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If it's difficult to follow my argument that's my fault. I should have been more clear about the distinction between "profits on sales in Germany" and "profits
by derriz 7y ago
If it's difficult to follow my argument that's my fault.
I should have been more clear about the distinction between "profits on sales in Germany" and "profits made by the German operation".
The $300 is the (global) profit on the sale in Germany.
The profit made by the German operation would be relatively small in this case - assuming for example that the Germany operation is purely involved in logistics and retail. These type of operations are quite low margin.
It is simply not the case that corporations can arbitrarily set the prices along the supply chain for accounting purposes. There are decades of international tax case law to determine where profits can be assigned in a global supply chain. Transfer pricing is governed very strictly.
Clearly, in this example, the German logistics and retail can only claim a very small proportion of the value - given that typically their profits are single digit percentages. The US can claim nearly all of it since it's US engineering which adds the most value (like German engineering adds the most value to a car sold in the US).
- mytailorisrich 7y ago> It is simply not the case that corporations can arbitrarily set the prices along the supply chain for accounting purposes. And yet the reality is that all those companies report virtually zero profit in countries like the UK, France, Germany, etc. I feel you are clutching at straws here.
- derriz 7y agoLogistics and distribution are low margin operations and so make small profits and so pay small amounts of corporation tax. If the operations of Apple, say, in those countries are mostly logistics and distribution, then the profits of those subsidiaries will be low. By international tax law your German subsidiary cannot charge $200 per iPhone to bring it from a port warehouse to a retail outlet. It can only book a "reasonable" or arms-length profit for it's part of getting an iPhone into the hands of a consumer. Re. clutching at straws - it doesn't contribute much to offer guesses about how confident I am with my arguments. If I were not happy with my case, I would not be putting it into writing.
- mytailorisrich 7y agoLogistics and distribution in Germany is irrelevant. What happens is that the product is re-sold from one subsidiary to the next in a way that allows to effectively locate profits arbitrarily. It is avoiding to look at reality to claim that it must be that these companies report no profits in the countries I mentioned. The reality is that this is done on purpose by clever schemes.