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How Apple sidestepped a 2013 crackdown on its Irish tax practices (bbc.co.uk)
372 points by gadders on Nov 6, 2017 | hide | past | web | favorite | 331 comments



The issue with all of these major companies will forever be their "product".

--- From: Silicon Valley (HBO)

Jack: Richard, I don't think you understand what the product is. The product isn't the platform, and the product isn't your algorithm, either. And it's not even the software. Do you know what Pied Piper's product is, Richard?

Richard: Is... Is it me?

Jack: Oh God! No! No. How could it possibly be you? You got fired. Pied Piper's product is its stock.

---

When the only product a company cares about its stock, and they only care about their accountability to the shareholders, we will continue to see mass tax evasion schemes and using any/all methodologies (including illegal/unethical) to maximize profits.


This is, unfortunately, very insightful, and also a very unfortunate persistent state of affairs.

I wonder how differently the world would look if companies didn't operate like this.


wtf does this even mean. companies will always care about profitability for their owners. that's the whole point of starting and having a business


How is this the whole point of starting a business? Elon Musk is often quoted as using Tesla as a mean to promote electric transportation. Corporate structures that may never pay dividends to the owners such as gGmbH (gemeinnützige GmbH) exist and get used in practice. There’s a ton of reasons to start a business, shaving off the absolute maximum in profits is just one.


What Elon Musk is doing is called amazing PR and guerilla marketing. I wish it wasn't so but I'm eagerly waiting to be corrected


If passed, and for a brief period of time, Trump's dollar repatriation tax scheme brings home some of the +2 trillion dollars sequestered abroad - including some of the billions Apple has parked offshore.

http://www.businessinsider.com/trump-gop-tax-reform-plan-bil...

There's something to be said for Apple's efforts to level the playing field against the favorable tax & public policies under which Samsung and Huawei Technologies operate. I'm not crying 'boo hoo' for Apple, but their tax strategies are understandable.


Or the US Congress could just change the law, close the loophole and require corporations to bring the money home anyway without any tax holidays...


I'm always skeptical when someone precedes "close the loophole" with the word "just", especially when the entity searching for loopholes has hundreds of billions of dollars in cash. Closing loopholes is good, but they'll almost certainly find another one.


The thing, though, is that their main "loophole" currently consists of "play chicken with the government until someone passes a tax holiday". If you make it clear there will never be a tax holiday, but that you will instead keep adjusting the rules to go after earnings withheld abroad, at some point the rational choice for them will be to bite the bullet and repatriate the income.

As it is, the most rational choice for them is to keep waiting for that amnesty/tax holiday unless they badly need the cash.


> If you make it clear there will never be a tax holiday, but that you will instead keep adjusting the rules to go after earnings withheld abroad, at some point the rational choice for them will be to bite the bullet and repatriate the income.

Another rational choice is to relocate the company, a la Burger King's move to Canada [1,2].

Then the government can counter with tariffs [3,4]. It's a balancing act, though.

[1] "Tax inversion", Wikipedia. https://en.wikipedia.org/wiki/Tax_inversion

[2] "Let's Abolish The Corporate Income Tax", John C. Goodman, Forbes, Aug 26, 2014. https://www.forbes.com/sites/johngoodman/2014/08/26/lets-abo...

[3] "Trump takes aim at Obama's ban on tax inversions", Larry Light, Moneywatch, April 21, 2017. https://www.cbsnews.com/news/trump-taxes-corporate-transfer-...

[4] "Trump to keep Obama rule curbing corporate tax inversion deals", Reuters, October 4, 2017. https://www.reuters.com/article/us-usa-tax-inversions/trump-...


> It's a balancing act, though.

At the end of the day, there is no way you as a corporation can entirely subvert a nation state. I find it odd even that rational individuals think its possible against an adversary (typically with effectively unlimited resources) that can tariff you, dissolve your organization, and even jail you.


It's not corporation against nation state, it's nation state against nation state.

I'm pretty sure China would be quite happy if the US punishes Apple. That means that their protectionist policy towards Huawei will be even more effective. It is difficult for me to imagine other nations either not rolling out the red carpet to bring Apple over, or giving virtually tax free giveaways to their own companies to gain smartphone supremacy.


>I'm pretty sure China would be quite happy if the US punishes Apple. That means that their protectionist policy towards Huawei will be even more effective.

If the US put onerous taxes on the purchase of Apple phones that might be true.

If the US instead just collects a larger share of Apple's profits then Apple is going to go on exactly as before and just not deliver quite as much cash to its shareholders.


Taxing the phone or the company’s margins should have the same effect, right? They’re both costs on apple’s revenue. Barring maybe some enforcement issue or something it makes no difference how you collect it, Apple will pass some of it off to their customers and eat another percentage based on whatever the new cost/demand curve looks like to them.


>Taxing the phone or the company’s margins should have the same effect, right?

Wrong

>They’re both costs on apple’s revenue.

Hardly. Make zero profit and you pay zero tax on that profit.


My argument is that since apple can move the price, if you tax the company they increase the cost of the phone as much as makes sense and eat the rest. If you tax the phone, they leave as much as the increase on the cost to the end user as makes sense and lower the price beyond that, eating it. In neither case are profits or demand going to zero.


>if you tax the company they increase the cost of the phone

Raising your prices in response to not making as much profit as you desired is not often a winning move in business.


And a tax on the phone does this, so they either lower the cost and eat it, or suffer the same fall in demand as when the price of the phone increases to protect their margins.


Perhaps, but a tax on profits does not do this.


Are you arguing that a 100% tax on Apple profits wouldn’t impact their competitiveness? How would they build new factories, develop new products or hire more workers without reinvesting profits into their company? Why wouldn’t a company that can raise more money from capital markets and that has the support of its government quickly overtake Apple’s position?


>Are you arguing that a 100% tax on Apple profits wouldn’t impact their competitiveness?

Pretty much. It would render their stock worthless, but there's nothing about a 100% tax on realized profits from preventing a business from operating exactly as before.

>How would they build new factories, develop new products or hire more workers

With relative ease. Corporation tax is paid only on realized profits. Reinvesting earnings has often been a way of avoiding paying it at all, which is actually supposed to be a feature.


> With relative ease.

Yeah, but why would they? Why would any employee or manager have an incentive to do extra work to do so? Where do they get the money from, and more importantly, why would they reinvest the money if there is absolutely no gain to doing so, instead of paying it out to executives and shareholders and just cashing out?

> Corporation tax is paid only on realized profits.

I’m not sure you know what this means. A new factory is an asset, taxes are definitely paid on it if Apple buys a new factory with retained earnings. Are you claiming that a corporation can gain new long term assets without paying any tax unless investors put more money into the business or banks loan them money?

I'm sorry if I sound shocked, but I actually file corporation taxes for a small business. Corporate profits are taxable whether they get paid out to shareholders or reinvested into the company.


>Yeah, but why would they? Why would any employee or manager have an incentive to do extra work to do so?

Coz they get paid.

>why would they reinvest the money if there is absolutely no gain to doing so, instead of paying it out to executives

It's true that with a higher profit tax you'd may see execs paying themselves higher and higher salaries and shareholders would be less inclined to prevent it.

>I’m not sure you know what this means. A new factory is an asset, taxes are definitely paid on it if Apple buys a new factory with retained earnings. Are you claiming that a corporation can gain new long term assets without paying any tax unless investors put more money into the business or banks loan them money?

>I'm sorry if I sound shocked, but I actually file corporation taxes for a small business.

So do I. Actually, the year before last I personally paid more in corporation tax than Facebook did (they paid £4,000).

I'm pretty sure they were taking neither investment nor loans.


It's a balancing act, not (just) an arms race. As a government, raise corporate taxes too high, and corporations leave and/or overseas corporations outcompete them and/or new corporations form overseas instead of domestically. Raise tariffs too high, and domestic consumer choice and quality decrease, and consumer purchasing power decreases. These aren't consequences that dissolving your domestic corporations or jailing their managers address.


>As a government, raise corporate taxes too high, and corporations leave

Only when there's almost no cost to leaving, which in itself is a tax loophole. If you declare that residency is about where you do the most business and has nothing to do with which letterbox has the word "headquarters" on it then their reaction would be limited to tantrums in Wall Street Journal op eds.

>or overseas corporations outcompete them

That's not how corporation tax works. It's paid on profits and does not affect the competitiveness of the firm.


>>As a government, raise corporate taxes too high, and corporations leave

>Only when there's almost no cost to leaving, which in itself is a tax loophole. If you declare that residency is about where you do the most business and has nothing to do with which letterbox has the word "headquarters" on it then their reaction would be limited to tantrums in Wall Street Journal op eds

Or to the other two arms of the disjunction in the text that you elided.

>>or overseas corporations outcompete them

>That's not how corporation tax works. It's paid on profits and does not affect the competitiveness of the firm.

It has to come from somewhere. It can come from owners, workers, or consumers. If it came from consumers (higher price or lower quality for products and services) this would affect the competitiveness in a straightforward way. [1] and [2] claim that it instead comes from owners and workers, with considerable uncertainty about the ratio between those. If it comes from owners, it increases the corporation's cost of capital – but only to the extent that investment is global. If it comes from workers, it decreases the ability for the corporation to compete for labor – but only to the extent that labor is global. So you're correct that it does not affect competitiveness in a sufficiently non-global economy.

[1] "Who Pays the Corporate Income Tax", Bruce Bartlett, New York Times, Feb 19, 2013. https://economix.blogs.nytimes.com/2013/02/19/who-pays-the-c...

[2] "Who Ultimately Pays the Corporate Income Tax?", Uwe E. Reinhardt (Economics @ Princeton), New York Times, July 23, 2010. https://economix.blogs.nytimes.com/2010/07/23/who-ultimately...


>It has to come from somewhere. It can come from owners, workers, or consumers.

Owners. It comes from owners.

>If it comes from owners, it increases the corporation's cost of capital

There is currently an almost absurd overabundance of capital relative to aggregate demand.


It is collected from owners. Tax collection and tax incidence are separate issues. In economics parlance, where tax "comes from" or "falls on" refers to tax incidence, not tax collection.


Tax collection and tax incidence are indeed separate issues.

The tax incidence falls on owners - probably at least until profit taxes reach ~80% or capital became magically very scarce for some reason that clearly doesn't apply to the present day.


>That's not how corporation tax works. It's paid on profits and does not affect the competitiveness of the firm.

Corporations often need to raise money from investors, who will rationally only fund corporations that are expected to generate enough profit to produce a good enough return for the risk and so on. If profit is lower in some countries, that reduces the amount of money going to investment in that country as the potential reward has gone down. Therefore such companies are less competitive in fundraising.


Having to move your headquarters every time you open up a foreign market that is more lucrative than your home market is insane. Suicidal, in fact.

I don’t think you’ve thought your solution through.


>At the end of the day, there is no way you as a corporation can entirely subvert a nation state.

There are countless examples of this happening, from the East India Company (who essentially ruled India for a century) to the United Fruit Company to present-day Shell Oil.


