

Apple Avoided Billions in Taxes, Congressional Panel Says  - econnors
http://www.nytimes.com/2013/05/21/business/apple-avoided-billions-in-taxes-congressional-panel-says.html?smid=tw-bna

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aarondf
Apple avoided billions in taxes? Well done!

Apple evaded taxes? Now that's illegal.

I posted it on the story about the Google whistleblower, but I'll post it
again here for posterity:

"Anyone may arrange his affairs so that his taxes shall be as low as possible;
he is not bound to choose that pattern which best pays the treasury. There is
not even a patriotic duty to increase one’s taxes. Over and over again the
Courts have said that there is nothing sinister in so arranging affairs as to
keep taxes as low as possible. Everyone does it, rich and poor alike and all
do right, for nobody owes a public duty to pay more than the law demands."
Judge Learned Hand in Helvering vs Gregory, 1934.

We were taught in school that avoiding taxes makes one a good accountant,
evading them lands you in Levenworth. (I'm a CPA in Texas)

[http://en.wikipedia.org/wiki/United_States_Penitentiary,_Lea...](http://en.wikipedia.org/wiki/United_States_Penitentiary,_Leavenworth)

~~~
hahainternet
> There is not even a patriotic duty to increase one’s taxes

Yes, yes there is. The quotes of a single person do not change this fact. The
greatest good for the greatest number is achieved through the state.
Witholding taxes for the purposes of greed is immoral and unpatriotic.

~~~
thatswrong0
> The greatest good for the greatest number is achieved through the state.

Then why doesn't North Korea have the highest standards of living?

In reality, the huge increases in standards of living in the past century has
been due to incredible technological progress driven by free enterprise and
"greed".

~~~
hahainternet
> In reality, the huge increases in standards of living in the past century
> has been due to incredible technological progress driven by free enterprise
> and "greed".

Citation needed. Trickle down economics has been roundly disproven again and
again. Yes the rich do want to get richer, but so does everybody. The state
pays for an AWFUL lot of scientific research already and I would much rather
put another billion into NASA than into research on how to lie in advertising
to sell hair cream more effectively.

~~~
thatswrong0
Do you use planes? Do you watch television? Do you have a computer or drive a
car? Do you have electricity in your home? Do you live in a furnished and
comfortable building? Do you have plenty of quality food in your pantry and
refrigerator? Do you have and wear clothing and shoes? Do you love getting
your cup of coffee in the morning? Do you buy goods on Amazon and at Walmart?
Do you go out to restaurants occasionally?

That was all rhetorical. My real question: do you honestly believe the
government made that all happen? Mostly happen?

Because the answer is no. You fly in planes because people were free to invest
in and create airlines. You watch television because someone had the ingenuity
to broadcast, receive, and display moving pictures, and other people were free
to use this idea and freely pursue the enterprise of creating television and
content to display on it. Etc. etc.

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zmmmmm
I wish politicians who talk about this would factor in some accountability on
their part. The fact is, the companies are doing it because the politicians
wrote the laws that allowed it. They should be saying "We _allowed_ company X
to avoid billions in tax through our moronic actions" not "Company X avoided
billions in tax".

~~~
rayiner
Can you describe precisely which provisions Apple took advantage of that you
think are "moronic" in specific terms?

There is a lot of crap in the tax code (accelerated depreciation schedules for
farm equipment and whatnot), but that's not what is at play here.

~~~
toyg
International "free trade" agreements are the problem here, clearly. The free
flow of capital for investment purposes in actual companies must not be
restricted, but stashing money in offshore accounts should not be considered
acceptable.

Of course, whoever is tasked with brokering and approving these agreements
usually has a stake in that same game, either directly or indirectly (through
revolving-door opportunities later on).

Note that this is not an American problem, it's a global problem. At the
moment you either do it like China (you can't move any money out of the
country) or you do it like US/Europe (your government gets shortchanged). This
is clearly suboptimal.

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alanthonyc
Headline: "Apple Avoided Billions in Taxes"

Fact: "Investigators have not accused Apple of breaking any laws, and the
company is hardly the only American multinational to face scrutiny for using
complex corporate structures and tax havens to sidestep taxes."

