Apple accused of sidestepping taxes, company counters by touting job creation - Page 6

 

 

Flat tax has arguable benefits, but elimination of the income tax, the IRS and the Federal Reserve should be a first-term priority for the next president.

 

 

LOL. If you want to continue to embarrass yourself, go ahead, by all means. There's no law against it.

 

If that is the "most stupid thing ever written here," then the most famous, and widely-used finance textbook in the world -- Brealey and Myers (you can look it up!) -- must be the most stupid thing ever written in finance.

 

Here's a verbatim quote from their introduction to Chapter 8 (p. 238, 9th edition; italics mine): "The company cost of capital is the opportunity cost of capital. It is usually calculated as a weighted average cost of capital, that is, the average rate of return demanded by investors in the company's debt and equity securities."

 

Comprende?

 

 

Embarrassing?

Let me give you a clue. You're mixing up two different contexts of cost of capital in the same phrase. But that happens when you copy and paste in haste.

 

Comprende?

 

Embarrassing indeed. And notice I'm allowing you to sidestep the other embarrassing slip-up.

 

 

 

 

What are you talking about? "Contexts of cost of capital"?!

 

There is only one notion of cost of capital, i.e., the opportunity cost of capital, i.e., the return expected by investors. That is the only thing I -- or anyone that knows what it means -- refer to when the term is used.

 

It is quite obvious at this point that you are not up on much of this stuff, or perhaps you're tripping all over yourself (not the first time, I've noticed, in this Forum; you're another person whom I generally avoid by way of responses...... so, ciao, after this!).

 

Let's move along....

Edited by anantksundaram - 4/30/12 at 2:13pm

 

 

And when you're done with that, why not do something easy like figure out how many angels can dance on the head of a pin.

There's absolutely no way that they're going to get rid of the income tax, the IRS, and the Federal Reserve - at least not in my lifetime.

 

 

Do you really expect either zzzzzz or stelligent to know what they're talking about?

 

 

That depends on how long you live.

 

 

That's what SIRI is for.

Here's an illuminating article for all the Apple-hating idiots to stew over:

 

 

 

 

Link to the article:  http://allthingsd.com/20120430/apple-and-taxes-what-the-new-york-times-missed/

 

 

How do you pay $100 of tax on taxable income of $100,000?      Are you writing off personal expenses as business expenses?    Are you talking about $100,000 of company revenue?     Is this a C Corp or an S Corp?

Huh? Rupert just soiled himself after reading that he owned the NYT.

Taxation is theft, at the point of a gun, plain and simple. I encourage every person and company to do all that they are able to lower taxation.

What is "my tax model"? By recognizing taxation is theft, you owe it to yourself or company to do all you can to minimize the theft. Apple and other companies take measures to minimize theft at their retail stores, and we learn they do the same with governments' theft. After all, a large portion of taxes just goto the tax eaters, which is amoral, inefficient, and out of control.

How many times have you heard bureaucrats and politicians trying to "make us safe", WHEN have you heard them talk about "making us more free"?! Rhetorically, we will be further enslaved by their excuse to make us "safe" but slaves.

Income Tax is the biggest scam in the US, and it is voluntary (yes, even IRS Commissioners admit as much), yet illegally enforced, and uses graft and deception to con people and companies into paying a tax which no person has a legal obligation for. Do some research, look up people like Joe Bannister, and Bill Benson, for example.

ENOUGH IS ENOUGH.

 

 

 

You know what is quite sad about your post? You are one of the few here who knows what he's talking about. Corporations won't pass taxes along to consumers. It would be impossible to do so. The American dollar fluctuate a lot these days and those changes are rarely seen in any price index whatsoever. Price fixing is a supply and demand game. Nothing else, nothing more. They simply don't want to pay taxes, but they are dishonest about it.

And for those who say that 47% of people don't pay taxes, well that's the biggest b*llshit assumption ever.

 

Simply imagine this simple scenario. I geniusbate, start a successful corporation by working hard or by a lucky streak, and employ all the posters on these boards. I pay you all one dollar per year, while I reap billions of your hard labor, then have the decency to claim that you don't pay any taxes and that you are not true Americans. Although it will work for some time, it is unsustainable in the long-term. What good is it that someone has a two million dollar car (piece of steel on wheel) when academic institutions are crumbling.

 

One last point, the government makes laws. That's a fact. Corporations blame the government for every law that has passed. However, what some simply fail to mention is that the government doesn't listen to common citizens. It listens to corporations (lobbyists). The problem is that corporations are not really smarter than the government, hence they cannot anticipate the consequences of their actions. When things go poorly, it's the government's fault (a beautiful scapegoat). This is why many politicians later go working for those same corporations.

 

To get to the point, the loopholes were created by the same corporations. I can hardly imagine bureaucrats saying: "Hey, let's create a loophole".

