7 ms·

Errr because they're headquartered in the US and rely on the shield of the US government when it comes to rule of law, educating their workforce, providing the

Errr because they're headquartered in the US and rely on the shield of the US government when it comes to rule of law, educating their workforce, providing the infrastructure etc for them to be in the position where they are today? In this day and age it makes _less_ sense to try and tax based on where componentry or network services or consumers start or finish.

mahyarm 11y ago
But apple & co isn't just in the USA, and many of their best workers were educated & raised in other countries.
charlesdm 11y ago
Only an American could have written this answer. All other countries in the world use a non global taxation system. Two basic scenarios: 1. US entity owns a company in the UK. UK company earns $100, pays 20% tax on that, and is left with $80. Declares a dividend to the US parent, and the US then taxes the difference (35% US tax rate - 20% UK tax rate = another 15% to pay). We're left with $65 2. UK entity owns a company in Sweden. Swedish company earns $100, pays 22% tax on that, and is left with $78. Declares a dividend to the UK parent, which is then left untaxed. Why does 2 make more sense than 1? Because the money was generated in Sweden, and the fact that some parent/holding entity is UK based does not matter (like, at all). Scenario 1 pushes US companies to expand abroad (i.e. through foreign M&A), and not repatriate any profits back to the US. It also makes it easier for non US entities to acquire US companies, because they can achieve larger tax synergies than a domestic US acquirer would. A US company trying to achieve something like that would have to do an inversion, which sometimes can be hard to do. The current state of the US tax code is a great example why Microsoft paid a whopping $2bn for something like Minecraft (Sweden based), or an even larger amount for Luxembourg based Skype. What can they do with that cash otherwise? It's not like they're going to repatriate (ever) without a tax holiday.
- tormeh 11y ago
  You know, I think maybe this taxation system is a part of why US companies become so successful. It basically forces any US company that sells overseas to become a multinational.
  - adventured 11y ago
    The world's largest economy under a single unified market speaking the same language, has a lot more to do with it. By the time companies come out of the US, they're typically already well on their way competitively and have scale. It's the same reason China is so effective at producing giants like Alibaba, Xiaomi, and Baidu.
- return0 11y ago
  It looks like the real issue is the high corporate tax rate in the US then. Are there not double-taxation treaties to avoid overtaxing otherwise? On the other hand, the scenario of a UK company owning a company in a tax-free zone in dubai and thus paying 0% taxes anywhere doesn't sound fair either.
  - IkmoIkmo 11y ago
    Double tax treaties are pretty common, it depends on the good and the corridor so I don't really know what it's like for Apple. Still, the fact they mention tax as a reason to keep cash offshore probably means the treaties are non-existent or limited at best.
  - charlesdm 11y ago
    Well, the second part of this equation is that they are able to funnel a ton of cash to low tax companies (via loans/royalties/other loopholes). So maybe they've only paid 1-5% on the entire amount. Repatriation of those funds would essentially mean paying close to 35% tax (+ state taxes). DTTs don't fix that, they just make sure you don't pay the same amount twice. I.e. the 20% in the UK AND 35% in the US. Add to that fact that Apple can pretty much borrow unlimited funds in the market (debt != income, you don't pay tax when you borrow) to fund share buybacks and dividends. Why repatriate? Financially it just does not make sense, since you'd lose so much of your equity. It's better to invest it abroad. Re Dubai: If an entity is a conduit company, then maybe not. But if you're operating a business or selling stuff there, then I think it is. No income tax is more of an anomaly these days, and a way for countries to attract new business.
- jusben1369 11y ago
  You're sort of falling victim to the rules of the current game (US entity owning subsidiary in xyz location) I was working at a higher level and rejecting the notion that a company no longer needs to pay taxes on profits simply because they're outside their borders. The Chinese government can tax worker salaries and levy a consumption tax on goods and services sold into the production. The German government can levy a GST too. And Apple, where applicable, can deduct those taxes before calculating profits. So conceptually that's the cleanest way it should work (same for a German or Australian company. No U S A U S A thing going on here)
devmach 11y ago
This made me think: * Apple, Google, Microsoft et al. have many foreign workers (green card, H-2B, or maybe L1 visa) and it is easier for american citizens to move/work outside of US than foreigners to get work visa in US. So the question is, if a country (like Spain or Greece) promises tax advantage for next 25 years and makes easier to get visa for employees, would these companies move their hq there? * If, say, European Union provides better shield, would Apple move its HQ to Germany or Spain? * Infrastructure: I can say most European counties have better infrastructure than US and it looks like most us companies build their own if needed. With $500 billion on hand, what would prevent these companies to build a better infrastructure in a host country.
- jfuhrman 11y ago
  >So the question is, if a country (like Spain or Greece) >If, say, European Union provides better shield, would Apple move its HQ to Germany or Spain? Two words. Labor laws. http://www.businessinsider.com/ceo-employee-lawsuits-killed-mandriva-2015-5 http://www.businessinsider.com/ceo-employee-lawsuits-killed-... https://news.ycombinator.com/item?id=9663421 https://news.ycombinator.com/item?id=9663421
  - devmach 11y ago
    Good point. But I would like to know other side of the story too, not just from the CEO. Although, while I'm not an expert on France's labor laws, I agree laws in most EU countries are on the side of employees. But that doesn't mean when you hired someone, he/she will be working at the company for rest of his/her life without doing some work. Maybe someone who's expert on labor laws can clarify. Edit: Also different countries in the EU has different laws. It might be difficult to `get rid of bad employee` but it might be easier in Spain...
    - lmm 11y ago
      > Although, while I'm not an expert on France's labor laws, I agree laws in most EU countries are on the side of employees. But that doesn't mean when you hired someone, he/she will be working at the company for rest of his/her life without doing some work. Maybe someone who's expert on labor laws can clarify. As someone who lives and works in the EU, none of the conditions seems to be particularly unreasonable. If you're talking about someone who isn't working, presumably you'd be firing them for cause. Which you can do: you need to follow a process and document that you're following it, you need to give them explicit warning that their performance is not up to par and give them the opportunity to fix it, and you need to do all of this within a reasonable timeframe. The Mandriva guy was explicitly not doing that; if you're making people redundant then you're declaring that there was no problem with them specifically, the company just needs to eliminate those positions. If you then rehire people for those positions within the next few months, the courts tend to take a rather dim view of that.
ulfw 11y ago
What infrastructure is needed to sell a product manufactured in China to a customer in the US? Which educated workforce is needed to ship and then sell said product in Germany? What do American 'rules of law' have to do when the product is sold in Germany (under EU consumer laws)?
- jusben1369 11y ago
  If a country or region implemented tariffs that discriminated against Apple products to grow or protect a mobile industry which government do you think they're going to call? And the US government won't say "sounds like a Chinese manufactured product being sold into a Latin American country. Ask someone else to help" Nope, it'll be the threat of retaliatory measures that'll get that market reopened/fixed and it'll be a costly endeavour.
  - ulfw 11y ago
    The iPhone is extremely high tariffed in for example Argentina because it is not manufactured in the country. I haven't seen any US government putting pressure on the Argentinian government to change that so that the iPhone can be sold more competitively.
fit2rule 11y ago
No, in this day and age it makes more sense to tax production and consumption in their respective locations wherever they are on Earth. It'd do a lot to reduce global warming by humans.

