
If Apple didn’t hold $181B overseas, it would owe $59B in US taxes - signa11
http://arstechnica.com/business/2015/10/apple-google-microsoft-hold-more-than-336b-overseas-via-legal-tax-loopholes/
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replicatorblog
This is a subject in dire need of some non-partisan, fact-based reporting.
This piece is not remotely close.

I'm not a tax lawyer, but as I understand the recent spate of "tax
inversions," that is when a US company buys a foreign company and make the
non-US entity the new HQ are much less of a dodge than is often reported.

My understanding is that the US company still pays the full US tax rate (which
is the highest in the world) on all sales in the US. They then pay the
prevailing tax rates in the countries in which they operate.

If they didn't have the foreign entity, they would have to pay the full US
rate on sales they make in China, Spain, and South Africa—all of which have
lower rates.

In that light, Apple isn't dodging taxes, rather they're just not additional
taxes on sales that happen outside the US. There's still an argument that can
be made that they should still pay the US, but I think it strikes people as
less fair. So instead we get amorphous reports designed to stoke fear,
uncertainty, and doubt with regard to these companies.

If nothing else, the reporting should be clear that the US wouldn't be getting
all that money back, just the portion that exceeds the tax rate in the various
countries they operate in.

Like I said, I'm no lawyer, or even accountant, but this piece is garbage from
a logical perspective.

~~~
tosseraccount
"... the full US tax rate (which is the highest in the world)"

not really.

" the Congressional Research Service put the U.S. effective rate at 27.1
percent, slightly lower than the OECD average of 27.7 percent."

( source :
[http://www.politifact.com/punditfact/statements/2014/sep/09/...](http://www.politifact.com/punditfact/statements/2014/sep/09/eric-
bolling/does-us-have-highest-corporate-tax-rate-free-world/) ).

Actual corporate taxes paid are below the average developed country

~~~
replicatorblog
From the same link:

"Out of the 34 countries in the OECD, America ranks first with a 39.1 percent
corporate tax rate, compared to an OECD average of 24.1 percent. The OECD
figure is what’s called the statutory rate, meaning the base rate applied to
corporate profits."

------
mentat
I've become even more skeptical of "the government needs more money, think of
the children" after learning a bit more about how the sausage is made in The
Box (about containerization). Subsidies and the games that go around them
create a world that incents gaming the government and regulatory capture. If
you think $59 billon wouldn't attract more sharks, you're really not paying
attention.

~~~
55555
Everyone in my family except me works for the government, and most of my
friends do as well (I was born and raised in DC). Lots of them (the friends)
are contractors who work from home, smoking weed all day, literally working 30
minutes per nine hours of billable time. I have friends who were hired (and
paid six-figures) but not even given any work for their first year and a half.
Everyone constantly talks about how easy their jobs are. My sister works in a
Diblert-esque office where nobody actually knows what their role is or what
specifically they are supposed to be doing. My brother got his job through
nepotism.

Government lives in an alternate reality without the pressures and incentives
of free market competition. Ninety-nine percent of its revenues come, at the
end of the day, from people robbed at gunpoint (try not paying your taxes and
then refusing to go to be locked in a cage). It doesn't operate at all
similarly to how small businesses operate. And no, I don't have a better idea.

My point is that I'm all for people paying less tax because I think there's a
decent probability that that's literally more beneficial than paying more. The
government is like a fat pig. Giving it more food doesn't help. Giving it less
(to a point) forces it to operate more efficiently.

~~~
jinushaun
You give examples of contractors you personally know that rob the government
and then go on to say the govt steals money from its people and wastes it. You
say the govt is a fat pig that needs less money to operate more efficiently,
but fail to see that means your friends will be out of a job if that were
true.

Seems like every time there is a story about govt waste, there is a greedy
private company that was contracted to do the work. They charge rates only the
govt can stomach to pay, because their choices are limited to a small number
of approved companies in the procurement process. Who's fault is that?