The relevant link for the "East India Company" would appear to be: https://en.wikipedia.org/wiki/East_India_Company#Regulating_...

The first sentence there ends with "this clearly established Parliament's sovereignty and ultimate control over the company". So not a very convincing example of company independence over its host nation.

[Influence and control over another, relatively weak country is clearly a separate issue, but that's not always clearly separable from the host country's influence]


Can you provide an example present day of a company successfully subverting the US government? To my knowledge, they're even pursuing companies successfully outside of their jurisdiction (Kim Dotcom/MEGA).


So many that there’s a term for it: Regulatory capture.


Halliburton?


Large corporations simply have the ability to shop around to figure out which tax/legal jurisdiction they want to incorporate under, and which instruments they choose to represent their incomes, expenses, and holdings. If things like tariffs are implemented, then the cost/benefit situation changes and shopping around resumes. A smaller company or individual often doesn't practically have that scale of flexibility & research to pull off the same changes, though technically they do.

But even in your personal purchasing, because you might shop around and even negotiate prices with sellers to get a good deal, does that make you an adversary of the economy? No, it makes you part of the economic structure, like the various corporate implements are part of various jurisdictions' tax structures, and the governments benefit from their presence in various ways, not just directly through taxes. That's what all the negotiations are based on.

Of course, I'm speaking of options that are legal, and it gets arguable (and sometimes flagrant) how some corporate actions get interpreted in that sense.


Samsung subverts the tax laws of the US every day, forcing repatriation would just give our foreign competitors even bigger advantages.


In this case it's not a loophole in American laws. It's a problem with European and Carribean laws. This money was earned abroad. Blame the Irish, and now whatever this Jersey Island place is.

The EU made a move to close the loophole, apple found another.

I suppose there are loopholes with them selling IP assets to subsidiaries. But that's a different loophole than the one with them floating money around different countries. That money wasn't earned in America, so why are you trying to "repatriate" it? The better term would be "appropriate" it as it was never here in the first place.

Until it costs more for apple to pay interest on a loan (and/or penalties and fines) than they would pay in taxes, that money will never come here.


It's a British crown dependency, and afaik not the only tax haven under British rule. And it seems like there's no much the EU will be able to do about those.


Perhaps this might change after brexit though.


Yes, French and German authorities have made it known that they cannot wait for brexit to happen because it will relieve them of any need to play nice with the UK about shenanigans like these. At the same time, the Irish border problem puts the Republic of Ireland in a similar position of weakness, and they are enemy n.2 for honest tax authorities worldwide. Enemy 3 and 4 (Luxembourg and NL) have also been weakened by the disappearance of the “free trade alliance” that ran from Poland to Ireland, and when left isolated, they have been successfully bullied in the past anyway.

This is one of the very few areas where brexit might actually end up a net positive for the world at large.


Maybe. It's likely a UK-EU trade deal will appear before Brexit (in some way or another) and that might not lead to many changes in the end.


The US government doesn't, as a general rule, care if the money has ever been here. If you as a private US citizen choose to live and work abroad, you are required to file US income taxes and declare all foreign income. And depending on the precise details of the foreign government's treaty situation and tax rates, you may be required to pay the normal US tax rate on some or all of that income.

I don't know that it counts as a "loophole" exactly that the system for corporations works the way it does. "Loophole" sort of implies an unintended consequence, when the reality is that the laws are written with the express purpose of making this type of tax avoidance possible.


> If you as a private US citizen choose to live and work abroad, you are required to file US income taxes and declare all foreign income.

Do you support this practice though? Does any other country try to tax people for income earned entirely abroad? This puts US citizens at a disadvantage compared to citizens of say, the EU.


The US and Eritrea are the only two.

In practice, the US has tax treaties with most other nations that permit foreign taxes paid (on income that would be taxable federally, so not on wealth taxes) to be taken as a dollar-for-dollar credit. That means that any country with a lower tax rate than the US will generally not increase your overall income tax bill. If you owed $X to a foreign country and $Y to the US for work done in the foreign country, you pay $X to the foreign country (regardless) and if Y is greater than X, you pay $(Y-X) to the US.


It's a pretty weird practice, and I can't come up with a good reason why I think it should be done, but it is. Just not for corporations. That's my point -- not that it's desirable, just that corporations get special treatment here.


At some point you tax people too much and they leave your country for one with better taxes. Never forget that the top 20% of citizens are responsible for like 87% of all the tax revenue the US and state governments rely on.

In fact this already happens at the state level in the US: http://www.howmoneywalks.com/irs-tax-migration/

If the new cut cut cut tax plan passes and Californian's can no longer write off state income tax on their federal returns, you will see even more people leave California.


Never forget that the top 20% of citizens are responsible for like 87% of all the tax revenue the US and state governments rely on.

Never forget that you implicitly assumed this is because taxes on that segment are too high, rather than because various aspects of our economy were rigged to give those people a disproportionately high share of the total taxable income.

In other words: there are two ways to reduce your tax bill, and only one of them requires Congress to pass a law that puts you in a lower bracket.


> "various aspects of our economy were rigged"

This is an entirely handwavy and unsupported assertion, whereas stating the percentage of tax paid by the top 20% is a statement of fact with no implicit assumptions.

The people of a country get the tax system written by the representatives they voted for, and are complicit in any "rigging" of the economy.

What we have is a tax code that is layer upon layer of exceptions that came about when Group A supported a tax on Group B to pay for a benefit for Group A. Sometimes group A is in the top 20% (e.g. taxes used to subsidize an industry) and sometimes group A is in the bottom 20% (e.g. taxes used for food stamps). The former arises from things such as regulatory capture and the latter arises from uninhibited populism.

No politically active bloc of voters is innocent. Everyone from the rich to the poor are special interests and all are equally as guilty of "rigging our economy". Only a flat tax that treats no group as special is fair.

I'm curious what you think of Nozick's Wilt Chamberlain example: http://resources.seattlecentral.edu/faculty/jhubert/wiltcham...

In it, absent any tax code distortions, Wilt Chamberlain would end up with most of the taxable income through entirely voluntary transactions. If thousands of people voluntarily pay Wilt Chamberlain to be entertained and Wilt ends up with most of the income, is that a rigged system? Power law distributions in income are a naturally occurring phenomena. No rigging is required.

If the system is indeed rigged, it's rigged in favor of the 45% of Americans that don't pay any federal income tax. They get all of the benefits at none of the cost.


Apple is not waiting for anything. They store their money abroad, and they invest it abroad, in foreign manufacturing and foreign retail expansion and foreign R&D and foreign acquisitions. And when domestic investors complain, Apple takes on domestic debt (at very good terms) to fund stock buybacks and dividends.

The idea that U.S. international tax policy is somehow hampering Apple is just not true. There's a big world out there outside U.S. borders.

What it is hampering is U.S. domestic investment and job growth.


I think once a loophole has been identified, it becomes a "just." But you are right that the trickier problem is with the more fundamental process of constantly searching for loopholes. If only we could "just" close that one, too.


Yup. It's to some extent an adversarial process. But that's part of why we have a legislature all the time, rather than just relying on laws written decades ago.

A fine example is wire fraud. Existing fraud laws didn't really cover it, and innovative criminals made extensive use of the loopholes until wire fraud was criminalized. (For those interested, the Yellow Kid's autobiography is a fun read. [1])

Same thing with any sort of security hole, really. We'll always have on-line attackers, but that's not a reason to give up. It's a reason to keep plugging holes and improving state of the art.

[1] https://www.amazon.com/Yellow-Kid-Weil-Autobiography-America...


This reads a bit fatalist, why don't we close this particular loophole and deal with the next when it comes along. This may be a game of whack-a-mole but we're never going to have a sane tax code if we don't start killing some moles.

If anyone is knowledgeable in accounting and wants to point out some future loopholes that may arise, sure we can get those as well but... don't let the perfect be the enemy of the good.


Clearly we need stochastic regulations, where the regulations are chosen randomly from time to time subject to the constraints that they accomplish their policy goals. Just have to change them faster than the accountants can figure out how to exploit them...


Several places have what's called a "General anti-avoidance rule". The way this works is, if you think you've got a brilliant wheeze that avoids taxes, you're required to tell the tax officials about it. If you choose not to tell them then they can prosecute for evasion, and if you tell the court actually it was a clever avoidance tactic not evasion the court says hang on, why didn't you obey the General anti-avoidance rule? So you're screwed either way.

On the other hand if you tell them, they get to look at your clever idea and decide to either allow it, change the rule for next year, or go to court saying you're wrong this avoidance method doesn't work so you owe taxes.


Tax minimization is still possible in such a system if it’s consistently adjudicated. If not, it is subject to regulatory capture and possibly bribes. And the nation executing this scheme still has a target effective tax rate, so the base rates will be adjusted up or down depending on the extent of minimization. I am not sure if you’re presenting this as an solution or a warning. :)


This translates to arbitrary legislation.


That's a terrible idea. You need stable tax regulations in order to make a business plan, get a loan etc. If you kill or drive away the taxpayer you're going to be left without taxes to collect.


You can close all loopholes that rely on literal interpretation by changing the approach to interpretation of the law/tax code. You can reinforce it with minimum taxation based on revenue, which prevents you having to wade through treacle in the courts.


Taxing revenues means taxing products on every step in production, many many times on their path through production and the economy. You would essentially also destroy low margin businesses, like grocery and retail and Adobe they ate such low margin the entire tax bill would be paid by the end consumer.


We should just keep pursuing the tax loopholes as they are discovered, they should be closed. I also think we should be lowering tax rates in conjunction with this as our tax code becomes more effective.


How about: it would be good if we lowered taxes /except/ for companies that had been abusing loopholes...

Though to be perfectly honest, I'd rather the state used the funds for the betterment of man, but then I'm a boring lefty


No, We need to eliminate corporate income taxes. They are a tax on investment and job formation.


the company would likely relocate

to bring business and money here, make the corporate tax rate very low (5%?) and have no writeoffs and no exemptions


Indeed. Doing business with the tax havens is a choice in the same way that refusing to do business with Iran is a choice.

The tax havens are almost all small islands that are dependent on food and fuel imports. Iran-level sanctions would collapse them in a week.


It seems that you're suggesting that we tax corporations on overseas income, even when reinvested overseas. That would put American companies at an extreme disadvantage compared to those from other countries, by forcing them to pay double taxes, US and foreign corporate taxes, on all income.

The logical solution is to get rid of the corporate tax altogether. The only reason why it exists is to be a plank for politicians who want to tax the "greedy corporations." All corporate income is either paid as dividends, paid as salaries, or reinvested. When it is paid as dividends, it is taxed as capital gains. When it is paid as salaries, it is taxed as income. When it is reinvested, it is either lost, or eventually becomes income and capital gains. There is no need to have another layer of taxation that just makes a giant accounting mess and creates all sorts of ridiculous incentives to use tax shelters.


That's fine, but all other things remaining equal, there's not as much revenue coming in. So, you need to raise capital gains tax and income tax in some proportion to retain the balance. Does that still seem easier?

Alternatively, we could cut a bunch of spending, but that turns into its own dogfight.


