taxes will affect how much we will pay then I have a couple of bridges in London I'd like to sell you.

    For the record, I've never suggested taxes should be tied to morals. I've suggested taxes should be tied to your company's obligation to pay tax as stated in law.

    That is precisely what you're suggesting since these corporations are not actually breaking the law.

    The people applying morals to taxation are people like you guys who think that "I shouldn't have to pay taxes" or "taxes are too high".

    Guys like me actually think that corporations (especially banks) should pay more taxes, but no one should be forced to pay more than they legally have to. If we listened to 'guys like you' then only the 'moral' companies would pay and while the rest would not. That is what the folk (the sensible ones anyway) are arguing for. If you want to raise the tax level then change the law to make it clear. Relying on moral arguments  is just foolish.

    Taxes are taxes are taxes. You don't choose not to pay taxes because you think they are too high. You lobby government to reduce taxes in future. In the meantime, suck it up, because taxes are not optional, or only to be paid when they are low enough that you think they are reasonable.

    The US government requires, by law, that US profits made by US companies when selling US goods to US consumers should pay corporation tax at the standard rate. And Apple has chosen to make a claim to the US government that 30% of the profits it made in the US selling US goods to US consumers from US stores in the US are actually profits made by a company with no employees in Ireland.

    This isn't a moral argument. It's a legal one. Apple is lying to congress and the US government to reduce it's tax bill. If a citizen did that, they would go to jail. Hence I would like to see Apple's CFO in a jumpsuit behind bars, and Apple ordered to repay the taxes that it owes to the American people.

    Right, so first you start off by saying that Apple is not paying corporation tax at all:

    It paid no corporation tax on profits in the United States.

    now a few paragraphs later, you're saying that they've made a claim that 30% of the profits are taxable. Which is it? Perhaps you need to take some time to read up and get this stuff straight in your head, because at the moment it sounds like you're spinning around trying to win an argument without being really clear on what Apple has or hasn't done – which is understandable because Apple's tax avoidance measures do seem to be quite involved (hell, the senate committee wasn't sure either).

    You have no evidence or links to back up anything you're saying. Apple, GE, Microsoft, Google etc meet their tax obligations under the law. Even the senate knows that, which is why they have not accused Apple of tax evasion.

  • User profile image
    evildictait​or

    , Ray7 wrote

    Right, you're really going to have to start actually attaching references for some of this stuff. 

    For the third time this thread, my reference is the Official US Senate Memo on Offshore Profit Shifting and The U.S. Tax Code - Part 2 (Apple Inc).

    According tApple, AOI's net income made up 30% of Apple's total worldwide net profits from 2009-2011, yet Apple also disclosed to the Subcommittee that AOI did not pay any corporate income tax to any national government during that period

    That's from the Senate report written by elected legislators investigating tax evasion by Apple, quoting Apple's CEO, COO and CFO under oath in front of Congress.

    That's slightly better evidence than your "Bing-foo".

    But sure, if you think Apple CEO Tim Cook lied when he gave televised evidence under oath to Congress when they were investigating his company's tax affairs, I suggest you phone 911, because lying to Congress is a felony.

    Guys like me actually think that corporations (especially banks) should pay more taxes, but no one should be forced to pay more than they legally have to. If we listened to 'guys like you' then only the 'moral' companies would pay and while the rest would not. That is what the folk (the sensible ones anyway) are arguing for. If you want to raise the tax level then change the law to make it clear. Relying on moral arguments  is just foolish.

    I already discussed this, but I'll repeat myself just for you:

    For the record, I've never suggested taxes should be tied to morals. I've suggested taxes should be tied to your company's obligation to pay tax as stated in law.

    The people applying morals to taxation are people like you who think that "I shouldn't have to pay taxes" or Apple CEO Tim Cook who said "we would pay more tax if US taxes were lower".

    Bokum.

    Taxes are taxes are taxes. You don't choose not to pay taxes because you think they are too high. You lobby government to reduce taxes in future. In the meantime, suck it up, because taxes are not optional, or only to be paid when they are low enough that you think they are reasonable.

    The US government requires, by law, that US profits made by US companies when selling US goods to US consumers should pay corporation tax at the standard rate. And Apple has chosen to make a claim to the US government that 30% of the profits it made in the US selling US goods to US consumers from US stores in the US are actually profits made by a company with no employees in Ireland.

    This isn't a moral argument. It's a legal one. Apple is constructing a elaborate lie for the purposes of tricking the US government into reducing it's tax bill. If a citizen did that, they would go to jail. Hence I would like to see Apple's CFO in a jumpsuit behind bars, and Apple ordered to repay the taxes that it owes to the American people.

    Right, so first you start off by saying that Apple is not paying corporation tax at all:

    I didn't say that. I said that Apple Operations International (AOI), effectively a US company in all but name, paid no corporation tax on profits made in the US. Keep up, Ray. AOI is a subsidiary of Apple Inc. It has no employees. It constitutes 30% of all of Apple's worldwide profits because it "owns" the Apple brand and all of Apple's intellectual property (which were actually invented in the US). It is managed from the US by US directors. The board meetings are held in the US. It pays no taxes in any country.

    That's $30bn the US tax code clearly intended Apple to be taxed on, and which it offshored as an elaborate tax avoidance scheme to defraud the US citizens of $6bn of owed taxes.

  • User profile image
    DaveWill2

    According tApple, AOI's net income made up 30% of Apple's total worldwide net profits from 2009-2011, yet Apple also disclosed to the Subcommittee that AOI did not pay any corporate income tax to any national government during that period

    Has there been any specifics stating whether the AOI net income has been transferred to Apple Inc. yet? If the money is still in AOI then it wouldn't fall under U.S. tax code.

