5 ms·

I think they are often engaged in illegal activities but it is difficult to prove it. A company and its subsidiaries are different entities and when you do an I

I think they are often engaged in illegal activities but it is difficult to prove it. A company and its subsidiaries are different entities and when you do an IP transfer between them where a huge set of patent and trademark is exchanged for 1 euros and then used back for millions, one of the company has been wronged. Try to do the same shenanigan with a LTD and yourself and you will very fast see what the IRS (or equivalent) think of it. A company is just a legal construction but we let people transgress the legal constrains that should rule its behavior.

improbable22 9y ago
Maybe the problem is in trying at all to tax something you can't pin down, like this IP transfer between (say) Apple Germany and Apple US. I mean what should its value be? Clearly Apple Germany is nothing at all like an independent company importing phones from China to sell. Much of what they sell is the software, the image, the brand... these things don't have open-market prices. So who gets to decide what their price is? Apple's accountant? Some bureaucrat? The much simpler solution is not to bother taxing these things you can't see. Why don't we set the corporate profit tax to zero, and then this whole argument goes away. Tax is collected every time they sell a computer in Germany. Tax is collected every time they employ someone. Tax is collected every time someone sells shares and profits. These seem like good things to tax, as they involve actual people and take place unambiguously in particular countries. If you'd like to collect more tax, then by all means adjust the rates.
- johannes1234321 9y ago
  This would mean that immaterial things won't have a worth in the book keeping way and can't be billed. In simple terms what happens is that Apple Europe, Inc. has to pay a lot for the license to use the Apple logo and trademark to Apple Paradise, Inc. Thus Apple Europe, Inc. doesn't have profits, while Apple Paradise, Inc. has all the profits. Now the value of the logo and trademark are artificial ... What's needed are international agreements how to handle those licenses, that you can't simply push them to tax heavens, but tax has to be paid where they are created or used or whatever.
  - improbable22 9y ago
    But this is exactly what happens now. And this is what the letter is upset about. He thinks Apple Europe Gmbh. made profit, and Apple's accountants say Apple Paradise Inc. made the profit, and we all think Apple Cupertino made the profit. And I don't see a good way to settle the argument, thus I suggest not having it. "tax has to be paid where they are created or used" Yes exactly. When they sell a cool computer for E2000, they have used their brand to sell it, and there tax is collected. The sale took place in an apple store in Berlin. Angela can adjust the tax rate to anything she pleases. And to create that brand, they had to pay some guy $200K to write jingles, and this transaction is also taxed. This guy works in a spaceship which has landed in San Francisco. Donald can adjust this rate to anything he pleases. Neither of these ends can easily move to a tax haven. Everything in between happens in the financial equivalent of the cloud. It seems to me a fool's errand to argue about which bits of that cloud were in whose territory. Anyway I will shut up now!
    - toyg 9y ago
      > Apple's accountants say Apple Paradise Inc. made the profit ... because they offset all local profits to expenses incurred in licensing the brand. > When they sell a cool computer for E2000, they have used their brand to sell it, and there tax is collected. But tax is supposed to be collected there and it's not, because Apple accountants immediately declare all profits as debits towards AParadise, so there is $0 profit. That $2000 laptop is now sold at cost, so there is nothing to tax - unless you start taxing expenses, and good luck with that (you'll kill half the economy overnight). All profit goes to AParadise, and the European economy is now at net negative: it pays for the roads that Apple trucks use to deliver their China-made wares, it pays for the social security that frees disposable income for Euro citizens to buy laptops, and in exchange it gets a big fat $0. The solution is to do away with the "IP licensing" regime altogether, or tax it at absurd rates to discourage these moves. Otherwise you might as well give up and turn into Somalia.
