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back to article Senators: You - Cook. Apple guy. Get in here and bring your tax books

Apple head honcho Tim Cook looks set to be hauled in front of a Senate committee to explain why his firm dodges taxes by keeping its cash overseas. Cook is expected to appear in front of the Senate's Permanent Subcommittee on Investigations to explain why Apple has failed to repatriate up to $100bn in cash stashed in foreign …

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Anonymous Coward

"Because you let us."

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I have to agree.

Throughout all the "immoral" tax scandals of the last year, I can't help but think they are just playing the system that's been created for them. Why didn't you pay more tax? Because I didn't need to. Seems a pretty fair answer to me.

The biggest question, then, is not why Google aren't paying enough tax, but why the ministers who decide tax policy are too stupid to tax them enough without introducing loopholes that let them evade that tax. Perhaps that explains why we're skint as a country more than anything to do with the big banks.

Rather than expect people to play ball when they don't need to, we should be making people need to play ball more often. And if we don't, it's a failure of the taxation system, not the skilled finance people getting around the laws that they were drafted in to help craft (if recent news reports are anything to go by).

How's this? I want, say, 10% of your profit. Every time I find a way that you make profit without me getting my 10%, I introduce a law that gives me that 10% from the next April. Quite how hard can that be? Paying your own company (but in another country) all your profits in "intellectual property rights" payments? Fine. Introduce a tax on intellectual property rights payments that cross international borders. Or any intra-company transfer that crosses the ocean in some way. Using Guernsey's laws about VAT on flowers to avoid paying VAT on DVD's sold to the UK? Fine, we'll narrow to law to only include flowers (quite why it was so broad in the first place is a mystery), or extend it so that it covers everything, or refine it so that if you're not actually a flower seller based in Guernsey selling flowers grown in Guernsey to the EU then you still have to pay VAT (whether you do that by a simple geographical test of the manufacturer / customer of the products or some other convoluted method will really depend on how many loopholes you can find).

What is so hard about setting a tax and collecting it from companies that comply with the law (as virtually all of these big names that are being chastised actually did)?

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Meh

Sadly

They have done nothing wrong and are just following the rules.

Just following the rules got almost all out MP's off the hook over their expenses.

It's a great get out of jail for free card to play.

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Re: Sadly

Obeying the rules and doing nothing wrong doesnt necessarily mean the same thing.

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Re: Sadly

"Obeying the rules and doing nothing wrong doesnt necessarily mean the same thing."

Too true: "I was only obeying orders" did not prevent many from being executed.

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Probably.

"An Apple spokesman insisted the firm paid all its taxes."

Probably true. And therein lies the problem.

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"We paid all the taxes due under the rules we paid you to write for us".

To be fair in this case they not only pay a vaguely sane (although probably not when viewed as a %) amount of tax but are being reasonably sensible (if not immoral) keeping it abroad. At some point the GOP will get in and give them a repatriation break as they have done in the past and the money will come back tax free. If you invent a lower tax for no tax for repatriated funds suddenly all funds will be 'repatriated' as companies pay license dues for IP usage to sister companies in tax havens.

If the senators were serious they would just change the tax code. This isn't what their 'sponsors' paid them (and their pacs) to do so they won't.

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Thumb Up

Spot on.

"If the senators were serious they would just change the tax code. This isn't what their 'sponsors' paid them (and their pacs) to do so they won't."

Correct you are sir.

Until the corporations are FORCED to get their hands out of the pants of the politicians...this will never change. And the likelyhood of THAT happening is nil.

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Trollface

Next stop for the War on <your political agenda here>

The Cayman Islands. Pack your sunscreen, marines! Hoorah!

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Big Brother

Re: Next stop for the War on <your political agenda here>

From the Halls of Montezuma,

To the shores of Tripoli;

We fight for cronys' battles

Pretend we are all freedom-y;

First get paid in paper dollars

Printed by the Bernanke:

Then inflation kills our pensions

Which we accept quite meekily.

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Flame

"No, don't sit down. Where's all our damn money?"

In your swimming pools, gentlemen. If not stashed away in your fridges.

Any further questions?

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Good to see

Unlike the UK, the USA's bark usually has some bite behind it.

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Re: Good to see

It is worth mentioning that if they were a British company, they wouldn't have to worry about that because we don't charge corporation tax on dividend income.

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Re: Good to see

It is worth mentioning that if they were a British company, they wouldn't have to worry about that because they'd just have to buy the right person dinner.

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Interview without coffee? - if only it were true......

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Anonymous Coward

Interview without coffee? - if only it were true......

It's probably Starbucks, so indeed true :)

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Corporation tax should go. The cost of it is only passed onto customers/employees/shareholders anyway. Without such a huge owing directly to the exchequer, perhaps these big companys' influence at the very top levels of power would be somewhat mitigated.

