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Apple Pays Only 2% Corporate Tax Outside US 432

Posted by timothy
from the villagers-with-pitchforks dept.
New submitter dryriver writes with this snippet from the BBC: "Apple paid only $713m (£445m) Tax in the year to 29 September on foreign pre-tax profits of $36.8bn (£23.0bn), a remarkably low rate of 1.9%. Apple channels much of its business in Europe through a subsidiary in the Republic of Ireland, which has lower corporation tax than Britain. But even Ireland charges 12.5%, compared with Britain's 24%. Apple is the latest company to be identified as paying low rates of overseas tax, following Starbucks, Facebook and Google in recent weeks. It has not been suggested that any of their tax avoidance schemes are illegal. Many multinational companies manage to pay substantially below the official corporation tax rates by using tax havens such as the Caribbean islands."
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Apple Pays Only 2% Corporate Tax Outside US

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  • No Corporate Taxes (Score:1, Interesting)

    by MyLongNickName (822545) on Sunday November 04, 2012 @05:40PM (#41875159) Journal

    It may not be a popular position, but I don't think corporations should pay income taxes. Instead, we should increase tax rates on higher incomes. If owners want to reinvest their profits into a company, it is a good thing for the economy long-term. Taxes instead should come from consumption. If we had a 50% top end income tax rate and a 0% corporate tax rate, a good deal of the tax avoidance schemes would go away -- no not all of them, but a great deal of them.

    That and we should get rid of the mortgage interest deduction.

  • by rtaylor (70602) on Sunday November 04, 2012 @05:45PM (#41875187) Homepage

    Why would anybody have a personal income when they can just register a company to buy them what they want?

  • by hairyfeet (841228) <.bassbeast1968. .at. .gmail.com.> on Sunday November 04, 2012 @06:00PM (#41875303) Journal

    The problem is it has become like the days of the old west, remember the old westerns how the bandits would head for the Mexican border and once they were across not worry about shit because all the border mess kept the rangers from giving chase?

    Well now with electronic banking you can do that on a planetary scale in seconds. NO country can "close the loopholes" as another suggested because we are not talking about the laws of ONE country, we are talking about the laws of ALL countries as they can bounce a billion dollars through a dozen nation s in less than a second.

    Never forget the words of Thomas Jefferson, who tried to warn us of the dangers of mercantilism: "Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gains." In the end they don't care if the economy of their "home" country collapses, they can have their funds moved in seconds and have offices in dozens of countries. There is no loyalty or patriotism to country, just profits.

  • by Andy Prough (2730467) on Sunday November 04, 2012 @06:17PM (#41875435)
    As an accountant myself, I think it's important to point out that a number of countries (and US states - including my home state of Texas) offer significant tax incentives for businesses that will move more of their operations to their location and create jobs. TFA does not say whether or not this was the case, but an article from Forbes this past March pointed out that Ireland lured significant Apple business to the country through creative tax reduction incentives: http://www.forbes.com/sites/kellyphillipserb/2012/03/18/ireland-continues-to-flex-tax-haven-muscles-will-their-luck-run-out/ [forbes.com]

    The article points out that Microsoft, Dell, Pfizer, and Wyeth have also taken advantage of Irish corporate tax incentives. So, a lot of this isn't "beancounter magic" at all - its a carefully negotiated corporate strategy that benefits the company as well as the host country.
  • by jbolden (176878) on Sunday November 04, 2012 @06:20PM (#41875457) Homepage

    Of course there is something they can do. Its even in the constitution a Letter of Marque. We simply indicate a list of countries that follow a multi national tax treaty. Money kept anywhere else is considered fair game. That is we will not enforce property rights from that countries banks, so anyone working for a Cayman islands bank can rip off their customers, legally deposit the money in the US, pay about 1/3rd in taxes and keep the rest forever.

    Companies will find it mighty uncomfortable once the people who work in the tax havens have such lucrative options.

  • by khallow (566160) on Sunday November 04, 2012 @06:35PM (#41875593)

    Except how to stop mercantilism?

    Free trade (here, trade with low regulation and zero tariffs and trade barriers) is the obvious way. If someone sets up trade barriers, respond in kind. That's how it's commonly done today though there are obvious counterexamples (agriculture subsidies, employment subsidies, etc).

