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Apple is able to use their Double Irish with Dutch Sandwich strategy because they can employ the army of tax lawyers and lobbyists necessary to keep the governm

Apple is able to use their Double Irish with Dutch Sandwich strategy because they can employ the army of tax lawyers and lobbyists necessary to keep the government busy. XYZ Company cannot do this. So when you see that the United States has a 35% top corporate tax rate, you need to remember Leona Helmsley's observation: We don't pay taxes. Only the little people pay taxes. That rate would be lower if it were administered fairly. It effectively is lower.

btian 10y ago
Isn't it nice that XYZ startup also doesn't make profits, thus pay $0 in tax?
- a13n 10y ago
  Hmm, no... profits are nice.
- EpicEng 10y ago
  ... Nice for whom? I'm sure xyz would love to turn a profit.
valuearb 10y ago
No it's not effectively lower, it's higher. Apple has to pay roughly 40% because it's headquartered in CA, which has a 8.9% rate. That's the rate it must pay if it repatriates overseas profits, there is little it can do to change that. other than not repatriate. The myth of Apple's low tax rate goes something like this. Let's say Apple makes $10B in profits. $5B are profits of Apple US, and $5B are profits of it's international subsidiaries. Apple pays about $450M in state income taxes on the $5B and about $1.6B in federal income taxes on the remainder (35% of the $5B minus state taxes). It also pays income taxes in every country it has a subsidiary in on the foreign $5B (let's estimate income taxes average out to 20%, or $1B), and ships the remaining $4B to Ireland for storage until such time as US tax rates aren't so onerous. Now someone looks at Apples financials and sees it paid "only" $1.6B in federal income taxes, even though it made $10B! OMG, they shout, Apple is only paying 16%, no one is paying 35%, our tax system is a LIE! But in this example, Apple paid over $3B in total income taxes, or 30%. And if it repatriates the $4B, it will pay another $1.6B in state and federal income taxes for a total tax rate nearing 50%. And this doesn't count all the other taxes Apple pays, from property taxes, sales taxes, VAT, import tariffs, etc, around the globe. The "double dutch" strategy revolved around how much value you assigned to your IP and moving that IP to tax favorable countries. It's no longer legal or used. What costs and profits Apple assigns to subsidiaries is subject to judgement and audit. But mostly it's just a smokescreen to ignore how terrible our corporate income tax system is and it's rates are among the highest in the world. Apple pays a ton of taxes. We'd be better off not taxing corporate income, so one can argue it pays too much.
- CalChris 10y ago
  The Company’s effective tax rates for 2015, 2014 and 2013 differ from the statutory federal income tax rate of 35% due primarily to certain undistributed foreign earnings, a substantial portion of which was generated by subsidiaries organized in Ireland, for which no U.S. taxes are provided when such earnings are intended to be indefinitely reinvested outside the U.S. https://www.sec.gov/Archives/edgar/data/320193/000119312515356351/d17062d10k.htm https://www.sec.gov/Archives/edgar/data/320193/0001193125153...
- revelation 10y ago
  Duh, except Apple isn't paying that foreign income tax. Apple, which has some 6,000 workers in Ireland, says its Irish units paid the parent company a licensing fee to use the intellectual property in its products. The Irish companies didn't own the IP, so they don’t owe tax on it in Ireland, Apple says, but the units will face a U.S. tax bill when they repatriate the profits. Apple expects to pay about 26 percent of its earnings in tax for the most recent fiscal year and has set aside some $32 billion to cover taxes it says it will face should overseas income be returned to the U.S. That day will never come.
  - narrowrail 10y ago
    A repatriation tax holiday is being talked about. A whole bunch. I think it's currently priced into the market.
- IkmoIkmo 10y ago
  > But mostly it's just a smokescreen to ignore how terrible our corporate income tax system is and it's rates are among the highest in the world. I think it makes sense to look at outcomes. It's a fun intellectual exercise to look at the thousands of pages of tax guidance from many tax advisors on lots of different structures within a complex tax system, and analyse the tax rates, which include some high top-end marginal rates. But at the end of the day, tax revenues as a percentage of GDP in the US are 26%. That's well below the EU (world's largest economy, biggest block of developed countries) of 35%, and well below the OECD (world's largest economies) of 34%. It's kind of a myth that the US has some of the world's highest taxes. Perhaps it has some high tax rates, but after all the exemptions and deductions etc, the result is a relatively low tax burden, about 1/3rd lower than the average of other developed countries.
adventured 10y ago
1) The rich pay most of the taxes in the US. The top 10% take home 45% of all income and pay 82% of all income taxes. The US has a very progressive taxation system overall. 2) Most large corporations pay a substantial corporate tax rate. Exxon and Chevron for decades have routinely paid over 35%. Walmart pays a 30% rate. Facebook has averaged a 32% tax rate the last five years. Boeing has averaged a 25% rate the last five years. Intel routinely pays 20% or higher. Pfizer has averaged a 22% rate the last five years. 3M has averaged a 28.6% rate the last five years. Would you like me to continue listing the tax rates of major US corporations? Because the overwhelming majority of them pay a high rate compared to the rest of the world. So much for your theories.
- maxerickson 10y ago
  How much of the federal budget does 82% of income taxes represent?
  - adventured 10y ago
    The top 0.3% of returns paid $500 billion in federal income taxes. That's from half a million total returns. For that segment, they paid an average combined tax rate of 33% (27% income tax rate) - roughly double the combined rate of the middle class in the $50k-$75k bracket (about 4x the income tax rate). That group is the $1m and over line on income returns. Also, that's just the federal income tax. Combined, the top 500,000 tax payers cover around 20% of all federal tax receipts (there are about 12-13 million, millionaire households in the US in terms of assets, excluding the value of the primary residence). The top 20.5% of returns (incomes over $100k), paid $1.27 trillion in federal income taxes out of the $1.35 trillion total for all returns. That group paid a total of $2.15 trillion in federal taxes. That's out of about $3.2 trillion in total federal tax receipts for that year. So the top 20% of tax payers, are providing around 67% of all federal taxes. Now by comparison: The $40k to $50k income bracket, has 14 million returns and $640 billion in income. On that income, they paid $4 billion in federal income taxes, or a 0.7% average federal income tax rate. That group paid a total combined (all federal taxes) of $75 billion, or a 11.7% average rate for all federal taxes paid by that group (eg including things like Social Security). The $50k to $75k income bracket, has 25.5 million tax filers, with a combined income of $1.56 trillion. On that $1.56 trillion, they paid ... $59 billion in federal income taxes, or a 3.8% average federal income tax rate. Need I say more?