"ordinary people have a viscerally negative reaction to the notion that large, profitable corporations should pay no tax while they bear the income tax burden. This is universally dismissed as an example of ordinary people’s “fiscal illusion,” the misguided belief that corporations bear the burden of the tax, while every economically literate person knows that taxes can only be borne by natural persons." - Reuven Avi-Yonah, a professor at the University of Michigan Law School

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So corporations get all of the benefits of corporate personhood, but none of the costs.

That's going to end well, isn't it?

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FAIL

I guess corporations don't benefit from interest either, and this is a priviledge afforded only to individuals huh?

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Anonymous Coward

A fair point...ish.

Yep in these days of multinationals and their armies of tax lawyers the whole business of who paid what taxes needs a rethink.

personally I always though it would better if we focussed on what wages a company paid its staff. If nothing else that is much easier to tax. Then if apple was paying all its staff top whack it wouldn't matter whether it paid any tax as their staff would be doing it instead. Throw in a proper clearup of tax law to ensure you remove the loopholes so that everyone who can afford to do so pays their share. And in the case of the States dump the idea of corporations being persons and thus influencing politicians. No representation without taxation and all that.

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FAIL

Hang on a minute

According to recent legal cases in the US, large and small corporations are natural persons which is why they can set up super PACs to fund politicians as well as receive tax breaks as persons contributing to political activity.

I think the professor needs to revamp his view. His argument is based on the premise that all taxes are ultimately paid by real (as in flesh and blood) people either as employees, shareholders, executives, etc of these companies. This is no longer true. The corporation is now viewed, at least under US law, as a natural person (flesh and blood) and therefore the reality is that the corporation should pay the taxes whereas those who benefit from the gifts of the corporation (dividends, wages,etc) should no longer be taxed on such gifts in the same way as I am not taxed when my granny gives me a gift.

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Yag
Pint

Indeed, it is true. In the land of the economists.

In this marvellous land, if corporate tax is removed thanks to the InvisiHand Faery or one of her friend, then :

- the corporations will reduce the overhead in good & services production

- they will then be able to reduce price in order to gain market share.

- As the one with the lowest price would grab all the customers, and game theory teach that corporations will NEVER agree on a given prices...

- ... then the price will be reduced until the equilibrium point is reached, which should be precisely the former price reduced by the cost of the taxes - no more, no less.

- all the benefits will then be reaped by the consumers!

The more I read Stiglitz & Walsh's 'Economics', the less I understand economic 'science'...

<----- perhaps I need more than one... keg.

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Anonymous Coward

"...I am not taxed when my granny gives me a gift."

oh? lucky guy... In socialist France, the gift taxes YOU.

erm... let me rephrase...

In socialist France, you are supposed to pay taxes on such gifts. The fiscal administration usually don't care for low value gifts (20K Euros if I remember well)

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Re: Hang on a minute

"The corporation is now viewed, at least under US law, as a natural person (flesh and blood)"

No, it ain't. The corporation is a legal person, just as it always has been. A natural person is, by definition, an 'uman being, not a legal person.

The question was rather different. It was "Do legal persons have the same First Amendment rights as natural persons?" and the answer came back "Pretty much, yes."

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Re: "...I am not taxed when my granny gives me a gift."

That is true but in the US, it's granny who pays the gift tax unless it's under the annual limit, which is $14k this year. Some gifts, being more equal than others, are also exempt regardless of amount such as political or charitable donations and direct payment of medical expenses. There are other technicalities granny can pull off to avoid the tax such as gifting $14k to both you and someone else, gramps perhaps, and that other person can then gift you another $14k tax free if they don't catch the next flight to the Virgin Islands.

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Anonymous Coward

Not corporate tax?

That's why it is called "corporatism", and many people have been wonderfully brainwashed into thinking that it will benefit themselves to support it.

The fools.

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Probably because

They'd get sued by shareholders if they didn't. All companies have a legal duty to shareholders to maximise income. The big companies all employ accountants to work out how to minimise their expenses (tax being one) and maximise their income because of this.

As soon as governments change the law to make this sort of thing illegal then they'll pay the extra tax. Until then they will continue to use all and every legal ways to reduce their tax bill, and there's no point in politicians moaning about it as their ilk were responsible for setting up the rules the companies are working to.

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Re: Probably because

I keep reading about this "legal" duty but I am hard pressed to find any legislation that embodies such an obligation and it certainly does not exist in tort.

Companies seek investment from investors (the shareholders) on the premise that if the business is successful it will pay a return to the investor. Any company that is set up without the expectation of making a return that can be passed on to the investors is probably a fraud and the law will deal with such companies.

