“There’s a disconnect between how Apple CEO Tim Cook sees his company’s tax strategies and how some members of the US Senate view it. That became clearer than ever today after Cook and two other Apple executives testified before Congress, explaining why they’re holding most of their international income in Irish subsidiaries like Apple Operations International, which declare no tax residency anywhere in the world. AOI hasn’t filed a tax return anywhere in the world for the last five years, yet it earned $30 billion in income from 2009 to 2012, according to a Senate report released yesterday.” Just because something is legal, doesn’t mean it’s just. Apple, Google, Microsoft, and many more – these companies might not be breaking any laws, but it’s obvious to anyone that what they are doing is scummy.
So can someone explain to me how this is legal? How can a subsidiary claim no residency? This is like saying the company is homeless!
It doesn’t have to be legal in all or most countries. It only has to be legal in Ireland. That’s the beauty of being a multinational corporation: you get to choose the laws which will apply to your various subsidiaries and have governments compete for your investment by offering the best package of political sweeteners.
The only way that western governments can escape from this fiscal austerity death spiral is with import tariffs. The corporate tax is futile.
Not necessarily futile. It’s just that Ireland and Netherlands have to fix their tax laws.
They’re just following rules and regulations set out by governments.
And now governments are unhappy because things aren’t going the way they planned and need more money to cover up their massive mess.
Boohoo!
http://daringfireball.net/linked/2013/05/21/mccain
Hilarious.
Edited 2013-05-21 23:39 UTC
Or… more likely that governments are finally acting after decades of apathy because they’re being pressured into it by their citizens, the press and lack of tax income.
I’ll assume that you, as a citzen are happy to cover the tax not paid by a very profitable company operating very successfully in your nation.
Nah. It’s a too complicated unrealistic scenario. Think kindergarten simple. We’re talking about humans here.
The reality here is that the US federal government deeply needs revenue and now it’s got to get off its arse to clean up some of its own mess.
No one is getting hurt. Only the intolerant/bored people are getting emotionally hurt. Personally, I find it hilarious.
I am covering my fellow citizens. The problem is corrupt government as usual. Central planning at it’s finest.
LOLWHAT!?!?!
No the governments are unhappy that the rules are used not for their intended purposes, aka abused.
That what Apple is doing is ‘scummy.’ According to Cook, AOI is a holding company where the money has already been taxed elsewhere, and the interest earned on that money is also taxed by the USA at a 35% rate. Cook is calling for a vastly simplified re-structure of the corporate tax system in America….worthwhile to consider and act on, IMHO.
It seems that Apple is doing everything it can to pay as little taxes as it can, without breaking any laws. But the question is, who doesn’t do this? For example, I believe that if you drive your own vehicle for business purposes, you can use the cost of gas as a tax write-off. So if I ran my own business, do you think I’m going to do that? Of course I am. I think just about anyone would.
So now we want to blame these large companies for doing the same thing that each of us would do ourselves, but just on a bigger scale? If you ran a large company, would you do the same thing? Or would you say to yourself, ‘Gee, I think I’m going to give the government more money than I am required to. Instead it going in my back pocket, why not put it in the back pocket of some corrupt politician instead?’ I say F that. If nothing else, give it to charity or something.
Except it isn’t that simple, it’s not like Apple have these companies arranged based on their function and simply pay the appropriate tax…
… like most large multinationals they’ll fiddle the books so that the part of their company in a tax haven make all the profit even if that profit is generated elsewhere in reality.
They used to simply move the profit to the haven based offices by charging for “services”, I’m sure it’s more sophisticated now.
Edited 2013-05-22 11:51 UTC
Yeah of course… and almost anyone who runs their own business or is a contractor is likely to include ‘non-business’ expenses as expenses.
Take a friend out for lunch – business expense.
Have a personal cell phone – business expense.
Drive a fancier car – business expense.
Write off a portion of your personal home – business expense.
Sure the government is going to catch you if you go over the top. But in general, that’s how people work.
Apple is doing things legally. They are a global company and will park their assets in the best region.
