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In-depth report finds Apple moved $8B in untaxed profits out of Australia over past decade

post #1 of 188
Thread Starter 
An investigative report published on Wednesday takes a microscope to Apple's Australian tax dealings since 2002, finding the Cupertino company successfully avoided taxes on profits of $8 billion. The report is the first to assign numbers to Apple's outgoing, untaxed Australian cash flow.

Australia
Units in Australian dollars. | Source: Australian Financial Review


Sifting through a decade's worth of financial statements, the Australian Financial Review found Apple to have shifted some $8 billion out of Australia through its Irish subsidiary, all of which was unencumbered by country taxes.

Apple Sales International, the Irish-based entity in charge of Apple's international tax dealings, has never filed financial returns with the Companies Registrations Office in Dublin, but reported over $100 billion in profit over the last five years while paying less than 50 cents in tax on every $1,000 of income.

As Apple is a foreign company doing business in Australia, however, it was required by Australian law to file annual financials to the Australian Securities and Investments Commission from 2000 until 2009. From these documents, the Financial Review was able to extrapolate the margin ASI charged to sell iPhones and iPads to subsidiaries in a number of regions worldwide.

While no filings exist past 2009, ASI's margins over the preceding decade very closely follow gross margins reported by Apple for worldwide sales. Using Apple's worldwide margin as a proxy for ASI margin, the publication calculated Apple Australia to have paid an estimated $6.5 billion in profits to the Irish subsidiary between 2010 to 2013. This is based on Apple's reports to ASIC of total sales equating to roughly $18 billion and pre-tax profits of $349 million.

Cork
Apple's headquarters in Cork, Ireland, via Flickr user Sigalakos.


As is well known, Apple employs an accounting method, dubbed the "Double Irish with a Dutch Sandwich," that leverages multiple international laws to sidestep taxes. The method is used by a number of large corporations, though Apple has taken the brunt of government and media criticism for employing the technique.

Apple leans on an Irish law that views a company as a tax resident of the country from which it is managed, not incorporated. For international profits, Apple directs money to its subsidiary in Ireland as royalties on company-owned patents, or "intangibles." Ireland's regular tax rate is 12.5 percent, but that is not applied to ASI because, under the law, it is managed by Apple in the U.S. This also means the U.S. and other countries, like Australia, are also unable to levy taxes on Apple's Irish operations because ASI is out well out of their jurisdiction.

Ireland upholds treaties with other European countries that allows companies to pass money across its borders without leveling a tax, meaning Apple's money can be routed through the Netherlands, or Singapore in Australia's case, to ASI in Cork. From there, Apple's still untaxed profit can be sent to the Caribbean or Cayman Islands.

The publication offers a recent example of Apple's reported pretax earnings for 2013, which came out to only $88.5 million after an estimated $2 billion of income was funneled to ASI.

Australia
Units in Australian dollars. | Source: Australian Financial Review


In 2012, the Australian Tax Office slapped Apple with a $28.5 million bill for back taxes, though the details behind the charge remain unknown. The year prior, Apple paid $94.7 million in taxes after having generated $4.87 billion in revenue.

Ireland's Finance Minister Michael Noonan has promised to close the loophole in the country's tax code that allows multinational corporations like Apple, Google, Microsoft and others to avoid paying billions of dollars in taxes.

For its part, Apple's tax dealings cannot be faulted as they don't break any laws and with little impetus other than adhering to the "spirit of the law," a change in corporate policy seems unlikely. CEO Tim Cook has met separately with the U.S. Congress and Noonan over the issue of tax reform, which is the only way to tie up the loopholes.

Critics say the new Irish laws lack teeth and will still allow Apple to choose its own tax residence. Apple in 2010 set up a Singapore subsidiary called Apple South Asia Pte Ltd. and was able to negotiate a ten-year tax incentive for "various concessionary rates" thought to be below five percent. Apple is now reportedly moving its Australian profits through this Singapore arm.
post #2 of 188

if it was done illegally, then Australia should prosecute. If it was done legally according to the rules of the tax code, then someone is doing their job well at Apple finance department. 

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post #3 of 188

And to quote the great Kerry Packer:

 

"I am not evading tax in any way, shape or form. Now of course I am minimizing my tax and if anybody in this country doesn't minimize their tax they want their heads read because as a government I can tell you you're not spending it that well that we should be donating extra."

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post #4 of 188
I'm crying for the Australian government.
post #5 of 188

Mountain or molehill?

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post #6 of 188
Quote:
Originally Posted by AppleInsider View Post

An investigative report published on Wednesday takes a microscope to Apple's Australian tax dealings since 2002, finding the Cupertino company successfully avoided taxes on profits of $8 billion. The report is the first to assign numbers to Apple's outgoing, untaxed Australian cash flow.
 

