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That's not entirely true. First of all, when Apple pays income tax in most countries, they will receive tax offset credit in USA so they don't have to pay tax
by lubos 13y ago
That's not entirely true.
First of all, when Apple pays income tax in most countries, they will receive tax offset credit in USA so they don't have to pay tax twice on same profit.
But Apple doesn't even do this. The whole point of having Irish subsidiary is to give it intellectual property which is the real money maker here.
What happens then is quite simple. Subsidiary company in Ireland is charging Apple in other countries huge licensing fees. In fact, so huge that it amounts to 100 billion dollars. Licensing fees are tax deductible so Apple is basically avoiding paying corporate tax all over the world because licensing fees and royalties eat up all the profit.
Of course, Apple as a group of entities is making billions in profit but as far as overseas tax authorities (Australian Tax Office, UK Revenue & Customs etc) are concerned, Apple is barely breaking even therefore is not paying its fair share of tax.
Obviously this whole scheme comes at cost. All these billions are basically stuck somewhere in Ireland and can't be used. They just sit there and earn interest.
Eventually money will have to come to America. How? Irish subsidiary will pay dividends to parent company Apple Inc. At that point all these billions in profits will get finally taxed at ~35% by IRS.
Congress is just asking Apple when they are going to bring to USA all those profits and what's the point of deferring it. Apple is saying, we will bring it when you lower our tax rate. They are basically blackmailing the government.
edit: I was wrong by saying Apple doesn't pay corporate tax in USA. I modified my comment to reflect what I have learned from comments bellow.
- nknighthb 13y ago> Subsidiary company in Ireland is charging parent company Apple Inc. huge licensing fees. Cook explicitly denied this in his testimony. Are you simply assuming Apple is doing the same thing some other companies have done, or do you have evidence they have done this?
- justincormack 13y agoI believe the details are in the committee report released before the hearing. The claim is that the IP deal is not something that would be done with a third party it is far too cheap. See here for references and one view http://blogs.reuters.com/felix-salmon/2013/05/21/tim-cooks-improbable-victory-in-washington/ http://blogs.reuters.com/felix-salmon/2013/05/21/tim-cooks-i...
- nknighthb 13y agoThis sounds like it's practically the opposite of the accusation I quoted, no?
- mtgx 13y agoThat sounds an awful lot like "Hollywood accounting".
- glurgh 13y agoas far as IRS is concerned, Apple Inc. is barely breaking even therefore is not paying its fair tax share. Is this really true, though? http://www.bloomberg.com/news/2013-05-23/apple-tax-rate-ignores-profit-shifting-offshore.html http://www.bloomberg.com/news/2013-05-23/apple-tax-rate-igno... Among various other points it says Apple paid 6 billion in taxes last year which sounds unlikely if they were 'barely breaking even'. I don't have any trouble believing that a large multinational has the means, opportunity and incentive to exploit every bit of every tax code it is subject to in order to minimize its tax liability. I'm just finding it difficult to get a handle on the basic issues between the 'zomg corporations, our evil overlords' and 'leave Britney/Apple/the free global market alone' rhetoric. My vain hope is to somehow summon up some grellas-like entity who is knowledgable in these matters and will provide a bit of level-headed insight.
- deleted 13y ago[deleted]
- lubos 13y agoYou are actually right. They pay corporate tax in USA on profits generated in USA. What they really do is that they don't pay their rightful share in other countries such as Australia and UK where they transfer profits to Ireland through phony IP claims. For example, their net profit margin in Australia was less than 2% in last financial year which means they paid only $40 million in tax on revenue of $6 billion. All that profit which should have been taxed in Australia and in other countries now sits somewhere currently untaxed in Ireland.
- glurgh 13y agoLet's just take that as a given, but Apple's tax status in other countries is not why their CEO gets called to testify before the US Senate - my questions were specifically about that. Not that we're going to get much further in this, though, given that the submission dropped off the front page and into the dark recesses of HN a few minutes ago.