Linked by Thom Holwerda on Tue 30th Aug 2016 17:00 UTC
Apple

The European Commission has concluded that Ireland granted undue tax benefits of up to €13 billion to Apple. This is illegal under EU state aid rules, because it allowed Apple to pay substantially less tax than other businesses. Ireland must now recover the illegal aid.

That sound you hear? That's the sound of a house of cards tumbling down.

There's quite a lot of misinformation on the web about this whole thing. First and foremost, the crux of the matter here is that it's the EU's job to protect the internal market, and to ensure that there's a level playing field between its various member states, and it does this through a number of regulations, laws, and codes that member states must adhere to. Whether you, personally, agree with this goal or not is irrelevant; Ireland is part of the EU single market and signed the dotted line - and this comes with the responsibility of implementing, adhering to, and upholding said regulations, laws, and codes.

Second, the EU claims that the special deals the Irish government gave to Apple are a form of illegal state aid; something many other companies have been fined and punished for as well. It's just that with a company the size of Apple, and the extensiveness of the tax-lowering deal Ireland gave to Apple, the illegal state aid easily reaches monstrous proportions.

Third, this isn't some EU manhunt or vendetta specifically targeting American companies; European companies have been fined time and time again for shady practices as well. And, just to be pedantic - technically speaking, Apple itself (the American company) isn't paying these taxes; various European shell companies owned and created by Apple are.

Fourth, there's a distinct and clear public opinion in Europe - and in the US as well, see e.g. the rise and popularity of Bernie Sanders - that seemingly, laws do not seem to apply to the extremely rich and wealthy. The EU and various member state governments - including my own - are starting to adapt to public opinion, taking concrete steps to end these shady tax deals and tax avoidance schemes that allow large, wealthy companies to pay effectively little to no taxes, while us 'normal' people and small business owners pay our fair share.

The main sticking point here is that the EU wants to makes sure that merely being rich and large should not give a company undue benefits that competitors simply cannot compete against. Proper capitalism only works when there's a level playing field where competition is based on merit, and not on who can dangle the biggest sack of money in front of the Irish or Dutch governments.

Apple, in response, published a deeply American (i.e., overtly sappy tugging-at-the-heartstrings nonsense) and cringe-inducing open letter to European consumers, and, of course, the ruling will be appealed. I can't wait until Apple is brought to its knees and forced to pay the taxes it owes for participating in the EU single market and the use of our infrastructure.

Google, Amazon, Starbucks, and everyone else, wherever from - you're next.

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The root cause of this is US taxes
by jonsmirl on Tue 30th Aug 2016 17:49 UTC
jonsmirl
Member since:
2005-07-06

If the US would bring the 35% corporate tax rate down to a more reasonable level (it is highest rate in the developed world) US companies would not park all of their profits offshore in places like Ireland.

Note that those profits in Ireland are not free of US tax, Apple owes 35% of their $181B held offshore to the US government. But Apple chooses instead to hold that money offshore and endlessly defer paying US taxes. This grab by the EU is likely to set off a fight with the US which thinks that is their money to tax if they can ever get their hands on it.

Keeping the US Corp tax rate high looks great on paper - let's stick it to those evil corporations. But it doesn't have the effect of collecting huge amounts of money, instead it creates a giant incentive for US corps to leave their money, jobs and plants offshore.

Reply Score: 2

jgagnon Member since:
2008-06-24

No company pays 35%, though, unless it is run by idiots. There are countless ways to reduce that to a very low percentage (and even zero in many cases). A much lower base rate with no deductions would be a boost to tax revenue but suicide for the politicians involved, which is why it will likely never happen.

Reply Parent Score: 7

unclefester Member since:
2007-01-13

No company pays 35%, though, unless it is run by idiots. There are countless ways to reduce that to a very low percentage (and even zero in many cases). A much lower base rate with no deductions would be a boost to tax revenue but suicide for the politicians involved, which is why it will likely never happen.


The problem is that it costs corporations a vast amount of money to reduce those taxes. They need to spend a fortune on lawyer and accountants.

Corporate taxes are just a political stunt to please gullible voters who think that big companies are getting rich a their expense.