NY Times going for another Pulitzer.

~~~
joelrunyon
Breaking News: 300 million americans avoided paying the maximum amount of tax
possible through legal deductions because they also like to keep as much of
their money as possible.

/shocker

~~~
hahainternet
> Breaking News: 300 million americans avoided paying the maximum amount of
> tax possible through legal deductions because they also like to keep as much
> of their money as possible.

Breaking News: America lacking social care facilities of other first world
nations. Personal greed and lack of social conscience confirmed factors. No
self awareness in sight.

~~~
joelrunyon
You're assuming that paying more taxes = increased social facilities.

In theory, that works great, but given the track record of various government
programs, I'd suggest that it's not a 1:1 ratio.

I'd argue, the matter is a lack of trust in the government to allocate money
wisely rather than a prevalence of greed among people who'd rather watch the
world burn than pay another cent to the government.

~~~
hahainternet
> I'd argue, the matter is a lack of trust in the government to allocate money
> wisely rather than a prevalence of greed among people who'd rather watch the
> world burn than pay another cent to the government.

Who would you trust more? A group of people formed explicitly to help others,
with no profit motive and less fear of job loss or a group formed to make
profit, organised around a profit motive?

Yeah it's not perfect and there's all sorts of fraud and corruption that goes
on, but I'll take the NHS any day over the US health system, and so would
almost everyone here.

------
credo
Many of the comments seem to justify Apple's tax avoidance by pointing out (as
the top comment says) _"Investigators have not accused Apple of breaking any
laws, and the company is hardly the only American multinational to face
scrutiny for using complex corporate structures and tax havens to sidestep
taxes."_

However, it should be troubling that

1\. Deception is considered excusable and that Companies care little about
ethics and break the spirit of tax laws (if not the letter).

Redirecting US profits or European profits to other unrelated countries (on
paper) and then claiming tax exemption clearly indicates deception. If they
made their money in the US and claim that all of this money belongs to a
subsidiary in Bermuda, that should be a matter of concern to everyone
(regardless of whether this deception is legal or not)

2\. It is true that many companies indulge in this type of deception and
defend it as "legal" Often, it is the companies (through their lobbyists) who
created these legalities. So it is disingenuous to defend their practices as
legal. Obviously, Microsoft, Google and other large companies do the same (or
similar) things. However, that doesn't do much to dispel the fact that each
company engages in deception.

~~~
pserwylo
I agree, and find these practices deeply troubling. It is similar in
Australia, where every now and then there is a story published about how
extremely rich corporations or individuals pay a few million to accountants,
and reduce their taxable income to almost zero dollars. Those accountants
provide a massive ROI for these people.

Sure, it may be perfectly legal according to the law, but it seems grossly
unfair. One of the premises of our tax system is that the well off shoulder a
larger burden then those who earn less (for better or worse - I think for the
better). But the people who don't earn as much cannot afford to spend millions
of dollars on accountants to reduce their tax bills like this.

If everybody wants to work in a functioning society, where essential services
are funded by the government, then there needs to be income. Everybody who can
contribute, and should do their bit.

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hkmurakami
When are we going to talk about the oil industry avoiding billions in taxes
through laws specifically designed for them so that "they can be competitive
with overseas oil companies"?

edit: example - _The administration estimates closing these Big Oil tax
loopholes would save "approximately $4 billion per year in tax subsidies to
oil, gas, and other fossil fuel producers."_

[http://www.americanprogress.org/issues/green/news/2011/01/31...](http://www.americanprogress.org/issues/green/news/2011/01/31/8951/big-
oils-lust-for-tax-loopholes/)

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FellowTraveler
As long as they didn't EVADE taxes, it's perfectly legal. (And in keeping with
their fiduciary responsibility to shareholders.)

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padmanabhan01
It's time they take some responsibility for the laws they make..

If your tax laws are full of loopholes, start by fixing them.

If it got so complicated that loopholes can't be avoided, try simplifying
them.

Ranting about companies exploiting loopholes make no sense. But then, it's
politics. So, I guess it's not meant to make sense..

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astrodust
Is this a case, as Apple says, of keeping foreign profits in the markets in
which they were generated, or is it a case of avoiding tax they owe in the US?

I know individual American citizens are required to report on all income to
the IRS, no matter where it is earned, no matter if they have ever set foot in
the United States in their life. Failure to file is a serious offense.

Does US corporate tax law require the same?

