9 ms·

Of course, there's actually a much deeper and more important connection. The huge cash hoards of Apple, Google, Microsoft and other big multinational corporatio

by apress 15y ago

Of course, there's actually a much deeper and more important connection. The huge cash hoards of Apple, Google, Microsoft and other big multinational corporations are a direct outgrowth of clever tax strategies they use to shift profits to low-tax countries and avoid US taxes. http://www.reuters.com/article/2011/07/27/us-microsoft-tax-idUSTRE76Q6OB20110727 http://www.reuters.com/article/2011/07/27/us-microsoft-tax-i... Corporate tax payments as a percentage of total tax revenues are low and historically low compared to the size of the economy. http://www.csmonitor.com/Business/Tax-VOX/2011/0209/Corporate-tax-only-a-piece-of-tax-revenue-pie http://www.csmonitor.com/Business/Tax-VOX/2011/0209/Corporat... http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=263 http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc...

kevin_morrill 15y ago
It's a bit strange to call it shifting when the profits were made overseas. And it's no surprise they'd keep it off shores once they've made it, since they'd have to give up 35% of it to bring the money inside the U.S.
- apress 15y ago
  This is not about profits made overseas, say like selling iPhones in China This is the use of complex strategies, like creating a shell company in the Isle of man that "owns" intellectual property and "licenses" it to the US subsidiary for a fee that just happens to equal most of the profits on US sales. The profits go to the tax haven and never come back.
  - tomelders 15y ago
    In this instance, to my knowledge, Apple isn't using shell companies. It has iTunes set up in Luxembourg, but that's a very real company. And each country has it's own Apple subsidiary which again are real companies in their own right. I'd say that it's hardly tax avoidance, since they pay their taxes in the countries where the revenue is generated. No one in their right mind would give up 35% of their wealth simply to move it to a different country, and nor should they.
    - ceejayoz 15y ago
      > It has iTunes set up in Luxembourg, but that's a very real company. Sure, but is it really operating out of Luxembourg? I suspect most of their employees are here in the States.
      - SoftwareMaven 15y ago
        Apple has a company here in the States and in Luxemborg. US employees are employed by the US corporation.
      - tomelders 15y ago
        Yup, they have real people employed by, and working in Luxembourg.
    - apress 15y ago
      Please go read the links. This is not about the sales happening in countries outside of the US. This is about the billions of dollars inprofits Apple, Microsoft, Google and others would otherwise be making on their US sales being shifted around to low-tax havens using clever internal licensing agreements. For example, see http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-sho...
ctdonath 15y ago
Note that those big multinational corporations can't move money made outside the country to back home in the USA without incurring an absurd ~30% tax on top of whatever other taxes they paid whoever already. Word is Apple has been pushing for an amnesty so they _can_ bring their money home; until then, that money earned outside the US stays outside the US.
- apress 15y ago
  Again, this is not because of ordinary sales outside of the US. This is a purposeful effort to reduce the amount owed in US taxes on activity in the US (and other "high" tax countries).
  - apress 15y ago
    here's another good explanation http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-sho...
- ZachPruckowski 15y ago
  Last time we had an amnesty, all the money that flooded back in to the USA wasn't reinvested the companies or used to grow the economy, it just want straight into bonuses and dividends.
  - gwright 15y ago
    I'm not sure I follow. Distributing profits to employees (bonuses) or to investors (dividends) is bad? The employees and investors now have more money to buy things or to re-invest. I'm not an economist, but I think that when money flows from A to B, the economy does grow. It doesn't matter if that flow is to employees as bonuses, investors as dividends, or to vendors as business expesnses.
    - dpark 15y ago
      > I'm not an economist, but I think that when money flows from A to B, the economy does grow. Money moving from one place to another does not always help the economy. When money flows from the corporate coffers directly into the private accounts of its executives, generally little of that money actually flows into the greater economy. When you consider that under normal circumstances 30% of that money would flow into the federal government to fund programs, it's pretty clear that less money flows into the economy in cases of tax amnesty.
ristretto 15y ago
Imagine how worse this problem is for European countries, which face the same tax avoidance, and have to sustain massively more expensive public sectors.
- fungi 15y ago
  Europe is a big diverse place... I would imagine you couldn't really generalise to accurately. Also offset by comparative minuscule military spending and far more efficient health and corporate/public welfare. But [citation needed], just generalisations from an antipodean armchair.

