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I find it a little mystifying when people act as if revenue earned overseas ought to be contributed to US tax revenue. In the end, that kind of policy would hur

I find it a little mystifying when people act as if revenue earned overseas ought to be contributed to US tax revenue. In the end, that kind of policy would hurt the US at a time when America needs more winners like Apple and less businesses that rely on the tax base to keep their failing concerns afloat.

metaphorm 9y ago
it's still the law of the land. an individual U.S. citizen that earns income abroad still owes U.S. federal income taxes. corporations are granted legal personhood and so are responsible for their taxes in the same way an individual person is.
- toast0 9y ago
  An individual that owns shares in a foreign corporation does not owe taxes on any income the corporation generates, unless the income is distributed as a dividend or through capital gains recognized when selling the shares. It's the same for Apple, it's just more convenient for them to structure their overseas activity as an overseas corporation, than it is for most natural persons. (And they got a sweet tax deal from Ireland)
  - SomeStupidPoint 9y ago
    It would actually be like if I started an overseas corporation, gave it my laptop, and rented myself my work computer for 90% of my income each year, then wrote that off my taxes as a business expense.
- nolite 9y ago
  Or maybe you should consider the flip side, this law is fundamentally abusive and immoral, and should neither apply to corporations, nor individual citizens...
  - metaphorm 9y ago
    off topic. we can debate the law until we're blue in the face, but it really only matters if Congress is debating the law, not you and I. the reality right now is that that is the law and corporations based in the U.S. go to great lengths to avoid their legal tax burdens.
actuallyalys 9y ago
I think the argument is that a lot of it is only technically overseas revenue because Apple structured itself to avoid taxes: "The company could repatriate its vast offshore holdings — which it’s accumulated deliberately, through years of byzantine tax-dodging schemes..."
mikeyouse 9y ago
The rub comes from all of the effort they go through to make domestic income look like foreign income. It's one thing to argue local income should be taxed in the jurisdiction that it's earned in, but when you look at all the transfer pricing games these companies play in every jurisdiction, it's clear that they just wouldn't pay taxes anywhere. Edited to add example: E.g. when Apple sells an iPhone in New Zealand for say $800, they are meant to pay taxes on the difference between what the phone cost and the sales price. Except, all Apple products sold internationally need to pay Apple Sales International for their IP. This amount happens to eliminate the tax liability in every country that they sell products. So okay, then Apple Sales International should pay taxes on all of that IP licensing cash, right? Well Apple negotiated an agreement with Ireland such that all profits earned outside of Ireland are attributed to a "head office" that literally doesn't exist. So the only taxes that Apple Sales International pay are from sales in Ireland. So they can make tens of billions in profit, pay a few million in taxes and wait for a repatriation holiday to capture that money basically tax free.
- mcphage 9y ago
  > Well Apple negotiated an agreement with Ireland such that all profits earned outside of Ireland are attributed to a "head office" that literally doesn't exist Apple has 5,500 employees in Ireland.
  - galvin 9y ago
    "head office" isn't the company that employs those people, it's an entity that exists solely on their books in Ireland.
    - sfifs 9y ago
      the point your parent post is making is that creating jobs for 5500 relatively well paid people is likely worth the tax deal. Especially given if not Ireland, Apple would have stuck the deal elsewhere. Ireland is basically selling the ability to tax arbitrage. The risk they are taking is other countries might apply penalties. However going by the fact that no one has really taken any effective action, it's been a pretty smart risk.
ubernostrum 9y ago
Like the other comment says, there's a lot of "Hollywood accounting" style misdirection going on with subsidiaries in one country paying subsidiaries in another country paying subsidiaries in another country paying subsidiaries in another country... until finally the money ends up in the Caymans and Apple can claim they didn't realize a profit in any jurisdiction that charges tax on profit.
rtpg 9y ago
Could you explain how Apples cash abroad makes them "winners" in a practical sense for the country In an alternative universe, Apples profit would have been taxed, and everything would have been the same, except that they would have 2/3rd of the amount in bank than they do now. But the US govt would have a bit more resources to help build the infra/research to build more companies like Apple.
- nihonde 9y ago
  Apple pays lots of taxes in the US. It doesn't pay US taxes on money earned elsewhere. Can you articulate a sound policy for why any global company should be required to pay taxes in the US on revenues earned elsewhere? Why shouldn't the U.K., Germany, France, Japan, Korea, and China do the same?
  - rtpg 9y ago
    One of the core arguments for comprehensive corporate tax reform is that multinationals play accounting games in order to reduce it's taxable income, in ways completely detached from reality. For example, I (a Dropbox user in Japan) am somehow paying Dropbox Ireland for my services. Apple Ireland did not make Macbook Pros, so why should they be the one cashing in the revenue, when the "real" sellers are Apple US? I realize that laws are complicated, so you might want national entities or something... but in that case, given there's Apple branches in many countries, shouldn't the respective national branches collect? Part of a complication about this is that EU has a common market but far from a unified fiscal approach... but the EU paradox is not the source of all tax manipulation.
    - nihonde 9y ago
      If Japan wanted to tax Dropbox for sales to Irish businesses that are transacted in Japan, it can do so. The classic Double Irish with Dutch Sandwich is about avoiding taxes on non-US revenue in jurisdictions outside the US. That's an issue between Ireland, Holland, and the rest of the world. In no way is it able to shield a multinational from paying taxes to the IRS on revenue generated in the US. You have a similar dynamic within the US between one state's tax code and another's. I've yet to hear anyone articulate a sound case for "repatriation" (doublespeak alert) of overseas profits to the US that didn't amount to US exceptionalism.
vacri 9y ago
> In the end, that kind of policy would hurt the US at a time when America needs more winners like Apple How does it hurt the US if the policy is changed to remove tax on foreign earnings? Total change on inbound money = $0. Frankly, screw Apple. They play fast and loose with tax law, and so what if other companies do it, it's not an excuse. Particularly given their target demographic. And here in Australia, Apple makes us pay proportionately more anyway; I'd rather that extra money go to the US citizens than Apple's $250B "let' not do anything with this" money. The US budget is in dire straits, and Apple could take a 35% haircut on its ready cash and not change its behaviour a jot. They could be doing so much with that money, from tangible Gates-style global philanthropy to re-investment a la Amazon. Nope, just throw it in a bucket and crowd around saying "ooh, that's a lot!" The other big American 'winner' of this kind is Wal-mart. Amazingly explosive growth and armloads of cash, yet plenty of their employees rely on government food stamps to make ends meet. The US needs fewer of these kinds of 'winners', not more.
- brigade 9y ago
  Eh, if the US somehow forced Apple to repatriate all its international revenue, the US still wouldn't benefit from that because then there's much less incentive for Apple to reduce how much they pay in local foreign taxes. So the US would get less tax revenue from that than a repatriation holiday every decade or so. Really, the only winners would be foreign countries. I don't see why the US should change its policies to benefit Australia; aren't your own politicians capable of closing loopholes in your own laws?
  - vacri 9y ago
    > I don't see why the US should change its policies to benefit Australia How on earth did you get that out of what I wrote?
- ubernostrum 9y ago
  Generally what people propose is some type of VAT or border-adjustment tax, which taxes on the value of goods sold in a jurisdiction rather than on profits realized from the sale. The problem is many companies have gotten too used to being able to avoid taxation essentially at will, and would not take kindly to either having their products get more expensive (if they pass the entire cost on to the customer), which decreases their profits through reduced sales, or having their profits directly reduced by paying tax on sales. The tax rate they want is zero, and they've shown they'll go to extraordinary lengths trying to achieve it.