btian 10y ago

Isn't it nice that XYZ startup also doesn't make profits, thus pay $0 in tax?

a13n 10y ago
Hmm, no... profits are nice.
EpicEng 10y ago
... Nice for whom? I'm sure xyz would love to turn a profit.

valuearb 10y ago

No it's not effectively lower, it's higher. Apple has to pay roughly 40% because it's headquartered in CA, which has a 8.9% rate. That's the rate it must pay if it repatriates overseas profits, there is little it can do to change that. other than not repatriate. The myth of Apple's low tax rate goes something like this. Let's say Apple makes $10B in profits. $5B are profits of Apple US, and $5B are profits of it's international subsidiaries. Apple pays about $450M in state income taxes on the $5B and about $1.6B in federal income taxes on the remainder (35% of the $5B minus state taxes). It also pays income taxes in every country it has a subsidiary in on the foreign $5B (let's estimate income taxes average out to 20%, or $1B), and ships the remaining $4B to Ireland for storage until such time as US tax rates aren't so onerous. Now someone looks at Apples financials and sees it paid "only" $1.6B in federal income taxes, even though it made $10B! OMG, they shout, Apple is only paying 16%, no one is paying 35%, our tax system is a LIE! But in this example, Apple paid over $3B in total income taxes, or 30%. And if it repatriates the $4B, it will pay another $1.6B in state and federal income taxes for a total tax rate nearing 50%. And this doesn't count all the other taxes Apple pays, from property taxes, sales taxes, VAT, import tariffs, etc, around the globe. The "double dutch" strategy revolved around how much value you assigned to your IP and moving that IP to tax favorable countries. It's no longer legal or used. What costs and profits Apple assigns to subsidiaries is subject to judgement and audit. But mostly it's just a smokescreen to ignore how terrible our corporate income tax system is and it's rates are among the highest in the world. Apple pays a ton of taxes. We'd be better off not taxing corporate income, so one can argue it pays too much.