The corporate tax is actually a small (but not negligible) portion of tax revenue. Part of the logic for capital gains tax being lower than income tax is to account for the double taxation of the corporate tax. So I would be in favor of raising the capital gains tax to make up for eliminating the corporate tax.

I also happen to think that taxes should be lower overall, but I think it’s best to divide the two issues: 1) how much we should be taxed, from 2) how we should be taxed.


No, they couldn't. The money belongs to foreign corporations also named Apple whatever.

That little issue is purposefully glossed over for the sake of sensationalism to sell advertising, of course.


Treat income of any foreign company wholly owned or with substantially similar ownership structure of a domestic company as taxable income for that domestic company.

I don't think this is a good idea; I'm just demonstrating that it's not impossible.


How do you define "domestic"? Is it a company that earns the majority of its revenues in your country? That won't work because Toyota is certainly not an American company but the US market represents the majority of their revenues. Is it a company that was founded in your country? That won't work because of companies like Airbus that are supranational in origin. Is it a company that is headquartered in your country? That won't work because a headquarters can be moved in a matter of months (look at how GE left CT for a more regional example).


Domestic has a technical meaning: a company registered in a US state. To do business in the US you have to spin up a US company. Toyota USA would be taxed for global Toyota income. You could try to mitigate that by saying these rules only apply to companies whose ownership or control structure is more than 25% american, directly or indirectly. But yeah, these side effects are part of why I say I don’t agree with such a proposal.


Those foreign corporations named "Apple whatever" are owned, and controlled by "Apple Inc. (forever)". Such conglomerates are usually treated as one for tax purposes, which is why Apple and others can't just create 2500 shell companies each year to take advantage of various "startup" incentives across the world.

That's the sort of knowledge journalists learn in journalism 101, before they advance to their seminar on "sensationalism and selling advertisement" and the group therapy session "some know-nothing on the internet thinks I have anything to do with the BBC's business side, completely ignoring that online advertisement is, like, 0.001% of the BBC's revenue and that, being one of x thousand people working for the BBC, and my articles' revenue going into one big pot with all the others', my personal future is almost completely devoid of anything resembling a link to my articles' readership numbers".


If congress is to simplify the tax code to $rate = $rate->{calculate_bracket($amount_of_revenue)} then the members of congress would lose 99% of their net worth because there would be nothing special that is worth any money that the members of congress could do so they could reap some money for doing it.

which is why this would never happen.


David Mitchell makes an interesting argument regarding moral outrage against entities taking advantage of "loopholes".

https://youtu.be/m2q-Csk-ktc?t=25s


Exactly. And it avoids the problem of losing tax revenue by creating an expectation of additional future tax holidays at regular intervals, incentivizing people to keep untaxed money offshore.


We won’t do that because it’s terrible tax policy and would damage this country even more than our current bad corporate tax policy does.


So wait, wouldn’t that just mean an end to USA companies operating abroad as USA companies? Microsoft has to invest money in china for example, they just can repatriate profits from China willy nippy, and China would get pissed of about it. Also, might as well make SAP do it also, even if a German company, otherwise American companies can’t compete with them.


What's your proposed rule that would close the loophole? I don't think it's actually possible.


The Stop Tax Haven Abuse Act would help:

https://www.congress.gov/bill/113th-congress/senate-bill/153...

Also, as a meta point, since I seem to see these kinds of challenges often: any time a person is put on the spot to name a specific change to a specific provision of law to enact a policy goal, it's probably going to be difficult to immediately give a specific answer. To translate policy into legislation often requires the assistance of multiple layers of paid staff and legislative analysts.

So the difficulty of answering that type of question is a function of the complexity of legislating, and not necessarily a sign that someone's preferred policy is a bad idea.


Won't help against foreign state sanctioned competitors to Apple, e.g. Samsung (Korea) or Huawei (China).

I am sure foreign nations would be quite happy to gain any advantage for their own companies over US corporations like Apple. Personally I would prefer that the US maintain a technological advantage for as long as possible.


Apple has been using tax strategies since the '80s and pioneered many of the techniques [1]. Samsung or Huawei weren't competitors then (perhaps Sony is the bogeyman you're looking for?)

[1] http://www.nytimes.com/2012/04/29/business/apples-tax-strate...


It also won't make Apple's bezels smaller or write their ad copy for them, because that's simply not among the objectives of any prospective law targeted at reigning in tax havens.

If we need to prop up the U.S. tech sector with special tax handouts because they can't compete, we can do that on a targeted basis when that day comes rather than continuing to perpetuate an open-ended tax giveaway enjoyed by major companies in every sector of the economy.

And in the meantime perhaps we can use the missing revenue to bring our infrastructure up to parity with the rest of the modern world.


"Any kind of business or financial transfer or ownership of assets or beneficiary interest in the Cayman Islands (Etc) is a criminal offence"?


That's insufficient. Most of the world has a lower corporate tax rate than the United States. The Cayman Islands might be the most attractive place to park their funds, but pretty much anywhere would still be more attractive than bringing it to the US.


Lowering the US corporate tax rate to say 10 or 15% is the only reasonably feasible solution. Incentivize companies to book profits in the US. Then increase the dividend tax rate to compensate (depending on if this ends up being tax neutral or not -- it might very well be tax neutral given the extra profits that would be booked in the US)


That's more or less what I would suggest. Though, I would probably put the rate at 25% and only tax domestic profits. That would bring US policy in line with the rest of the G7. Raising taxes on dividends and capital gains to make it revenue neutral is also a good idea.

At the moment, tax policy basically penalizes companies bringing money earned in other countries home into the United States. It's stupid. Tax holidays are also stupid. Fix the problem at its heart.


The US reserves these kinds of hostile sanctions for its established enemies such as North Korea and Iran. In general, trade between nations should be encouraged, not blocked by economic nationalism.


You cannot close the loophole, they will just create another one. In cases like this we (meaning the judicial system and society as a whole) should be able to use judgement and just say that its clear they are creating these complex scenarios to avoid paying taxes.


It depends, if you decide to tax them too much, they'll "just" change home.


How do you propose forcing a company to move money from one country to another?


Or Apple could reincorporate abroad?


They could also get their thumbs out of their asses, but they won't.


Yeah but then they couldn't pay congress as much!


So you are saying that rather than taxing the middle class more that we should simply make large corporations like Apple actually follow the existing tax laws?

Owing to its source it doesn't sound like this idea is going to be popular on hacker news, in spite of its blatant rationality.


> we should simply make large corporations like Apple actually follow the existing tax laws

Apple is in compliance with our tax laws. The laws, not Apple, are the underlying problem.


No, the spirit of the law is effectively being broken. Sidestepping the law does not constitute following it in my opinion. Laws are meant to be guidelines and legal precedent defines its true extent, you cannot make laws extensive enough to cover every scenario. If they make it illegal to offshore money then apple will simply find a way to establish a corporation on the moon. Its clearly demonstrable that they are going through great lengths to sidestep the law.


A product has its components fabricated in east Asia, is assembled in east Asia, sold in Europe, and the profits from the sale are held in Europe. Somehow you consider this “illegally offshoring money”. Somehow you think the US government deserves 34% of these profits. Apparently, the spirit of the law being violated is that the US government has the right to stick it’s nose in anyplace in the world it wants and extract rent.

At a physics conference Wolfgang Pauli heard a talk that was so misguided that his comment was that “it wasn’t even wrong.” IMO your comment isn’t even wrong.


I don't think the US government deserves 34% of these profits, but some country out there does. Make it point of sale, if you want.

But right now that money isn't taxed at all. That money is what the Irish subsidiary owes Apple US for the license to Apple IP. So the Irish subsidiary isn't paying taxes on it, and Apple isn't paying taxes on it in the US because they are refusing to "bring it home".

That is why Apple is lobbying so hard for some sort of "tax holiday". They want to pay 0, nada tax on those overseas profits.

You seem to be missing this little detail.


A British judge, Lord Hoffman commented ‘The only way in which Parliament can express an intention to impose a tax is by a statute that means that such a tax is to be imposed,’.

In other words, for tax there is no distinction between the spirit and letter of the law. They’re one and the same.


Except the General Anti Avoidance Rule flatly contradicts that.

The GAAR takes the spirit of the law into consideration when considering whether the law has been broken.

The Ramsey Principle (first stated with respect to a case governing circular transactions) also raises the spirit of the tax law being superior to the strict rules based interpretation.


English law has three typical means of statutory interpretation: the literal rule (where you literally apply the letter of the law), the mischief rule (where the defendant is clearly guilty of the mischief that the law was intended to address), and the golden rule (where you reinterpret as necessary to avoid an absurd result).

That said, when it comes to most tax law the mischief rule doesn't apply (because in principle it needs to be dealing with a limitation of the common law). The golden rule rarely comes into play with tax law (though consider the case of murdering a parent and the consequences on inheritance tax, for example). So yeah, the literal rule almost always applies.


Let’s keep it concrete.

Should we force companies to repatriate all foreign-earned profits?

If yes, then the US will lose its economic advantage. No international company would be insane enough to incorporate in the US.

If no, then we have our current situation.

IMO the tax law itself is broken, not Apple’s response to asinine laws. Remember that Apple has not violated the law. I also agree with the comment you replied to - for tax law, there should not be a difference between the law and the intent. What is written is what needs to be followed. And right now Apple is following it to the letter of the law.


>In other words, for tax there is no distinction between the spirit and letter of the law.

HMRC's essentially disagreed with the spirit was being followed in this case and Google paid up:

http://www.bbc.co.uk/news/business-35381130


it's hard enough to interpret the letter of the law sometimes (i.e. ambiguous situations). You might as well have random or no laws then if you have to reflect about the fact whether you're breaking the "spirit of the law". This would mean different things to different people, and things are complex enough as they are.

Also, the spirit of the law argument seems more like a pass to politicians for doing crappy legislative work. If you make proper laws, this shouldn't be an issue.


> If they make it illegal to offshore money...

... then the US would immediately end up losing all it's multinational companies to less insane countries.


Is Apple going to pack up and move 50,000 people from Cupertino to the Cayman Islands?


Apple might not, but we were talking in general


Prove it. I think companies like being in the US because of the sophisticated capital markets, strong and predictable legal environment, and deep pockets of American consumers. I'd like some evidence instead of hyperbole.


How about you provide the evidence? If US makes it defacto illegal to operate internationally as a US-based company, the US will lose its economic moat within a matter of decades [citation needed, I know]

I’m not a tax expert but IME the people who are blaming Apple don’t know what they’re talking about. Only the US has such an insane attitude towards international profits.

And remember that there’s no loophole to close, unless the “loophole” is deciding what to do with your capital. Who is the US to tell Apple that its foreign subsidiaries must return their foreign-made profits back to the US?

Also remember that with our current laws, repatriating the money before a tax holiday is arguably a violation of Apple’s fiduciary duty to its shareholders.


The person making the claim has the burden of proof.

Maybe repeating a string of specious arguments that have already been debunked or refuted elsewhere in the thread isn't the best approach for your brand-new HN account.


