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back to article Academic blames US for tech titans' tax dodge

We already know that tech giants are good at keeping money out of reach of tax authorities. Now, an Australian academic has laid the blame for the problem squarely at the feet of the US government. Writing at The Conversation, Antony Ting, whose analysis suggested that Apple had skipped billions in tax in Australia alone via an …

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The money would come home...

If it weren't taxed at one of the highest corporate rates in the world. Of course it would be taxed again as dividends are paid out and investors had to pay THEIR taxes as well. Corporate governance dictates that a company pay the smallest amount of taxes necessary. So they do it!

If you want more taxes, feel free to write a check to your local government. I suspect they even accept credit cards.

What a country!!

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Re: The money would come home...

You're dreaming, or more accurately lying. Corporate tax takes in the US are at their lowest ever as part of the total tax take.

When companies structure themselves specifically to not pay tax you know they are not acting honestly. This is the rich stealing from the rest of us and then trying to point blame in another direction. It's only possible because the media are owned by the same rich corporations.

Corporation taxes have dropped from 30% of the total tax take to less than 5%, So what you are saying is demonstrably false.

We are meant to have laws against transfer pricing like this but they were written for the governments by PWC, Deloitte, etc and thus they then sold the loopholes for these same taxes to their other clients the corporations.

It's a corrupt system but it was sponsored by the big corporates.

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Re: The money would come home...

Corporate governance dictates that a company pay the smallest amount of taxes necessary. So they do it!

Corportate governance says no such thing.

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Re: The money would come home...

You don't seem to understand the difference between a tax rate and tax take. There isn't a linear relationship between the two. Increase the rate above a certain point and the take actually goes down. This works for both personal and company tax.

The US need to do two things:

1) Reduce their corporate tax rate so it isn't so much of a penalty to do business there

And

2) Close the loopholes and make it harder to avoid paying.

Those two together would increase the take, but I suspect that lobbyists would be fighting against at least the second.

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Re: The money would come home...

Steve Todd - you are on the wrong forum - your post is intelligent, well said and correct.

It's called the Laffer curve if anyone wants to do some extra reading.

Previous post about corporate governance - directors have to act in the best interest of shareholders by law. Shareholders are interested in dividends & capital growth. Both best served by minimising tax paid.

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Re: The money would come home...

Does corporate governance dictate that the government be bought and instructed to remove (legitamate) obstacles to tax avoidance?

no I didn't think so.

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Re: The money would come home...

"Corporation taxes have dropped from 30% of the total tax take to less than 5%, So what you are saying is demonstrably false."

Possibly. But corporation taxes provide between 2 and 4% of GDP in federal tax revenues. Inside the range that they've been since the Korean War.

It's that other federal tax revenues have risen.....

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@Persona non grata

Perhaps as an allegedly native speaker of English, you should learn to read it and not substitute your own words for what the poster said.

What he said very clearly is that at this time tax rates on corporations in the US are at their highest ever, particularly given our double taxation in that first the corporation pays an income tax and then when they disburse it as dividends it gets taxed again. This results in the entire predictable behavior of offshoring the money so it isn't taxed at those confiscatory rates and the revenue collected collapses. Which is exactly what supply side economics predicts. And exactly why the luxury yatch business in the US collapsed when they added the special tax on it. Lower the taxes and eliminate the double taxation and the revenue numbers will go up.

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Re: The money would come home...

> It's called the Laffer curve if anyone wants to do some extra reading.

Indeed: the harder you squeeze, the bigger the leaks.

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Then it's time

For every country to change their own internal tax laws to put an end to this sort of rort.Or, at the very least, add in so many extra tariffs for not having a truly local organisational representative that the companies in question will have to decide between either setting up shop and paying what they owe, or ceasing to do business in that country altogether.

I betcha if Apple decided it wasnt worth doing business in one country, Samsung would all of a sudden be in talks with the local govt about setting up a new fab plant.

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Whatever shenanigans Apple (or any other iRich entity) employ to pay as little as they can in Australia, China, and Ireland combined I fail to see, frankly, how the US government is to blame. Is the distinguished academic saying that the US government waterboards the Australian and Irish legislative bodies (and the Chinese Communist Party?!?!?) to provide convenient tax structure to American multinationals (and the CIA hides the activity from the Senate)?

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Indeed

I would claim on the contrary that the US government is far more aggressive in getting tax out of its corporations. I understand it is one of the few countries that taxes the income earned abroad on top of what it got taxed abroad.