Hence, saying it's OK because it's legal is the biggest slap in the face one can get. By the same logic, if I'm rich and powerful enough, I can influence laws to burn building: "It's OK, it's in the law".

 

Edited by geniusbate - 4/30/12 at 6:22pm

Supply and Demand obviously effects prices on commodities like oil and sugar. But Apple sets the prices on their own kit, such as iPads, and they stay generally constant, regardless of supply and demand. People aren't out there in the market bidding the prices up or offloading items and causing the price to plummet. It's not an open auction like wall street or ebay. Pricing is often just an educated guess within a range (Apple does want to maintain their margins).

 

Apple even constrains the pricing that be set by their retail partners via a suggested retail price. You won't see a drastic price difference between an iPad bought from Apple.com and one bought at MacMall.

 

Once you've had your fill of that iPad and sell it on Craigslist or ebay, then it's all about supply/demand.

Totally true, but the companies basically simulate that supply and demand game by different mathematical models before the market entry. Once on the market, the prices rarely fluctuate. Taxes, no taxes ... blah... blah ... rarely matters except for election purposes...

I can't make out why the NYT is talking about Apple all the time, as if they are unique. Sadly -- yes, sadly -- the international reality of these transglobal corporations allow them to get low-cost labor across the world, and allow the company (and all other companies) to behave this way, in fact, demand it. The gospel of free trade is cemented by treaty after treaty, forget that it's not the best thing for our country. (I know, that's controversial, but that's what I think. How about this? You can't take the money out of the country until you pay taxes on it.

 

Apple alone would pay about $10 billion to the California treasury if they were upstanding citizens in this regard. Wow, that would come in handy for the schools and medical care and infrastructure repair. How about it, Apple? (And everybody else.)

 

But until the legal standards are changed, this is the way it is. No bull-- argument about, "but Apple is..." No, no. What's legal for one is legal for all.

 

In 1997, when Jobs returned, there was no question of manufacturing Macs locally, as Jobs had tried, twice. Instead, the only way to keep things as cheap as they ARE, now, compared to the '80s and early '90s, was to go offshore and set up the production process overseas. 

 

So California schools are begging for tax money so they can stop making education unaffordable. So Silicon Valley disappears, eventually, because it started up from huge government investments in Defense and R&D, and the large quantity of folks educated in California universities, which used to be almost free.

 

 

"Designed by Apple in California. Nyay-nyay-nyay-nyay-nyay!"

 

There, fixed that for you.

As soon as I start working in country A while paying the income tax rate of country B that statement might make sense. As usual, it doesn't.

You think they would officially report that they pay too little tax? As noted in the report:

"Neither the government nor corporations make tax returns public, and a company’s taxable income often differs from the profits disclosed in annual reports. Companies report their cash outlays for income taxes in their annual Form 10-K, but it is impossible from those numbers to determine precisely how much, in total, corporations pay to governments. In Apple’s last annual disclosure, the company listed its worldwide taxes — which includes cash taxes paid as well as deferred taxes and other charges — at $8.3 billion, an effective tax rate of almost a quarter of profits.

However, tax analysts and scholars said that figure most likely overstated how much the company would hand to governments because it included sums that might never be paid. “The information on 10-Ks is fiction for most companies,” said Kimberly Clausing, an economist at Reed College who specializes in multinational taxation. “But for tech companies it goes from fiction to farcical.”"

Now, it could well be argued that if the only public financial evidence is fictional then so is the criticism of it but the report has information from ex-Apple employees who helped setup the systems:

"“We set up in Luxembourg because of the favorable taxes,” said Robert Hatta, who helped oversee Apple’s iTunes retail marketing and sales for European markets until 2007. “Downloads are different from tractors or steel because there’s nothing you can touch, so it doesn’t matter if your computer is in France or England. If you’re buying from Luxembourg, it’s a relationship with Luxembourg.”

Downloadable goods illustrate how modern tax systems have become increasingly ill equipped for an economy dominated by electronic commerce. Apple, say former executives, has been particularly talented at identifying legal tax loopholes and hiring accountants who, as much as iPhone designers, are known for their innovation. In the 1980s, for instance, Apple was among the first major corporations to designate overseas distributors as “commissionaires,” rather than retailers, said Michael Rashkin, Apple’s first director of tax policy, who helped set up the system before leaving in 1999."

Apple has said it “has conducted all of its business with the highest of ethical standards, complying with applicable laws and accounting rules.” and on the face of it, the Apple staff demonstrate a high level of integrity but the lower taxed offices are a reality and that is not ethical. Apple's HQ is in California and iTunes is a core product. UK sales in iTunes being paid by people paying UK tax rates are registered in Luxembourg - the UK site has the contact details of iTunes S.a.r.l in Luxembourg:

http://www.apple.com/uk/contact/

People in the UK pay taxes for healthcare and services. Tax on the profit shouldn't be going to Luxembourg just because they have a lower rate.