Debunked/refuted where?

I admit I haven't provided much in the way of evidence. However we're talking about a complicated tax situation so it's hard to stick to the concrete.

Do you agree that the only way to "close the loophole" is to force companies to repatriate their earnings? I don't see another way to address it.

Right now the issue is that iff Apple repatriates its money, it must pay taxes. So Apple has been fulfilling their fiduciary obligations by opting not to repatriate (which would destroy 30%+ of the value, I don't know the actual number but I believe I am being conservative), instead choosing to take on cheap debt domestically to fund share repurchases.

Thus I don't see a "solution" to the "loophole" (obviously I don't believe it's a loophole because it's the law) that doesn't involve forced repatriation.

If there's something wrong with what I've said or something I haven't considered, I'm all ears.


No one is saying the US would make it illegal to operate an international company.

They're looking for ways to close some of these loopholes that are keeping a ton of tax money out of the coffers belonging to We the People.

Please don't conflate "closing tax loopholes" with "making it illegal to operate internationally".


Please define the specific tax loophole.

The "loophole" as far as I can tell is that a company can choose not to repatriate their earnings, which is completely legal.


You were saying "make it de facto illegal to operate a multinational" and that is not on the table and has never been anywhere close to it.

Are you walking that back, and want to talk about loopholes now?


I consider forced repatriation to be a no-go. Others probably disagree with me, maybe even Tim Cook himself. IMO if you force companies to do something like that with their capital, then they won't incorporate in the US.

I do want to talk about loopholes. How do we close the "repatriation loophole"?


Huawei and Samsung seem to be operating in the US just fine.


Oh, would you then also force Samsung to pay US taxes on all profits it made in Korea and elsewhere? The same for Huawei and the profits it makes in China?

For obvious reasons, no other developed country in the world has a corporate tax system like the US. We should try to reform it, not make it worse.


Exactly. I honestly do not understand how people think Apple is evading US taxes on overseas sales. Seems like any real way of taxing them on it will be a bad solution and advantage foreign companies.

A lower repatriation rate seems like a good idea to get money back into the US for local spending as well as collecting a bit in taxes.


This is like that lawsuit, I forget against whom, where the defendant was arguing he de facto didn't steal anything or commit any crimes because the server let him do it. (Nevermind he was exploiting the server)

There are no bugs, only features?


I don't believe that this is accurate. Apple believes they are in compliance and at this time it appears the US federal government agrees. If the government was to disagree, they could take action and force Apple to comply with the existing tax laws. Apple would have their day in court and precedent would be set. Should Apple win that case, then we'd need to look into creating new laws.

I am not convinced that new laws are necessary, in fact, I think this just used to distract from the issue and to allow the polishing of that old chestnut about more laws creating more loopholes.

It is my opinion, but I do feel the argument that the problem is the law, and not the large corporations who can afford to flout them, is disingenuous. Apple is under no obligation to pay as little taxes as they can convince themselves is reasonable.


Companies have had days in court and presidents have been set, even if the name of the defendant was not Apple. This isn't some crazy scheme that Apple's accountants cooked up. Even when the dutch sandwich was new, it was still built from components that individually had case law backing them up.

You don't just get to reinterpret the law because you don't like what effects it has. The courts are only really able to interpret ambiguities. Where the law is clear (and it is pretty clear here), you need to change the laws.


That's pretty much all courts do: interpret the law. There's a lot of ambiguity here, hence all the push-back on Apple stowing profits offshore. In my opinion, the only case that can be made is that, in general, profits made outside of the US by corporations is not subject to tax. That is hardly the only issue being discussed, in fact, it strikes me as the most simplistic interpretation.

There are lots of other good questions, and it may not turn out to be the case that everything Apple has done is legal. For instance...

Is it legal for Apple to attribute all of their intellectual property to their Irish subsidiary?

Is it legal for Apple to avoid paying taxes in Ireland by sending the money to a fictitious head office with no physical location?

And so on and so forth.

https://blogs.wsj.com/briefly/2016/08/30/apples-irish-tax-bi...


Pure foolishness.

The law says “if you bring your foreign-earned profits abroad, you must pay taxes”. (I left it vague because I’m not an expert but my understanding is Apple would be responsible for around a 30% or higher tax rate).

Apple says, “okay we’re not going to bring the money back at that rate. Instead we’ll leave it invested in liquid assets abroad and take on cheap debt in the US to fund our share repurchases”.

So what’s your proposal? Forced repatriation? I hope it’s clear why that isn’t a good approach.

Our international tax code is completely fucked. Apple’s not the problem.

Full disclosure: My portfolio is heavily weighted towards Apple at an average cost of $120/share


I don't think it's at all that straightforward. Apple has assigned intellectual property to their subsidiaries in Ireland and has used that as a way to direct profits out of the US. Is that legal? I am not an expert, but surely it is not straightforward.

Once profits collect in Ireland, Apple moves the profits to it's "head office", which not only is not in Ireland, it's not physical in any way. Thus they avoid the bulk of Irish taxes. The EU is suing Ireland and seem fairly serious, at least in this case it looks like Apple will pay some of the taxes, eventually.

https://www.reuters.com/article/us-eu-apple-taxavoidance-cou...

Is this the only way they are avoiding taxes? I strongly suspect it is not and that they are breaking the law in more than one case.


Which issue are we discussing? The age old double dutch irish or whatever it's called, or tax repatriation?

I surmise that you're stating that the two are linked. That's fair. However isn't Apple already paying taxes on its US-sold goods?

This thread seems to specifically be about the repatriation side of things, and the only way to force repatriation is to...force repatriation.


>Forced repatriation? I hope it’s clear why that isn’t a good approach.

It isn't clear to me. Why is that?


Apple spent ~$3.5 million on lobbying in the first 6 months of the Trump administration: https://9to5mac.com/2017/07/21/apple-trump-lobbying-increase...

How many times do we have to reiterate the point that large corporations and the people who own them spend a fortune on lobbying sitting politicians and bankrolling their election campaigns, and that the controls on such spending limits have been systematically dismantled over the years, in decisions like Citizens United, among others?

Trotting out these facile arguments like 'it's not corporations, it's the laws!' without acknowledging this point borders on trolling. Could you please do your fellow HNers the courtesy of acknowledging what they're actually saying instead of just repeating simplistic shallow comebacks?


Where did the $3.5 go to?

> The company specifically outlined in its filing that a strong focus of its lobbying has been for immigration.

> In addition to immigration, Apple’s government filing indicates lobbying for climate change, patent reform, accessibility, health initiatives, diversity, and education.

Seems like worthwhile lobbying to me.


I'm not complaining about the existence of lobbying per se, I'm pointing out that they have the resources to lobby for special treatment and that companies in general shape the law by paying to influence lawmakers. Please don't obfuscate the point this way.


> In addition to immigration, Apple’s government filing indicates lobbying for climate change, patent reform, accessibility, health initiatives, diversity, and education.

Right. And we're supposed to eat that up. Why didn't they add happiness, rainbows, and kittens to that list.


$3.5 million is absolutely nothing. Compare that figure to Apple’s yearly FCF (free cash flow)...


Letter of the law vs the spirit.

Play many board games? I have. With any sufficiently complicated ruleset, there are always cheats, exploits, holes.

To have a good time together, players often agree to play in the spirit of the game, vs the literal rules.


>it doesn't sound like this idea is going to be popular on hacker news, in spite of its blatant rationality

An hour later, this statement is proven hilariously accurate given the number of "rules as written having loopholes doesn't mean anyone's breaking the law" replies to this post.


Right?


Pretty sure Apple is following existing tax laws.


Pretty sure Apple and their 'class' is writing the existing tax laws.


Apple has actually argued for better tax laws (that they'd pay more under!) but the problem here is that the US is absolutely a complete anomaly in how it handles this issue.

It's literally cheaper for Apple to store the cash outside the US and then get loans for the money they can't bring into the country.

That's just wacky. For a country that is incredibly pro-business and pro-corporate the USA is very strange on this front.


That depends if you believe tax law should be about checkboxes or about keeping to the spirit of giving back to the community that made you


Yes, I prefer a law where I can take a possible action and judge by the text whether that action is legal or not, rather than always trying to avoid pissing off a fickle public, like trying to avoid waking a husband who drinks too much so you don't get a black eye.


Except tax law is not always capable of being totally black and white. Have you ever had to work through small business or rental deductions on your taxes? Grey areas, grey areas everywhere, at least if you want to take all the deductions & credits you are entitled to. Nobody including the IRS can give you a black and white answer. (Repairs vs improvements, which are deducted differently, is a good toy example)

Part of this I think may actually be intentional, to prevent the accidental creation of technically-legal-but-obviously-exploitative loophole tax strategies. If it's fuzzy, you have to weight your risk of audit, your ability to justify your choice, and so on.

Anyway, in the corporate case there are also fundamentally difficult-to-define areas. For example:

Company A transfers its global IP portfolio to Subsidiary B. B is incorporated in Ireland, but is controlled and managed by directors based in a low corporate tax jurisdiction such as Bermuda, the Cayman Islands or Andorra; crucially, under Irish law, this characteristic renders B tax resident in these havens and therefore subject to their relevant tax legislation. Subsequently, B grants licences to exploit the IP portfolio to Subsidiary C which is incorporated and tax resident in Ireland; it is this link between two Irish subsidiaries which yielded the name “Double Irish”. C is the actual operative unit of the Company A: it owns real estate, it employs workers, it exploits the IP portfolio, it sells advertising and collects payments, ultimately generating earnings. Nevertheless, C does not make profits, as it has to pay royalties to B for the IP licences; crucially, B pays very little corporate taxes because it is based in a tax haven. Thus this structure allows A to shift all profits emerging from its IP portfolio to a jurisdiction where they will not be subject to a significant rate of taxation.

This scheme depends in part upon the ability of the company to set royalties and IP transfer costs at whatever they like, independent of the real value of the IP. Clearly this is not quite right, but what is the real value? Who determines it?


This is exactly my point, if the company can create a complex web of interactions to the point that it creates a grey area at what point to we as a society throw our hands up, call a spade a spade and instead pursue a determination that they are clearing trying to avoid paying taxes, regardless of what the specific technical interpretation of the scenario they have set up.

For example, what if they said that the taxable location of the entity was a function of the output of a quantum state? This is a grey area, but is even this enough for us to say that they are clearly just trying to pull the wool over the governments eye?


In our society, taxation laws are a system of rules. I think its important that if companies and people are following the law that they're then not held to some other second arbitrary standard.


mrguyorama I agree 1000% and most reasonable people should as well. The technical letter of the law should not matter as much as the spirit of the law!


The spirit of the law is not clearly defined. In fact, by definition it means "person X's interpretation of what the law was trying to achieve".

How could that be the basis for an intelligent taxation system?


Then you're at the mercy of the judge. That's a very bad scenario. With literal interpretation, the legal system is way more previsible.

What if the literal interpretation create unfair loopholes?

Then you change the law.