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Re: Indeed

This certainly applies to ordinary individuals, but does it apply to corporations? Really?

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> Is the distinguished academic saying that the US government waterboards the

> Australian and Irish legislative bodies (and the Chinese Communist Party?!?!?)

> to provide convenient tax structure to American multinationals

No. What the US government did was change the law in 1997, prior to which this revenue would have been subject to tax in the US.

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Re: Indeed

It does apply to corporations; this is why Apple & Co are not bringing the cash they earned overseas back in the United States: because they would need to pay tax on it again, even though they "paid taxes" on it in whichever country they earned it.

Of course, the last part is a bit theoretical, since in fact the profit is mostly declared in fiscal paradises where the tax is zero. But for the sake of the argument, assuming they paid UK taxes on the profit they do in UK, they would still need to pay more taxes on it when bringing the rest of the cash in the US.

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Re: Indeed

And after the corporation pays taxes on it, the shareholder has to AGAIN pay taxes when he gets the money. If he gets it as a dividend it is treated as ordinary income. If the value goes up and he decides to cash out share to take profit, depending on how long he has held the stock it either gets treated as ordinary income or capital gains (with no indexing for inflation).

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Let us all be clear about this

Apple is far from the only US company to use Eire as a tax haven.

Google - All EU Business in 'done' in Eire and not in the country where they employ sales droids thus legally they have no presense in said country despite their being a google.plc/gmbh/etc registered in that country

Adobe

Microsoft - same modus operandii as Google

IBM

etc

etc

etc

As has been stated, it is beholden ON ALL Corporations to mimimise their tax bill using whatever LEGAL means possible.

It is no use complaining to your Congress critter/MEP/MP/etc. They rely too heavily on donations from business when it comes to election time.

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LDS
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Re: Let us all be clear about this

"It is no use complaining to your Congress critter/MEP/MP/etc. They rely too heavily on donations from business when it comes to election time."

You've got the point. Today being elected gives you so many benefist you'll do whatever you need to achieve it. And today thanks to how the silly media business influence elections (and get paid very well for it), you need a lot of money - especially in the US where electoral campaign are crazy and too long - and that money can only come from where there are too many - and of course they want something back.

The solution? Make electoral campaigns last one week only, and put a "cap" on the expenses. And remove many benefits from politicians - so it becomes far less appealing for some kind of people...

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Anonymous Coward

Re: Let us all be clear about this

All those down votes obviously indicate that some readers don't like their favorite company being identified as doing the same financial doges as Apple.

Shame really that the fans can't see past the end of their noses.

I say, 'a plague upon the lot of them'

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Holmes

Re: Let us all be clear about this

Apple is far from the only US company to use Eire as a tax haven.

Just for future reference:

If you're speaking or writing in English, the name of the country is Ireland.

If you're speaking or writing in Irish, the name of the country is Éire.

It always seems passive-aggressive to me to hear people from "the mainland" refer to Ireland as Eire - a bit of a post-colonial grudge perhaps?

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Flame

That's capitalism

It's no good blaming a single country - the fault lies squarely with capitalism as a system. Get rid of that or at the least make it harder for capitalism's worst excesses to damage economies or blight the lives of the people who actually do all the work, and we might end up with a world worth living in.

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Re: That's capitalism

It's caused by governments taxing the wrong thing (profits rather than revenues). If income tax was paid on how much money you had left at the end of the month, rather than what you were paid at the beginning of the month, tax revenues would be much reduced. Whether this is the result of stupidity or corruption is left as an exercise for the reader.

You unaccountably failed to mention what you would like to see as an alternative to capitalism (note that no-one, apart from possibly a few nuts in their Montana bunkers, support totally unregulated capitalism). Centralised government control over the levers of the economy was tried in several different flavours last century - none of them worked out well (some die-hards in Venezuela are currently giving it one last try, nicely verifying Einstein's definition of insanity).

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Re: That's capitalism

in the depths of a depression, cause by the excesses of capitalism, it might just be possible to cobble together an argument that asserts that;

"capitalist control over the levers of the economy was tried in several different flavours this century - none of them worked out well "

rubber and glue with the straight jacket?