CalChris 10y ago
The Company’s effective tax rates for 2015, 2014 and 2013 differ from the statutory federal income tax rate of 35% due primarily to certain undistributed foreign earnings, a substantial portion of which was generated by subsidiaries organized in Ireland, for which no U.S. taxes are provided when such earnings are intended to be indefinitely reinvested outside the U.S. https://www.sec.gov/Archives/edgar/data/320193/000119312515356351/d17062d10k.htm https://www.sec.gov/Archives/edgar/data/320193/0001193125153...
revelation 10y ago
Duh, except Apple isn't paying that foreign income tax. Apple, which has some 6,000 workers in Ireland, says its Irish units paid the parent company a licensing fee to use the intellectual property in its products. The Irish companies didn't own the IP, so they don’t owe tax on it in Ireland, Apple says, but the units will face a U.S. tax bill when they repatriate the profits. Apple expects to pay about 26 percent of its earnings in tax for the most recent fiscal year and has set aside some $32 billion to cover taxes it says it will face should overseas income be returned to the U.S. That day will never come.
- narrowrail 10y ago
  A repatriation tax holiday is being talked about. A whole bunch. I think it's currently priced into the market.
IkmoIkmo 10y ago
> But mostly it's just a smokescreen to ignore how terrible our corporate income tax system is and it's rates are among the highest in the world. I think it makes sense to look at outcomes. It's a fun intellectual exercise to look at the thousands of pages of tax guidance from many tax advisors on lots of different structures within a complex tax system, and analyse the tax rates, which include some high top-end marginal rates. But at the end of the day, tax revenues as a percentage of GDP in the US are 26%. That's well below the EU (world's largest economy, biggest block of developed countries) of 35%, and well below the OECD (world's largest economies) of 34%. It's kind of a myth that the US has some of the world's highest taxes. Perhaps it has some high tax rates, but after all the exemptions and deductions etc, the result is a relatively low tax burden, about 1/3rd lower than the average of other developed countries.

adventured 10y ago

1) The rich pay most of the taxes in the US. The top 10% take home 45% of all income and pay 82% of all income taxes. The US has a very progressive taxation system overall. 2) Most large corporations pay a substantial corporate tax rate. Exxon and Chevron for decades have routinely paid over 35%. Walmart pays a 30% rate. Facebook has averaged a 32% tax rate the last five years. Boeing has averaged a 25% rate the last five years. Intel routinely pays 20% or higher. Pfizer has averaged a 22% rate the last five years. 3M has averaged a 28.6% rate the last five years. Would you like me to continue listing the tax rates of major US corporations? Because the overwhelming majority of them pay a high rate compared to the rest of the world. So much for your theories.

maxerickson 10y ago
How much of the federal budget does 82% of income taxes represent?
- adventured 10y ago
  The top 0.3% of returns paid $500 billion in federal income taxes. That's from half a million total returns. For that segment, they paid an average combined tax rate of 33% (27% income tax rate) - roughly double the combined rate of the middle class in the $50k-$75k bracket (about 4x the income tax rate). That group is the $1m and over line on income returns. Also, that's just the federal income tax. Combined, the top 500,000 tax payers cover around 20% of all federal tax receipts (there are about 12-13 million, millionaire households in the US in terms of assets, excluding the value of the primary residence). The top 20.5% of returns (incomes over $100k), paid $1.27 trillion in federal income taxes out of the $1.35 trillion total for all returns. That group paid a total of $2.15 trillion in federal taxes. That's out of about $3.2 trillion in total federal tax receipts for that year. So the top 20% of tax payers, are providing around 67% of all federal taxes. Now by comparison: The $40k to $50k income bracket, has 14 million returns and $640 billion in income. On that income, they paid $4 billion in federal income taxes, or a 0.7% average federal income tax rate. That group paid a total combined (all federal taxes) of $75 billion, or a 11.7% average rate for all federal taxes paid by that group (eg including things like Social Security). The $50k to $75k income bracket, has 25.5 million tax filers, with a combined income of $1.56 trillion. On that $1.56 trillion, they paid ... $59 billion in federal income taxes, or a 3.8% average federal income tax rate. Need I say more?