Not in this case. They have created a complex tax haven out of juggling around entities and IP's. We should NOT expect the law to have a specific technical description of this, and they shouldn't be around to get around the law just because they created a new scenario. In this case we should just use the obvious determination that its clearly they are trying to dodge taxes, rather than try to change to law to account for every possible scenario they could come up with.

Specific laws don't preclude the ability to use common sense and judgement, and the law shouldn't be expected to explicate every possible permutation in order to be enforceable.


My understanding of the economics (via popular-press reporting [1,2]) is that corporate taxes are effectively paid by workers and shareholders.

In the case of Apple, many employees are high-income individuals. One way to tax them is to raise Apple's effective tax rate, by closing loopholes. Another would to move these individuals to a higher bracket, and tax them directly on income. The latter would allow the tax system to target only those employees who actually are high-income individuals. I don't know how that plays on Hacker News, but it doesn't seem to be politically feasible.

Apple's individual investors are probably mostly high-net-worth individuals. (Apple might have more non-rich investors than a blue chip like GE does. I know quite a few middle class individuals whose only outside of funds are in APPL or TSLA. They have brand loyalty even if [with TSLA] they don't own the product. It's like playing fantasy football.) (The individual investors with the greatest number of shares are super-high-net-worth, of course[3].) To a progressive, it seems fair to tax them more, which taxing Apple effectively does. Those individuals aren't going to pay taxes on stock appreciation unless the capital gains exemption is rolled back. Now that Apple is paying dividends instead of just appreciating, raising the income bracket could be an alternative to closing the loophole.

My understanding is that institutional investors in general are largely funds, endowments, and pensions. Apple seems to be mostly funds[4]. Funds are probably held by middle and middle-upper class individuals with mutuals or indices in their portfolios. (The poor don't own stocks. The rich own them directly.) The loophole benefits them. [Big disclaimer: I'm a novice in how to interpret this, and I wouldn't be surprised to be wrong.]

[1] "Who Pays the Corporate Income Tax", Bruce Bartlett, New York Times, Feb 19, 2013. https://economix.blogs.nytimes.com/2013/02/19/who-pays-the-c...

[2] "Who Ultimately Pays the Corporate Income Tax?", Uwe E. Reinhardt (Economics @ Princeton), New York Times, July 23, 2010. https://economix.blogs.nytimes.com/2010/07/23/who-ultimately...

[3] "Top Apple Shareholders for 2017", John Edwards, Investopedia, October 6, 2017. http://www.investopedia.com/articles/markets/120115/top-5-ap...

[4] "Apple Inc. Institutional Ownership", NASDAQ. http://www.nasdaq.com/symbol/aapl/institutional-holdings


As I look at schemes to prevent this, it's pretty obvious that a low gross tax rate on exported goods is a net positive for a nation. But that leaves the question of how/whether to tax companies with comparatively few exports (think of telecoms as an example, where the majority of a company's total capital is physically located and impossible to move).

I don't think there's much argument that a near-zero corporate tax rate is ideal; unfortunately wealthy individuals would simply take advantage of that to lower their individual taxes and the country would end up with a revenue crisis.

I would actually argue that the largest contributing factor to the success of the US over the last 80 years has been our ability to consistently collect tax revenue. Many other countries are not nearly as successful at enforcing and collecting on their tax code as the US is (but then, their tax agencies don't have nearly as much power as the IRS).


There actually is a fair amount of argument [1-4] that a near-zero corporate tax rate is ideal. [5-6] argue that it isn't.

(These are all, except [2], popular press articles. I imagine that there's more considered discussion in the academic literature.)

[1] "Six Policies Economists Love (And Politicians Hate)", Planet Money (podcast). http://www.npr.org/sections/money/2012/07/19/157047211/six-p.... This contains interviews with Dean Baker (co-director of the Center for Economic and Policy Research in Washington, D.C.); Russ Roberts (George Mason University economics professor); Katherine Baicker (professor of health economics at Harvard University's Department of Health Policy and Management); Luigi Zingales (professor of entrepreneurship and finance and the University of Chicago's Booth School of Business); and Robert Frank (professor of management and economics at Cornell University's Johnson Graduate School of Management).

[2] "Simulating the Elimination of the U.S. Corporate Income Tax", Hans Fehra, Sabine Jokischb, Ashwin Kambhampatic and Laurence J. Kotlikoff. NBER Working Paper No. 19757. Issued in December 2013, Revised in April 2014.

[3] "Abolish the Corporate Income Tax", Laurence J. Kotlikoff (Economics @ U. Boston), New York Times, Jan 5, 2014. https://www.nytimes.com/2014/01/06/opinion/abolish-the-corpo...

[4] "Let's Abolish The Corporate Income Tax", John C. Goodman, Forbes. Aug 26, 2014. https://www.forbes.com/sites/johngoodman/2014/08/26/lets-abo...

[5] "Why Do We Tax Corporations?: Wouldn't it be easier just to tax individuals?", Christopher Beam, Slate, Oct 17 2008. http://www.slate.com/articles/news_and_politics/explainer/20...

[6] "10 reasons we should tax corporations", Nicholas Shaxson, The Guardian, March 15 2011. https://www.theguardian.com/commentisfree/2011/mar/15/tax-co...


I'm speaking of a near-zero corporate tax rate more from a game theory perspective -- if you look at the game from the perspective of a central government, and your competitors are both the corporations and the other countries. In this case, your goal is to maximize tax revenue while minimizing "brain drain" and "legal" tax loop holes.

But regardless of what system we choose, wealth redistribution needs to be a primary goal before inequality reaches "torches and pitchforks" levels.


Can you elaborate on Samsung and Huawei's favorable tax and public policies under which they operate? Are you saying that their tax rates rates are lower?


This was offered/done around 2004-2005, with the proviso that it would be a one-time deal.

Fool me once, shame on you. Fool me twice, shame on me.

Investigate. Confiscate. Incarcerate.

I'm done with the "business" line of rhetoric.


Note that Cook has been vocal about repatriation and has suggested that it be mandatory to all corporations, then taxed specifically for infrastructure development.


What's the benefit to Apple or anyone else if the money is here in the US?


What exactly is that money doing right now? What would the ramifications be of transferring that money back into the US economy?


If you mean "back into the US," then indeed there is the potential to continue sitting on that money and maybe it won't enter the US economy.

If, however, you do mean to ask "...back into the US economy," then ... jobs. How they choose to place the money into the economy is definitely a question, but ultimately any use should indeed support employment of the labor force. Loan the money out? The borrower puts someone to work. Use it for R&D? Hire humans to perform the research.


Unless it's paid out in dividends and executive compensation and stock buybacks. Which is what happened with the last tax holiday under Bush.

https://theintercept.com/2017/04/27/bush-already-tried-trump...


I would argue that's not "...back to the US economy."


Yes, exactly the point. Sorry.


Point of debate:

Why should Apple have the US government lay claim to the revenue/profits that it generates in non US countries?

From the article: "This allowed Apple to funnel all its sales outside of the Americas - currently about 55% of its revenue - through Irish subsidiaries that were effectively stateless for taxation purposes, and so incurred hardly any tax."

If you support the taxation, do you also support the IRS taxing the wages of expats living abroad?


Doesn't it already? I've been under the impression that is one of the big "things" about being an American. You will always pay taxes to the US:

"If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside."

Per https://www.irs.gov/individuals/international-taxpayers/taxp...

EDIT: To answer your question, no, I don't like that, but I don't think "companies" should be exempt.


For the US to start taxing Apple's foreign income abroad is not like taxing an American living in Ireland (and even that is crazy). It's like if the US started taxing an Irish person in Ireland[1].

However obvious it is that EU Apple is a sock puppet of US Apple, directly imposing taxes on foreign companies operating in foreign countries would be met with retaliation. It is not a smart nor a profitable trade policy.

[1] This actually does happen: https://en.wikipedia.org/wiki/Accidental_American


>>For the US to start taxing Apple's foreign income abroad is not like taxing an American living in Ireland (and even that is crazy). It's like if the US started taxing an Irish person in Ireland[1].

I'm not sure I follow. Apple is an American company.


No, Apple US is a shareholder of Apple EU. The US can tax Apple US for whatever income they get from Apple EU, but they can't tax Apple EU


It would be more akin to the US taxing a dual American/Irish citizen living abroad. Which they do. You cannot just pretend not to be a US citizen when convenient.

Of course, typically you aren't taxed on the first $100k of income abroad, but likely businesses have similar carve-outs...


Yes, the US taxes the income of citizen's that live and work abroad. Those citizens' are taxed twice: once by the country they live in and again by the US[0]. From the article:

"If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside."

[0]: https://www.irs.gov/individuals/international-taxpayers/taxp...


You get an offset though for the foreign tax you paid, right? So you aren't taxed twice as much as you are just taxed at the higher rate of the two countries.


Up to a certain point. Above that point, not only do you have to pay the tax to the foreign country in which you earned the money, but you also have to pay American income tax on that as well. I believe the cutoff is around $90,000.


You can choose to either take a foreign income tax exclusion (up to the first ~100k earned), and deduct income taxes paid beyond that point (like paying state taxes), or get a credit for foreign taxes paid.

So if you earn less than 100k, you need to file US taxes, but will only pay the foreign tax rate. If you earn, say 200k, then you’ll pay at least as much as the US would have taxed you on that income.[0]

There are still absurd pieces of this law: for instance, if you buy a home using foreign currency, then sell the home for the exact same amount, but the foreign currency became a lot stronger, you owe US taxes on the change in USD to your home’s value.

[0] https://www.irs.gov/individuals/international-taxpayers/fore...


Yes it does already, and the US is particularly unique in this regard.


First some background... VATs (value added taxes) are pretty solid for distributing this money fairly between the national entities involved in producing this wealth. Currently companies cheat the system a bit to do the bulk of their value adding in nationalities that don't tax it highly (the famous putting stickers on computers in bermuda in apple's case).

I think it is fair for a nationality to claim that there is a certain minimum amount of our production we wish to divert to social causes, in that case I also think it is fair that, for products sold in that nationality the government can claim any shortfall in paid taxes on the value accrued to that point. Let's assume that China has a 10% VAT on 5% of the value, Bermuda .5% on 90% of the value and USA 8% VAT on 5% of the value. The tax owed to the US might be calculated by ignoring the first 5% of the value, since china already collected a sum exceeding the sum the US would collect, then the US would collect a 7.5% remainder tax on the middle 90% and a full 8% on the last 5%.

These collections would only be owed on products sold or incrementally improved in the US, any items that never entered the US could live by their own rules.

Regarding the IRS taxing the wages of expats living abroad, it follows much the same system. An expat is only required to pay the difference between the taxes they are paying and the taxes they would owe if they resided in the US, this is a silly rule that probably shouldn't be on the books since expats living abroad gain none of the benefits from their citizenship.


VAT is paid by customers, not companies


Technically VATs are almost always collected from customers, and paid by companies. A higher corporate income tax will affect consumer prices too. The bigger difference is that VATs are taxes on consumption, and not on earnings which alters consumer and corporate incentives and behaviour.


