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Do you think that a profit margin for Apple of 0.0275% is reasonable? Nobody questions the right amount of tax is being paid on the declared profits. People qu

Do you think that a profit margin for Apple of 0.0275% is reasonable? Nobody questions the right amount of tax is being paid on the declared profits. People question that the declared profits are actually the actual profits that the Apple operation generates in the UK without any sort of financial shenanigans, e.g. transfer pricing, etc ...

qaq 7y ago
You do realize it works this way for all goods and the only reason people single out Apple is because they have lots of $.
- b_tterc_p 7y ago
  And thus Apple is a good public target for this common problem because laypeople can better understand their financials than, say, Kraft foods.
  - qaq 7y ago
    If you want to shift to taxing on revenue you do realize will be at net loss ?
    - b_tterc_p 7y ago
      I don’t know what you’re looking for me to say here. I didn’t say anything about taxing on revenue.
- ebg13 7y ago
  I believe that that is what we call "low hanging fruit" or "bang per buck". Is there more to your position?
  - qaq 7y ago
    There is no position thats how world economy works Google is shifting profits to it's home office and HSBC is doing same thing. You start taxing Google on UK revenue US will start taxing UK companies on their US revenue.
- reallydontask 7y ago
  I'm pretty sure that Starbucks, Google, Microsoft, Amazon and, I might be mistaken here, Facebook, have all been pulled up on this type of financial engineering in the UK before. If you want to believe that these companies genuinely generate these kind of profit levels for their UK operations that's up to you, but I don't think that belief is based on evidence.
  - qaq 7y ago
    All companies shift profits to home office do you think Land Rover USA is showing profits? Or UK banks in other countries show huge local profits?
- ptah 7y ago
  small companies simply cannot pull the kinds of tricks the big corporates that have dedicated staff at HMRC can. EDIT: the big ones are not being singled out, they are the only ones doing this shady stuff
raverbashing 7y ago
Where are you getting this % from?
pjc50 7y ago
Apple's "gross margin" is 38%, so there's definitely a gap somewhere. https://finbox.com/AAPL/explorer/gross_profit_margin https://finbox.com/AAPL/explorer/gross_profit_margin
Lazare 7y ago
There is a law in the UK that defines exactly how transfer pricing works, in order to prevent abuses. Is your argument that Apple is breaking this law, or that the UK law is simply poorly drafted? If the latter, have you contacted your MP? I understand your concern about their profit margin, what I'm curious about is why you think any answers lie with Apple and not some branch of the UK government.
- reallydontask 7y ago
  As it happens, I have written to my (labour) MP, hard to see anything coming out of it since they've not been in power since 2010? To be fair, my position varies between blaming the companies for the financial shenanigans and blaming the politicians for the messy tax code, not that I said anything about this in my previous post.
- chimprich 7y ago
  > I'm curious about is why you think any answers lie with Apple and not some branch of the UK government. It appears that it's very tough for governments to stay ahead of the tax shenanigans of enormous multinational corporations with immense resources at their disposal. The UK tax laws could certainly do with improvement, but in my opinion this is deeply unethical behaviour by Apple, even if it's difficult to establish whether it's actually illegal.
- AnthonyMouse 7y ago
  The problem isn't that the law is poorly drafted, it's that the underlying premise is flawed. For example, suppose the UK operation needs money to buy inventory. One possibility is to sell its own shares. Then it has "free" money, zero borrowing cost, so it makes profits. Another possibility is to go to a lender and borrow the money at interest. Then the interest payments eat its profits. That difference in treatment is intended. The idea behind the distinction is that loan interest doesn't depend on the success of the business. If the business does poorly the investors make less profit but a lender isn't owed less interest. If the business does well the investors make more profit but a lender isn't owed more interest. That's the difference between profit and interest. But in this context the retail operation has highly predictable costs and revenues, and it's easy to adjust things in real time as sales volume increases or decreases. It's not like R&D where you have to spend for five years before you start making potential returns. So it's easy to borrow exactly the amount of money you need at market interest rates in an arms length transaction, and have the interest eat up your profits. And none of that is "wrong" -- profits come from investment. If nobody made any initial investment into the UK operation and it had to borrow all of its operating capital, it's completely expected in an efficient market that the borrowing costs would eat all its profits. The expected return (profit) on investing no money is no money. The problem isn't transfer pricing. The amount they're paying can be the amount you would pay in an arms length transaction and still have it eat all their profits. A retail operation that has taken no investment will legitimately have minimal profits.
taylodl 7y ago
But this is Apple's retail operations, not Apple Corp the maker of iGadgets. And the profit margin is 0.275%. Is that reasonable? IDK, but I imagine Apple Retail is paying near list price to Apple Corp along with the overheads of staffing and rent (which includes taxes). In light of that this may not be all that unreasonable. That's why I'm asking if I'm missing something.
- jahewson 7y ago
  > And the profit margin is 0.275%. Is that reasonable? No, that’s madness.
  - taylodl 7y ago
    Depends on the goal of Apple Retail. I don't think their primary objective is to make money. I think they should rather be viewed as more of the marketing arm of Apple Corp. They don't appear to skimp on their operations so I can see their margins being incredibly thin to the point of non-existent.
- amazingman 7y ago
  This is a fantastic point, and will almost certainly be lost in the moralistic uproar. If Apple Retail’s margins were super high, it would indicate that Apple Retail is getting a wildly, probably illegally unfair deal compared to its other retailers (e.g. Target, Best Buy).