They will ‘shop’ for the best tax laws. Ireland gets more revenue than if they didn’t have the low tax rate in the first place. The US still has lots of jobs created by Apple whose employees pay income tax and the US has investors who invest in Apple who pay capital gains taxes…
Using your example of an individual taking liberties with their business expenses and equating that with what Apple (and many others) are doing would be like working as an employee for a US company but setting up a shell company in the Caymen islands for the salary, pay no income tax, say the transactions and services were delivered abroad and it’s all OK because tax was paid on the fuel used to get to work.
Not saying any rules have been broken, just that something needs doing about the rules because it’s ordinary citizens who have to fill the shortfall made by companies who could easily afford to pay their way if they chose to stop being so underhand.
I’m sorry, but you are comparing an actual expense(that gets taxed) to hoarding money not to pay tax.
The problem isn’t Apple – or any company. Google also does this, but then again, that’s not sensational enough. But no, Tim Cook testifies, so now it’s all about Apple…
This is about money that is made in Europe or other continents. There is no reason for any company to bring this money to the USA just so they can be taxed on it. This would be stupid, nobody would do that if they needed it. It is a company’s obligation to it’s shareholders to make a profit, not throw money out of the windows on purpose… Apple and Google both pay taxes on every dollar made in the USA.
HP is far worse in this regards, keeping ALL of their cash offshore in tax-heavens. THAT is dodgy.
And using Ireland as a tax-heaven? Well everybody is doing that. Intel, HP, Google, Cisco, Oracle, … – you name it. Is it their fault? No. Ireland in particular is a EU problem, where they created a tax-heaven on purpose to attract big companies and create jobs. This is an international trade issue. Fix the system, not the ones using it.
To be honest Apple is probably targeted because they have bragged so often about their wealth.
Plus having Apple in the headline still bring more attention than HP, Intel, Cisco, Oracle.
When did they brag? People keep bringing up their cash reserve, because it’s so enormous and they could do a lot of wild things with it, like take overs, so the media would like to know and speculate about these things.
If they try to buy a company, then they have to bring that money back… and get taxed.
It depends where that company is located I guess.
But Apple has always paid any taxes they needed to pay, that’s not the or their issue. What Apple and many others do is try to pay as less tax as possible.
Apple has offered to help and change the rules, which is cool of them.
I don’t think it should be too difficult. The foreign Apple companies are owned and controlled by the US Apple. It should seem it’s very easy to state that if this condition is so they pay US tax.
I’m a bit surprised this isn’t already so. I live in The Netherlands and if I store money abroad I still get taxed for it here.
Just change the laws. You can’t punish companies that break no laws. It’s like stop fixing bugs and demand hackers don’t exploit them.
Take myself as an example. I could go to the Netherlands and start a contract. I could put all my money into my company back in Lithuania, with a tax rate of 5%. Keep all(most) my money there and pay myself say EUR20k per year, while living in the Netherlands. I would be using the services to the fullest and pay the minimal amount of money to the sate of Netherlands. If I were to do that, I bet you would not like me too much…
However, I would be paying all the taxes I have to. And I would be paying only a fraction(about 15.5% in total) of taxes I would be incurring in the Netherlands.
All legal. All right. Same thing Apple does.
I would have no problem with that. If you told that story in a Dutch bar you’d probably become very populair.
We miss/lose a LOT more money to illegal practices.
Completely and utterly false. Apple has ZERO employees in Ireland. Most of the income is actually generated in the USA. The subsidiaries are simply shells designed to minimise tax via transfer pricing.
Ebay is even worse. It pretends to be a Swiss Corporation. In reality it is a purely US corporation that has negligible physical presence in other countries.
In The Netherlands we have TV stations called RTL4, RTL5 and RTL7. Hell, maybe even RTL8, I don’t know. The L in RTL stands for Luxembourg.
In practice these are 100% Dutch TV stations, based in The Netherlands.
It has to do with our rules for commercial TV.
You keep saying Apple has zero employees in Ireland. This is complete nonsense. Take your lies somewhere where folks are stupid enough to believe you.
The number of Apple employees in Ireland(Republic of Ireland) is abysmally low. Compared to the revenues “they generate” it’s nothing. They don’t even handle shipping through Ireland, all of it’s done through Netherlands.
Compare that to Google and Microsoft, that have large campuses in Ireland and actually use Ireland as bases of operations.
Apple has been in Ireland since 1980 and has 4000 employees there. Apple isn’t pretending that their Irish Subsidiaries are sourcing all of their revenues and profits within Ireland. Ireland does not take issue with Apple and says they are paying the appropriate tax rate.