That's not entirely accurate. Companies do pay VAT, but then can deduct it if they're not the end users. This is unlike sales tax, where only end users are taxed (there's usually no sales tax payment in the sales chain).


As a U.S. citizen who has lived abroad, all expats have to report and pay back their taxes to the U.S. Given, there's a bigger exemption (I don't remember the exact number, but you start paying taxes at 40-50K).

So I agree, Apple as an American company should pay taxes on the money it makes abroad. And again, I would vouch for a larger tax break, but still pay on their income abroad - as expats do.


The US is the only country which does this though. From an outsiders perspective, it seems unreasonable. The rules have become significantly harsher in recent years. Banks may avoid dealing with Americans, and there is a lot of paperwork to prove you owe zero.


Although most of its sales are outside the US, I believe that in reality Apple generates the vast bulk of its profit in the US - specifically in California.

Let's say an iPhone is sold in the UK, generating a $200 profit. How much of that profit was really generated in the UK and how much in the US? The answer is to consider what would happen if Apple's US and UK operations were two distinct, independent companies: Apple in California would determine almost everything about the way iPhones are sold in the UK - where the Apple stores are located, what the stores look like, what their TV and billboard advertising should look like, what happens when a customer returns a product, etc. Apple US would then take this list of requirements and negotiate with a UK business partner. In that negotiation the UK partner has very little leverage - if the UK partner doesn't like terms Apple US is offering, Apple US can just find another partner. The UK partner then sells phones according to Apple's specification. The result is that the UK partner will have thin margins and almost all profit will flow back to the US.

Now perhaps I'm being hard on Apple's UK employees - maybe they are doing more than simply working to a specification given to them by their California colleagues. In this case it would be fair to say that a somewhat larger portion of that $200 is actually generated in the UK - so the total tax Apples pays on that $200 profit would be a combination of US and UK tax rates. But there is absolutely no reason why Irish tax rules should apply to the allocation of profit on the sale of an iPhone in the UK.


If you unplugged Apple's board (or given decision-making apparatus) and plugged in a (currently nonexistent) AI with the parameter "Maximize Profit," would you see a different result? I think not. I think we'd see things far more morally horrifying, in fact, with just enough PR makeup to ensure "maximized profit."

Unsure why we laud capitalism and then act horrified at the result. Here in America we've made our decision - profit rules above all else. It is more profitable to lobby congress than it is to upgrade a refinery, it's more profitable to auto-deny every health insurance claim than it is to provide the services your customers think they're paying for, it's more profitable to avoid taxes than not (as long as you can avoid breaking the law TOO hard).


This is not the fault of Capitalism alone. In a healthy democracy, the people vote in the Government, who can impose fines, tariffs, penalties and such on companies and business practices that the people (via the people they elect) deem to be working against them. Sadly, as you point out, this creates a direct incentive to lobby or otherwise attempt to control Government by large and powerful companies. The only way to prevent this is to impose fines, tariffs and penalties on businesses undertaking this behaviour (effectively disincentivising it financially), since it fundamentally unbalances the power dynamic between Government and business. However if you've got nobody left to elect who will fight that corner for you, you're kinda stuck.


Pure free market Capitalism is playing a game of Monopoly where after each time anyone passes go, the player with the most money gets to create a new rule. Guess what? The game is gonna get pretty skewed, pretty darn fast.

Consolidated money is power. The only way that capitalism can work long term is if there are rules actively countering/fighting using that power to change the rules.

Money is power and capitalism consolidates money. So capitalism consolidates power. Consolidated power can change the rules in its favor to consolidate more.

The only options are prevent entities from consolidating money (which means you're risking losing capitalism), Or prevent entities from using money and power to change the rules (which, if you think of all the ways gratuitous money could be used to influence, is the social equivalent of solving the halting problem).


> Pure free market Capitalism is playing a game of Monopoly where after each time anyone passes go, the player with the most money gets to create a new rule. Guess what? The game is gonna get pretty skewed, pretty darn fast.

I think you've misunderstood the free in free market. If anyone is allowed to make rules like that, it is not a free market, not superlatively, not normally, not even slightly.

The problem here is that you have a government apparatus which has outgrown its mandate in ways that were not adequately accounted for, which makes it ripe for the picking.


I'm not sure why you're being downvoted, you actually make a great point. If there exists a Govt. which has the power to impose certain rules which change the markets, its by definition not "free". If there was no Govt. to create and enforce these rules, corporations could not influence said Govt. to create unfair rules (since it does not exist).

But I don't agree with your conclusion. If there were truly no Govt. creating and enforcing rules, there would be Guilds/Cartels that would (e.g. see how criminal gangs behave and operate). Which is why we do need an overarching authority that has the power to create, change and enforce rules that make the market less free, but potentially more beneficial to more rather than a few.

The problem isn't that the government apparatus has outgrown its mandate. Its that its become more easily influenced by money. Reduce that influence and you will have a Govt. that works for the general interests of its people.


> Reduce that influence and you will have a Govt. that works for the general interests of its people.

I recently found out about an old solution that would achieve that goal: Sortition. Instead of having elections every few years, we could randomly pick a hundred people from the population and task them with creating a law. After an initial preparation, they would deliberate like a jury and their decisions would be written as law. After a single task, they should disband and new groups should be selected for new tasks. With a country of hundreds of millions of people, it would be a light burden on the population to serve from time to time.

The benefits are: 1. by random selection, every social category is represented equally, 2. there is no need to have elections, so no lobbying and money in politics, and 3. because the legislative group only works on a single task, once, they can't grasp power, like politicians do.

I believe a group of 100 random people would make more heartfelt and wise decisions than a parliament full of professional liars. Regular population is more in touch with reality. Regular population needs to be heard directly because politics sucks, and this is a way to do it.


>1. by random selection, every social category is represented equally

No, every social category would be represented similar to their ratio in the rest of society. This wouldn't line up well with many groups that want much stronger support for minorities.

Take Native American concerns for example. With just over 1% of the population being Native American they will probably only end up with a few representatives out of the 100. The remaining ~98 people are going to be spending a bunch of time concerned about their own problems and won't put effort into making sure Native Americans get equitable treatment due to past issues.

In other words, by cutting out the ability to lobby for rich people to help themselves, you also cut out the ability to lobby for legitimate issues as well. Lobbying has (rightfully) been seen as a terrible thing, but it does have the legitimate purpose of bringing issues to a representative's attention that he/she would never even think about otherwise.


There's also the point that 100 random people won't have any background on the topic in question. Who's going to help them understand it? Most likely the same vested interests that today lobby the government.


It's a fun solution to consider, but I'm also concerned in that lobbying for this solution already exists - mass marketing, which has already been mastered.

My parents had me at 17 and had no idea how to raise kids. They see a commercial of kids eating cereal and poptarts, so they feed me cereal and poptarts under the false assumption that that is a healthy meal, and that plus other factors led to me growing up fat and unhealthy.

Basically, if lobbying is a problem, disinformation through mass marketing is a MAJOR problem.


> The problem isn't that the government apparatus has outgrown its mandate. Its that its become more easily influenced by money. Reduce that influence and you will have a Govt. that works for the general interests of its people.

I think it's simpler than that: you need to have one entity which could ever possibly have the mandate, and then bind them eternally never to use it. The supreme court is supreme, but it also has rules. When the supreme court plays by its rules, it does not create a power vacuum for violations, it creates an assurance against them.


I think their point is that in a free market, the vacuum of power leads to organizations (with the means to) filling that vacuum and establishing rules that rationally favor themselves.


Which is why you have to constitute a power structure which is actively prohibited from the unwanted behaviours, while filling the void of an organization with said behaviours. This is partially accomplished by the U.S. constitution, but there are some holes either in the formulation or in the interpretation.


> each time anyone passes go, the player with the most money gets to create a new rule. Guess what? The game is gonna get pretty skewed, pretty darn fast.

We call that crony capitalism and it is very much the opposite of a free market. I do agree with you however that we don't have effective barriers between money and government (or other forms of) power and therefore the stable state for liberal democracies with capitalist markets is crony capitalism and regulatory capture.


>>Consolidated money is power. The only way that capitalism can work long term is if there are rules actively countering/fighting using that power to change the rules.

Yes. This is why I'm in favor of term limits, as well as a rule that outlaws "revolving doors"[1].

https://en.wikipedia.org/wiki/Revolving_door_(politics)


That sounds nice, but why don't proponents of term limits ever offer evidence for their claim? We already have term limits in California. The result? Politicians spend a lot of their time in office figuring out how to leapfrog up the political ladder - usually city/county school board, to supervisor, to state assembly, to state senate, to Congress. They are never in one place long enough to build stable networks of influence (superficially a good thing) but that just means they're easier for lobbyists to manipulate (definitely a bad thing).

I have an open mind on term limits, but since they exist in multiple jurisdictions why don't you show, with data, that they are leading to qualitatively different outcomes where they have been implemented?


Sad but true. In California the legislature is just a tool for the bureaucratic state to pander To itself. Legislators who fulfill the wishes of the state bureaucracy get favorable treatment on the career ladder. I often suggest we should have term limits on laws, not politicians. An absolute sunset on every law and regulation with up/down votes only, no debate, will do a lot to show whether elected public servants are on the job and who they are working for.


>easier for lobbyists

Elsewhere in this thread, the concept of lobbying is being questioned as well. Find a way to prevent this and that removes a huge chunk of the problem, in my mind. Not that I can figure out how to prevent it.

Stopping corporate donations to political campaigns would be another thing.


@shhkmo, are you proposing choosing random people off the street to be our elected officials for short terms? That is such an interesting idea!


Right? It would be like jury duty, but with a salary and amazing benefits! Brilliant!


This is why I favor making our representatives an actual representative population using random selection.

Our current selection process overwhelmingly favors white male lawyers who are good at talking corporations into giving them money for their election campaigns.


It's a noble idea that government should exist to protect consumers from corporations. But it will never work unless there is some authority that could protect the governments from the corporations.


That authority is the justice system. Corporations also have rights and they can defend them by going to court.


> The only way to prevent this is to impose fines, tariffs and penalties on businesses undertaking this behaviour (effectively disincentivising it financially), since it fundamentally unbalances the power dynamic between Government and business.

That is neither the only way, nor a particularly effective way. I think we should go back to having representatives who represent a reasonable number of people (~100-500), and who are not full time politicians. Then regulatory capture would be much more expensive and difficult.


>The only way to prevent this is to impose fines, tariffs and penalties

The ONLY solution to an abuse of power by government is more government exercise of power? How about limiting the powers of government to remove the "direct incentive to lobby"?


So they only players left are the large corporations? I don't think you can have thought this through, so I'll take you through it:

Nation states are social constructs, whereby some people collectively lay claim to some land, and have their claim recognised by all the other states. In order to be able to do this, a key thing you must be able to do is defend your patch of land. This requires some sort of military, who will need paying. You can further entrench your position and standing amongst the group of nation states by doing trade with them. The greater your economic output, the more likely the are to treat you well, be your ally, and do trade with you in return.