mahyarm 11y ago

But apple & co isn't just in the USA, and many of their best workers were educated & raised in other countries.

charlesdm 11y ago

Only an American could have written this answer. All other countries in the world use a non global taxation system. Two basic scenarios: 1. US entity owns a company in the UK. UK company earns $100, pays 20% tax on that, and is left with $80. Declares a dividend to the US parent, and the US then taxes the difference (35% US tax rate - 20% UK tax rate = another 15% to pay). We're left with $65 2. UK entity owns a company in Sweden. Swedish company earns $100, pays 22% tax on that, and is left with $78. Declares a dividend to the UK parent, which is then left untaxed. Why does 2 make more sense than 1? Because the money was generated in Sweden, and the fact that some parent/holding entity is UK based does not matter (like, at all). Scenario 1 pushes US companies to expand abroad (i.e. through foreign M&A), and not repatriate any profits back to the US. It also makes it easier for non US entities to acquire US companies, because they can achieve larger tax synergies than a domestic US acquirer would. A US company trying to achieve something like that would have to do an inversion, which sometimes can be hard to do. The current state of the US tax code is a great example why Microsoft paid a whopping $2bn for something like Minecraft (Sweden based), or an even larger amount for Luxembourg based Skype. What can they do with that cash otherwise? It's not like they're going to repatriate (ever) without a tax holiday.