Edited 2013-05-24 20:17 UTC
This outrage is misplaced, in my opinion. Apple doesn’t legislate laws, and is well within their right to operate within the limits.
We don’t work off of the honor system in business, and I think the blame should lie squarely on the legislators who allowed such loopholes to exist.
The Senators and Congressmen who allowed themselves to succumb to the special interests are the real criminals here, because Apple is just an example, out of many, of a widespread and crippling corporate tax loop hole.
The outrage is not misplaced, but simply too narrow.
Not only are companies using these tax evasion schemes, they are of course the driving force behind their existance, through years of lobbying (bribing) of politicians.
Same said politicians are now paying lip service to their voters, trying to make it look like they are going to do something about this, which is pure bullshit.
Only way to stop these schemes is to make them illegal, but that will of course never happen.
Instead we are treated to these dog and pony shows, where politicians who are recieving tons of funding from these companies suddenly puts on a stern face and act as if they are crossed with their corporate masters, all in the interest of trying to make the general public feel as if something is being done.
That would be a fair point if corporate/special interests Lobbying was not an integral part of American politics. Alas…
More to the point… how is it scummy?
I don’t know a single person who doesn’t go out of his way to lower his taxes. Apple is not “not paying taxes” but rather trying to keep more of what it made… just like everyone else.
The current administration has made the US a non business friendly country. Apple’s accountants have found legal ways to allocate about 70 percent of its profits overseas, where tax rates are often much lower.
Apple created two Irish subsidiaries — today named Apple Operations International and Apple Sales International — and built a glass-encased factory amid the green fields of Cork. The Irish government offered Apple tax breaks in exchange for jobs. Seems like a fair deal to me.
Each of those jobs creates a wage that is then taxed. This is good government policy in action… coincidentally something each of the republican presidential candidates advocated for as ultimately it creates more wealth for the country.
Now, Obama’s policy is to make large taxes on business and then make large taxes on citizens all while spending higher and higher.
Edited 2013-05-22 04:19 UTC
Apple has Z-E-R-O employees in Ireland. So Ireland gets absolutely nothing in return.
The subsidiaries are nothing but shells designed to evade tax. They employ nobody and produce nothing.
The Irish economy until recently was based entirely on EU agricultural subsidies. These subsidies were used by the Irish government to bribe many foreign companies to set up factories and offices. The ‘Celtic Tiger’ economy was nothing but an illusion.
The GFC ended the subsidies. The foreign companies simply closed their factories and offices and went home because they made no money without massive subsidies.
They basically keep their profits in a hole in the earth in Ireland somewhere while contributing absolutely nothing to that economy. Its not just Apple, its common practice in the United States.
Hell, even that Republican Presidential Candidate you brought up evades taxation like the best of them. When your Republican Presidential Candidate has an offshore bank account, you’re in deep shit.
We need to absolutely reform this chronically broken system. I’m in favor of waiving Apple’s repatriation tax in exchange for job creation, but only if its followed by the subsequent raising of tariffs to make up the difference in corporate taxation.
Did you forget jobs? They create numerous jobs each of which are taxed at the standard rate. Its a MASSIVE benefit to that economy.
I mentioned no specific republican presidential candidate as all of them were advocating for a simpler tax code. You’re the one smearing Romney referencing off shore investments made by a 3rd party investment company to which he was not even privy to how that was invested… Coincidentally enough, that information was obtained and made public ILLEGALLY by the Obama administration… a president who also has offshore investments made for him the same way. The leftist media didn’t cover that though.
I tried. I voted republican.
I agree with rand paul’s suggestion of making corporate tax a flat 5%. It’s low, yet its better than nothing which the US gets when business goes overseas. That 5% taxation grows exponentially when you consider the number of employees that that business will create each taxed at the standard rate.
But apparently we can’t have that as only republicans are advocating sensible taxation like this.
Apple delivers the US government more money in taxes than any other company. They didn’t break any laws and aren’t accused of such, yet they have to appear before a commission.
There are laws and rules and I don’t think it’s scummy to read the law and figure out how to optimize your business without breaking the law.
If the laws are changed, companies change there routines.
Sure Apple, can move all their money to the US and lose a large portion of if and get nothing in return.