Even in the US, shareholders cannot sue because the return is not as great as it should have been, they can sue where the information provided by the board of a company is alleged to be false or misleading or where there actions are deemed to be fraudulent or perverse. Again there is no way to sue the company for failing to "maximise" profits.

The determination to minimise tax is something that people will always seek to do simply because no one likes to pay tax. The directors of companies will always look to make the most money available to investors because a)they own lots of shares or will receive lots of shares where they can take steps to boost the share price and b)for most executives any failure to boost profits year after year is likely to reduce the share price thus causing them to lose their jobs (possibly). Therefore maximising the share price is the driving factor not dividends. This is evidenced by the long standing practice of Apple to not pay dividends a practice which failed to stop the rapid rise of the share price.

Of course Apple has seen a fall in the share price following the board's announcement to pay dividends. The approach they are now taking to do share buybacks is aimed to improve the share price by reducing the number of shares.

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Re: Probably because

There may not be a legal duty to shareholders to pay as little tax as possible, but there is a duty to pay the tax as per the law. If the law doesn't require them to repatriate funds and pay 35% tax on that transaction, why should they do that?

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Stop

Re: Probably because - @bluenose

In the US a board of directors has two main legal responsibilities - a Duty of Care and a Duty of Loyalty. While they can get away under the Duty of Care with business decisions that work out badly (depending on how badly, and how ill-informed they were when they made them) its pretty easy to argue that a reasonable person (which is the legal test) wouldn't pay more tax than they had to, which would leave the board liable.

You also seem to have failed to spot that the Apple board first voted to restart paying dividends over two years ago, following which their share price climbed hugely, even though it has since fallen back somewhat (you'd still be ahead if you purchased back then).

Conversely maximising share price in the short term, to increase the value of the board members personal holdings, is a breach of the Duty of Loyalty. Generally the reason for a board working to keep the share price up is to prevent the company being bought out for less than its asset value (and they have extra duties in the case of the sale of the company), which is both bad for shareholders and likely to have them looking for a new job.

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Mushroom

Armchair politicians - a meta-comment

With all political articles, there is a tendency among the commenters to put forward their best solution. Of course, none of these will be taken on board, this is the comments on el reg, not a parliamentary petition or US senate round-table.

I, for one, would suggest that instead of beating our chests in a news forum, we instead send our opinion to our MPs. With enough letters on the same topic, even the laziest of MPs will want this discussion in parliament. An open, no holds barred ruck in commons is the only thing that will resolve this, but nobody seems willing to step up to the plate.

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Re: MPs will want this discussion in parliament.

You know, I smell an opportunity here. You guys set it up and invite our guys to debate by your rules in the forum. On our side of the pond we set it up as a Pay Per View event. You guys do whatever the corresponding thing is for your side. The broadcasters bid to produce it up front, that cost gets deducted from whatever gets collected. Then we split what's leftover 50-50 and each government gets the cash.

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jai
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Re: Armchair politicians - a meta-comment

Not sure how a discussion in Parliament is going to have much effect on how much tax Apple pays in the US?

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Meh

Punitive

The tax is not punitive (anymore than any other tax anyway) it is the tax due.

Besides R&D is deductible, maybe Apple should look into some new product development and use the cash for growth. They are getting perilously close to the 'too much money horizon' by being so greedy they won't spend the money they make.

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Politics

The govt maintains a complicated tax statute partly to enable tax avoidance, and it continues to add more layers of complexity every year. A tax avoidance industry is sustained, in which the sellers are the fig four accountancy groups, the buyers are large companies, and HMRC provide the necessary framework. The British govt also kindly provides protectorates, eg the Caymans, where tax laws do not apply.

The govt could stamp out all tax avoidance tomorrow if it wished, but this would be seen as too demotivating for executives. The govt can only work by maintaining large corporations as friends. To that end, the Chancellor will make anti-avoidance speeches in order to work up anti-avoidance feeling with the public. When public feeling is strong enough for long enough, the government can act against the corps, but keep them as friends by pointing to public opinion.

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Are we talking about money made abroad that the US thinks should be repatriated?

Assuming that I haven't misunderstood something here then it seems that the US government seems to want it both ways: they don't want corporations to pay tax abroad for money made within their own country - if that happens then that means less tax revenue for them - but they think that they should be able to demand tax from profits made within the borders of other states.

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The US are special that way

Indeed, I believe that very few countries tax income earned abroad. They have the same thing for citizens: US citizens living in other countries do have to report their income and pay tax above a certain level. Practically no other country does that.

It used to be that the attraction of a nice US passport was great enough that people would not care, but I am personally glad my children were not born in the US, otherwise they would have been on the hook with the IRS their whole life.