Reply Parent Score: 1

CaptainN- Member since:
2005-07-07

This is one of those things that "everyone knows" that simply isn't true - especially when looking at effective tax rates.

Many of the biggest US corporations on balance receive more money from benefits and subsidies than they will ever pay in taxes, which themselves are loop-holed (the loop holes having been written by their own lobbiests in most cases) into a tax-bill of basically $0.

Reply Parent Score: 8

CaptainN- Member since:
2005-07-07

Even aside from the supposedly high tax rates that corporations pay, the individuals that own and run these huge companies pay almost nothing too, taking most of their pay in the form of capital gains instead of wages or salary. Capital gains are taxed at both a lower theoretical rate (the rate know nothings like to quote), but also a much lower actual rate (the rate only their accountants and lawyers know).

Reply Parent Score: 4

jonsmirl Member since:
2005-07-06

You need to do some research....

http://taxfoundation.org/article/summary-latest-federal-income-tax-...

This is for 2013 data, but it is the same every year.

Key Findings
In 2013, 138.3 million taxpayers reported earning $9.03 trillion in adjusted gross income and paid $1.23 trillion in income taxes.

Every income group besides the top 1 percent of taxpayers reported higher income in 2013 than the previous year. All income groups paid higher taxes in 2013 than the previous year.

The share of income earned by the top 1 percent of taxpayers fell to 19.0 percent in 2013. Their share of federal income taxes fell slightly to 37.8 percent.

In 2012, the top 50 percent of all taxpayers (69.2 million filers) paid 97.2 percent of all income taxes while the bottom 50 percent paid the remaining 2.8 percent.

The top 1 percent (1.3 million filers) paid a greater share of income taxes (37.8 percent) than the bottom 90 percent (124.5 million filers) combined (30.2 percent).

The top 1 percent of taxpayers paid a higher effective income tax rate than any other group, at 27.1 percent, which is over 8 times higher than taxpayers in the bottom 50 percent (3.3 percent).

Reply Parent Score: 2

nej_simon Member since:
2011-02-11

The corporate tax rate in Ireland is 12.5% but this story tells us that Apple doesn't even want to pay that.

Reply Parent Score: 9

l3v1 Member since:
2005-07-06

Yeah, funny, that. I don't think anyone would be "angry" about this whole thing if they actually paid that.

"The Commissions's investigation concluded that Apple had effectively paid 1% tax on its European profits in 2003 and about 0.005% in 2014." http://www.bbc.com/news/business-37220799

Will be interesting to see how this will end and how it will affect the other big names that did exactly the same thing as Apple.

Reply Parent Score: 5

jonsmirl Member since:
2005-07-06

You can look up effective tax rates:

http://csimarket.com/stocks/singleProfitabilityRatios.php?code=AAPL...
Apple's is 26% -- with the off-shore parking. If they repatriated it would be much higher.

Facebook's effective rate is more interesting. Last quarter we have data for it is 43.52%.
http://csimarket.com/stocks/singleProfitabilityRatios.php?code=fb&i...

Reply Parent Score: 3

dionicio Member since:
2006-07-12

"...But Apple chooses instead to hold that money offshore and endlessly defer paying US taxes."

Can't get a good reasoning or explanation to allowance in [endlessly] deferring tax payments. Should be an extremely exceptional measure.

Deferring doesn't noting but increasing the chance of default.

Reply Parent Score: 2

jonsmirl Member since:
2005-07-06

You need to ask a tax expert (I am not one) but I believe the US foreign deferral game only works if profits get bigger and bigger each year. If profits start shrinking there is no way to continue deferring and they are forced to start repatriating. Apple has strung together an incredible run of years with increasing profits.

Look at older multinationals like Exxon, they only have minor amounts in deferred taxes.

Reply Parent Score: 3

ssokolow Member since:
2010-01-21

If the US would bring the 35% corporate tax rate down to a more reasonable level (it is highest rate in the developed world) US companies would not park all of their profits offshore in places like Ireland.


Publicly-traded corporations are built on the concept of "fiduciary responsibility to maximize profit". That's the only "moral imperative" and, if the CEO tries to value human morals over that, it's a deriliction of duty and they'll be fired.

This is why companies seek out every way they can to squeeze out an extra buck and, therefore, the only way lowering the corporate tax rate will stop that is if you start a race to the bottom and remain in the lead.

