Linked by Thom Holwerda on Tue 7th Nov 2017 09:52 UTC
In the News

Five months after Mr. Cook's testimony, Irish officials began to crack down on the tax structure Apple had exploited. So the iPhone maker went hunting for another place to park its profits, newly leaked records show. With help from law firms that specialize in offshore tax shelters, the company canvassed multiple jurisdictions before settling on the small island of Jersey, which typically does not tax corporate income.

Apple has accumulated more than $128 billion in profits offshore, and probably much more, that is untaxed by the United States and hardly touched by any other country. Nearly all of that was made over the past decade.

Apple is the largest company in the world, so they're the big target - but tons of other companies engage in the same shady activities.

Every euro or dollar Apple, Google, and Facebook dodge in taxes is a euro or dollar regular folk like you and I have to pay instead. These companies make use of all the facilities and infrastructure paid for by our tax euros and dollars, but then turn around and stab society in the back by extracting vast sums of wealth from it without paying their fair share of taxes. It's exactly this reason why the divide between rich and poor is growing exponentially, which in turn is destabilising our communities because it becomes ever clearer that the Tim Cooks and Mark Zuckerbergs of this world get to live under a different set of rules than you and I.

I am lucky to live in an incredibly solid welfare state, where, while exceptions exist, we take care of each other (interestingly enough, The Netherlands is also one of the biggest shady tax havens in the world). A welfare state is built upon the concept of the strongest shoulders carrying the heaviest burdens, and the knowledge that Joe Billionaire is capable of paying more into the system than Jane Minimum Wage. When this system of trust breaks down - as it clearly is at risk of - our society breaks down. The fact that Tim Cook et al. have the gall to claim their 0.0002% tax rate is "fair" just rubs more salt in the wounds of any regular person who dutifully pays her or his 20-40% taxes every year.

Sadly, any meaningful change to the tax codes of the US and the EU will be blocked through the corruption and bribery Apple, Google, Facebook, and so on engage in on a daily basis. Unless we break these giants up into small companies that aren't 'too big to fail', our societies will grow ever more at their mercy.

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That's part of the comprimise
by sukru on Thu 9th Nov 2017 08:39 UTC
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There are two major social "covenants" in play here, however big companies are able to use them to their advantage very well.

First is the company being a separate entity for tax purposes,
and the second one is that they are being multinational (note: I do work for a big company as well, however I am small myself in the mist).

When professionals come together and build a partnership, that company will most likely be "pass thru", which means if they have 45% personal tax rates, then the profits of the partnership will be divided and taxed at personal rates (after deducting valid business expenses). This is reasonable and easy to understand.

However things became complicated when the company became a separate entity by itself. The "founders" or "owners" might not be actively working in it anymore (or might be able to do a very limited amount of work compared to size), and not every employee can be a shareholder to give a perfect division of revenue. Then there was a compromise. The company will be taxed at 25% as a separate entity, while owners will be taxed 20% when they withdraw profits from it (these numbers are made up). The total would still be 45%, however timing and individual tax burdens are distributed.

However companies found clever ways to postpone or even completely avoid paying 25%, at least reducing that number to a much smaller ratio in practice. All the techniques they used sound perfectly reasonable in isolation, however when a savvy group of accountants build complex algorithms for tax purposes the end result might not be what's initially desired.

The same can be said for individual owners / investors / stockholders for those companies. They will also find ways to avoid the mentioned 20% rate.

The end result is the total 45% easy to calculate tax rate becomes much smaller in practice. Unfortunately this is not easy to avoid without a much larger overhaul.

(There is also the issue with companies being international. If a large company design something in Ireland, produces it in China, stores that in Brazil, and sells to a customer in Argentina, while being headquartered in USA, which country receives how much tax becomes an interesting question. The company will use its leeway to maximise the legal options to have as much profit with as little tax burden as possible).

Anyways, even though I do not like the final tax rates Apple or other companies are paying it would be difficult to change it will small modifications. We need a major overhaul, while keeping it just. Fortunately people are already having these discussions, so I'm hopeful for a better social deal.

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