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“Many large multinationals use cost-sharing because it reflects the global nature of their business.” A comparable example might be Apple, where sales of my (a

• Y_Y 3y ago
  It's simple enough, an Irish company called Apple licenses its very valuable IP to its entities in cheaper countries so they can do things like manufacturing, server farms, customer support. (It also carries on these some of these functions in Ireland, as it happens, and pays a ton of tax at the relatively high income tax rates there.) It's frankly curious to me when a multinational chooses to base itself anywhere less favourable.
  • gemstones 3y ago
    At one point, it wasn’t an Irish company. Now technically the American company sold or transferred its IP to the Irish company. But it did so as a fiction, to avoid taxes, and neither I nor a government I help elect are obligated to honor that fiction.
    • hattmall 3y ago
      It's no less fiction than any other contract or legal document.
      • gemstones 3y ago
        Yes it is, because this one negatively affects enough people that the law should make a special case to disallow it. Contracts are enforceable when laws say they are enforceable, but governments are free to change laws. If the government says it is a fiction, it is a fiction.
        • deleted 3y ago
          [deleted]
      • gemstones 3y ago
        Although in this case, this was a good use of government time even if it goes to the courts! I would like to see the government instill a culture of fear in these companies’ legal departments, that leaves them wondering them the law will change to hit them.
      • lmm 3y ago
        The idea that the business' value is being created in Bermuda (in Google's case, but there will be similar things going on here) is a fiction. The idea that what creates the value is a single concrete piece of intellectual property is a fiction. The idea that that piece of intellectual policy was transferred to Bermuda is a fiction. The idea that what was transferred could be legitimately valued at zero when transferred and yet suddenly responsible for 100% of the business' value in subsequent years is an especially blatant fiction. I'd love to see the government of Bermuda nationalize that piece of intellectial property and claim all of Google's global income. They've made such a careful, vigorous legal argument that it's responsible for 100% of their revenue, surely they would acknowledge the things they've been claiming for years and continue to pay 100% of their profits to Bermuda.
        • thfuran 3y ago
          I'd rather see the US declare that the IP is no longer promoting the progress of science and the useful arts and annul it.
          • londons_explore 3y ago
            I would like to see an experiment where a country disallowed any company from keeping any secrets at all - IP or otherwise. Everything on all the companies computers and hard drives would always be visible to competitors and the public. While it discourages long research projects, it really incentivises fast execution and building on other companies designs.
            • thfuran 3y ago
              I think companies overvalue secrecy to the point that most that are able would immediately leave. And I don't think most any industry has such a problem with willingness to execute quickly that trying to incentivize that is worth totally crushing R&D. Hell, I think the world could do with a bit more research and a bit less moving fast and breaking things.
            • hiatus 3y ago
    • c0pium 3y ago
      Of course they are, it’s a contractual agreement that is within the law. The fact that you don’t like it could not be less relevant, you don’t matter. If the government doesn’t like the law, they can (try) to change it but that has to go through the actual process. They are welcome to be as mad as they want that their law is poorly written but it is still their law.
      • skeaker 3y ago
        I believe "their law" is what is being criticized, and GP's "government that I help elect" would do away with "their law." Pointing out that the law being criticized as bad is in fact a law is at best a tautology...
      • gemstones 3y ago
        As a voter, I’m OK with them not following the process on this one!
        • c0pium 3y ago
          That’s a very near-sighted idea. Can you really not see the problem?
          • deleted 3y ago
            [deleted]
          • gemstones 3y ago
            It’s not a problem for me! It sets a precedent, sure, but I’m okay with the tradeoff there.
      • realusername 3y ago
        Every law is judged with the intent behind the action... except for taxes which is the single exception I know of. And here the intent is pretty clear.
        • sokoloff 3y ago
    • Projectiboga 3y ago
      That tax break "Double Irish Dutch Sandwich" is being phased out. It involves both those countries with one of the Irish companies managed out of Bermuda. It has shifted to other schemes now. https://en.m.wikipedia.org/wiki/Double_Irish_arrangement https://en.m.wikipedia.org/wiki/Double_Irish_arrangement
      • Horffupolde 3y ago
        What other schemes?
        • zdkl 3y ago
          Nice try, FBI.
        • londons_explore 3y ago
          As soon as a scheme has a wikipedia page, you can be pretty sure it will become illegal within a year or two...
      • nixass 3y ago
        https://en.m.wikipedia.org/wiki/Feargal_O%27Rourke https://en.m.wikipedia.org/wiki/Feargal_O%27Rourke You know things are nuts when one corporate accountant gets his own wiki article
  • olliej 3y ago
    The same applies to all the BS Delaware corporations.
    • alexanderchr 3y ago
      AFAIK Delaware incorporation is more benign and has more to do with predictable courts and lots of case law existing rather than paying as little tax as possible.
  • daft_pink 3y ago
    There are limits in place that prevent these ip schemes these days.
