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Apple faces scrutiny again after paying no 2012 corporate taxes in UK - Page 3

post #81 of 94
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Originally Posted by Frood View Post

Microsoft was actually pulled before the same committee investigating Apple a year earlier, and more companies are slated to follow.  Still the perception here exists that 'Apple is being persecuted.'
How many articles were written about Microsoft? How many we're written about Apple?
post #82 of 94
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Originally Posted by hmm View Post

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Originally Posted by digitalclips View Post

I hope the UK powers that be are checking into Google, Microsoft, etc. etc. etc .... 1oyvey.gif

Actually they have all been investigated. Starbucks was in the news last year when they were investigated over transfer pricing. Apparently they've been operating at a loss for years there due to the cost of coffee beans paid to their subsidiary:rolleyes: .

Apple says they don't play transfer pricing games. But of course, they will not sell products to Apple Stores at cost, but at the same price they would sell it to retailers. That's important, because if they didn't do that, the stores would show profits, even when they are losing money, because the stores must make money as retail operations, not just because they are pushing product. If third party stores work better then that's what Apple will pursue, if first party stores work better, then that's where they will move. The only way to figure that out is to treat their own stores like a wholly owned subsidiary retail chain that must operate under the same conditions as third party stores (besides of course having the advantage of the official Apple brand).
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Originally Posted by asdasd View Post

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Originally Posted by copeland View Post

When thorougly reading the article you can read that Apple made 15billion operating profits in the EU and 10% of revenues are attributed ot the UK.
That would mean that Apple made ~1,5billion operating profits in the UK, but they are reporting 102million.
Do you really think that selling goods in the UK is so much more expensive than in the rest of the EU?
The question that has to be answered is why has Apple so mediocre profits in the UK!

Is Apple Ireland selling the goods to Apple UK more expensive than to others to minimize the taxable profit in the UK?
Would any other reseller sell Apple goods at an ebit of ~2,8%?
I don't know, but these are questions that come to my mind.

You are right that it looks like Apple is singled out and that laws - at least within the EU should be homogenized to reduce the incentive to manipulate numbers.

Apple Europe may make 1.5B operating profits but it does so by selling from Cork. The only corporation profits due in the UK are the profits of Apple UK, which is effectively a retail division. Apple UK, like Currys or other electrical retailers, buys goods from the manufacturer - Apple Ireland - and makes a profit on sales. Currys would do exactly the same.

 This isn't tax avoidance, its the way tax works. Its the same for BMW, were it to  make say 1.5B in Europe it would book it to Munich; however if BMW owned it's own showrooms it would create a subsidiary in the UK to run the local retail division. The profit would be the difference between the retail and the wholesale price of the cars sold in those showrooms. 

First tax avoidance is not a problem. Tax evasion is a problem. These are legally relevant terms. So "accusing" Apple of tax avoidance is accusing Apple of doing good business. Accusing Apple of tax evasion is accusing Apple of criminal acts. So it's key to be very discriminate in the use of these two terms.

When Apple UK retail buys the goods from Apple Ireland @ Cork for the same prices as all the third party retailers, then that's not a transfer pricing shell game. Of course, Apple will try to deduct from the profits made in the UK whatever they can: their expensive retail outlet leases, their labor costs, etc.
Since Apple's main objective with the stores is to sell Apple product and shape the perception of Apple as a brand, and only a secondary motive is to make profit with the stores above and beyond what they would make if third parties were to sell their wares, I'm not surprised that the UK retail profits after deducting all costs are relatively small. Of course one could argue Apple should somehow account for the value the stores add to the brand and pay tax on that intangible income, but that would be stretching the tax code quite a bit.
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Originally Posted by reefoid View Post

You're correct, except Apple UK makes almost zero profit on their sales as the price they pay the Irish subsidiary for hardware is way above wholesale.  That's the whole point, Apple Ireland buys direct from China and they then sell to each country at almost full retail price to reduce their tax bill in those countries to almost zero.  And because of the Irish setup, they pay almost zero tax there as well.

I'm not saying you're wrong, or criticising Apple, but just pointing out how they are using the tax systems to pay as little as possible, which they are entitled to do.