  • User profile image
    evildictait​or

    , DaveWill2 wrote

    Has there been any specifics stating whether the AOI net income has been transferred to Apple Inc. yet? If the money is still in AOI then it wouldn't fall under U.S. tax code.

    It should never have not been under the US tax code, because the money was made on profits of intellectual property that was invented in the United States when US citizens bought US-made iPhones from Apple Stores in the United States.

    AOI is not a legitimate foreign company that makes intellectual property; it has no employees to make intellectual property, its board is in the US, and it has facilities or address in Ireland. It is a front for Apple Inc. to avoid paying taxes. It has no employees, and yet makes a claim that it made $30bn that is not taxable in any country.

  • User profile image
    DaveWill2

    @evildictaitor: hmmm. Not sure the intellectual property fact matters. Intellectual property wasn't sold. Product was sold. If AOI created the product on their books (their costs at this point) then sold the products on their books (their revenue at this point), the profit on AOI books is taxable to AOI's jurisdiction. Now when that money is transferred from AOI to Apple Inc., then Apple Inc.'s book incurs the income and at that point falls under the jurisdiction of Apple Inc. (I'd imagine AOI would keep the income on their book until a more favorable transfer could take place to bring the money back to Apple Inc.)

  • User profile image
    evildictait​or

    , DaveWill2 wrote

    @evildictaitor: hmmm. Not sure the intellectual property fact matters. Intellectual property wasn't sold. Product was sold. If AOI created the product on their books (their costs at this point) then sold the products on their books (their revenue at this point), the profit on AOI books is taxable to AOI's jurisdiction. Now when that money is transferred from AOI to Apple Inc., then Apple Inc.'s book incurs the income and at that point falls under the jurisdiction of Apple Inc. (I'd imagine AOI would keep the income on their book until a more favorable transfer could take place to bring the money back to Apple Inc.)

    AOI didn't invent anything. It couldn't have done, because it has no employees and no staff and no facilities.

    What's going on is that Apple Inc has its headquarters in the US, and employs thousands of US engineers to invent things. These inventions are patented by Apple Inc in the United States, and those patents are then "sold" to Apple Operations International in packages for $1, despite being worth billions of dollars.

    This is legal. You're perfectly entitled to sell your own stuff at a loss, so so-far, so good.

    What then happens is some US citizen rocks up to an Apple Store in California and decides to buy an iPhone either at full price, or subsidized by a carrier. Either way, the Apple Store gets about $600 for the iPhone, about $300 of which is the actual manufactured cost of the phone and $100 the cost of the retail.

    That leaves about $200 which we would normally call "profit" that according to the US, Apple ought to pay about $50 of tax on.

    But wait! We've forgotten about all of those patents. Apple Inc says that for every phone sold, $150 of the cost of the phone is the cost of licencing those patents. And who owns the patents? Apple Operations International owns them.

    So what's happened here is that although the US citizen bought that phone in the US from the Apple Store in California, part of the cost of the phone is the licencing cost of the patents which were invented down the road by Apple employees working for Apple Inc in Cupertino, USA.

    So this is the part where stuff starts to get murky. When you, a US citizen, buy a US-made phone in the US from a US company and you pay for inventions that were invented in the US by that same US company down the road, that's where US tax law is pretty clear: It's time to pay tax on those profits.

    But Apple Inc. is telling the US government that those profits aren't US profits. They're Irish profits, made by the company with no employees and no offices in Ireland.

    Pretty dodgy ground so far, but it gets better.

    In the United States, you must file a US tax return if your company is incorporated in the United States. In Ireland, you must file an Irish tax return if your company is run from Ireland.

    But if your company is incorporated in Ireland and run from the United States, you don't need to pay tax in either the United States or Ireland.

    So yeah. When you buy your US-made iPhone from a US store, $150 of what you're paying goes directly to a company which has never made anything, never hired staff, and never opened an office in order to defraud the US taxpayer of roughly $50 per iPhone.

    Now when that money is transferred from AOI to Apple Inc., then Apple Inc.'s book incurs the income and at that point falls under the jurisdiction of Apple Inc. (I'd imagine AOI would keep the income on their book until a more favorable transfer could take place to bring the money back to Apple Inc.)

    AOI will never transfer the money to Apple Inc. Why would it? It would lose 35% of the value as it crosses into the US. No. That money is used to pay for stuff abroad (like making the iPhones in Taiwan) and buying international patents and businesses.

    Also dividends to international investors of Apple Inc are paid by AOI in order to avoid onshoring the cash and taking a tax hit.

    It is a total myth to think that eventually the cash gets taxed because it eventually ends back in the United States. It's simply not the case. AOI is specifically designed to avoid paying US taxes. It serves no other purpose.

  • User profile image
    davewill

    @evildictaitor: I tend to have trouble staying awake during accounting classes but not this one.  Fascinating.

  • User profile image
    cbae

    @evildictaitor: I hope this loophole gets closed before Microsoft tries to emulate Apple in this regard.

  • User profile image
    davewill

    @cbae: Is it a loophole? If they stopped the money flow for the licensing aspect, wouldn't it kill the inventor/license technology paradigm that drives innovation?

  • User profile image
    cbae

    , davewill wrote

    @cbae: Is it a loophole? If they stopped the money flow for the licensing aspect, wouldn't it kill the inventor/license technology paradigm that drives innovation?

    I don't see how giving away patents to a shell company that you form overseas only to license it back from them is any kind of "paradigm that drives innovation".

     

  • User profile image
    davewill

    @cbae: I was thinking more along the lines of congress passing some law(s) that put up barriers to license money flows that cross the border, essentially boxing in the licensee and licensor to the geographic boundaries of the taxing authority.

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