4 ms·

>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

by 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.
mikeyouse 10y ago
Having a limited liability corporation isn't a natural right, so part of the deal when Apple sets up a subsidiary in a country like New Zealand is that they'll follow the local laws. When they so transparently avoid their tax obligations, the New Zealanders have every right to be annoyed. If Apple New Zealand shirks their tax responsibility by taking advantage of a backdoor negotiation with Ireland, I would fully expect the local authorities to take action. If Apple's not happy with that outcome, Tim Cook can accept financial and criminal liability for anything that goes awry with Apple products in New Zealand and avoid the use of the local subsidiary.
- gozur88 10y ago
  But Apple is following the local laws. You're sidestepping the question - why does New Zealand care whether or not Apple pays Irish taxes in Ireland?
  - mikeyouse 10y ago
    It's amazing how far people go to defend these supranational corporations who are clearly in the wrong but I'll bite. Nearly every country on earth has a law on the books that voids transactions that only exist to avoid tax. Usually with penalties. It's 2am or else I'd reference the specific law in New Zealand, but the relevant case law in the US is from Gregory vs Helvering: https://en.m.wikipedia.org/wiki/Gregory_v._Helvering https://en.m.wikipedia.org/wiki/Gregory_v._Helvering It's transparently obvious that Apple's subsidiaries in Ireland and the Netherlands exist purely to evade taxes. However their lobbying and economic power have protected them for years, which may have broken recently when the EU determined that they owe $14 billion for illegal benefits (http://www.cnbc.com/2017/01/31/apple-misses-deadline-to-pay-ireland-illegal-tax-benefits.html http://www.cnbc.com/2017/01/31/apple-misses-deadline-to-pay-...). So to answer your question, New Zealand has an agreement with all of the companies that they recognize their revenue and expenses and pay tax on the difference. When Apple New Zealand says that they owe their Irish counterpart hundreds of dollars per phone for licensing, and the New Zeaand authorities see that it's an obvious tax dodge shell company, they can and should question whether those hundreds of dollars fall into form vs substance. There is no actual business purpose to pay licensing fees to an Irish subsidiary that was gifted huge amounts of Apple IP.

by gozur88 10y ago

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.

mikeyouse 10y ago

Having a limited liability corporation isn't a natural right, so part of the deal when Apple sets up a subsidiary in a country like New Zealand is that they'll follow the local laws. When they so transparently avoid their tax obligations, the New Zealanders have every right to be annoyed. If Apple New Zealand shirks their tax responsibility by taking advantage of a backdoor negotiation with Ireland, I would fully expect the local authorities to take action. If Apple's not happy with that outcome, Tim Cook can accept financial and criminal liability for anything that goes awry with Apple products in New Zealand and avoid the use of the local subsidiary.

gozur88 10y ago
But Apple is following the local laws. You're sidestepping the question - why does New Zealand care whether or not Apple pays Irish taxes in Ireland?
- mikeyouse 10y ago
  It's amazing how far people go to defend these supranational corporations who are clearly in the wrong but I'll bite. Nearly every country on earth has a law on the books that voids transactions that only exist to avoid tax. Usually with penalties. It's 2am or else I'd reference the specific law in New Zealand, but the relevant case law in the US is from Gregory vs Helvering: https://en.m.wikipedia.org/wiki/Gregory_v._Helvering https://en.m.wikipedia.org/wiki/Gregory_v._Helvering It's transparently obvious that Apple's subsidiaries in Ireland and the Netherlands exist purely to evade taxes. However their lobbying and economic power have protected them for years, which may have broken recently when the EU determined that they owe $14 billion for illegal benefits (http://www.cnbc.com/2017/01/31/apple-misses-deadline-to-pay-ireland-illegal-tax-benefits.html http://www.cnbc.com/2017/01/31/apple-misses-deadline-to-pay-...). So to answer your question, New Zealand has an agreement with all of the companies that they recognize their revenue and expenses and pay tax on the difference. When Apple New Zealand says that they owe their Irish counterpart hundreds of dollars per phone for licensing, and the New Zeaand authorities see that it's an obvious tax dodge shell company, they can and should question whether those hundreds of dollars fall into form vs substance. There is no actual business purpose to pay licensing fees to an Irish subsidiary that was gifted huge amounts of Apple IP.