Actually, that’s exactly what scummy is: finding loopholes to avoid doing what’s required of you.
It’s like saying it’s not scummy for a restaurant owner to find loopholes in the sanitary regulations so that he could “legally” serve food unfit for human consumption.
That said, I agree with Nelson that the anger would be better focuses on those that fail to create the proper laws and regulations in the first place, especially since they quite often fail due to lobby pressure.,
It’s not scummy.
Let’s say you need a car for the period of one year. Your dad gives you $100000, but if you buy a car you need to pay him $50000 back for which you get nothing.
So you rend a car, which turns out to be a little more expensive than buying one, but you don’t need to pay the $50000 back so in the end it’s much cheaper and you don’t break the rules.
Does that make you a scumbag? I’d say it makes you a smart person.
If people and companies follow the rules you can’t blame them if they figure out how to make it work best for them. If we don’t like it we should change the rules.
In basketball players started to block the ball on its way down. It wasn’t scummy, it was within the rules. But people didn’t like it, so they changed the rules and it isn’t allowed anymore.
What is happing now is that the US sees Apple’s large cash pile and they want Apple to hand it over without them giving anything in return.
Nothing in return… except powerful IP protection, US pressure for other governments to adopt strong IP protection, apathy within government towards actually doing something to stop China from manipulating their currency against the Dollar in violation of trade treaties, tax policy designed to benefit investors over everybody else, tax policy designed to give advantage to large corporate entities, tax subsidies for being an online store, tax subsidies for being a manufacturer, or even a quality public eduction system all the way up to the college level for training the engineers they eventually hire. Yup. Nothing at all.
(I feel like I should mention the aqueduct.)
Apple lobbied heavily during the Bush administration to get the corporate tax rate lowered, on the promise that they’d spend more within the US. The corporate tax rate was lowered, more exemptions carved out, yet Apple didn’t start spending more in the US in any appreciable amount attributable to the reduced rates.
Now, they say if the corporate tax rate is lowered some more, this time they really will spend more money within the US. Really! This time, they mean it!
Apple isn’t the only one that does this. GE infamously paid $0 in taxes in 2010(?) off of a couple billion in profits. However, Apple has huge profit margins, and doesn’t really do anything anywhere to generate good will. I lived in Silicon Valley when I was in elementary and middle school, and our math and science classes would frequently have volunteers from the major tech companies help teach engineering and math concepts. Intel had the largest presence (Including an annual field trip to one the local fab – child-sized clean-room gear and all.), but we’d get people from HP or Sun, even smaller companies. Never from Apple. They weren’t willing to make one of their engineers make the 10 minute drive to our school. They’d sure send sales staff, though.
It seems Apple doesn’t need anything from the US government.
But never mind that. Sure they probably lobbied, like many others, but if they promised to spend more in the US and didn’t then maybe the US shouldn’t believe their pretty blue eyes.
If they have any laws favoring companies like Apple just change the laws. Isn’t that what governments do to govern?
Apple is an US company and those foreign Apple companies looking after the cash are owned and controlled by the US Apple. To me it doesn’t seem that difficult to make laws and rules that are fair and logical to benefit from the money Apple makes overseas.
It’s not just Apple, they just have a large amount of money, almost every large company does it. Our royal family does it. Even common people store cash abroad to avoid tax or get higher interest. I skip our local village economy if I can get a better deal in the city or on-line.
If you don’t like the system fix the system, don’t punish the players that follow the rules of the broken system.
Seeing as how Apple (And others, to be sure) are the ones working hard to keep the system broken, why not try to find ways to extract punishment?
Punishing them for not breaking any rules?
That’s a rather dangerous president.
Providing a shoddy service and the payment of taxes are entirely different things. Taxes are confiscations of wealth. In other circles… it’s called theft. Courts in the USA have ruled that taxed entitites have no obligations outside what is in the law. There is no “moral” obligation to pay taxes. There is only a legal statute.
Pretty much. There’s nothing ethical about taxes. It’s a legal device. An imperfect device with arbitrary rules.
I pay more taxes than the average citizen in my country. Sure, I also earn more than the average citizen. But I work way more too. However, the way in which I’m taxed is thus: the more I earn, the higher the taxed percentage of my income is.