by apress 15y ago

kevin_morrill 15y ago

It's a bit strange to call it shifting when the profits were made overseas. And it's no surprise they'd keep it off shores once they've made it, since they'd have to give up 35% of it to bring the money inside the U.S.

apress 15y ago
This is not about profits made overseas, say like selling iPhones in China This is the use of complex strategies, like creating a shell company in the Isle of man that "owns" intellectual property and "licenses" it to the US subsidiary for a fee that just happens to equal most of the profits on US sales. The profits go to the tax haven and never come back.
- tomelders 15y ago
  In this instance, to my knowledge, Apple isn't using shell companies. It has iTunes set up in Luxembourg, but that's a very real company. And each country has it's own Apple subsidiary which again are real companies in their own right. I'd say that it's hardly tax avoidance, since they pay their taxes in the countries where the revenue is generated. No one in their right mind would give up 35% of their wealth simply to move it to a different country, and nor should they.
  - ceejayoz 15y ago
    > It has iTunes set up in Luxembourg, but that's a very real company. Sure, but is it really operating out of Luxembourg? I suspect most of their employees are here in the States.
    - SoftwareMaven 15y ago
      Apple has a company here in the States and in Luxemborg. US employees are employed by the US corporation.
    - tomelders 15y ago
      Yup, they have real people employed by, and working in Luxembourg.
  - apress 15y ago
    Please go read the links. This is not about the sales happening in countries outside of the US. This is about the billions of dollars inprofits Apple, Microsoft, Google and others would otherwise be making on their US sales being shifted around to low-tax havens using clever internal licensing agreements. For example, see http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-sho...

ctdonath 15y ago

Note that those big multinational corporations can't move money made outside the country to back home in the USA without incurring an absurd ~30% tax on top of whatever other taxes they paid whoever already. Word is Apple has been pushing for an amnesty so they _can_ bring their money home; until then, that money earned outside the US stays outside the US.

apress 15y ago
Again, this is not because of ordinary sales outside of the US. This is a purposeful effort to reduce the amount owed in US taxes on activity in the US (and other "high" tax countries).
- apress 15y ago
  here's another good explanation http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-sho...
ZachPruckowski 15y ago
Last time we had an amnesty, all the money that flooded back in to the USA wasn't reinvested the companies or used to grow the economy, it just want straight into bonuses and dividends.
- gwright 15y ago
  I'm not sure I follow. Distributing profits to employees (bonuses) or to investors (dividends) is bad? The employees and investors now have more money to buy things or to re-invest. I'm not an economist, but I think that when money flows from A to B, the economy does grow. It doesn't matter if that flow is to employees as bonuses, investors as dividends, or to vendors as business expesnses.
  - dpark 15y ago
    > I'm not an economist, but I think that when money flows from A to B, the economy does grow. Money moving from one place to another does not always help the economy. When money flows from the corporate coffers directly into the private accounts of its executives, generally little of that money actually flows into the greater economy. When you consider that under normal circumstances 30% of that money would flow into the federal government to fund programs, it's pretty clear that less money flows into the economy in cases of tax amnesty.

ristretto 15y ago

Imagine how worse this problem is for European countries, which face the same tax avoidance, and have to sustain massively more expensive public sectors.

fungi 15y ago
Europe is a big diverse place... I would imagine you couldn't really generalise to accurately. Also offset by comparative minuscule military spending and far more efficient health and corporate/public welfare. But [citation needed], just generalisations from an antipodean armchair.