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Government The Almighty Buck Apple

Irish Government May Close Apple's Biggest Tax Loophole 292

DavidGilbert99 writes "Ireland and its tax system came under some extreme scrutiny earlier this year when it was revealed that Apple funneled billions of dollars of revenue though three subsidiaries based in the country. Thanks to a loophole, none of these subsidiaries were tax-resident in Ireland, meaning they didn't even have to pay Ireland's relatively low 12.5% corporation tax rate. Worryingly for Apple, Ireland's finance minister may now shut this loophole. A measure within a new budget bill (PDF) would disallow Apple's status as a 'stateless' corporate entity for tax purposes. Apple will still be able to select a country like Bermuda as its tax residence, but it's a step in the right direction."
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Irish Government May Close Apple's Biggest Tax Loophole

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  • by kommakazi ( 610098 ) on Tuesday October 15, 2013 @04:13PM (#45136673)
    I'm sure no other companies use this.
  • Tax Avoidance (Score:5, Insightful)

    by Anonymous Coward on Tuesday October 15, 2013 @04:14PM (#45136679)

    I will not speak out about this practice that hurts me indirectly because I am deluded into thinking that any day now I'll be rich enough to make use of it myself.

      - Joe Sixpack Americano

    • Re:Tax Avoidance (Score:4, Insightful)

      by PPH ( 736903 ) on Tuesday October 15, 2013 @04:25PM (#45136827)
      I own Apple shares. So in a small way, I already benefit from this practice.
      • Re:Tax Avoidance (Score:4, Interesting)

        by MickyTheIdiot ( 1032226 ) on Tuesday October 15, 2013 @04:40PM (#45136993) Homepage Journal

        My family owns Apple shares and I think it's wrong.

        • My family owns Apple shares and I think it's wrong.

          Just curious. Do YOU pay more taxes than you're legally obligated to?

          If not, why not?

          You've just stated that you "think it's wrong" that Apple pays no more taxes than they're legally liable for. Which would make YOU wrong for not paying extra taxes.

          • Re:Tax Avoidance (Score:4, Insightful)

            by ewibble ( 1655195 ) on Tuesday October 15, 2013 @07:12PM (#45138273)

            I do, I sometimes don't claim back charitable donations. I don't claim depreciation on my rental property I do not think it is valid expense. I claim deductions that I believe to be fair and for business purposes, I do not claim ones i don't, legal or not.

            But the real reason is probably everybody could get away with paying less tax if they knew what they where doing. The reason normal people don't is it is not feasible for the average person to pay millions to an accountancy firm to set up tax shelters. Once a company starts making billions however those admin costs become insignificant.

            Why couldn't you set up a company in Ireland and contract out of that instead of being directly employed by your company. (they would think you where dodgy but only because it isn't common practice). Your employer is paying you the same amount, what difference does it make to them. The hassle is just not worth it, at least for the common man.

          • Re:Tax Avoidance (Score:4, Interesting)

            by Stickerboy ( 61554 ) on Tuesday October 15, 2013 @08:19PM (#45138895) Homepage

            My family owns Apple shares and I think it's wrong.

            Just curious. Do YOU pay more taxes than you're legally obligated to?

            If not, why not?

            You've just stated that you "think it's wrong" that Apple pays no more taxes than they're legally liable for. Which would make YOU wrong for not paying extra taxes.

            Whoa. You're confusing "It's wrong because ethically it stinks" with "It's wrong because it's against the law".

            It IS wrong that multibillion dollar corporations are unfairly paying cellar-level taxation for large profits made from consumers. Just because corporations own governments around the world and have enshrined that unfairness in taxation law to benefit themselves does not suddenly make that right.

      • by Anonymous Coward

        I own Apple shares. So in a small way, I already benefit from this practice.

        Unless you own millions of dollars worth of shares, I assure you that the net benefit between your gains on that stock and what you personally have to chip into the US coffers because of companies like this is a negative for you.

        If companies like this repatriated the profits that they are stashing overseas, much of our government budget problems would be solved. As it is, you and I are stuck with the bill - contrary to the propaganda on Fox News and Talk Radio.

        Yes, the US tax system is THE worst in the Wor

        • by PPH ( 736903 )

          Unless you own millions of dollars worth of shares, I assure you that the net benefit between your gains on that stock and what you personally have to chip into the US coffers because of companies like this is a negative for you.

          Not really. My interest in collecting potential taxes is far more diluted than my benefits accrued by ownership and this tax strategy. The 'break even' would be at about 3 shares of Apple stock.

      • by mjwx ( 966435 )

        I own Apple shares. So in a small way, I already benefit from this practice.

        But as a member of the society that Apple is evading tax in, you suffer for it in a big way.

    • I will not speak out about this practice that hurts me indirectly because I am deluded into thinking that any day now I'll be rich enough to make use of it myself.