That's the whole point of things like environmental regulation: To convert externalities (technical term) like pollution into items on the balance sheet, so companies will include them in their decision-making rather than "privatizing the gains and socializing the losses".

Reply Parent Score: 5

TM99 Member since:
2012-08-26

Corporate tax rates and economic growth since 1947

This brief examines corporate income-tax rates, and the argument linking low corporate tax rates with higher economic growth. The principal findings are:

Claims that the United States’ corporate tax rate is uniquely burdensome to U.S. business when compared with the corporate tax rates of its industrial peers are incorrect. While the United States has one of the highest statutory corporate income-tax rates among advanced countries, the effective corporate income-tax rate (27.7 percent) is quite close to the average of rich countries (27.2 percent, weighted by GDP).

The U.S. corporate income-tax rate is also not high by historic standards. The statutory corporate tax rate has gradually been reduced from over 50 percent in the 1950s to its current 35 percent.

The current U.S. corporate tax rate does not appear to be impeding corporate profits. Both before-tax and after-tax corporate profits as a percentage of national income are at post–World War II highs; they were 13.6 percent and 11.4 percent, respectively, in 2012.

Lowering the corporate income-tax rate would not spur economic growth. The analysis finds no evidence that high corporate tax rates have a negative impact on economic growth (i.e., it finds no evidence that changes in either the statutory corporate tax rate or the effective marginal tax rate on capital income are correlated with economic growth).


http://www.epi.org/publication/ib364-corporate-tax-rates-and-econom...

Just more libertarian Randian economic sophistry and mythology I am see. ;)

Edited 2016-08-31 03:33 UTC

Reply Parent Score: 6

jonsmirl Member since:
2005-07-06

The effective tax rate does not hit all industries equally. Some industries (like energy) receive great amounts of corporate welfare from the government. Tech in particular does not get much of this corporate welfare.

You can't argue that the US corporate tax rate creates a huge incentives for tech to park profits offshore.

You need to consider this industry by industry since there is huge variance in the impact. For example, you don't hear the energy companies complaining about this.

Reply Parent Score: 2

p13. Member since:
2005-07-10

35% isn't the highest in the developed world.

We (Belgium) pay 35% as well, some nordic states pay more.

Reply Parent Score: 3

jonsmirl Member since:
2005-07-06

Rate in Belguim is 33.99%. It is in the low 20's in all of the Nordic countries.

Reply Parent Score: 2

darknexus Member since:
2008-07-15

Keeping the US Corp tax rate high looks great on paper - let's stick it to those evil corporations. But it doesn't have the effect of collecting huge amounts of money, instead it creates a giant incentive for US corps to leave their money, jobs and plants offshore.

Couldn't have said it better myself. You've hit the nail firmly on the head.
The main problem is, I think, that people view corporations as evil. Let's break this down:
1. A corporation is a collection of facilities, businesses, departments, and everything that goes with them. These are run by people.
2. A corporation has no consciousness, therefore it cannot be evil.
3. People can be evil, however there really are very few genuinely evil people. Too often what we see as "evil" is people trying to seek the best position for themselves. This is human nature, pure and simple. Without it, we would not have come as far as we have as a species.
4. If someone lives in a system that encourages people to be a certain way, most will do so. It's easier and you are more likely to thrive.
So, put all this together and what do we have? A system that encourages people to put as much of their money outside the country as possible, coupled with people who are just acting the way anybody would act in that situation. It's hardly "evil," just an unfortunate system with nasty consequences. If anything, the people behind the system are the cause of the evil.
So it seems to me that we're left with one option: change the system. Anyone want to tackle that?

Reply Parent Score: 2

dpJudas Member since:
2009-12-10

So it seems to me that we're left with one option: change the system. Anyone want to tackle that?

Good luck with that. There are players in the system that gain on the status quo. We already have the US government crying that Apple was punished - and Ireland sure don't want to budge voluntarily either, as they were bribed with some jobs in Ireland if they'd help screw over the rest of the EU.

The stupid thing is if just everyone could agree on stopping this everyone would be win. Prisoner's dilemma in game theory, I think.

Reply Parent Score: 3