I’m still one person. I use the same amount of healthcare and other facilities as the average citizen. I pay more taxes because the state has decided that I can afford to. Yet I only earn more because I also work more.
Taxation is not about ethics. Don’t pretend it is.
No, Exxon paid more taxes than Apple did last year. In fact, apple ended up with an effective tax rate over 40% lower than most American energy giants. So congratulations Apple on out-scumming some of the scummiest corporations on earth…
Edited 2013-05-22 19:38 UTC
Fuck the US Government and their desire to tax and control business operations outside the US. Thom can take his “eat the rich” political BS and shove it.
damn right he should take his politics away… to make room for yours.
What a remarkably well-reasoned argument. I feel more enlightened having read it.
Thank you.
Come on baby, eat the rich,
Put the bite on the son of a bitch,
Don’t mess around, don’t give me no switch,
C’mon baby eat the rich
C’mon baby eat the rich
What dollar figure higher than Apple legally pays in taxes should they be paying?
What dollar figure higher than you legally pay in taxes should you pay?
What dollar figure higher than they legally pay in taxes should EVERY COMPANY AND PERSON IN THE WORLD PAY?
But you gotta appreciate their ingenuity. Apple is obeying the law, as it is currently written, so quit whining. Maybe instead of demonizing companies that provide jobs around the world, we should make it more attractive for them to stay Stateside.
Drop the corporate tax rate, close some of the loopholes, and make it more expensive to send jobs overseas, and cheaper for foreign corporations to bring jobs here. Oh, yeah, and maybe STOP SPENDING SO DAMN MUCH! Politicians are like drunk sailors spending their whole paycheck and running up their credit cards on ale and prostitutes (only a figure of speach, I have the greatest respect for the Navy and all those that protect our freedom).
It is the government that got us in this wretched hole, not corporations, and not rich people. Yet for some reason, everyone wants to give the government even more money to waste and the government wants to keep getting bigger so it can justify taking more.
Every one seems to be spouting some Randian Libertarian ‘don’t tax’ me bullshit but is completely avoiding the real numbers involved here.
The corporate tax rates in America starts at 15% for a business making up to $50,000. The highest tax rate is 35% for a business making above approximately $18,000,000. Through lobbying efforts, shell corporations, off shore banking, etc. almost all corps making above $18,000,000 (this includes Apple) are paying only an effective tax rate of 12.1%.
So yes, Apple is a scummy sociopathic entity. Whether Congress allowed this to happen or not is irrelevant. Apple and others pay less corporate tax in a year than businesses making $50,000 or less. And those businesses get no where near the tax havens and deductions that these mega global corps achieve. So they are paying their fair share while Apple and others are not.
Now let’s compare this further to the individual income tax rates. 15% falls for individuals and families making roughly $10,000 to $40,000. 35% falls for individuals and families around the $400,000 mark. Again these individuals and families have less power to reduce their tax rates legally and end up paying close to those rates. They may be able to effectively lower them by 5 to 10% tops.
So Apple pays an effective corporate tax rate of about 12.1% and someone making up to $40,000 a year pays about the same.
OK, when revenue is short, because the dumb ass Republicans and Democrats love their wars abroad and have drained the treasury, then to balance the federal budget something has to be done. Well, we can’t cut the MIC as that keeps the War on Terrah going strong. We can’t penalize the poor little corporations because god knows they give sooooo fucking much the country that gives to them.
No, what is left is the individual and the family. We can’t raise their taxes near enough to cover it all, so austerity measures begin. We play chained CPI games with Social Security. We cut billions in food stamp programs. We create Obamacare which is a pay out to the insurance corporations instead of giving the American population health care like all other civilized nations in the world have. We push through sequesters and cut science grants and arts endowments.
All the while the idiots scream, don’t tax me man. Don’t take my guns. We watch the kabuki theater of this sham panel on Apple. One congress critter saying it is a damned shame Apple is allowed to do this. An another congress critter says it is a damned shame that the government is upset at poor little successful Apple. They deserve to be ‘demonized’. They don’t deserve any further tax breaks or incentives. It won’t happen because your last paragraph is simply wrong. The government and the corporations are just a revolving door with both sides scratching each others backs while the rest of us poor schmucks work our asses off, follow the rules, pay our fair share, and then let there propaganda make us fight amongst ourselves.