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Re: That's capitalism

Leave the corporations out of the tax equation entirely and the mess will sort itself out. With corporations paying no tax on income there's no need for tax deductions for the corporations. That means you can treat all benefits paid to employees as income, which closes the tax loophole of the CEO who collects no salary while all his living expenses are paid by the corporation.

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Re: That's capitalism

the Great Depression had nothing to do with the excesses of capitalism and everything to do with the excesses of Congress. Just like now.

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Re: That's capitalism

> the Great Depression had nothing to do with the excesses of capitalism and everything to do with the excesses of Congress. Just like now.

At last, someone with sense!

During a recession, the one doing all the blaming is usually the one at fault.

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@Naughtyhorse

You're talking about a failure of regulation, which I emphasised was necessary. Come back to me, when Google starts sending people to the Gulag or building gas chambers and we'll have another little chat. Cretin.

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Oz still doesn't get any money

One thing is clear though: it's the US government which loses out here, not the Australian one. Apple in Australia acts merely as an importer, and importers have thin margins (and thus low profits). It's no different than Kogan: they import at $550, sell at $600, deduct expenses, leaving very little profit. Corp tax is charged as a percentage of profit, and x% of a small profit is an even smaller tax bill.

The real profits are made by Apple in the USA. They buy $190 of components, hire FoxConn to package them in a shiny case, and sell them on for $550 a piece. That's a whopping profit and should incur a tax liability in California, but the US govt explicitly exempts them.

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Re: Oz still doesn't get any money

The case could be made that Apple USA is also just an importer.

This is just international trade. Perhaps it is the *reason* for much international trade.

Typically, the scheme only postpones taxes until shareholders demand dividends, but it is unfair to smaller tech developers without expensive accountants, who can't re-invest in development abroad in a tax free manner.

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LDS
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It looks Apple in Italy collects VAT it shouldn't... and nobody knows where the money goes.

Here (sorry, it's in Italian):

http://www.corriere.it/inchieste/reportime/interviste/apple-business-rimborso-iva-non-dovuta/c88d6e30-a940-11e3-a393-9f8a3f4bf9ce.shtml

It says Apple Irish operations are collecting VAT on goods sold to businness in Italy it should not collect - and it's not clear if it's then paying at least that maoney to Italian revenue service, or if it's disappearing into Apple's off-shore treasure island. It a 22% on each sale, not a small amount of money...

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Re: It looks Apple in Italy collects VAT it shouldn't... and nobody knows where the money goes.

any company selling anything in the EU and is VAT registered has to send the money to the relevant tax authorities.

Business done with entities outside that country are reported separately.

If Apple (or any company for that matter) is not paying VAT then they should be hauled up in court and made to pay.

I has to pay it when I ran my own company so why should apple get away with it.

That said, if I buy something from Adobe that is an electronic download then I pay Irish VAT. If it comes in a Box, I pay UK VAT because the order is fulfilled from Scotland.

There might be some confusion here. I would imagine that all iTunes sales attract Irish VAT and not that of the country where the end user resides.

Apple (Eire) is duty bound to pay the Irish Gov all the VAT it has received where it has levied Irish VAT rates.

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Want to pay more for your stuff

For most companies tax on products just flows through and is paid by the final consumer.

The only way the companies would have of paying the governments the tax is if they charged it in the first place to the consumers.

This would mean paying 20%-30% more for shiny devices and lattes.

I'm OK with companies doing nothing illegal to improve their efficiency permitting them to keep their product prices lower so I can buy more shiny things.

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Re: Want to pay more for your stuff

Minor nit:

It's not just a flow through. The company has to make money for acting as the governments tax collection agent. So it is actually the tax + normal profit (expenses for acting as the government tax collector and a profit for the shareholders).

Which makes it a really inefficient system for collecting taxes. But hey, it makes the Occupiers feel better about tolerating all those Evil corporations.

Otherwise, spot on.

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Elections don't pay for themselves; US politicians are bankrolled by people who expect favours to be returned.

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Anonymous Coward

The Laffer curve

was comprehensively disproven (in the US, ironically) in the early-mid 1990s. The republicans claimed that the 1992-3 tax revenues showed how dramatically Clinton's policies affected tax take; actually it was demonstrated that companies shifted their profits to low tax years and expenses to high tax years... subsequent years the economy rebounded from the Regan/Bush I economic disaster of spendspendspend with minimal corporate tax (and regressive income taxes).

Not quite the analysis that most right wingers want; it's all economic voodoo which most left wingers hate; so posted anon.

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