Please avoid the use of ad-homs in your generalisations. The article doesn't in any way discount the report, all it says is the same thing people are saying here - that it's ok for Apple to avoid taxes on their own earnings as long as they are generating lots of sales tax and income tax from job creation i.e they can profit as much as they like while the majority of the population foots the bill for public services.

We don't all have the privilege of avoiding it though and there's little sense in allowing the wealthiest to pay less so that the poorest pay more. We either all pay our fair share or none of us do. The debt the taxes are used for has to be paid, the reasons that the debt exists can be debated at length.

 

 

No, it has nothing to do with multiple countries. You are claiming that Apple should be paying more taxes than legally required because it would be good for the country. If that's the case, it would be good for the country if YOU paid more taxes then legally required, as well. So why aren't you doing it?

 

 

Because NYT is a smear rag and they get more hits when they attack Apple. No need to even be accurate in their article - as long as it's sensationalistic enough, they get lots of hits by writing about Apple.

Or maybe some NYT exec is short AAPL......

 

 

That's overly simplistic, as well. While there is no DIRECT link between taxes and selling price, taxes clearly influence selling prices. Consider a basic Econ 101 supply/demand chart.

Taxes are a cost of doing business. If everyone has to pay taxes, that increases the cost of doing business and shifts the supply curve to the right. If I make 1 million widgets and pay $10 M in taxes, then that adds $10 per widget to my cost, so I am willing to make 1 million widgets only if the selling price is at least $10 higher than if there were no taxes.

 

 

It's technically true that corporations don't directly pass taxes on to consumers.  However, in effect they do.  This is because corporate taxes are built into the business model of the competitors who are out there in the market pricing their products against each other (and, BTW, it's not just "supply and demand", but that's a longer discussion).  And so they ALL factor that into their pricing model.  One corporation can't come along and NOT factor in the taxes, because then they would not be profitable.  (Old joke:  "I'm losing money on every sale, but I make it up in volume!")  

 

The American Dollar fluctuating has little to do with anything in this discussion.  In fact, the ridiculously high corporate tax level in the USA leads to corporations essentially bifurcating their operations between the USA and internationally, and never repatriating the profits earned outside the country.

 

"They simply don't want to pay taxes but are dishonest about it?"   So you think that if corporate taxes were reduced to zero, prices would not be lower, profits would just zoom?  Um, no. There's this little thing called competition that would take care of that.  Somebody out there would see that they could lower prices, have a smaller profit margin, sell a zillion of them, and make more profit at the lower price point.  Not to mention get an upper hand in the market in terms of recognition and leadership (which BTW are some of the things other than "supply and demand" that determine pricing.  High tech goods are not oats in a barrel at the general store.)

The NYT article does not show any illegal or immoral acts by Apple.  Apple's name could have been replaced with any of hundreds of Fortune 500 companies that follow the same tax strategies.  

 

I used the post publication sell-off to add more shares to my IRA.  

Yes, taxes are a cost of doing business. But contrary to the assertion that they are the single big factor is laughable. In the case where taxes are only applied on profits....corporations cannot play with the price. I hope you get the point. Whether I sell you a 1$ pen or the same pen for 200$, if i'm taxed on profits, I would have no reason to jack the price up.

Good to have someone who knows it stuff. I oversimplified my assertations but its understandable since it' a message board :) However, the world is so interconnected that it is in fact true that taxes would play a big part in prices, you would see drastic price differences between different countries for the iPad. It is not the case.

 

Canada has much higher taxes than the US. The iPad or any other product for that matter is not necessarily more expensive. Maybe a few dollars but mostly due to the exchange rate fluctuations. Like I said above, if you tax on profits, corporation cannot pass it to the consumer.

 

My biggest point is not the divergent views. However, my problem lies in the simplified rhetoric present in the political sphere, including those boards around such a topic.

 

"You tax more so price will go up or you tax more so the economy will be bad." It's not the case. Since Reagan, taxes have been the lowest since at least a century and except for a defined period of time during Clinton (whatever the merits) the USA has been digging itself more and more in the ground. Most big corporations pay close to nothing and they don't pass along the savings to the consumer or to the country which results in bad education, bad jobs...

 

What's more interesting will be the next elections, where the level of the discourse will be even lower than on those boards. Everything will be simplified to soundbites. "No more taxes" "Taxes will destroy the economy".....

 

Funny times we live in.

 

 

You're completely missing the point - and misstating the comments that you're trying to refute.

If EVERYONE has to pay higher taxes, then it is likely to increase the market price. Companies want to make a reasonable profit after tax (where 'reasonable' depends on the circumstances). So higher taxes across the board is likely to increase the consumer's price.