metaphorm 9y ago

it's still the law of the land. an individual U.S. citizen that earns income abroad still owes U.S. federal income taxes. corporations are granted legal personhood and so are responsible for their taxes in the same way an individual person is.

toast0 9y ago
An individual that owns shares in a foreign corporation does not owe taxes on any income the corporation generates, unless the income is distributed as a dividend or through capital gains recognized when selling the shares. It's the same for Apple, it's just more convenient for them to structure their overseas activity as an overseas corporation, than it is for most natural persons. (And they got a sweet tax deal from Ireland)
- SomeStupidPoint 9y ago
  It would actually be like if I started an overseas corporation, gave it my laptop, and rented myself my work computer for 90% of my income each year, then wrote that off my taxes as a business expense.
nolite 9y ago
Or maybe you should consider the flip side, this law is fundamentally abusive and immoral, and should neither apply to corporations, nor individual citizens...
- metaphorm 9y ago
  off topic. we can debate the law until we're blue in the face, but it really only matters if Congress is debating the law, not you and I. the reality right now is that that is the law and corporations based in the U.S. go to great lengths to avoid their legal tax burdens.

actuallyalys 9y ago

I think the argument is that a lot of it is only technically overseas revenue because Apple structured itself to avoid taxes: "The company could repatriate its vast offshore holdings — which it’s accumulated deliberately, through years of byzantine tax-dodging schemes..."

mikeyouse 9y ago

The rub comes from all of the effort they go through to make domestic income look like foreign income. It's one thing to argue local income should be taxed in the jurisdiction that it's earned in, but when you look at all the transfer pricing games these companies play in every jurisdiction, it's clear that they just wouldn't pay taxes anywhere. Edited to add example: E.g. when Apple sells an iPhone in New Zealand for say $800, they are meant to pay taxes on the difference between what the phone cost and the sales price. Except, all Apple products sold internationally need to pay Apple Sales International for their IP. This amount happens to eliminate the tax liability in every country that they sell products. So okay, then Apple Sales International should pay taxes on all of that IP licensing cash, right? Well Apple negotiated an agreement with Ireland such that all profits earned outside of Ireland are attributed to a "head office" that literally doesn't exist. So the only taxes that Apple Sales International pay are from sales in Ireland. So they can make tens of billions in profit, pay a few million in taxes and wait for a repatriation holiday to capture that money basically tax free.