However, keeping a military, and generating power and providing infrastructure to enable economic activity (roads, ports, airports, healthcare(?), fire, police etc.) costs money, and to raise this money, the state charges people tax. All states raise money via taxes, and it's the predominant way they do raise money. So there's the question, who do you tax, and how much? Do you tax everyone the same (a poll tax), or do you tax people who have less money less? Or people who have more money less? The power to decide who pays is one of the key roles of Government, and one of the main expressions of Government power.

I would be interested to hear how you would see a limitation of the powers of Government, by which I assume you mean limiting their ability to set tax law would work.


Thanks for "taking me through that." Never thought about that before now.

Let me take you through your scenario.. you give government increasing power to censure corporations it doesn't like, effectively making it kingmaker of the economy. You end up with something like China where every company is state-sanctioned, and there is widespread graft and corruption.


My point is not about increasing or decreasing the power of Government (in a democracy, Government power cannot really be 'increased' or 'decreased', but it can be concentrated or spread out though). The Chinese Government is not a democracy, so not really relevant to this discussion.


>in a democracy, Government power cannot really be 'increased' or 'decreased', but it can be concentrated or spread out though

What is the point of a constitution then?


The people of Ireland have democracy, perhaps they have different views on taxation than you do.

It may come as a surprise to you but some people aren't so greedy as to believe that they are entitled to the fruits of other's labour.


Most Irish citizens had no idea about the extend of this.


I think most Irish people are aware that the primary appeal of the country to multinationals is as a tax-efficient English-speaking common law bridge into the EU, in approximately that order. The specific amounts flowing across the bridge, no, I don't think people are generally aware of the numbers.

But because it is a bridge, we Irish don't really have a strong claim on that money: the revenue was generated somewhere else, and it's going somewhere else, it's just resting in Ireland for a while.

There's a bunch of hypocritical talk from other EU countries criticising Irish tax rates, all the while having lots of carveouts and tax breaks of their own that reduce supposedly high rates to nearly nothing in various deals. For example, France has an effective rate of about 8% on profits for companies in the the CAC40. Luxembourg is much worse, it's practically a tax haven that avoids being listed as such somehow, probably down to location.

In principle I'm in favour of something like the common consolidated corporate tax base. The problem with taxing multinationals comes down to game theory: if there's a common market between countries, there's a race to the bottom in tax rates for hosting multinationals. So there needs to be a pact.


So what you're saying is their corporate tax law wasn't enough of a concern to them to actually read it?


Come on fleitz, are you genuinely suggesting it is the responsibility of every citizen to have read through their tax code?

If you are, are you going to tell us with a straight face that you've read the US'?

https://en.wikipedia.org/wiki/Internal_Revenue_Code

http://www.slate.com/articles/news_and_politics/politics/201...

It's about 3,500 pages long, written in esoteric accountant speak. Considering that in the USA "32 million adults in the U.S. can’t read. That’s 14 percent of the population. 21 percent of adults in the U.S. read below a 5th grade level, and 19 percent of high school graduates can’t read," I think it's an unfair burden to place on a population.

https://www.huffingtonpost.com/2013/09/06/illiteracy-rate_n_...


I do agree that the tax code should be simplified, I would advocate for a flat tax with a high personal deduction and few other deductions. The voters seem to disagree with me and prefer the complicated system currently in place.

It would seem to me that with compulsory education everyone was afforded an opportunity to learn to read and write, if they choose ignorance I would not say it's an unfair burden. I managed to learn to read and write before my compulsory education began. Using this rare and mysterious ability I incurred about a dollar fifty in late fees at the library and became very well educated. I do find most people to be quite ignorant, but I must respect their choice to remain ignorant while surrounded by knowledge.

It's certainly an unfair burden if they were never afforded an opportunity to learn, however, in the United States I think you'd have to agree that if you don't know how to read and write it's a matter of personal choice rather than lack of opportunity.

I don't personally know the tax code as well as I'd like as it's not my area of expertise but I do consult with those much more well versed in it.


>I managed to learn to read and write before my compulsory education began.

>Using this rare and mysterious ability I incurred about a dollar fifty in late fees at the library and became very well educated.

>with compulsory education everyone was afforded an opportunity to learn to read and write,

I have enough respect for your intelligence that to expect if you're here, you're aware of the vast educational chasms between the privileged and unprivileged. Basically, I'm confident you're aware that your experience is not necessarily the norm for every American. With that in mind, I'm curious why you still maintain such high expectations for tax code knowledge, especially considering all the evidence to the contrary of American financial literacy.


> I think it's an unfair burden to place on a population.

If the population is unable to read the code that is used to relieve them of wealth, something is off--in both their own ignorance and in their inability to appoint people they trust to handle that for them.


Given that it's the government's responsibility to educate its populace, wouldn't it then be the government's responsibility in the end?


This was not a law but a secret bespoke areangement.


That seems unsupported by the article, in 2015 Ireland changed its laws, Apple consulted a law firm on advice on how to proceed and sought assurances from the govts involved that it's understanding of the law was correct.

Where is this agreement you speak of?


This is a little off topic but the question will help me parse your posts better.

Is there any situation you can imagine where Apple, or any corporation, could have done anything wrong when it comes to how it pays taxes?


Of course there is, this is what tax evasion is about. There's a decent case to be made that the Apple and Ireland were wrong in Apple following Ireland's tax code, we'll see how the case turns out on appeal.

I would say that when the sovereign is in agreement the payment of taxes that it can't be construed as evasion, however, I'm not super well versed on how much of a sovereign Ireland really is given it's membership in the EU. Perhaps the EU is the real sovereign in this case and Apple has erred in consulting with the Irish government who lacks authority to set tax policy in its territory.


The case has nothing to do with Ireland's authority to set tax policy


The case against Apple is not about Double Irish, is about a secret agreement with Irish Government on how to account the revenue in Ireland


"some people aren't so greedy as to believe that they are entitled to the fruits of other's labour."

There is a distinct and strong sense of unaware irony in this comment.


>Here in America we've made our decision - profit rules above all else. It is more profitable to lobby congress than it is to upgrade a refinery, it's more profitable to auto-deny every health insurance claim than it is to provide the services your customers think they're paying for, it's more profitable to avoid taxes than not (as long as you can avoid breaking the law TOO hard).

This is not the decision "we've made in America". What you're describing is the behavior of some giant companies. There are millions of small to medium sized businesses that operate within the rules just fine and don't use the "corrupt the politicians" move as part of their business strategy.


If you unplugged the government's board (or given decision-making apparatus) and plugged in a (currently nonexistent) AI with the parameter "Maximize Power of Government," would you see a different result? I think not.

-----

My point is that you are implying government is the alternative ("they will govern morally! academics will keep them in check! journalists will keep them in check!") then you need to rethink your conclusions


Didn't see that implication. Isn't the more obvious solution to have a mixture of effective government and business? We're not talking about going from capitalism to communism, we're asking one of the wealthiest companies in the world to pay their fair share of taxes like the person making $40k does. It's not either or.


>if you are implying government is the alternative

I implied nothing on purpose, though I understand people will find meaning in other's words on their own.

What sort of solutions do you have in mind, if not governmental? Or do you not think solutions are necessary (that this isn't a problem)?


We The People don't have any other suitable mechanisms to reign in businesses. I'm a citizen first, and a buyer of stuff and owner of shares a distant, distant second.

The laws, that I get to, in at least some way, help craft as a citizen of a country are the only real voice I can meaningfully exert, far more than a boycott or trying to buy shares and sit on a board. And that's a power every voter has.

Heck yeah I want to maximize the government's power to make a better life for me and everyone else--the corp's not looking out for us, but we are.


Government, by definition, has total power over it's space. That power is systematically reduced by the law (every positive individual right is a restriction on government). Reductions (law) are enacted by the people (in the US, the members of Congress are "the people"). If we can speak, if we can vote, then we have, theoretically, the ability to set the dial of government power anywhere from 0 (Somalia) to totality (North Korea).

There are obvious constraints on this slider. Set the slider too low, and a weak government is vulnerable to take-over. Set too high, the people are oppressed, unhappy, and will revolt.

The West's slider is pretty firmly in the middle, although it's uneven from policy to policy (it's set very low on gun ownership; it's set very high on commercial flying).

The US Federal government could acquire far more power in a variety of ways. For example, they could federalize local law-enforcement. They could run drones within our borders, for both surveillance and assassinations. They could outlaw independent media and control all media output (a la Russia). They could require us all to carry Federal ID and require us to show this ID to any law-enforcement on-demand, for any reason. They could require us to run special DRM/tracking software in our smartphones, and fine/jail us if we remove it.


Government, by definition, has a monopoly on the legitimate use of force within its territory. But it doesn't (even in theory) have total control over its space. It's constrained by its ability to fund and apply force (military dictatorships aren't inherently stable), by its relationships with stakeholders both inside and outside its borders, and to some extent by the consent (or at least the acquiescence) of its public.

To put it in a more concrete sense, the government can decide to tax whisky at a rate of $1m per barrel. But it almost certainly doesn't have the power to enforce this against moonshiners, rights and law or otherwise.


Tighter corporate tax regulations as a slippery slope to government oppression? I'm not seeing it.


If it's some kind of representative government, then it would be "the government will push back on anything that threatens the interests of the majority." If you had a power-maximizing AI instead of politicians, it should still court voters.


Your reply is pure libertarian silliness.

The government hasn't remotely maximized its power.


How are you inferring that government is the alternative? I don't see that implication.


What’s horrifying about paying every cent of tax you are legally obligated to pay?

If i own a stock that increases 50% this year, am I doing something unethical by not selling it until january so i don’t have to pay taxes on the gain for another year?

That’s equivalent to what Apples doing. It pays all the taxes it owes in every country it does business in. It pays taxes in the US, UK, France, Germany, etc, etc, and what’s left over from the foreign profits it chooses not to bring back to the US, or leave in France, Germany, etc, etc.

Instead it moves those profits to Ireland or the Channel islands so it doesn’t have to pay more taxes on their interest every year while it waits for US corporate tax policy to no longer be so irrational so it can directly return that money to its owners, Apple shareholders.


I see your point about the bad side of capitalism, but consider that this kind of abuse is only possible because the governments allow it.

No economic system can live up to its design when corrupt governments interfere with it.


governments allow it

corrupt governments interfere with it

Are those not in opposition? Another solution is a better breed of business that doesn't see $ as the most important thing in the world, but not sure how you change that. Capitalism can and should be a conduit for innovation without outright greed.


I was working for a tech company that liked to pride itself on being "one of the good guys". They gave us pretty lavish benefits, that often seemed kind of silly, and had a massive well-designed office. Although the office was still an open office, and suffered from those aspects.

They recently had to lay off 60 of their ~200 people.

What would have been better? Should they have been greedier, given fewer benefits, and prevented the layoffs? Or should they have given more benefits, and not had layoffs, and simply collapse in bankruptcy in a couple years?

Money gives you options, and it is the tool which enables us to provide for people. I think your anti-greed position just... misses the point.


Not using a "massive well-designed office" would be a start. They probably didn't need 200 people, either.

