Overseas cash restricts Apple's options for reallocating capital - Page 2

While that's true, I think there's a simple matter of justice.

Since you have sales taxes in most of the states, it's not fair for the B&M stores to collect it and the online places not to. It basically subsidizes the online retailers. The effect? Amazon has put thousands of local book shops out of business. Those are lost jobs for local stores (Amazon's jobs don't make up for all the losses) and lost revenue for states and cities. To get around that, they end up raising tax rates and therefore charge more to the people who ARE paying it.

 

 

At least this is an honest question. I get kind of tired of those who haven't read up on prior tax holidays. The answer is it works both ways. Many of the foreign investments and expenses of a proclaimed US company can be written off. The Chinese workers are largely considered immaterial, as Apple isn't considered a Chinese entity. Even China taxes them as imports when purchased by Chinese citizens. This means that taking away one would largely stifle expansion of smaller companies. The current system is largely rigged against smaller companies, as many of these accounting methods are not feasible for them. I hope that adds something to the discussion. I'm going to avoid the idiots and their political commentary today. They already know who they are.

 

Thanks for diligently repeating this one. I'm amazed that sales tax on online purchases hasn't become the norm. In other countries it's often a part of the marked price. If something says $199.99, the final receipt or invoice will have a breakdown of actual price and tax totaling up to amount.

That's probably not realistic since it would give away too much competitive information, and the record-keeping and reporting requirements would be enormous.

 

A much simpler solution is for the US move to what most of the rest of the world does: move to a "territorial system" of taxation (i.e., you are presumed to have met your home country tax obligations if you've paid your taxes abroad) as opposed to the current "worldwide system" (where all of the income earned anywhere in the world is taxed when it's brought home). It's the latter that leads to a joke of a situation where US companies have parked well over a trillion dollars of their cumulative profits abroad!

 

The other large, advanced economies do not have this problem.

 

The US really needs to get its act together and come out of the Middle Ages when it comes to tax policy.

Edited by anantksundaram - 2/8/13 at 1:56pm

The big corporations pay hundreds of millions of dollar every year to lobbying for favorable corporate tax law.  That's how all the corporate tax loopholes are legal.

BTW, sales tax is double taxation.  You're paying sales tax with your after tax income.  In states where one has to pay state tax, sales tax is triple tax then.  Is it fair?  Sure, as long as the government says so.

So is corporate tax.

Really - I had no idea that your government is still persisting with that policy.

Yes - it's common for many countries to have tax treaties where the rate of taxation paid overseas is akin to what the company would have had to pay domestically. The company can then repatriate those funds/earnings/profits as declared tax paid. There's many ways around that though, hence the rise in multi layered international companies back to back trading amongst themselves leaving some profit in each - its not perfect, but at least taxes are paid.

 

I would have thought reversal of that policy would have been a no brainier - instead of borrowing or printing more - try to attract investment back. The world needs a strong us economy now or at least one that is showing signs of recovery. 

I realise its more complicated than that but it's lots of little things that make a difference . (Apologies for the digression)

Apple said in their conference call they were in active discussions about the cash and would do what was in best interest of shareholders. Same thing they just said in their press release now. No changes. Nothing new. I see Apple doing a token $2 per share increase and another 2 billion in buyback. Not enough to move the needle. Stock sells off.

Offshore cash is the problem and always will be (for at least 4 years while obama is in office). Romney would have killed the repatriation tax but he did not win. Now apple is handcuffed. Gotta love the politicians. Now that money never comes home. Never gets taxed on dividends. Never goes to work in the USA.

 

Obviously you never heard about "Double Irish with a Dutch Sandwich".

If you don't have a clue stop making dumb statements yourself.

That has little to do with it. Sales tax isn't always the best mechanic to assess such things. Obviously essential items are excluded in some states. California excludes a lot of food products as they're considered necessities. The issue is that policies should be consistent for online and brick and mortar retailers and should be handled in a way that isn't unnecessarily disruptive. I think that is the real problem. There are also many people who fail to understand the rules there. If the company has a physical presence in your state, they're typically registered to collect sales tax there, including sales tax from online purchases. That is why some of them say "we collect sales tax in the following states". 

See this is the part that belongs in political outsider. Debating success of prior tax holidays and who is in office could go on forever, and it makes little sense to regurgitate it here.

The point was that many people so the same thing Apple does, albeit on a much smaller scale and many of them are the first ones to blast them for it. I do what I can within the law to minimize my tax obligation. You are free to do the same. That doesn't make you any more evil than it does Apple.

Very cute. Come back and post when you can tell us that: (i) it is illegal (i.e., tax evasion, not tax reduction or avoidance); (ii) Apple is the only US firm doing it; (iii) it contributes materially to reducing Apple's tax burden.

 

Any fool that reads a newspaper knows what a "Double Irish with a Dutch Sandwich" is.

He said he would have. We don't know that he could have. What we do know that no President -- Republican or Democrat -- has been able to get it done it so far.

 

You should not make everything political.