        - Joe Sixpack Americano

      "Yeah, kick Apple in the balls! Hey, were ya going, Apple? Wait! Come back!" -- Paddy "Pintchugger" Irelando

  • by Joe_Dragon ( 2206452 ) on Tuesday October 15, 2013 @04:18PM (#45136729)

    apple will just move to the next free zone

    • Behold the beauty of the free market. Libertarians and anti-regulation-zealots rejoice!
      Apple is exercising its god-given right to freedom!

  • by Anonymous Coward

    If you start charing us tax, you'll lose even the tax we're paying you now, because we'll move somewhere else. Err... right, we're not paying any. Oh, oh, I know! Job, if you charge us tax we'll have to fire the two people that earn minimum wage for us in your country! You anti-capitalistic pigs are destroying jobs!

    Captcha: avarice - I can haz source code and database of this captcha? I really likez.

    • Job, if you charge us tax we'll have to fire the two people that earn minimum wage for us in your country!

      Except Apple has a rather large presence in Ireland, not two people earning minimum wage.

      • by Desler ( 1608317 )

        The point is that the subsidiaries they are using are not.

        Thanks to a loophole, none of these subsidiaries were tax-resident in Ireland,

  • Linkbait (Score:4, Informative)

    by Lysol ( 11150 ) on Tuesday October 15, 2013 @04:19PM (#45136739)

    Apple is not the only company doing this. Google does it was well.

    • I think we ought to get rid of corporate tax to end this pointless charade. Tax dividends and capital gains as income and move on with life. It's not all that much revenue, and could easily be made up. As a bonus, if other countries don't follow suit, companies might shift their headquarters to the US.

      • Re: (Score:2, Insightful)

        by Anonymous Coward

        I think we ought to get rid of corporate tax to end this pointless charade. Tax dividends and capital gains as income and move on with life. It's not all that much revenue, and could easily be made up. As a bonus, if other countries don't follow suit, companies might shift their headquarters to the US.

        I do so very much enjoy the primitive thinking that if we just increase the amount of sacrifices and offerings we give to the volcano gods, they'll cast down their blessings on us and save us from our increasing lack of sacrifices and offerings to give to the volcano gods.

        • What in the world is so primitive about taxing the people instead of the pretend economic entity? Are you honestly happy with the current situation?

    • Apple is not the only company doing this. Google does it was well.

      Most big companies do this. Why not? It is completely legal. If America wants more tax from companies that employ people in America, they should just raise payroll taxes. That would have the same effect.

      • Re:Linkbait (Score:5, Insightful)

        by MickyTheIdiot ( 1032226 ) on Tuesday October 15, 2013 @04:46PM (#45137033) Homepage Journal

        This is bullshit. The link between huge corporations and jobs has been use to justify all types of abuses and it's time to move on. The Internet has killed that link. We are shoveling more an order of magnitude more money (at least) towards corporate welfare than we do towards "real" welfare based on that theory. The small business is the only that is going to save he economy of the U.S. because those are the only jobs that are based in communities. The race to the bottom has made many multi-national employees no better off than slave labor. It's time to STOP shoveling money towards he biggest multinationals and taking care of the people that are doing the REAL capitalism, and that's small business owners.

      • It goes beyond that. [nytimes.com] Some complaints are legitimate, but things like this are just gaming the system:

        Finally, multinationals that invert have an easier time achieving “earnings stripping,” a tax maneuver in which an American subsidiary is loaded up with debt to offset domestic earnings, lowering the effective tax rate paid on sales in the United States.

        Most people do not know any of the details of these kinds of operations and so we all must just trust our benevolent job creators. As long as Obama has GE sitting at the table when he calls businesses in to talk about tax reform it'll never go anywhere significantly better for us the little men.

        • Gaming the system is fine. If the system was simpler, it wouldn't be possible to game. The really shady thing is when they buy the complifications, so that they can get their army of clever accountants (which wouldn't be needed in a simple scheme, and which don't actually produce any wealth....) can game them for all they're worth.

  • Tax everywhere (Score:5, Insightful)

    by prestonmichaelh ( 773400 ) on Tuesday October 15, 2013 @04:19PM (#45136741)
    I don't understand why countries like Ireland or Bermuda or wherever don't all just charge a small tax of some kind (like say 5%) that keeps the companies coming there, but gets them tons of money. What does Bermuda get out of having Apple "based" in Bermuda if they don't get any tax revenue? They get no additional jobs or property taxes (except maybe a mailbox rental).
    • Re:Tax everywhere (Score:5, Informative)

      by cheesybagel ( 670288 ) on Tuesday October 15, 2013 @04:26PM (#45136833)

      Different countries have different ways of appropriating revenue. Take Russia with their relatively low flat tax. It was made possible in a large part because of the State is being funded by oil tax revenues. In the case of Bermuda they have these low taxes for corporation and individual income but the kick is that land taxes are extremely high and they live on tourism revenues so you get taxed for snorkling, renting a hotel, etc. Monaco has the casino profits. Etc.