      - improbable22 9y ago
        Of the E2000 the customer paid, about E400 is tax right away. That's far from nothing. You could argue it should be higher, or lower. It's frequently adjusted. My point is that this transaction is what certainly happened in Germany. Taxing this is very clear, transparent, and fair. Whether or not the global empire turned a profit that quarter (maybe you bought a Samsung!), and which bits of the global empire were losing money or making money... and which bits are independent or not really independent... these are much harder to pin down, perhaps impossible. And attempting to do so (as we do now) encourages all sorts of strange behaviour, which requires lots of fancy lawyers, and can't be copied by smaller competitors. I don't know why we do this. I'm very much not arguing for zero taxes, I do not want to live in Somalia. I'm arguing for a tax system which doesn't reward stupid tricks --- the financial equivalent of moving your email server 100m across some border. Instead of ever stricter rules about where your server is located, we just have to get used to the idea that the cloud exists, and if the cloud is in Somalia or on the moon who cares? It's where the human beings are that matters.
- rtpg 9y ago
  Here's a solution: if you sell your IP to someone else, that other person has to be independent. This is done a lot in anti-trust settlements. You can sell your IP to Apple Germany, but then Apple Germany is independent and could go sell that/licence that however they see fit. Including selling to competitors of Apple US. If you're transferring IP but the receiving organisation is basically under your control.... are you really transferring anything?
sseveran 9y ago
This is just downright false. There is an entire field inside the tax world called transfer pricing. You cannot just transfer significant IP to a foreign entity for $1 and expect that you will only need to pay tax on that $1. The IRS will come up with its own determination of what the value of the transferred asset is if it disagrees with your valuation and assess taxes based upon that. Now companies and the IRS frequently disagree on what the value should be and do end up in court. Law firms have teams of in-house economists to build defensible models of what the value of the transferred asset should be. Additionally the OECD has issued significant guidance on the topic.
- DomreiRoam 9y ago
  If we had a way to have a realistic transfer pricing we wouldn't have the result that we have now where systematically groups make the biggest profits in countries with low taxation. If we look Apple group, their most productive employee are all based in small island nations. So on an Iphone, conceived in the US, made in china, sold in EU the biggest share of the profits is made in Bermuda or tax heaven?
  - sseveran 9y ago
    I don't see what is not realistic about it. We are talking about things which are incredibly difficult to value because there is no market for them to set a competitive price. In your Apple example the most productive employees are all in the US not island nations. If the money is being held by on overseas subsidiary then Apple can't use the money as it otherwise would if it could freely cross borders.
    - mariozivic 9y ago
      There was an article exlaining how they get that money back in U.S. tax-free. Something along the lines of geting a loan from the bank against deposit by their pardise subsidiary. Also, the money owned by the subsidiary is allegedly in NY bansk, not some small paradise banks.