mcphage 9y ago
> Well Apple negotiated an agreement with Ireland such that all profits earned outside of Ireland are attributed to a "head office" that literally doesn't exist Apple has 5,500 employees in Ireland.
- galvin 9y ago
  "head office" isn't the company that employs those people, it's an entity that exists solely on their books in Ireland.
  - sfifs 9y ago
    the point your parent post is making is that creating jobs for 5500 relatively well paid people is likely worth the tax deal. Especially given if not Ireland, Apple would have stuck the deal elsewhere. Ireland is basically selling the ability to tax arbitrage. The risk they are taking is other countries might apply penalties. However going by the fact that no one has really taken any effective action, it's been a pretty smart risk.

ubernostrum 9y ago

Like the other comment says, there's a lot of "Hollywood accounting" style misdirection going on with subsidiaries in one country paying subsidiaries in another country paying subsidiaries in another country paying subsidiaries in another country... until finally the money ends up in the Caymans and Apple can claim they didn't realize a profit in any jurisdiction that charges tax on profit.

rtpg 9y ago

Could you explain how Apples cash abroad makes them "winners" in a practical sense for the country In an alternative universe, Apples profit would have been taxed, and everything would have been the same, except that they would have 2/3rd of the amount in bank than they do now. But the US govt would have a bit more resources to help build the infra/research to build more companies like Apple.

nihonde 9y ago
Apple pays lots of taxes in the US. It doesn't pay US taxes on money earned elsewhere. Can you articulate a sound policy for why any global company should be required to pay taxes in the US on revenues earned elsewhere? Why shouldn't the U.K., Germany, France, Japan, Korea, and China do the same?
- rtpg 9y ago
  One of the core arguments for comprehensive corporate tax reform is that multinationals play accounting games in order to reduce it's taxable income, in ways completely detached from reality. For example, I (a Dropbox user in Japan) am somehow paying Dropbox Ireland for my services. Apple Ireland did not make Macbook Pros, so why should they be the one cashing in the revenue, when the "real" sellers are Apple US? I realize that laws are complicated, so you might want national entities or something... but in that case, given there's Apple branches in many countries, shouldn't the respective national branches collect? Part of a complication about this is that EU has a common market but far from a unified fiscal approach... but the EU paradox is not the source of all tax manipulation.
  - nihonde 9y ago
    If Japan wanted to tax Dropbox for sales to Irish businesses that are transacted in Japan, it can do so. The classic Double Irish with Dutch Sandwich is about avoiding taxes on non-US revenue in jurisdictions outside the US. That's an issue between Ireland, Holland, and the rest of the world. In no way is it able to shield a multinational from paying taxes to the IRS on revenue generated in the US. You have a similar dynamic within the US between one state's tax code and another's. I've yet to hear anyone articulate a sound case for "repatriation" (doublespeak alert) of overseas profits to the US that didn't amount to US exceptionalism.

vacri 9y ago

> In the end, that kind of policy would hurt the US at a time when America needs more winners like Apple How does it hurt the US if the policy is changed to remove tax on foreign earnings? Total change on inbound money = $0. Frankly, screw Apple. They play fast and loose with tax law, and so what if other companies do it, it's not an excuse. Particularly given their target demographic. And here in Australia, Apple makes us pay proportionately more anyway; I'd rather that extra money go to the US citizens than Apple's $250B "let' not do anything with this" money. The US budget is in dire straits, and Apple could take a 35% haircut on its ready cash and not change its behaviour a jot. They could be doing so much with that money, from tangible Gates-style global philanthropy to re-investment a la Amazon. Nope, just throw it in a bucket and crowd around saying "ooh, that's a lot!" The other big American 'winner' of this kind is Wal-mart. Amazingly explosive growth and armloads of cash, yet plenty of their employees rely on government food stamps to make ends meet. The US needs fewer of these kinds of 'winners', not more.

brigade 9y ago
Eh, if the US somehow forced Apple to repatriate all its international revenue, the US still wouldn't benefit from that because then there's much less incentive for Apple to reduce how much they pay in local foreign taxes. So the US would get less tax revenue from that than a repatriation holiday every decade or so. Really, the only winners would be foreign countries. I don't see why the US should change its policies to benefit Australia; aren't your own politicians capable of closing loopholes in your own laws?
- vacri 9y ago
  > I don't see why the US should change its policies to benefit Australia How on earth did you get that out of what I wrote?
ubernostrum 9y ago
Generally what people propose is some type of VAT or border-adjustment tax, which taxes on the value of goods sold in a jurisdiction rather than on profits realized from the sale. The problem is many companies have gotten too used to being able to avoid taxation essentially at will, and would not take kindly to either having their products get more expensive (if they pass the entire cost on to the customer), which decreases their profits through reduced sales, or having their profits directly reduced by paying tax on sales. The tax rate they want is zero, and they've shown they'll go to extraordinary lengths trying to achieve it.