Originally Posted by PaulMJohnson
The point is (and this is the crux of the problem), Apple and many other companies are recognizing revenue in Ireland that there is no way they actually generated in Ireland, and they are recognizing the revenue there purely because Ireland have a very low rate of Corporate tax.
I don't doubt Apples reporting was perfectly legal and above board, because within the European Union, you can book sales in one country even if they are made in another (Starbucks, Google, Amazon all do the same). The question is, why do our politicians allow it to be legal?
There's actually two problems, of which only one is under the control of the US.
The first problem, the one the US can't control, but is their fault, is the low tax rate in Ireland. Go take a look at which European countries needed or almost needed bailouts. Ireland is one of those. Now WHY is that? Because they seem hellbent on being "competitive" and they know damn well the only reason anyone sets up companies there is because of the low tax rate. If they were to suddenly raise the tax rates, those companies would move to the next stable country with a low tax rate.
That's no different than the reason companies in the US pick states with the lowest tax rates to setup in.
The second problem is double-taxation, and I can't figure out why any country does it. It makes no sense to tax income of a foreign entity for income earned by the foreign entity. All software companies already know that it's easy to setup a company in a foreign low-tax market and assign all the IP to that company, thereby all the income on sales is earned by that company. Repatriation of that money never needs to happen, because as far as legal jurisdictions go, that income wasn't earned by the domestic branch of the company. So it makes no sense to tax income that was already taxed in the legal jurisdiction it was earned in.
How that needs to be fixed, is a long and complicated process, but the gist of fixing the problem has to start with closing the same loopholes rich people have used to hide their wealth. Apple wouldn't be doing this if other companies and individuals weren't, and that comes down to competitive reasons, not "moral" ones. The solution really needs to be either:
a) that money can never be repatriated (those foreign companies are legally not in the US) and that money can only be sent to the US by the foreign company "paying" the parent company for services/licences, by which that money is then treated as income again to the US parent company. (which is where we are at now)
b) The US demands all offshore subsidiaries to be closed or be made independent of their "parent" company. Thus legally there are no offshore companies from which to "hide" income with. The offshore companies are basically turned into income trusts by which the parent owns 100% of, but has no control over. Since the owner would be collecting revenue from the foreign company, that would be subject to US tax rules.
But I have no faith in the US political system to fix anything, and what we're staring at is the elephant in the room.