  • Nursie 3y ago
    > "a ton of tax at the relatively high income tax rates there" Firstly, that's not Apple paying income tax, that's their employees. Secondly, they don't pay much in the way of corporation or other taxes that usually apply because of a sweetheart deal (Google also has one IIRC), which is why much of the EU is up in arms about the Irish government's behaviour here, that effectively allows these multinationals to operate across the EU without paying the usual expected taxes, giving them an advantage over local businesses and depriving governments of income, and there have been various court cases about it.
    • Y_Y 3y ago
      "Sweetheart deals" are not allowed in the EU, and whether or not there was one in this case is a matter of controversy[0]. In fact the EU courts have decided that there was no breach of law by Apple, though a further appeal maybe yet be made. It's easy to sling around accusations like this, but it's important to check the facts at the same time. [0] https://en.wikipedia.org/wiki/Apple%27s_EU_tax_dispute https://en.wikipedia.org/wiki/Apple%27s_EU_tax_dispute
      • Nursie 3y ago
        Whether they were precisely sweetheart deals or not, it remains that Apple and the Irish government did negotiate 'deals' and that Ireland has facilitated a lot of tax reduction for large US multinational corps, which much of the EU believes costs them both revenue and competitiveness. It is interesting that the last news about this is the EU saying they are going to appeal, three years ago. I find the use of such schemes pretty awful regardless of whether they technically fall inside of the law.
        • Y_Y 3y ago
          I can't disagree with any of that, except to say that I don't think the choice that a multinational makes is between Ireland and nothing. At some point you are making enough money that it makes sense for you to hire experts to "optimise" your tax liabilities, just like you'd hire someone to improve your IT infrastructure or your heating bill. If they didn't base their corporate structure around Ireland then it might have been Jersey or Malta or something else that got them 90% of what they had. It sucks when the outcome is that big companies end up paying less than they're expected to and have lower effective rates than small companies. I see it not as a moral failing so much as a law of nature, like flood waters taking the path of least resistance and destroying slums before bank buildings. Reasonably people certainly differ though.
• drivebycomment 3y ago
  Apple pays the majority of taxes to US. They report US income and pay taxes for that to US. Ireland is involved only so far as EU income. So if your American app is sold to European users, the income is recognized as EU, and reported to Ireland. https://fortune.com/2017/10/31/trump-tax-reform-apple-multinational-companies/ https://fortune.com/2017/10/31/trump-tax-reform-apple-multin... There are other possible criticisms on corporate tax and Apple, but this isn't a valid one.
  • kwhitefoot 3y ago
    Of course it is valid. The principal on which much of taxation is based is that it is a tax on the benefit that the income provides. And that benefit accrues in the US. The only way it can be claimed to be invalid is by conflating legal with moral.
    • esrauch 3y ago
      You're suggesting that their EU sales shouldn't pay EU income at all, rather US income taxes instead? Usually the criticism of this is the opposite direction, that sales in Germany should pay taxes in Germany.
      • littlestymaar 3y ago
        > You're suggesting that their EU sales shouldn't pay EU income at all, Well, since this is Ireland tax rates we're talking about, this is almost the same thing…
        • disgruntledphd2 3y ago
          That used to be true, but is no longer. Currently Apple et al pay 12.5% corporation tax in the Republic of Ireland, unlike the past where this rate existed but was notional as most of the revenue was ultimately booked to a real tax haven like Bermuda et al.
          • 3y ago
• nodamage 3y ago
  This is a common misconception but not actually true. If Apple sells a copy of your app to an American customer the revenue from their royalty is booked to Apple Inc. (the U.S. company) and they would pay U.S. income tax on that sale. The only time the sale would be booked to their Irish subsidiary is if the customer was located in Europe, or it would go to one of their other international subsidiaries depending on the specific location of the customer.
  • oldbbsnickname 3y ago
    Legal BEPS exist and is more complicated than this oversimplification. While Apple didn't do Stanley Works "moving" to Bermuda, Tim Cook is no slouch in the financial domain as that was (and is) his wheelhouse. The calculus involves a myriad of factors including a risk appetite, leadership ethics, lots of data, and decision support. As an aside, I once parted ways with 2 potential business partners because they were on the privately-admitted illegal side of BEPS and tax minimization in speech and action. (Last I heard, they're lobbyists for political interests based in another country.) Also, the books for taxes and the books for securities regulators aren't precisely equivalent per jurisdiction based on how things are counted or not counted. For example, in general, Norwegian and US accounting practices tended to be/are vastly different in some areas... hence a need for local external auditors. Corporate Inversions: Stanley Works and the Lure of Tax Havens (2002) https://www.hbs.edu/faculty/Pages/item.aspx?num=29288 https://www.hbs.edu/faculty/Pages/item.aspx?num=29288
    • nodamage 3y ago
      Sure, but not sure how that’s relevant to my point that Apple does not actually move US profits offshore. The major controversies around Apple’s tax practices are from: 1. Apple not paying US tax rates on products sold outside of the US because that money is kept offshore instead of being repatriated, and 2. Apple paying low Irish tax rates on products sold outside the US instead of the specific tax rate of the country where the product was sold. (1) I don’t find all that controversial because they would technically owe US taxes on the money if it was ever brought home, but (2) is understandably more controversial. Nonetheless given that Apple won their appeal against the European Commission it might not actually be illegal under EU law to do what they did.