If you will look at most tech companies, they are poorly run. Github lost $66 million in 2016 hosting code. You don't gotta be Warren Buffet to know that something is wrong with that setup.

The greed aspect comes into the everything needs to be big, because for too many companies the end goal is not the product, but money. That's greed. That's not just a failing of morality but a practical failure of building sustainable businesses.


They are in opposition in the same way 'we need to drink water to live' and 'don't drown' are in opposition.

Just because something is bad at the extremes doesn't mean it is always bad. We need a government that steps in to address the well known issues with unfettered capitalism (externalities, tragedy of the commons, etc).


You're right of course, just not sure whether the poster was saying this was due to government overreach or a lack of government action.


Nice try, but there is not much point in considering the corrupted without also taking a look at who is doing the corrupting.


Is it really "corrupting" though if the government allows it? It's wrong, but not corrupt (yet).


Except anarchism, of course.


Isn't that a board's fiduciary duty to their stockholders? To put it differently would you buy stock in a board that doesn't act this way, would a mutual fund?

Which way do you expect the mutual fund's proxies to vote when electing the board?

Multi-polar coordination (competition markets) have a lot of bad Nash-equilibrium states, but they are better than any command market in history.


No, it is not a boards fiduciary duty to maximize profits at the expense of all else for stockholders. This is a myth.

There is no legal basis for this claim.

https://hbr.org/2010/04/the-myth-of-shareholder-capitalism

So to take your differently put question, would I buy stock in a company that doesn't act this way? Hell yes I would. It means they're likely adults and not just looking out purely for the bottom line. Which tends to lead to bad results.



No, not fiduciary duty. One theoretical approach to corporate governance/management, but it's not a legal duty.

A competing theory is guaranteeing the long-term health of the company instead of short-term profits (current shareholder value). Another is being a good corporate citizen in society.

These are usually all at least in a bit of tension.

The reason shareholder value is often (almost always?) pushed at any large company is because it so often aligns with the boards' and managers' short-term goals, i.e., make lots and lots of money while the making is good.

For a long time, and perhaps even still, Amazon has been held up as an example of a company that is not especially driven by the theory of maximizing shareholder value.


To put it differently would you buy stock in a board that doesn't act this way, would a mutual fund?

YES. I don't want to maximize profit, I want sustainable profits and minimal externalities. The economic logic that says all considerations can be reduced to a single metric of utility are extremely suspect (per results from behavioral economics, in both humans and animal species), and also rest on a false utilitarian conceit of perfect foresight that leads its adherents to wildly overestimate the quality of their own judgement (which is one factor in the failure of command economies).


I will support in any business that ascribes to the 3 Ps: people, planet, profit, in that order.

If a business maximizes its dividend payouts by stiffing its workers (i.e. potentially my neighbors, friends, family), it's a shitty business and I want it to go away.

If a business maximizes its payouts by wrecking the planet (i.e. my future kids' playground), it's a shitty business and I want it to go away.

BUT, after a business looks out for its people and the planet, I want it to make as much money as possible.

Anything else, what kind of shitty life is that to live, or legacy to leave behind?


And if the law is too costly, just buy the law! Mortified.


It is easy to blame Apple (and other big companies) when the real problem is that governments are incapable of taming these companies.


Seems like we need some government-business GAN to keep each other at check...


I've never understood why is it greed to want to keep your own money, but not greed to want someone else's.


Part of the sacrifice you make to live in a stable society, governed by laws, is that you have to contribute some of your labor in the form of taxes to maintain the upkeep of that society. If you don't like it, you're free to try and eke out a living in a failed state somewhere.


We have a system of taxation. I pay my share. I expect others to pay there share. But when the other has found some legal loophole (perhaps one they helped to put in place or at least to maintain) and avoid paying their share, then yes, I'm upset and I want them to pay their share.

Why do you try to cast this as a matter of greed. Apple is getting billions of dollars in benefits from being a US-based company, directly and indirectly.


You mean you pay what the government says you owe, just like Apple does... Or are you saying that you don't claim any deductions and pay the maximum allowable by the system?


I don't have the power to entice politicians to enact loopholes which I can then take advantage of.

A ambassador might take advantage of his diplomatic immunity to commit a crime with impunity. One could say, "what's wrong with that? he was acting within the law." Or one could say, "That ambassador is a vile person and is taking advantage of the system."


Politicians offer voters various tax incentives as part of virtually every campaign.


I see where you're coming from (we're in agreeance that Apple is paying what the law says they owe), I think what people are discussing is that these loopholes probably shouldn't exist (i.e. that the spirit of the law is Apple should be paying ~30% tax on ALL profits, instead of just 50% of profits).


GP made a specific point about the fact that companies lobby for the creation of such loopholes, a point which has been made over and over in threads on this subject and even in this thread. Why are you misrepresenting their argument?


Virtually everyone lobbies for tax policy, like most everyone the policy Apple lobbies for is not the policy in existence. Tax policy is generally a major election issue and politicians offer a wide variety of policies to attract votes.

However, what I have noticed is that like Apple those who lobby for a different policy do not pay what they advocate for but rather the minimum (like Apple).

I'm asking if anyone on this thread who thinks Apple should not avail themselves of these deductions or loopholes knows of deductions or loopholes available to them that they don't take because it doesn't represent their views on tax policy.

Given the predominant view amongst those that advocate for higher taxes that paying more tax improves their lot in life it surprises me that they don't take individual action to purchase more government. For instance I think technology improves my life so I purchase a lot more than the average person.

I always find what people do to be far more instructive as to their views than what they say, the general consensus seems to me to be that paying more tax generates poor returns on investment so people minimize these costs.

I'm also wondering due to people not purchasing much lobbying if it's really as effective as they say it is, surely if a few million dollars would result in drastically higher taxes that someone would make a kickstarter to lobby for more tax and then voila a year later they're paying more tax. Could it be that increased taxes is not something that is palatable to a large segment of the populace and thus it is the votes and not lobbying dollars that results in the current tax policy?

Just wondering... is purchasing the services of lobbyists something that is not available to regular citizens and only corporations may purchase?

I've also noticed the poor spend a lot of money on lottery tickets, cigarettes, and alcohol so I surmise there is available funding amongst the great unwashed masses to purchase lobbying, however they find lotteries and various vices to be a better way to utilize their capital.


The issue is not capitalism and existing law, but the interpretation and enforcement of the law. The issue is that we have removed rational judgement from legal proceeding with regards to tax law. Its clearly demonstrable that Apple is not following the spirit of US tax law, but simply sidestepping the law by offshoring its money in this way. Does anyone with more legal expertise know of a more concise way of expressing this? Could the state simply sue apple and if they win then this establishes a new precedent for not offshoring money to dodge taxes?


A couple points here:

- The US federal government cannot sue someone for not following the spirit of the law. Thankfully.

- Per Justice Learned Hand: "Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant."

- "Offshoring" isn't the right word, because it implies that the money was in the US and moved offshore. In fact the money is from product that was sold outside of the US, and the money is remaining outside the US.


- This is really crazy sounding, but can individual or a group of individuals sue a corporation for what they view as an attempt to sidestep the law in civil court? Since the burden of proof is different in civil court?

- Did Justice Learned Hand make this statement with this type of scenario in mind where the amounts of money are on the level of an entire small country? Isn't he just talking about private citizens?

- The point is just that they didn't pay taxes, either to Ireland or to the US. To the extent that they could have paid those taxes to the US government, its still dodging taxes.


Replying to your points in order:

- No, in order to sue you must have standing, which in a super short version means that the plaintiff has to be really close to the harm, not a bystander who witnesses something.

- Obviously Apple did not not exist when Justice Hand said that, but I think he would be fine with it. Apple is complying with the letter of the law, and their responsibility on that issue goes no further. Apple is in no way obligated to pay more than what the law requires. If there is a problem with the tax law, then it is up to congress to address that.

- I guess I am less bothered by it than you are. Apple paid what it owed under the law. A lot of corporations pay 0 tax because they are set up as pass-through entities, like S Corps. Is it OK to set up a S Corp for tax reasons?


Then really I guess we need to work harder to change the letter of the law. I was under the impression when I started the conversation that the tax havens were more of a loophole or ambiguity in the law and that you could prevent this behavior by showing intent to dodge taxes but apparently it is a long standing explicit component of the law. Id be happy to read up more on the existing laws if you would be willing to provide links


I do not have any links, the best I can say is that these pieces usually reward close reading and diagramming of the facts.

My understanding (as a person who has taken a couple tax law classes) is that it isn't an explicit law but a combination of things, all of which are reasonable, which yields what could be said to be a surprising result:

- companies pay taxes on profits

- profits = revenue - expenses

- It is OK to expense licensing of IP

- It is OK to sell IP to a subsidiary

So Apple creates a subsidiary in Jersey, transfers IP to that company, then charges the Irish subsidiary fees which are more or less equal to the revenue for selling the phones. In this way the Irish subsidiary makes no profit, so there is nothing to tax. All the profit goes to Jersey, which happens to have no tax.

It needs to be said that the money is stuck there, if Apple wants to get at the money then it would in fact be taxed depending on where it goes. So it is not even really dodging taxes, but more like delaying when they get paid (hoping for a better tax rate in the future, I suppose).

I am not even sure if US law is to blame here, it seems like the EU is the one that is upset at Apple, and Jersey is under EU law not US law.


This is not an explicit letter of the law. If they are creating a web of complex interactions to avoid paying tax at what point do we throw up our hands and call a spade a spade and say that its clear that they are just avoiding paying a tax.


USA can make it illegal probably but they will not (treaties? And /or a total breakdown of the current system.)

Should Apple pay 35% if they can legally pay 5%, with some maneuvering?

Then we can ask: Why not pay 50% since they're really profitable?


I would say that its the "with some maneuvering" that we should re-evaluate as a society. If you can demonstrate clearly (and I think its clear to everyone here that they are dodging taxes) that they are attempting to sidestep the law even though its technically legal, then we should pursue precedents that prevent this.


Where would that end? How could anyone be confident that their actions would not land them in jail, if following the letter of the law did not guarantee safety, and judges or juries could decide that their interpretation of the "spirit" of the law was enough to result in a guilty verdict?


Im not a legal person so I apologize, but how does intent play into this then. If Im climbing with someone and I accidentally drop them and they die, then I have to show that my intent wasn't to murder them right? Can't you make the same argument here, the crime is that apple didn't pay the full taxes it owed the government don't they still have to prove that their intent wasn't dodging taxes?


If the state charges you with murder, the state has to prove beyond a reasonable doubt that you intended to kill. You don't have to prove anything. And that's the way it should be.


So why can't this be a scenario of the state charging Apple with tax evasion and the state proving beyond a reasonable doubt that this was their intention?


It's not evasion. They're paying everything they're legally required to pay. If the state proves that they didn't pay what was required by law, they'll pay it, with penalties.


To the extent of the law as it currently exists, but for the artificial scenario they have created the law is ambiguous and we shouldn't expect the law to be exhaustive of every possible permutation. We should be able to use common sense judgement to say they are clearly creating these complex scenarios to just avoid paying taxes.


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