qaq 7y ago

You do realize it works this way for all goods and the only reason people single out Apple is because they have lots of $.

b_tterc_p 7y ago
And thus Apple is a good public target for this common problem because laypeople can better understand their financials than, say, Kraft foods.
- qaq 7y ago
  If you want to shift to taxing on revenue you do realize will be at net loss ?
  - b_tterc_p 7y ago
    I don’t know what you’re looking for me to say here. I didn’t say anything about taxing on revenue.
ebg13 7y ago
I believe that that is what we call "low hanging fruit" or "bang per buck". Is there more to your position?
- qaq 7y ago
  There is no position thats how world economy works Google is shifting profits to it's home office and HSBC is doing same thing. You start taxing Google on UK revenue US will start taxing UK companies on their US revenue.
reallydontask 7y ago
I'm pretty sure that Starbucks, Google, Microsoft, Amazon and, I might be mistaken here, Facebook, have all been pulled up on this type of financial engineering in the UK before. If you want to believe that these companies genuinely generate these kind of profit levels for their UK operations that's up to you, but I don't think that belief is based on evidence.
- qaq 7y ago
  All companies shift profits to home office do you think Land Rover USA is showing profits? Or UK banks in other countries show huge local profits?
ptah 7y ago
small companies simply cannot pull the kinds of tricks the big corporates that have dedicated staff at HMRC can. EDIT: the big ones are not being singled out, they are the only ones doing this shady stuff

raverbashing 7y ago

Where are you getting this % from?

pjc50 7y ago

Apple's "gross margin" is 38%, so there's definitely a gap somewhere. https://finbox.com/AAPL/explorer/gross_profit_margin https://finbox.com/AAPL/explorer/gross_profit_margin

Lazare 7y ago

There is a law in the UK that defines exactly how transfer pricing works, in order to prevent abuses. Is your argument that Apple is breaking this law, or that the UK law is simply poorly drafted? If the latter, have you contacted your MP? I understand your concern about their profit margin, what I'm curious about is why you think any answers lie with Apple and not some branch of the UK government.

reallydontask 7y ago
As it happens, I have written to my (labour) MP, hard to see anything coming out of it since they've not been in power since 2010? To be fair, my position varies between blaming the companies for the financial shenanigans and blaming the politicians for the messy tax code, not that I said anything about this in my previous post.
chimprich 7y ago
> I'm curious about is why you think any answers lie with Apple and not some branch of the UK government. It appears that it's very tough for governments to stay ahead of the tax shenanigans of enormous multinational corporations with immense resources at their disposal. The UK tax laws could certainly do with improvement, but in my opinion this is deeply unethical behaviour by Apple, even if it's difficult to establish whether it's actually illegal.
AnthonyMouse 7y ago
The problem isn't that the law is poorly drafted, it's that the underlying premise is flawed. For example, suppose the UK operation needs money to buy inventory. One possibility is to sell its own shares. Then it has "free" money, zero borrowing cost, so it makes profits. Another possibility is to go to a lender and borrow the money at interest. Then the interest payments eat its profits. That difference in treatment is intended. The idea behind the distinction is that loan interest doesn't depend on the success of the business. If the business does poorly the investors make less profit but a lender isn't owed less interest. If the business does well the investors make more profit but a lender isn't owed more interest. That's the difference between profit and interest. But in this context the retail operation has highly predictable costs and revenues, and it's easy to adjust things in real time as sales volume increases or decreases. It's not like R&D where you have to spend for five years before you start making potential returns. So it's easy to borrow exactly the amount of money you need at market interest rates in an arms length transaction, and have the interest eat up your profits. And none of that is "wrong" -- profits come from investment. If nobody made any initial investment into the UK operation and it had to borrow all of its operating capital, it's completely expected in an efficient market that the borrowing costs would eat all its profits. The expected return (profit) on investing no money is no money. The problem isn't transfer pricing. The amount they're paying can be the amount you would pay in an arms length transaction and still have it eat all their profits. A retail operation that has taken no investment will legitimately have minimal profits.

taylodl 7y ago

But this is Apple's retail operations, not Apple Corp the maker of iGadgets. And the profit margin is 0.275%. Is that reasonable? IDK, but I imagine Apple Retail is paying near list price to Apple Corp along with the overheads of staffing and rent (which includes taxes). In light of that this may not be all that unreasonable. That's why I'm asking if I'm missing something.

jahewson 7y ago
> And the profit margin is 0.275%. Is that reasonable? No, that’s madness.
- taylodl 7y ago
  Depends on the goal of Apple Retail. I don't think their primary objective is to make money. I think they should rather be viewed as more of the marketing arm of Apple Corp. They don't appear to skimp on their operations so I can see their margins being incredibly thin to the point of non-existent.
amazingman 7y ago
This is a fantastic point, and will almost certainly be lost in the moralistic uproar. If Apple Retail’s margins were super high, it would indicate that Apple Retail is getting a wildly, probably illegally unfair deal compared to its other retailers (e.g. Target, Best Buy).