I've lived in DC too and have friends that work in and around the government.
Yes, it is inefficient and bureaucratic. Yes, the work culture is Office
Space. Everyone wants the govt to save money, but no one wants to vote
themselves into unemployment.

~~~
innocentoldguy
I worked for the Federal government for a number of years, and those employees
are not stealing anything. It is how the government works. It is the most
wasteful, incompetent organization I have ever had the misfortune of working
for. I too fully support anything companies and people can do, within the law,
to avoid paying taxes because the Federal government is capable of living on
much, much less. They just refuse to do it.

------
YuriNiyazov
I don't think I understand what the complaint is. Let me see if I understand
this right:

Tech is developed in the US, and then licensed to a subsidiary in a different
country, for a fee. The US entity pays taxes on the income produced by these
fees. Then the subsidiary sells products based on this tech, and pays taxes on
the profits in the country where this happens.

Is the complaint that the fee charged to its subsidiaries too low? The article
itself addresses that by saying that the fee is set in an "arm's length"
transaction.

Or is the complaint something much stronger, namely that Apple should pay
taxes on all the income produced everywhere in the world? If so, what is the
reasoning behind that? Is it because the software is written and hardware is
designed in the US?

~~~
jpobst
The issue is more that companies should pay US taxes on profits made in the
US. However they can use IP to move those profits to countries with lower tax
rates.

The way it should work is:

\- Apple makes an iPhone for $200 in China

\- Apple sells the iPhone in the US for $600

\- Apple pays US taxes on the $400 profit

The way it actually works is:

\- Apple creates Apple of Ireland as a PO Box in Ireland

\- Apple gives one of its iPhone patents to Apple of Ireland

\- Apple makes an iPhone for $200 in China

\- Apple sells the iPhone in the US for $600

\- Apple pays $400 to Apple of Ireland to "license" the patent

\- Apple pays $0 of US taxes because it sold the iPhone "at cost"

\- Apple of Ireland pays negligible taxes on the $400 profit due to low tax
rates

~~~
_djo_
Not quite. Apple's Irish entity owns the IP for non-US sales only. US sales
fall under Apple Inc and are not subject to IP transfer, royalty or licensing
and therefore attract the full tax rate. Minus whatever incentives apply of
course.

What's actually happening is that Apple (and other companies using this
system) are paying significantly less tax in countries outside the US where
they operate.

This arrangement arguably benefits the US government, as it makes US-based
companies stronger at the expense of the rest of the world's tax revenues.

------
gesman
If governments didn't charge ridiculous taxes, Apple and millions of other
businesses and individuals would bring back billions of assets.

~~~
jzd
Works really well for Somalia!

~~~
liamcardenas
Actually it has. Somalia improved by almost all metrics during the period in
which it did not have a state.

[http://www.peterleeson.com/Better_Off_Stateless.pdf](http://www.peterleeson.com/Better_Off_Stateless.pdf)

~~~
jzd
Thanks for the paper! Great read

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masonicb00m
There's an implicit assumption in these articles that the US Government should
maximize its revenue by revising tax law to capture these funds. That's not
obviously true.

If Apple provides more value to US citizens with those funds than the US
Government would, then these tax management tactics are beneficial to US
citizens.

------
iofj
This is not true at all. The correct way of stating matters would be :

If Apple paid out all of it's $181B to shareholders, it would owe $ about half
the claimed amount in US taxes. Apple however has not made this decision not
to pay out to shareholders, and it would be extremely impractical to attempt
to force it.

Note that Apple hasn't actually paid out this money to shareholders, so it
probably will do so at some point in the future, and still pay these taxes.
These taxes are deferred, not "avoided". It's just doing so at a slower rate
(and probably waiting until negotiations with the IRS yield a better deal)

If it was outlawed to hold this tax overseas, Apple would still not pay it out
to shareholders. Instead it would simply invest it, in overseas real estate,
overseas data centers, overseas financial holdings or whatever. It seems to me
very unlikely that it would make a different decision (not pay out vs. pay
out) simply because the US govt. would try to force them.

