Originally Posted by digitalclips
However creative, can I assume all the above is strictly within the tax laws of the US (and elsewhere) and no wrong doing occurred? He asks with fingers crossed
It's funny, Bullock was asked that - Johnson said he assumed they'd have the IRS pretty much auditing them full-time like many other large corporations and Bullock confirmed this, then the conversation went:
Johnson: they're looking at all this corporate structure, transfer prices and they're basically giving you the nod saying you're following tax law?
Bullock: *slight pause* They look at it in detail, yes.
Johnson: Ok, uh... Mr Cook...
If the IRS had found law-breaking, they'd most likely have been prosecuted by now so I don't think that's a concern. I get the impression that the IRS is extremely unhappy with it though, hence the push for near-term tax reform. Shareholders should perhaps be concerned about tax reform because if these loopholes are closed then Apple may be liable for significantly increased taxes next year (or more accurately, taxes significantly closer to what they're expected to be paying anyway).
Determining adherence to tax law is obviously made trickier by the fact that these Irish entities have no tax jurisdiction so they'd have to figure out whose law to hold them to first. It's very odd that this was ever allowed to happen. The subs are primarily being managed in the US so common sense would dictate that the US management are beneficiaries of the services provided by US income tax. On top of that, the cash is held in the US and managed by US banks and other financial institutions so obviously protected by the laws surrounding US banking.
I'm not sure when the IRS started auditing them, it seems as though they have been for a while. If they found that it wasn't legal for these entities to have existed and operated without a tax jurisdiction, maybe they can take some action but there's nothing to indicate that.
This seems to me to be like the Chinese labour conditions: most, if not all Apple's competitors do the same things or worse. When the spotlight shines in Apple's direction, they are quick to point this out, they claim (probably rightly) to be more ethical and end up leading by example. The more of these things that come to light, the more it seems they have a very malleable sense of ethics. I don't think that's easily avoidable though and I don't blame them entirely. It's easy to judge these issues from the outside but you get a different perspective from different vantage points.
If I was in Apple's position when paying the 2012 taxes, I'd be looking at the $41b of income knowing that I had nothing to spend it on and I'd think that a $14b tax bill was large but I'd still end up with $26b and still wouldn't know what to spend it on so kind of inconsequential. I'd perhaps like a say in how the tax gets spent beyond electing someone under the promise that it gets spent wisely but that would be the case at any income level. I also think a 25% tax rate is fairer and is what the rest of the world seems to have agreed on. I think that there's going to eventually have to be a new method of taxation or at least measuring it by using transactions instead of relying on companies being honest about their activities.
There needs to be a changed perception around the notion of taxation too. People have an indoctrinated hatred towards anything publicly funded and taxes, sometimes to the point of absurdity whereby some would even have an objection towards a minimum wage nurse working 12 hour shifts being funded by a parasitic entity (public funds) but have the utmost respect for a millionaire who makes a fat dividend from a stock holding being treated for a golfing injury sustained while playing golf all day and proclaim them to be the driving force of industry.
It's mainly because of the idea that any taxable allocation taken from money moving around is theft from a value determined by a free market. If I give someone a gift in exchange for some work and I decide I want the box back, some people would refuse and claim it belongs to them despite the fact that without me setting up the exchange, they wouldn't have a box to give back and I could have taken it prior to the transaction. If the public sector was funded from the central banks based on GDP, there would be no notion of theft at all because it's not personal but because most of the money would have to eventually go into the private sector, that would lead to hyperinflation as the money supply would have to keep growing so it has to keep going round without growing too fast, which means that non-profit organisations have to be subsidised by profit-making ones.
The point of the whole system, which people often forget is not to acquire wealth, it's to maintain a good quality of life. Quality of life isn't granted to everyone equally relative to productivity. The idea that the free market alone could determine life quality just doesn't hold up because human nature dictates otherwise. Everyone needs a form of centrally regulated justice, education and care because competition in certain areas would lead to war and a noticeable drop in life quality and profitability in many cases is opposed to the provision of a service.
So, the problem isn't that something is taken from individuals and businesses as that's essential but how it's taken, how much is taken and what it's being spent on. A lazy economy benefits no one so money has to be encouraged to move around to incentivize work but what's so ironic about the wealthiest people and companies is they don't all move money around. They have billions shored up somewhere separated from human interaction. How much has Apple's $100b sitting in a bank somewhere contributed to anyone's quality of life? Zero because not even shareholders are getting it.
What's the statement being made by not moving it around? That it's better to have a pile of money than a good quality of life? That unless the government offers better taxation rates than some of the poorest people that their only option is to deprive the economy of circulated currency? These are implicit statements made by people who explicitly declare that they aren't driven by money. There's a degree of intellectual dishonesty when someone's actions contradict their disposition like that.
The ability of people and companies to accumulate and freeze out large portions of money from circulation is really damaging to the whole economic model and as the subcommittee noted, the avoidance of taxes shifts the tax burden elsewhere:
"At its post-WWII peak in 1952, the corporate tax generated 32.1% of all federal tax revenue. In that same year the individual tax accounted for 42.2% of federal revenue, and the payroll tax accounted for 9.7% of revenue. Today, the corporate tax accounts for 8.9% of federal tax revenue, whereas the individual and payroll taxes generate 41.5% and 40.0%, respectively, of federal revenue.”
It's right to applaud when they make computers for the rest of us, not when they make tax increases for the rest of us and it even contradicts philosophies promoting the prosperity of self-interest. Why promote something that ultimately works against your own self-interest?
Governments taking too much is harmful too because it weighs down the private sector but the solution to that is for people to use state-provided services less, not to remove the services where there is a need for them.