I'm not sure that claim is correct. What you're describing would be a transfer pricing shell game, which Apple says it doesn't do.
post #83 of 94

@rfca who here has accused Apple of tax evasion?

I wanted dsadsa bit it was taken.
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post #84 of 94
Quote:
Originally Posted by asdasd View Post

@rfca who here has accused Apple of tax evasion?

People use the term "tax avoidance" in an accusatory fashion that would only be justified if what they mean is "tax evasion".

"Tax avoidance" is smart business and must be lauded, "tax evasion" is criminal.

So either people should start high-fiving each other over Apple's great tax avoidance, or they should get outraged (and show at least credible circumstantial evidence) over Apple's alleged tax evasion.

As it stands, the discussion here borders the absurd and ridiculous.
post #85 of 94
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Originally Posted by reefoid View Post

You are correct in that UK companies use Ireland's low tax rate to minimise their tax bill.  However, Apple go one step further, as detailed here.  Basically Apple have a subsidiary that all of their non-US sales are routed through that is incorporated in Ireland, managed and controlled in the U.S. but not tax resident in any country..

No, you have missed what I said, I said BSkyB operates in Ireland and pays no tax in Ireland, they pay their tax in England
post #86 of 94
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Originally Posted by rcfa View Post

"Tax avoidance" is smart business and must be lauded

 

By people that worship at the altar of business perhaps, others might have a more nuanced view.

 

Tax evasion is explicitly criminal, but tax avoidance as a descriptive terms occupies a much wider territory of behaviours, from pristinely white use of pensions, charitable donations, and low-tax investment schemes, to the markedly grey aggressive use of the shadowy international system to "avoid" transfer pricing rules, financial oversights or corporation tax.

 

Tax avoidance is by definition not illegal, but it can go pretty close to the line, and many would say that the line has been drawn overleniently anyway.  So laud away if you like, but don't criticise other people as having "absurd" views about clearly unbalanced and exploitative systems.

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post #87 of 94
Quote:
Originally Posted by Crowley View Post

Quote:
Originally Posted by rcfa View Post

"Tax avoidance" is smart business and must be lauded

By people that worship at the altar of business perhaps, others might have a more nuanced view.

Tax evasion is explicitly criminal, but tax avoidance as a descriptive terms occupies a much wider territory of behaviours, from pristinely white use of pensions, charitable donations, and low-tax investment schemes, to the markedly grey aggressive use of the shadowy international system to "avoid" transfer pricing rules, financial oversights or corporation tax.

Tax avoidance is by definition not illegal, but it can go pretty close to the line, and many would say that the line has been drawn overleniently anyway.  So laud away if you like, but don't criticise other people as having "absurd" views about clearly unbalanced and exploitative systems.

The issue is, as long as we have a capitalist system (and that may or may not be an ethical system which is beyond the scope of this discussion), the explicit task of an enterprise is to maximize profits and shareholder value and doing that in a way that does not violate the law.
If people think the law encourages unethical practices, then they should get the law changed, and not expect that a company voluntarily makes less profits than it could, potentially exposing themselves to shareholder litigation for neglecting their duty towards their investors.
While some aspects of what Apple and other companies are able to do are clearly questionable, what's questionable are the laws that allow them to do this, not their practices of using existing law to their best advantage.

Congress should look in the mirror and ask themselves why they keep selling out to lobbyists and why they keep creating laws that are intentionally full of holes like Swiss Cheese; it's a cheap show to fish for votes to use Apple that's very much in the public eye, to create a media circus that makes them look like they are concerned about the average Joe and what he has to pay in taxes due to the "evil" companies who don't pay their fair share, when it's in fact congress who made the laws.

The absurdity, thus, is not that some people get riled up over the tax situation for large corporations or very wealthy individuals as compared to the average person, but that they blame Apple for following the law to their best advantage (which is what they are obliged to do), rather than blaming the law makers who created the existing legal structure.
post #88 of 94
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Originally Posted by coffeetime View Post

I own a business park. Several years ago (2007-2008), we put a lot of money into one segment that - frankly - had a disastrous financial outcome. The losses from our business carried back (via our LLC) into our personal taxes, and when the dust all settled, we owed Uncle Sam zero taxes for that year.