Or worse, Apple would do what companies did before WWII. Never pay out
profits. Instead have a deal that roughly amounts to this : "if you have $xx
of apple stock, you get a director position within Apple, which comes with an
expense account, free disneyworld access, a yacht, ..." and never pay out
anything (and then have 10 tiers of this deal ...). And yes, that is legal.

------
Veratyr
I'm curious though, how much of this offshore cash was earned in the US?

For example although Google's advertising algorithms and engineering may be
largely based in the US, its advertising revenues come from all over the
world. Generally it's required to have a presence in the places where it
operates, with revenue accounted for there and taxed by the local governments.

Are these people arguing that that revenue needs to end up in the US and be
taxed there too instead of taxing it once then investing it elsewhere (like
treasuries)?

Anyhow, the companies in question aim to increase their profit as much as
possible within the law and are required to do so [0] by said law. If people
don't like it, change the law.

[0]:
[https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co](https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co).

~~~
luckydude
I've heard the "change the law argument" a lot but there is a problem. The
politicians are bought and paid for, people like the Koch brothers write the
laws. Or their lobbyists do. So the laws are rigged in favor of corporations.
Didn't use to be like this but it is now, it's crazy how skewed things are for
big money.

"Change the law" assumes that the politicians are working for all of us. They
aren't.

The tech companies benefit hugely from being based here. If you don't believe
that then please recreate Silicon Valley in another country and show me how
well that works (spoiler, been tried, didn't work). So long as they benefit
from being based here they should pay their taxes.

Source: CEO of a Silicon Valley company that is 18 years old and has paid
every penny of tax owed without whining and without trying to off shore it or
hide it in any way.

------
ganeumann
About 3.4 days of US government spending.

------
collyw
Dirty tax dodging bastards.

~~~
collyw
Anyone care to justify the downvotes?

Or maybe better any downvoters care to justify Apple's behaviour?

~~~
55555
During the height of the Iraq/Afghanistan wars, for every dollar you paid in
tax, 50 cents went to buying bullets [edit: incorrect?]. Let's just say you
and I disagree on whether or not people should be paying more or less tax. I
respect your dissenting opinion and don't believe that mine is objectively
superior, but your use of "dirty" and "bastard" implies that the respect and
humility is not mutual.

~~~
tosseraccount
50% of taxes paid by Americans went to military spending?

Link?

~~~
55555
Sorry, looks like it is +/\- 50% of 'discretionary spending'.[1] Wikipedia
adds: "The U.S. Department of Defense budget accounted in fiscal year 2010 for
about 19% of the United States federal budgeted expenditures and 28% of
estimated tax revenues. Including non-DOD expenditures, military spending was
approximately 28–38% of budgeted expenditures and 42–57% of estimated tax
revenues." So, more than I'd like, but also significantly less than I claimed.
My bad.

[1] [https://www.nationalpriorities.org/campaigns/military-
spendi...](https://www.nationalpriorities.org/campaigns/military-spending-
united-states/)

But the point I was fumbling to make is that there are a lot of people who
minimize their tax and honestly believe that they are doing the morally right
thing in doing so.

------
FatalBaboon
This is such a big deal, and I feel like we are so powerless against it.

If it was easy for governments to get the money owed, it would allow them to
cash in votes for finally lowering taxes (in France especially...).

The fact that they did not succeed so far is proof that we need the system to
evolve against these abuses. My only way of going in that direction is to
scrutinize officials' campaigns and vote for the ones who want to tackle that
problem, but that's so little it feels cowardly.

~~~
RHSeeger
I disagree with your opinion, but tossing an upvote because it seems you were
downvoted and I can't tell why other than some people disagreed with you.