  • by Anonymous Coward on Sunday November 04, 2012 @06:50PM (#41875717)
    The Fair Tax [fairtax.org] would be an interesting way to handle these issues and it wouldn't require foreign cooperation.
  • by perpenso (1613749) on Sunday November 04, 2012 @06:55PM (#41875759)
    Apple pays taxes on profits, they just do so in the tax jurisdiction that the profit was made in. Here is a somewhat simplified possible explanation. Products are made by Apple-China and sold by Apple-USA. There is a defined transfer cost between the two entities. Should that transfer cost be near actual manufacturing cost and thereby most profits recognized in the US jurisdiction or near actual sale price and thereby most profits recognized in the Chinese jurisdiction? In general the answer depends on whether one jurisdiction has a significantly lower tax rate.

    Which leads into a secondary problem, where they expand. If Apple can not return overseas profits to the US without those profits being taxed a second time then there is an incentive to do any future expansion overseas. Expanding facilities would be a better use of that money than just letting it sit in the bank. So a relatively higher tax rate ends up hurting the higher rate jurisdiction a second time.

    Intentional or not, this is the system the politicians have created. Government policy often has unintended consequences, and the more complex the policy the more and greater the unintended consequences.
  • by AK Marc (707885) on Sunday November 04, 2012 @06:56PM (#41875763)
    I like to point out that I was in the top 10% of wage earners in the US (the very bottom of that range), and I paid 10% in federal income tax. Between property tax on multiple properties, mortgage interest (it's financially beneficial if you can buy a house outright to take out the longest term loan possible at the lowest possible rate and invest your money in stocks, because the tax breaks on the interest make the cost of the loan lower than face-value), health and education deductions, my taxable income was significantly lowered. Anyone who makes enough can afford to "mask" income in untaxed or lower-taxed schemes.

    It isn't tax evasion. It isn't really even tax avoidance. The rules are generally not "loopholes" but deliberate social grooming, detailed by Congress, to encourage certain behaviors (marriage, kids, home ownership). It isn't gaming the system, but being gamed by the system. We'd be better off if all deductions were eliminated. All the artificial pressures would be gone.
  • by mabhatter654 (561290) on Sunday November 04, 2012 @07:22PM (#41875973)

    Except this money was never IN the USA. Apple sent blueprints to Foxconn, then Foxconn bought the parts in Asia and assembled iThings. Apple then has the products delivered directly from China to each country wher they are sold via "Apple of here".

    So where did the USA have any jurisdiction to collect taxes? The parent Apple USA only collects the profits. While on paper they get to claim them all, they don't actually move the money to any one bank account. Corporations are a type of fealty where they have independant accounts that are "sworn" but not owned by the parent. This is necessary to navigate all the local laws, but the profit issues are a secondary issue.

  • by gelfling (6534) on Sunday November 04, 2012 @07:23PM (#41875979) Homepage Journal

    An insurance company keeps two sets of books, one on insurance operations and one on investments. most of their tax liability comes out of operations which is why they typically show a loss on paper on their operations and then use that credit as a carry across to the investment side of the house. when I worked for Equitable we paid ZERO tax for many years.

  • by AK Marc (707885) on Sunday November 04, 2012 @07:50PM (#41876151)

    Sorry buddy, but I don't buy into your philosophy.

    So you choose to ignore reality because it's inconvenient. I can't argue with the mentally ill. I can just point it out so other's don't listen to you. Neither of the likely candidates has indicated they will change what's been done by both parties for more than 50 years now.

  • by vivian (156520) on Sunday November 04, 2012 @09:26PM (#41876685)

    I disagree - if more corporations were playing the game honestly, and actually shouldering their share of the tax burden, the overall tax rates could be lower, and regular citizens who can't escape tax as easily, could pay less. Therefore, with lower tax rates, there would be a lower marginal reward per tax payer for dodging the system.

    The problem is, right now, the biggest and richest corporations and individuals can escape a large chunk of the tax that they are supposed to be paying, so more has to be paid by middle and lower level tax payers to make up the shortfall.

  • by jelizondo (183861) <jerry...elizondo@@@gmail...com> on Sunday November 04, 2012 @10:29PM (#41877047)

    As pointed out by tragedy [slashdot.org] above, the IRS holds that any earnings by an American citizen are taxable, regardless of where they were made.

    There is a mechanism provided to account for taxes paid to the government of the country you are working in, but (there is always a but) that country has to have signed a tax treaty with U.S.

    I know of two people (one spent 20 years in the U.S. Air Force, the other 20 years in the U.S. Navy) who have renounced their U.S. citizenship over taxes, because after retiring they decided to move to a country that doesn't have a tax treaty with the U.S.

    You see, individuals have a hard time over money earned outside the U.S., corporations get to keep it.

  • by Rich0 (548339) on Monday November 05, 2012 @10:21AM (#41880675) Homepage

    The US used them for more than that. Here is one [piratedocuments.com] authorizing the attack of any British vessel, public or private.

The bogosity meter just pegged.

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