~~~
cremnob
Apple released their testimony today and it specifically addresses this.

"Apple wants to make clear to the Subcommittee that the Company does not use
its Irish subsidiaries or any other entities to engage in the following tax
practices that were the focus of the Subcommittee’s September 20, 2012
hearing, entitled Offshore Profit Shifting and the US Tax Code. Specifically,
Apple does not move its intellectual property into offshore tax havens and use
it to sell products back into the US to avoid US tax, nor does it use
revolving loans from CFCs to fund its domestic operations. Apple does not hold
money on a Caribbean island, does not have a bank account in the Cayman
Islands, and does not move any taxable revenue from sales to US customers to
other jurisdictions in order to avoid US taxation."

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mosqutip
Breaking news: American corporations "avoid" hundreds of billions of tax
dollars every year, and it's all completely legal because of a terrible tax
code that hinders individuals and bolsters companies.

Wait, this isn't breaking news.

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crazygringo
> _the audaciousness of the company’s assertion that its subsidiaries are
> beyond the reach of any taxing authority because they are stateless._

> _...Apple Operations International, which is incorporated in Ireland but
> keeps its bank accounts and records in the United States, and holds board
> meetings in California. Because the United States bases residency on where
> companies are incorporated, while Ireland focuses on where they are managed
> and controlled, Apple Operations International was able to fall neatly
> between the cracks of the two countries’ jurisdiction._

This is amazing, and awfully clever. A "stateless" corporation? Is this a
common thing?

~~~
msbarnett
> Is this a common thing?

The NYT appears to be (somewhat clumsily) describing the "Double Irish"
strategy. It is incredibly common. A large number of big companies are
structured this way (among them, Google, Microsoft, Facebook, Eli Lilly,
Pfizer, Adobe,...

~~~
Steko
<https://en.wikipedia.org/wiki/Double_Irish_arrangement>

Whats up with the Countermeasures section lol.

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chatmasta
I got a news alert for this on my phone. NYT must be trying to appeal to the
common American's automatic distaste for any monetary value above their yearly
salary. I would expect this from CNN Money, not the NYT. Keep it classy, NYT.

------
CoachRufus87
A Congressional Panel investigating a corporation that has taken advantage of
loopholes made possible by Congress.

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wmf
Here's Apple's testimony:
<http://www.apple.com/pr/pdf/Apple_Testimony_to_PSI.pdf> If this is correct,
it gives a very different impression than the Times article.

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dakrisht
They'll pay a fine, the stock will lose $20-30 and everything will be business
as usual.

~~~
bmelton
Actually, they won't pay any fines whatsoever, as they haven't done anything
illegal. They paid the amount of taxes they were legally obligated to pay, and
not more. The US tax code enabled them to pay less than what it intended to,
but that isn't Apple's fault at all.

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sinnerswing
Google, Microsoft, GE, etc.

"General Electric Paid No Federal Taxes in 2010"

[http://abcnews.go.com/Politics/general-electric-paid-
federal...](http://abcnews.go.com/Politics/general-electric-paid-federal-
taxes-2010/story?id=13224558#.UZqThqLkuSo)

"GE's CEO, Jeff Immelt Heads Obama's Council On Jobs And Competitiveness"

[http://www.huffingtonpost.com/2011/01/21/jeffrey-immelt-
coun...](http://www.huffingtonpost.com/2011/01/21/jeffrey-immelt-council-on-
jobs-and-competitiveness_n_812005.html)

"Former Google Exec Turns Whistleblower On Company’s Tax Avoidance
Machinations In The UK"

[http://techcrunch.com/2013/05/19/former-google-exec-turns-
wh...](http://techcrunch.com/2013/05/19/former-google-exec-turns-
whistleblower-on-companys-tax-avoidance-machinations-in-the-uk/)

~~~
rayiner
GE also lost a shit ton of money during the collapse. It's paying no taxes in
2010 isn't abuse of a loophole, it's the simple consequence of provisions
designed to address problems inherent in quantizing a continuous system.
Unless you allow the IRS to write checks to businesses that lose money, no
mathematically sensible income tax system doesn't have loss carry forwards.

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ttrreeww
All companies are equal, the bigger ones are just more equal than others.