I mention this because it is always easy to get off a cheap shot about so-and-so not paying any taxes. The way the tax code now stands - and I'm assuming it got there pretty much via both political parties - is that it's not just collecting revenue but providing incentives (and disincentives). Buy a Nissan Leaf and get a big tax credit. Take a withdrawal from your IRA before turning 59 1/2 and pay a 10% penalty. Donate old clothing to a charity and get a deduction. Replace an old fridge with a new one in your restaurant, and expense (depreciate) it all in one year using Section 179. And so on, and so forth.

If people don't like the fact that Apple didn't pay any UK income tax - and accountants / auditors confirm that they followed all tax laws and didn't do anything illegal - then they need to take it up with the people who write the laws, not with those who follow them.

People often compare what Apple is doing to tax incentives or tax relief for low earners but it ignores the fact that using those kind of tax incentives complies with the intent of the law. You quite rightly got some tax relief because your business venture failed. Apple is one of the wealthiest companies in the world. Tax incentives are meant to spur economic growth. That doesn't happen by shoring up billions away from tax authorities.

Apple's kind of avoidance is avoiding paying for an infrastructure that has allowed them to become one of the wealthiest companies in the world - in other words, let someone else foot the bill. The taxes are just offset onto others.

There have been many schemes used by wealthy people to avoid paying tax:

http://www.thisismoney.co.uk/money/news/article-2162245/The-tricks-British-celebrities-use-pay-tax.html

"The way that K2 and similar schemes work is remarkably simple. Its members redirect their earnings into a Jersey-based trust. The trust then grants interest-free or low-interest loans to members, on which little or no tax is payable. The borrowers then quietly 'forget' to repay these loans, which the trust later writes off against the earnings it holds.

Thanks to K2, Carr and other K2 members are paying tax rates of little more than 1 per cent on the millions of pounds they make each year. To put this tax avoidance into context, if the 39-year-old stand-up were to pay tax on this £3.3million through PAYE, then his tax bill would be nearly £1.7million a year.

Thus, Carr's tax loophole saves him as much as £1.66 million a year, which is nearly half of all the earnings he pours into K2.

it's reckoned that aggressive tax-avoidance plans such as K2 could be costing the UK as much as £4.5billion a year in lost taxes.
That's enough to reduce the basic rate of income tax from 20 per cent to 18.5 per cent overnight.

Carr today admitted to a 'terrible error of judgement'. He took to Twitter to explain that he would no longer use the Jersey-based K2 tax scheme and vowed to 'conduct my financial affairs much more responsibly'."

Loans from trusts aren't intended to be used that way. The avoidance just offsets the costs from the wealthiest people who arguably wouldn't miss it to people who could really use tax breaks in a poor economy. Say that Apple paid the taxes expected of them at the typical rate of 25%, worst case, it would take their cash pile from $145b to $109b. The remaining $109b is probably still far more than any other company in the world has. It's not that it would be a voluntary contribution - that would be where no payment is expected of them in the first place. They are expected to pay 25% in countries they profit from like everyone else.

It's not as simple as blaming one particular government for the mistakes because people are using international setups involving multiple governments and laws.

Concerning the ethics of it, it's like a restaurant having an all-you-can-eat, a telecoms company having unlimited services or insurance companies having low rates. The only way that the schemes work is when everybody complies with the intent of the offer i.e individuals don't take enough food to feed 3 people, individuals don't use their mobile phone to torrent 20GB of data a week, individuals don't make excessive insurance claims. Individuals who would do such things would be considered greedy by most people but those individuals would simply dismiss it by suggesting that if there aren't rules to limit their behaviour, they'll just take whatever they want.

There are two mindsets that are both valid. One is the mindset that promotes the virtue of selfishness. The people who get ahead in life and have the best quality of life are the people who look out for themselves before anyone else. This outcome is backed by a lot of evidence. The other mindset promotes the notion that altruism is not a disease that needs to be cured. Where giving blood, donating organs, sharing toys, helping the poor and the ill are not things to look down on.

