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The UK already has an 18% GST rate, which is equivalent to an 18% tax on revenues. In 2020, Apple had revenues of $274B and pre-tax net income of $67B. On whi
by rmah 5y ago
The UK already has an 18% GST rate, which is equivalent to an 18% tax on revenues. In 2020, Apple had revenues of $274B and pre-tax net income of $67B. On which, they paid $10B in income tax (a 15% rate).
Apple revenues in the UK was about $2B. Which means Apple is already paying $360mil in GST tax to the UK gov. Apple also paid some amount of wage, income, real-estate and other taxes.
Let's imagine companies had to pay income tax on a pro-rated, point-of-sales basis. Thus, apple's pre-tax income for the UK would be 2/274 * 67 = $500M. At a 20% income tax rate, this would net the UK gov an additional $100M.
This is why they want this sort of thing. It has nothing to do with fairness. The US gov is generally opposed to pro-rating profits based on location of sales. Because the US tax code allows companies to effectively deduct foreign taxes from net income, income taxes paid overseas has the effect of reducing income tax paid to the US gov.
- dragonwriter 5y ago> The UK already has an 18% GST rate, which is equivalent to an 18% tax on revenues. No, GST is a VAT (in fact, the UK’s is called a VAT, not a GST), which is not the same as a revenue tax.
- saddlerustle 5y agoThe majority of Apple's sales is to consumers, so it's equivalent for the sake of argument.
- dragonwriter 5y agoIts not equivalent to a revenue tax, because a VAT excludes purchase price and revenue doesn’t.
- deleted 5y ago[deleted]
- saddlerustle 5y agoI'm not sure what you mean. If you assume all sales were to consumers it's true that the government receives ~~18% of Apple's revenue compared to if Apple sold nothing. Or are you just referring to the small difference between counting "revenue" as inclusive of VAT or exclusive of VAT?
- tomp 5y agoVAT excludes the VAT paid when the company purchased the raw materials, i.e. it's paid net. The end result is, the consumer pays VAT which is 20% of the price (i.e. 20% of the revenue), and the tax is spread out evenly across the whole production supply chain, weighted by the amount of added value by each company in the chain.
- tomp 5y agoBingo. The reason that non-US governments (like the UK) want to get a share of the tax on profits is because they lack domestic innovative high-profit companies. They want to take a share of the added value created / subsidised by another government (US in this case). It's bad incentives all around.