I don't understand your statement. Those are expenses, subject to tax refunds.

Actually, Apple paid about 26% taxes in the US last year on sales here.

 

Maybe Apple should foreclose mortgages and call in the securities so they can make a cash payment to the Government in the form of tax.

 

Off course, that may leave those using that invested money in the lurch but tough titties, the Government must be paid, right?

Exactly!

In the beginning of Internet sales, Congress passed a time dated law prohibiting states from taxing online sales. That law was restated a couple of times. But states got around it by declaring that if the company has a "presence" in the state, their online sales could be taxed. The big fight was over whether the companies could be compelled to collect that tax. Amazon, and others, have been fighting that. It's complex, as always, but the states are finding out that they are losing big bucks here that they need for services, and so they are fighting to retain those taxes.

Most Americans pay taxes, don't use that proven false 48% politically motivated nonsense.

But Apple does obey all local tax laws. This is why they aren't in court in these countries. While the countries may complain, it's their own fault that Apple's financial people are smarter than their own legislators and experts who put their tax laws together.

I agree, the rich should be paying much more. It isn't fair to burden the poor with taxes that hit them much more than do the same taxes on the rich. What needs to be u derstood is that wealth is more of a trickle up than trickle down economic situation. The rich always make their money off the poor, but the poor never make money off the rich. Glad you finally understand that!

Ah, let's guess; the corporation? It's certainly not the executives.

The reason the Feds prevented states from collecting taxes from online stores for a number of years was to do exactly what you said; to subsidize their sales to the point where they would become viable competition. But it's become more than just viable competition. The problem in this country is that allowing the states to all collect taxes is consider by a certain group of people to be a tax increase, even though it is no such thing. These days, even the hint of a tax increase, whether true or not, is enough to get people outraged, even though at the same time, they are complaining about decreased services, and poor infrastructure.

All taxes and fees could be called that. It is a meaningless statement.

Sales tax is regressive in itself, however it's a poor justification for the split between BM and online retailers. Policy shouldn't change on that basis. Anyway I just wanted to add that. Also it's easier to discuss things without the left vs right mentality. Assigned value sets make me cringe.

actually US corporate taxes are the lowest among large developed countries

Again, Apple needs to think about how to use those money to its advantage and invest in things that is safe and grows, no matter it is bonds or what sort. I dont want it to return the cash to me. Apple should very much think for itself.

The US Currency is pretty low ( comparatively ), using the $100B Foreign Cash to Buy a 10 Year US Treasury Bonds would yield a yearly additional of $2B Cash. ( Correct me if i am wrong here ). Which Could have used to lower the production cost of its Mac Product, iCloud improvement or what other things that brings "value" to its Apple Product Users.

Or what others solution. I think dividends, brings back cash are just for short term investors.

And that is the thing that if Steve Jobs is still here it wouldn't have happen, he would properly RDF any stupid so called analysts and Hedge Funds manager into heaven.

Wrong answer.

'Finally understand' what? What do you think I did not understand before, and when/where did I express that lack of understanding? Moreover, are you implying I am anti-poor and pro-rich or pro-poor and anti-rich? Or pro both? Anti both?

Simply put, what the heck are you talking about!? Are you sure you're responding to the right person?

I was just making a simple point about the regressivity of the sales tax, man, that's all.

I agree with that. But I happen to think that both are regressive, and that's all I was pointing out.

I also think that there's absolutely nothing wrong with someone being a leftie or a rightie or in the center (where I happen to think I am). I only brought that up in the context of the traditional arguments about equity versus efficiency, and the views of the left versus the right on that argument -- i.e., someone concerned with issues of equity should be railing against all forms of regressive taxation, rather than attempt to justify it on the basis of 'two wrongs make a right.'

 

Your claim about how very few corporations, if not none, pay much less than the marginal tax rate of 35%. But in using this fact to refute a belief that the United States has the largest corporate tax rate in the world and it should be lowered to make our economy more competitive fails to account for a key fact-HOW corporations end up paying that low tax rate. The MARGINAL tax rate represents the tax rate incurred if a company did absolutely nothing at all to lower its taxes. Corporations have a fiduciary responsibility to shareholders, though, and reducing taxes is a part of that. In order to come up with ways of minimizing taxes, corporations employ and army of accountants and lawyers to comb through the tax code and devise a tax strategy that minimizes the tax bill. 

 

If the MARGINAL tax rate were lower, corporations wouldn't have to spend money paying accountants and lawyers to reduce their taxes. That money could be used elsewhere. In other countries, the marginal tax rate is lower, meaning that for no effort at all, companies in those countries pay less tax. This is what is meant my economic competitiveness. Taxes increase the cost of doing business relative to other countries. And people like to vilify corporations' tactics such as Apple's by saying that smaller businesses, i.e. the "little guys", are getting the shaft because since they're smaller, they can't take advantage of the loopholes like multinationals, partly because they don't have cash to spend on accountants. Well, if the marginal tax rate were lower, it would level the playing field, because all of a sudden, those lower taxes rates that could only be achieved through some complicated financial acrobatics can now be had with much less effort. 