Neither mindset in its extreme is the best because extreme selfishness causes isolation from the system that allows them to be successful and extreme altruism is unsustainable because you can't give what you don't take in the first place. The tax system is a balance between the two. The funds it takes provide an infrastructure for upwards mobility including education, healthcare and security - that allows you to be selfish because you are taking things you haven't earned. It forces social responsibility on people who have benefitted from that infrastructure by contributing to having educated, healthy, moral employees but at the same time allows them to gain vast amounts of profits from their work and from the customers it allows to travel to the stores and the banking regulations that allows them to safely pay.

If everyone stopped paying tax entirely, the government would get no money at all so no money at all for waste collection, clean water, sewage treatment, public schools, justice, military, retirees or any government employees. Many of these things can be privatized but who would stop abuse? The market alone can't do it so there has to be some form of control by an impartial arbiter - this is the role of government; the same government that Apple applies to in order to prevent Samsung ripping them off. People will always argue about the size and influence it should have but when you accept that it is necessary in some form at least then you have to accept that near zero levels of taxation are not sustainable and that if a company making 1 million a year pays the full tax rate that it's not fair if a company making 100 billion a year pays near zero. That's just an individual being greedy at the expense of everyone else.

I'm sure we'd all love lower tax rates but only the richest managing it will achieve the opposite. I see many people willing to attend the party with the banners that say 'congratulations Apple for increasing my personal tax burden' but it seems odd that they'd attend the party - I suppose it's a form of altruism but these same people are supposed to be against it. If self-interest is the order of the day then someone else getting rich at your own expense would surely be frowned upon.
post #89 of 94
Quote:
Originally Posted by rcfa View Post

The absurdity, thus, is not that some people get riled up over the tax situation for large corporations or very wealthy individuals as compared to the average person, but that they blame Apple for following the law to their best advantage (which is what they are obliged to do), rather than blaming the law makers who created the existing legal structure.

 

That's a lazy way of boiling the whole situation down to the assigning of blame.

 

Law makers aren't omniscient, and loopholes are rarely intentional or immediately obvious.  Corporations are the entities that are employing people to look into ways around laws, so rightly should be blamed, even if no one realistically expects them to change their behaviour as a response to that blame.  Financial institutions are the ones developing "innovative products" that work their way around laws and obviscate what is really going on, so rightly should be blamed, even if no one realistically expects them to stop doing what they are allowed to do. Law makers should be and are pressured to tighten up the system so that exploitations are shut down and monitoring put in place to keep on top of any further loopholes that come to the fore.

 

However, just because the law institutions are the most willing (not a lot) and able (not really) to change, doesn't mean that the blame rests on their shoulders.

 

 

And Apple are not "obliged" to use any legal means necessary to maximise their retained profit.  That's a fallacy.

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post #90 of 94
Check out my message to Apple...

https://vimeo.com/69605055
post #91 of 94
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Originally Posted by zedzero View Post

Check out my message to Apple...

Yep. It shows you don't have a clue what you're talking about.

Originally Posted by Marvin

The only thing more insecure than Android’s OS is its userbase.
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Originally Posted by Marvin

The only thing more insecure than Android’s OS is its userbase.
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post #92 of 94
Quote:
Originally Posted by zedzero View Post

Check out my message to Apple...

https://vimeo.com/69605055
Very nicely done.

I doubt it'll convince Apple or any hawks, so you're likely just preaching to the converted, but all the same, very nicely done.

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post #93 of 94
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Originally Posted by Crowley View Post

Very nicely done.

I'll agree with that. It looks nice.
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I doubt it'll convince Apple or any hawks...

Probably because it's just utterly wrong.

Originally Posted by Marvin

The only thing more insecure than Android’s OS is its userbase.
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Originally Posted by Marvin

The only thing more insecure than Android’s OS is its userbase.
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post #94 of 94

"And Apple are not "obliged" to use any legal means necessary to maximise their retained profit. That's a fallacy."

 

 

Indeed.

 

 

"Since Apple's main objective with the stores is to sell Apple product and shape the perception of Apple as a brand, and only a secondary motive is to make profit with the stores above and beyond what they would make if third parties were to sell their wares, I'm not surprised that the UK retail profits after deducting all costs are relatively small"

 

 

And it often does seem a sordid vocal world

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