3 ms·

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 t

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 10y 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 10y ago
  "head office" isn't the company that employs those people, it's an entity that exists solely on their books in Ireland.
  - sfifs 10y 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.
    - erichocean 10y ago
      > creating jobs for 5500 relatively well paid people Apple has made almost $10 million per employee with those tax savings. Maybe not the fairest of trades?
gozur88 10y ago
>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. Why does it matter to New Zealand whether or not Apple pays taxes in Ireland?
- ubernostrum 10y ago
  New Zealand (or any other country) would like to say that you pay tax equal to some percentage of the profit on iPhones sold in New Zealand (or whatever country is trying to tax them). Apple would like to route the money around between its subsidiaries in order to say "well, we actually made zero dollars of profit from selling iPhones in New Zealand this year, so we won't be paying you any tax". The fact that the money ends up in places where Apple pays very little tax or even zero tax on the profit is just rubbing salt in the wound. This is the kernel of usefulness in the border adjustment tax Trump has tried to propose a few times. His version of it is way off from the original idea, but the original idea -- to replace "tax profit made here" with "tax sales made here" -- is sound. You can hide the existence of profit all sorts of ways, but it's much harder to hide the existence of a sale, and bordering on impossible to hide the existence of millions of sales.
  - gozur88 10y ago
    That's opening quite a can of worms, though, isn't it? If I were selling a product that was barely breaking even, would you have the government tax me into a loss?
    - ubernostrum 10y ago
      Many countries already have VAT. And in the US, state and local governments levy taxes on a percentage of sales, which are paid by the buyer. If this were going to massacre gigantic numbers of businesses, or cause the number of people willing to go into business to drop to zero, it would have already and we'd have noticed. So if a tax on money made from selling products is what's desired, this -- rather than an avoidable tax on profit -- is a way to do it.
nolite 10y ago
All that doesn't justify the US govt getting a claim to it..

mcphage 10y 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 10y ago
"head office" isn't the company that employs those people, it's an entity that exists solely on their books in Ireland.
- sfifs 10y 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.
  - erichocean 10y ago
    > creating jobs for 5500 relatively well paid people Apple has made almost $10 million per employee with those tax savings. Maybe not the fairest of trades?

gozur88 10y ago

>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. Why does it matter to New Zealand whether or not Apple pays taxes in Ireland?

ubernostrum 10y ago
New Zealand (or any other country) would like to say that you pay tax equal to some percentage of the profit on iPhones sold in New Zealand (or whatever country is trying to tax them). Apple would like to route the money around between its subsidiaries in order to say "well, we actually made zero dollars of profit from selling iPhones in New Zealand this year, so we won't be paying you any tax". The fact that the money ends up in places where Apple pays very little tax or even zero tax on the profit is just rubbing salt in the wound. This is the kernel of usefulness in the border adjustment tax Trump has tried to propose a few times. His version of it is way off from the original idea, but the original idea -- to replace "tax profit made here" with "tax sales made here" -- is sound. You can hide the existence of profit all sorts of ways, but it's much harder to hide the existence of a sale, and bordering on impossible to hide the existence of millions of sales.
- gozur88 10y ago
  That's opening quite a can of worms, though, isn't it? If I were selling a product that was barely breaking even, would you have the government tax me into a loss?
  - ubernostrum 10y ago
    Many countries already have VAT. And in the US, state and local governments levy taxes on a percentage of sales, which are paid by the buyer. If this were going to massacre gigantic numbers of businesses, or cause the number of people willing to go into business to drop to zero, it would have already and we'd have noticed. So if a tax on money made from selling products is what's desired, this -- rather than an avoidable tax on profit -- is a way to do it.

nolite 10y ago

All that doesn't justify the US govt getting a claim to it..