 

Guys, help an out of towner here.

What level of tax does an Internet business based in the US attract ?

 

Sorry for dumb question. Interested.

This can be argued for every point. Corporations are pieces of paper. You're over simplifying it though, and you don't account for predominantly foreign owned entities. In fact I'm curious how much of Apple is under the ownership of US citizens.

 

It frustrates me for the reasons I mentioned. I've known plenty of people who vote Republican. It's just easier to discuss specific topics than wrap an ideology around everything. I've never felt reducing everything to a single dimension was a good way to explore it, and that is what basically happens with the right/left thing. It becomes all about ideology rather than the issues that are supposedly represented.

I think you posted this in the wrong thread - but your summation is bang on the nail. Nice.

Maybe a mod can move it to the Einhorn post.

Yes, and therefore they get taxed on those costs. Employee, material, outsourcing etc. So even though a French guy buying an iPod build by a Chinese person earns the US government some money.

My insight.

The tax on profits coming back into America is part of Washington's imperialistic ways.

The American owned money overseas spreads the tentacles of American imperialistic ventures far and wide.

Washington has no desire to bring this money back as it would disrupt this American subversive influences on other nations.

It is part of the new world order plan.

Mick

Companies are not taxed on costs (other than property tax on real estate, of course). They're taxed on profits.

There IS one unfair element in terms of that topic. Apple pays US tax on US income, China tax on China income, and France tax on France income, etc. Let's say that Apple France buys a phone from Apple China. They pay Apple China a certain amount of money for the phone. They pay Apple US a certain amount of money for their share of marketing, R&D, support, licenses, etc. They then sell the phone in France. Whatever is left over is clearly profit for Apple France and the US government is not entitled to any portion of that.

HOWEVER, the problem is transfer pricing. How much should they pay Apple China for the phone? How much should they pay Apple US for the IP? By setting those prices, Apple controls which country earns most of the profits - and therefore where most of the taxes will be paid. If the US taxes are very high, for example, they set the IP licensing cost low enough that the US subsidiary doesn't make money and France makes more money - where the taxes are lower.

There are rules that limit transfer pricing so that it's not TOO blatant of a tax avoidance scheme, but the window for allowable prices is very wide and there's a lot of leeway in moving income around simply by changing transfer prices.

I don't know that there's an easy way around that other than a global taxing agreement which would have more downside the upside.

Too many variables to answer.

In the US, there are many types of taxes:
Federal corporate income tax. Generally based solely on profits - the more profit you make, the more you pay in taxes. This could go as high as 35% of marginal income, but more typically is in the 10-15% range at most.

Fees:
You pay fees for specific services. While not taxes, they are payments to the government. For example, you pay fees to register a patent.

State income tax. Some (but not all) states have income taxes for corporate income. Typically up to about 15%, but most commonly 5-10%

Property tax. States and localities charge property tax based on the value of the property used.

Local income tax. Like state and federal income tax, but implemented by specific cities. Not particularly common except a few of the largest cities. Typically a couple percent.

Employment taxes. Employers pay a portion of the social security and medicare taxes for employees. Something like 8% of employee's gross income.

Overall, the total corporate tax burden could range from 0% to perhaps 50%. However, almost no one pays anywhere near the maximum. Few companies pay more than about 25-35% for all these taxes combined.

It's a complicated mess.

The 35% number is a red herring. Almost no business (certainly few, if any, of the largest businesses) pay anywhere near that amount. It's not uncommon for large, profitable businesses to pay no income tax at all.


Apple is already investing everywhere that it thinks it can improve products or create value. Getting 2% return isn't going to change that.

Note also that they can get similar returns by leaving the money overseas.

The only way that money will be repatriated is if Apple has a major investment in the US that requires it or decides to increase the dividends. Otherwise, bringing the money back to the US makes no sense at all for the reasons given earlier.

I was suggesting that most -- if not all -- taxes are paid by you and me. Ultimately, it is all passed though to consumers (through the prices they pay for goods and services) and shareholders (who would otherwise have a claim to the pre-tax rather than after-tax income). Period. I am not taking a stand on whether corporations should be taxed or not, but just saying that it is not some entity that is ultimately independent of us.

Regarding foreign share ownership, unfortunately, US companies don't have to report that data. (Many European companies do.)

Why do you always give useless answers, as if you actually know why you're talking about, and it is this big secret? If you're so sure of yourself, just come out and explain it. If not, keep quiet.

I took your entire statement into account, beginning with the first sentence, and with the experience of reading, and responding to your many posts over the years.

What? You say yes, and then state the opposite. Could you be clearer?

Apple is a US based corporation. Every product is R&D'd here. It's tested here. Most of, or all of the software is written hers. Most of their property is here. Most of their employees are here. Much of, but only about 40% of their profits are made here, and it's profits that are taxed. Is this a problem for you?

It's a silly post, but ok. Most other countries do the same thing.