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Pint

Re: The US are special that way

It is not "US citizens" but "US persons" that are required to pay income tax on foreign earned income even if they do not reside in the US. The definition of a US Person is rather vague and includes people who have ever been granted permanent residence status, those born in the US of non-citizen parents (the child is automatically a US citizen) and might even include "snowbirds" from Canada that spend a part of the year in Florida to avoid shoveling their driveways and paying heating bills during the winter.

The singer Tina Turner who has retired and until recently was living in Switzerland was required to file and pay US taxes each year. She has renounced her US citizenship, accepting a ban from travel to the US and paying an "Exit Tax" for giving the bird to the Internal Revenue Service. If you search for the story, there are some good links on FATCA. FATCA is the US government attempting to make banks worldwide act at US tax collectors.

Beer because I losing hope.

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Re: The US are special that way

Only on the income earned in excess of a certain amount (something in excess of US$90000, which is what? £60000?), and not spent on certain kinds of housing. Essentially, $900000 + what you spend on housing becomes a deduction on your income for purposes of figuring what US tax you owe. If your income is less than that, you owe the US government *nothing*. If you earn $125000 worldwide, it'll come to a few hundred dollars of tax. In short, If you've earning enough for it even to become more than a nuisance, the amount of sympathy from normal wage-earners with average incomes is going to be ... somewhat limited.

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Rather irked by this entire process

The entire business of appearing before government committees is, to my mind, largely a waste of public money. It appears to me to be nothing more than publicly funded advertising for the members of the committee to try and appear to be doing the right thing in the eyes of their voters. I've rarely seen these circuses make public policy changes as a result of their "investigations".

Admittedly its fiction, but Skyfall made the point rather well when the female committee member just kept ripping into MI6 without any testimony or any comment from MI6. Which appears to be more or less the point of the exercise - committee members get to espouse their political views for personal gain.

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Anonymous Coward

Well, if US politicians want to screw/destroy Apple

They're not going to let inconvenient little things like the law, and the rule of law, get in their way.

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Pint

Re: Well, if US politicians want to screw/destroy Apple

More likely the politicians want to make it clear they're unhappy with the amount that Apple is funneling to them personally. Haul in some big shots, make them sit and sweat under lights, call them names for a while, and act very stern, while the only real message is, "nice company you have there; shame if anything were to happen to it." Then Apple's lobbyists step up out of sight, and it all goes away.

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Anonymous Coward

Treat companies as people

As the US Supreme Court has judged, corporations are to be treated as people when it comes to !st Amendment rights to free speech and campaign contributions.

Let's take it further. US citizens are required to pay taxes on all income worldwide, with deductions for foreign taxes.

The countries will leave the US? Only the nominal headquarters will go. Impose a material presence rule, based on staffing or on revenue levels. And charge a separation fee of 55 percent of worldwide cash and assets.

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Anonymous Coward

Re: Treat companies as people

if they are "people" and required to pay taxes, then the "no taxation without representation" line means they get to vote as well ... or the politicians are trying to have it all their own way, without regard to any form of logic, which is of course completely unheard of ..

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feed the birds, tuppence a bag.

Yup, the old lady modernised for the net probably pays more corporation tax than Apple does in the UK/.

6 billion paid in the US and near 0.006 billion in the UK!

Yeh, we know that jingle, "There's an app than can SCAM"

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Pirate

Hard to launder 100 beelions

They should have laundered the money in smaller batches before it accumulated into such a ginormous (and hard-to-overlook) mountain.

Now they'll have to hire the complete population of the Cayman islands and pay them fair and untaxed bonuses.

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Happy

No charge for 'little tete-a-tete'?

Cook has just raised $610,000 for a one-hour coffee break with some idiot.

I guess the appearance before the Senate's Permanent Subcommittee on Investigations is a freebie?

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Why such a fuzz?

There's a simple solution to that... just pass a law that states that any returns on bonds issued in the US need to be repaid upon maturity with monies coming out of US accounts, ecause they were issued in the US in the first place.

Apple (and any other of those scheming b*st*rd comapnies) would then have to repatriate the funds to the US, and get hit with the tax as soon as they do. But that would presumably un'Murican.

Come to think of it, that should work here in the EU as well.

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Boffin

If you want to see some of the tax money...

Just create a partial amnesty.

Current corp tax rate... 35%

Amnesty period... drop to 20% or something like that for 1 year.

If they don't like it, then you can have them change the tax laws.

I'm sure California will love that one since they would also get a bonus in taxes too.

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Re: If you want to see some of the tax money...

Alternatively, give advance notice that there will be rate hike next year. Amounts to the same thing without loss of revenue.

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