    • Re:Tax everywhere (Score:4, Interesting)

      by ShanghaiBill ( 739463 ) on Tuesday October 15, 2013 @04:27PM (#45136841)

      I don't understand why countries like Ireland or Bermuda or wherever don't all just charge a small tax of some kind (like say 5%) that keeps the companies coming there, but gets them tons of money.

      Because that would quickly turn into a race to the bottom. If Ireland charged 5%, then Bermuda would charge 4%, so Ireland would lower theirs to 3% .... The only Nash Equilibrium [wikipedia.org] is zero.

      What does Bermuda get out of having Apple "based" in Bermuda if they don't get any tax revenue?

      They get corporate registration fees, and jobs for a few lawyers and administrators. That is better than nothing.

      • by icebike ( 68054 )

        There are more than a few jobs. By last year 2,800 staff in Cork [irishtimes.com] alone.

        The money brought in by that level of employment may be worth more than some minor tax they might earn if
        Ireland changed the tax loophole.

        Because Apple need do nothing more than change a couple lines their US tax return to cut that revenue stream
        out from under Ireland. So you can bet there will be some small increase in taxes but that increase will be very
        small as long as there is a large employment component in Ireland.

      • If Ireland charged 5%, then Bermuda would charge 4%, so Ireland would lower theirs to 3%

        OR: Bermuda and Ireland would both stick with 5%, getting more money than if they lowered the rate, and having no need to compete with each other.

        This is NOT a free market! Ireland and Bermuda are free to collude with each other, and pick a rate just barely lower than other countries, and they'll still make obscene amounts of cash. As each loop-hole closes, the next-best gets more expensive, and there's more profit to

    • Actually it benefits Ireland greatly....They actively sought out Apple among other companies to have a presence there...
      http://www.theatlantic.com/international/archive/2013/05/you-cant-blame-ireland-for-apples-tax-avoidance-either/276120/ [theatlantic.com]
      • That doesn't mean it actually benefits them, it just means that the administrators think it benefits them.

        How many cities get conned into building a giant new sports stadium, and then stuck with all the costs? Do those ever break even? Yet the lure of "jobs" and the chance of cutting into a ribbon or digging into a small pile of dirt with an impractically shiny shovel never fails to draw out the so-called "leaders."

  • Good (Score:5, Insightful)

    by msobkow ( 48369 ) on Tuesday October 15, 2013 @04:19PM (#45136743) Homepage Journal

    It's about time the multinational thieves got lynched and paid their fair share.

    • Comment removed based on user account deletion
    • by Greyfox ( 87712 )
      Yeah... that's not what's going to happen. There are a number of things that could happen, but that's not one of them. If I were guessing, I'd guess a large briefcase of money will quietly change hands and this effort will die a quiet death. If it doesn't, Apple probably already has some other country lined up that would be happy to fill that gap. The least probable thing I can possibly imagine is that thing you just said.
  • Not a Loophole! (Score:5, Insightful)

    by mythosaz ( 572040 ) on Tuesday October 15, 2013 @04:46PM (#45137031)

    A loophole is unintended.

    If anyone thinks that the tax code and the ability to do exactly what Apple (and others) are doing isn't completely intention is an idiot.

    • by smash ( 1351 )
      Exactly, and I guarantee you this law was intentionally left like this to encourage foreign investment.
  • by Leuf ( 918654 ) on Tuesday October 15, 2013 @04:47PM (#45137043)
    I have no problem with corporations taking advantage of whatever the law allows them to do but there should be consequences. If the government is going to consider a corporation to be like a person with 1st amendment rights and money to be speech, well they are declaring their corporate personhood to not be a citizen, only a resident. Residents don't get to vote, only citizens. If you don't have a vote then you shouldn't have any right to contribute anything to the election process. If you want a voice in the government then pay taxes.
    • I have no problem with corporations taking advantage of whatever the law allows them to do but there should be consequences. If the government is going to consider a corporation to be like a person with 1st amendment rights and money to be speech, well they are declaring their corporate personhood to not be a citizen, only a resident. Residents don't get to vote, only citizens. If you don't have a vote then you shouldn't have any right to contribute anything to the election process. If you want a voice in the government then pay taxes.

      No you're close, but not quite there. If corporations are people too then I would like to see Apple pay social security, AMT, and be taxed at the same income tax rate as an individual. They can't have their cake and eat it too. If a corporation has personhood, then let the corp pay on the same tax schedule as me. AMT means they would not be able to use all the crazy deductions they use as a corp and should have to pay much higher taxes than they do now.