improbable22 9y ago

Maybe the problem is in trying at all to tax something you can't pin down, like this IP transfer between (say) Apple Germany and Apple US. I mean what should its value be? Clearly Apple Germany is nothing at all like an independent company importing phones from China to sell. Much of what they sell is the software, the image, the brand... these things don't have open-market prices. So who gets to decide what their price is? Apple's accountant? Some bureaucrat? The much simpler solution is not to bother taxing these things you can't see. Why don't we set the corporate profit tax to zero, and then this whole argument goes away. Tax is collected every time they sell a computer in Germany. Tax is collected every time they employ someone. Tax is collected every time someone sells shares and profits. These seem like good things to tax, as they involve actual people and take place unambiguously in particular countries. If you'd like to collect more tax, then by all means adjust the rates.

johannes1234321 9y ago
This would mean that immaterial things won't have a worth in the book keeping way and can't be billed. In simple terms what happens is that Apple Europe, Inc. has to pay a lot for the license to use the Apple logo and trademark to Apple Paradise, Inc. Thus Apple Europe, Inc. doesn't have profits, while Apple Paradise, Inc. has all the profits. Now the value of the logo and trademark are artificial ... What's needed are international agreements how to handle those licenses, that you can't simply push them to tax heavens, but tax has to be paid where they are created or used or whatever.
- improbable22 9y ago
  But this is exactly what happens now. And this is what the letter is upset about. He thinks Apple Europe Gmbh. made profit, and Apple's accountants say Apple Paradise Inc. made the profit, and we all think Apple Cupertino made the profit. And I don't see a good way to settle the argument, thus I suggest not having it. "tax has to be paid where they are created or used" Yes exactly. When they sell a cool computer for E2000, they have used their brand to sell it, and there tax is collected. The sale took place in an apple store in Berlin. Angela can adjust the tax rate to anything she pleases. And to create that brand, they had to pay some guy $200K to write jingles, and this transaction is also taxed. This guy works in a spaceship which has landed in San Francisco. Donald can adjust this rate to anything he pleases. Neither of these ends can easily move to a tax haven. Everything in between happens in the financial equivalent of the cloud. It seems to me a fool's errand to argue about which bits of that cloud were in whose territory. Anyway I will shut up now!
  - toyg 9y ago
    > Apple's accountants say Apple Paradise Inc. made the profit ... because they offset all local profits to expenses incurred in licensing the brand. > When they sell a cool computer for E2000, they have used their brand to sell it, and there tax is collected. But tax is supposed to be collected there and it's not, because Apple accountants immediately declare all profits as debits towards AParadise, so there is $0 profit. That $2000 laptop is now sold at cost, so there is nothing to tax - unless you start taxing expenses, and good luck with that (you'll kill half the economy overnight). All profit goes to AParadise, and the European economy is now at net negative: it pays for the roads that Apple trucks use to deliver their China-made wares, it pays for the social security that frees disposable income for Euro citizens to buy laptops, and in exchange it gets a big fat $0. The solution is to do away with the "IP licensing" regime altogether, or tax it at absurd rates to discourage these moves. Otherwise you might as well give up and turn into Somalia.
    - improbable22 9y ago
      Of the E2000 the customer paid, about E400 is tax right away. That's far from nothing. You could argue it should be higher, or lower. It's frequently adjusted. My point is that this transaction is what certainly happened in Germany. Taxing this is very clear, transparent, and fair. Whether or not the global empire turned a profit that quarter (maybe you bought a Samsung!), and which bits of the global empire were losing money or making money... and which bits are independent or not really independent... these are much harder to pin down, perhaps impossible. And attempting to do so (as we do now) encourages all sorts of strange behaviour, which requires lots of fancy lawyers, and can't be copied by smaller competitors. I don't know why we do this. I'm very much not arguing for zero taxes, I do not want to live in Somalia. I'm arguing for a tax system which doesn't reward stupid tricks --- the financial equivalent of moving your email server 100m across some border. Instead of ever stricter rules about where your server is located, we just have to get used to the idea that the cloud exists, and if the cloud is in Somalia or on the moon who cares? It's where the human beings are that matters.
rtpg 9y ago
Here's a solution: if you sell your IP to someone else, that other person has to be independent. This is done a lot in anti-trust settlements. You can sell your IP to Apple Germany, but then Apple Germany is independent and could go sell that/licence that however they see fit. Including selling to competitors of Apple US. If you're transferring IP but the receiving organisation is basically under your control.... are you really transferring anything?

sseveran 9y ago

This is just downright false. There is an entire field inside the tax world called transfer pricing. You cannot just transfer significant IP to a foreign entity for $1 and expect that you will only need to pay tax on that $1. The IRS will come up with its own determination of what the value of the transferred asset is if it disagrees with your valuation and assess taxes based upon that. Now companies and the IRS frequently disagree on what the value should be and do end up in court. Law firms have teams of in-house economists to build defensible models of what the value of the transferred asset should be. Additionally the OECD has issued significant guidance on the topic.

DomreiRoam 9y ago
If we had a way to have a realistic transfer pricing we wouldn't have the result that we have now where systematically groups make the biggest profits in countries with low taxation. If we look Apple group, their most productive employee are all based in small island nations. So on an Iphone, conceived in the US, made in china, sold in EU the biggest share of the profits is made in Bermuda or tax heaven?
- sseveran 9y ago
  I don't see what is not realistic about it. We are talking about things which are incredibly difficult to value because there is no market for them to set a competitive price. In your Apple example the most productive employees are all in the US not island nations. If the money is being held by on overseas subsidiary then Apple can't use the money as it otherwise would if it could freely cross borders.
  - mariozivic 9y ago
    There was an article exlaining how they get that money back in U.S. tax-free. Something along the lines of geting a loan from the bank against deposit by their pardise subsidiary. Also, the money owned by the subsidiary is allegedly in NY bansk, not some small paradise banks.