tormeh 11y ago
You know, I think maybe this taxation system is a part of why US companies become so successful. It basically forces any US company that sells overseas to become a multinational.
- adventured 11y ago
  The world's largest economy under a single unified market speaking the same language, has a lot more to do with it. By the time companies come out of the US, they're typically already well on their way competitively and have scale. It's the same reason China is so effective at producing giants like Alibaba, Xiaomi, and Baidu.
return0 11y ago
It looks like the real issue is the high corporate tax rate in the US then. Are there not double-taxation treaties to avoid overtaxing otherwise? On the other hand, the scenario of a UK company owning a company in a tax-free zone in dubai and thus paying 0% taxes anywhere doesn't sound fair either.
- IkmoIkmo 11y ago
  Double tax treaties are pretty common, it depends on the good and the corridor so I don't really know what it's like for Apple. Still, the fact they mention tax as a reason to keep cash offshore probably means the treaties are non-existent or limited at best.
- charlesdm 11y ago
  Well, the second part of this equation is that they are able to funnel a ton of cash to low tax companies (via loans/royalties/other loopholes). So maybe they've only paid 1-5% on the entire amount. Repatriation of those funds would essentially mean paying close to 35% tax (+ state taxes). DTTs don't fix that, they just make sure you don't pay the same amount twice. I.e. the 20% in the UK AND 35% in the US. Add to that fact that Apple can pretty much borrow unlimited funds in the market (debt != income, you don't pay tax when you borrow) to fund share buybacks and dividends. Why repatriate? Financially it just does not make sense, since you'd lose so much of your equity. It's better to invest it abroad. Re Dubai: If an entity is a conduit company, then maybe not. But if you're operating a business or selling stuff there, then I think it is. No income tax is more of an anomaly these days, and a way for countries to attract new business.
jusben1369 11y ago
You're sort of falling victim to the rules of the current game (US entity owning subsidiary in xyz location) I was working at a higher level and rejecting the notion that a company no longer needs to pay taxes on profits simply because they're outside their borders. The Chinese government can tax worker salaries and levy a consumption tax on goods and services sold into the production. The German government can levy a GST too. And Apple, where applicable, can deduct those taxes before calculating profits. So conceptually that's the cleanest way it should work (same for a German or Australian company. No U S A U S A thing going on here)

devmach 11y ago

This made me think: * Apple, Google, Microsoft et al. have many foreign workers (green card, H-2B, or maybe L1 visa) and it is easier for american citizens to move/work outside of US than foreigners to get work visa in US. So the question is, if a country (like Spain or Greece) promises tax advantage for next 25 years and makes easier to get visa for employees, would these companies move their hq there? * If, say, European Union provides better shield, would Apple move its HQ to Germany or Spain? * Infrastructure: I can say most European counties have better infrastructure than US and it looks like most us companies build their own if needed. With $500 billion on hand, what would prevent these companies to build a better infrastructure in a host country.

jfuhrman 11y ago
>So the question is, if a country (like Spain or Greece) >If, say, European Union provides better shield, would Apple move its HQ to Germany or Spain? Two words. Labor laws. http://www.businessinsider.com/ceo-employee-lawsuits-killed-mandriva-2015-5 http://www.businessinsider.com/ceo-employee-lawsuits-killed-... https://news.ycombinator.com/item?id=9663421 https://news.ycombinator.com/item?id=9663421
- devmach 11y ago
  Good point. But I would like to know other side of the story too, not just from the CEO. Although, while I'm not an expert on France's labor laws, I agree laws in most EU countries are on the side of employees. But that doesn't mean when you hired someone, he/she will be working at the company for rest of his/her life without doing some work. Maybe someone who's expert on labor laws can clarify. Edit: Also different countries in the EU has different laws. It might be difficult to `get rid of bad employee` but it might be easier in Spain...
  - lmm 11y ago
    > Although, while I'm not an expert on France's labor laws, I agree laws in most EU countries are on the side of employees. But that doesn't mean when you hired someone, he/she will be working at the company for rest of his/her life without doing some work. Maybe someone who's expert on labor laws can clarify. As someone who lives and works in the EU, none of the conditions seems to be particularly unreasonable. If you're talking about someone who isn't working, presumably you'd be firing them for cause. Which you can do: you need to follow a process and document that you're following it, you need to give them explicit warning that their performance is not up to par and give them the opportunity to fix it, and you need to do all of this within a reasonable timeframe. The Mandriva guy was explicitly not doing that; if you're making people redundant then you're declaring that there was no problem with them specifically, the company just needs to eliminate those positions. If you then rehire people for those positions within the next few months, the courts tend to take a rather dim view of that.

ulfw 11y ago

What infrastructure is needed to sell a product manufactured in China to a customer in the US? Which educated workforce is needed to ship and then sell said product in Germany? What do American 'rules of law' have to do when the product is sold in Germany (under EU consumer laws)?

jusben1369 11y ago
If a country or region implemented tariffs that discriminated against Apple products to grow or protect a mobile industry which government do you think they're going to call? And the US government won't say "sounds like a Chinese manufactured product being sold into a Latin American country. Ask someone else to help" Nope, it'll be the threat of retaliatory measures that'll get that market reopened/fixed and it'll be a costly endeavour.
- ulfw 11y ago
  The iPhone is extremely high tariffed in for example Argentina because it is not manufactured in the country. I haven't seen any US government putting pressure on the Argentinian government to change that so that the iPhone can be sold more competitively.

fit2rule 11y ago

No, in this day and age it makes more sense to tax production and consumption in their respective locations wherever they are on Earth. It'd do a lot to reduce global warming by humans.