  • by JoeyRox ( 2711699 ) on Tuesday October 15, 2013 @04:54PM (#45137111)
    The mere semantics of governments calling it a "corporate tax" is disingenuous. A corporation is not an inanimate object separate from humans. An income tax on corporations is really an income tax on people, which include its shareholders, employees, and many times its customers as reflected in the price of products. And since shareholders/employees already pay income tax on their earnings and customers sales tax on their purchases, a corporate tax is really just double taxation. If governments want to have an honest debate about corporate tax they should first be honest about what it really is and who actually pays it. When that happens I suspect there will be less lynching of corporations by the uninformed citizenry.
    • There's also no such thing as a corporation. It's just a legal contrivance, just like corporate taxes, and I hate being disingenuous like that. If "corporations are people, my friend!" then why this why this fictitious entity, with its tax liability one one hand, and incredible powers of scapegoating on the other? Just hold the shareholders and executives (i.e. the people who actually receive corporate profits) personally liable for the debts and criminal actions of corporations. I'm sure they'll jum
      • Before Wall St. bought Congress the Government used to prosecute corporations, dissolving them if proven guilty. But this isn't unique to corporations - the DOJ is also letting individuals walk free as well.
      • by Copid ( 137416 )
        Ambrose Bierce had it about right:

        CORPORATION, n. An ingenious device for obtaining individual profit without individual responsibility.

        That being said, I'm all for dumping taxes on corporations and appropriately ratcheting up income and captal gains rates to compensate. Corporations are enough of a legal contrivance that they can reshape themselves in ridiculous ways to avoid just about any tax we lay on them. We're just giving them massive incentves to waste resources doing stupid things, and we're no

        • I could go for that so long as "income tax" is progressive, and defined broadly enough. For one thing I question whether capital gains should be separate from other income. But all the other perks and benefits of corporate royalty status would need to be included also.
          • by Copid ( 137416 )
            I go back and forth on capital gains. In theory, low capital gains rates encourage investment over consumption, which is good for long run growth. In practice, I don't see a lot of empirical support for the notion. There's surely a breaking point on both sides, but the top capital gains tax has been much higher in the past without any obvious ill effects. The low capital gains rate does encourage entrepeneurs to take bigger risks starting businesses--I'm doing that right now and the capital gains rate w
  • by swb ( 14022 ) on Tuesday October 15, 2013 @05:01PM (#45137169)

    Why does Apple get to lobby the government or expect the support of the government when they won't pay for it?

    Maybe the next time Apple has a patent dispute, the Chinese authorities embargo their product at the docks, or the EU starts making demands the US government should tell them to sit down and take a number.

    I love how corporations and the rich hate the government and won't pay for it until they need it to do their bidding.

    • Apple's spending on lobbying is actually one of the lowest among the big tech players, if not the lowest. Quite a bit of speculation on why Washington is putting this pressure on them centers around the idea that it's a form of punishment aimed at Apple for not playing ball with them. Tim Cook seems to be waking up to that fact, since I seem to recall hearing some quotes recently suggesting that he intends to increase Apple's presence in Washington.

      And it's not as if Apple is the only one employing this par

    • Re: (Score:2, Interesting)

      Why does Apple get to lobby the government or expect the support of the government when they won't pay for it?

      Apple paid more in corporate taxes to the American government than any other company (iirc, they cut the US Treasury a check for $6 BILLION).

      Sorry to ruin your rant with facts...

    • Actually a lot of wealthy people love the government as to way to get wealthy themselves.

      They pay some greedy(as opposed to one who's interested in serving the people) politician a little money. Then the greedy politician borrows from the national debt and pays back his campaign contributors. The fact that the non-greedy politicians can't get campaign contributors furthers the problem and there is probably no solution to it.

      I love the USA, don't get me wrong. I just don't think the way it runs now
  • Didn't we just read a story about that?

  • Corporate tax in the global world is very complex.

    On the one hand, you have global companies who create products/services in lots of countries.

    So where do they 'book' their profits? The ability to choose a place to book profits is something that has to be done.

    Now, this of course has resulted in companies doing little/no work in certain countries, yet picking it as the country to 'book' their profits due to the low rate.

    This is not a complete game. For example, Apple pays US corporate taxes on the income it

  • Clearly, the Irish have not figured out who's the boss.

  • The Irish make ~$46B in tax revenue from corporate taxes. Their GDP is only 210B. Apple's gross income is ~$60B. I doubt Apple is paying close to 80% of their income to the Irish.

  • Pfft. If you are a multi-national company with shareholders, you minimize your tax burden, by optimizing your company structure within whatever legal framework exists. This isn't exclusive to apple, and is not going to suddenly stop when Ireland change their taxation law. The company (like all the major multi-nationals) will simply evolve to make the best use of whatever taxation structure is possible.

    If apple (or google, or samsung no doubt) were to NOT make use of legal quirks like this, then they

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