 

Apple has the best lawyers and the best accountants of any multinational corporation on the face of the Earth.  I'm sure everything Apple did was 100% legal.

 

Suck it, Australia!  

post #7 of 188
This, again.
post #8 of 188
Think of it as an R&D tax credit.
post #9 of 188
Tim Cook said that he complies with the "spirit" of the law.
These practices don't sound very ethical to me, especially considering it's only large corporations who can afford to set up these mazes.
I hope ASIC and the ATO change the reporting and taxation requirements to clamp down on this, not just for Apple of course.
post #10 of 188
Quote:
Originally Posted by SudoNym View Post

Apple has the best lawyers and the best accountants of any multinational corporation on the face of the Earth.  I'm sure everything Apple did was 100% legal.

Suck it, Australia!  
And suck it to every media outlet reporting this as if it was some outrage.
post #11 of 188
Quote:
Originally Posted by aussiepaul View Post

Tim Cook said that he complies with the "spirit" of the law.
These practices don't sound very ethical to me, especially considering it's only large corporations who can afford to set up these mazes.
I hope ASIC and the ATO change the reporting and taxation requirements to clamp down on this, not just for Apple of course.
When ethics and law are at cross purposes, one must follow the law. That is good corporate governance. It is a fiduciary responsibility that must be met. It is ethical behavior. And, most importantly, it supports the rule of law. If you don't like that ethics and the law are at odds, change the law to suit your ethical purpose. If you can't do that, accept that others' views of what is ethical are at odds with yours. If that is still unsettling, either change your ethical values or work to change others'.
post #12 of 188
Quote:
Originally Posted by Rogifan View Post


And suck it to every media outlet reporting this as if it was some outrage.

Indeed - page-clicks being the name of the game.

 

Having "Apple" in the headline boosts them a lot.

post #13 of 188
"For its part, Apple's tax dealings cannot be faulted as they don't break any laws and with little impetus other than adhering to the "spirit of the law," a change in corporate policy seems unlikely...."

Thus: so what? They followed the law. End of story.
post #14 of 188
I'm sure you're short on apple
Missing disclosure
post #15 of 188
Quote:
Originally Posted by macaholic_1948 View Post


When ethics and law are at cross purposes, one must follow the law. That is good corporate governance. It is a fiduciary responsibility that must be met. It is ethical behavior. And, most importantly, it supports the rule of law. If you don't like that ethics and the law are at odds, change the law to suit your ethical purpose. If you can't do that, accept that others' views of what is ethical are at odds with yours. If that is still unsettling, either change your ethical values or work to change others'.

 

Great post. The problem is that Apple being Apple gets the headlines even though pretty much any large corporation worth anything is operating under the same rules. If Apple as an entity didn't take advantage of laws, whether people like them or not, they could be held liable by shareholders for not upholding their fiduciary responsibilities. If people think Tim Cook is being dragged over hot coals now, imagine what would happen if Apple didn't operate this way.

 

While I don't necessarily agree with the fact that these loopholes exist, they do at this point in time.

post #16 of 188
Is there anything newsworthy here?

Didn't think so...
post #17 of 188
Quote:
Originally Posted by snova View Post
 

if it was done illegally, then Australia should prosecute. If it was done legally according to the rules of the tax code, then someone is doing their job well at Apple finance department. 

 

I agree.  It's only natural that any business will do what it can to minimise tax, but...

 

What's clear is that there's growing public discontent over the situation and just how low the rates of tax actually are.  The fact that a conservative financial newspaper conducted and published this research is evidence of that.  The rates are so low that Apple and others could be thought of as having tax-free status in the countries in which they operate and make massive multi billion-dollar profits.

 

What's more, the tax avoidance functions to stifle innovation and competition.  Young and smaller companies that can't afford to set up and manage offshore tax havens have a higher burden so it's therefore not a level playing field.  They also can't afford to defend themselves vigorously in courts the way the likes of Apple can and does so they're more of a target.  The balance is clearly skewed too far towards the big multinationals.  I'd prefer to see support and concessions for smaller business instead of the biggest and most profitable companies.

 

If there's any blame it lies with the government and Tax Office for allowing it.  It should be very simple to close the loopholes but they seemingly don't want to.  In the end, as always, it'll be the public that forces any kind of change.  I think this will happen slowly but there are rumblings of change afoot.


Edited by s.metcalf - 3/5/14 at 8:31pm
post #18 of 188
As an Apple stockholder I appreciate it. As a taxpayer who doesn't have such options available to me and must make up for the lack of tax income from international corporations, this is a travesty. That said, our politicians made it legal.
post #19 of 188

And here's a prime example why Peter Oppenheimer and Luca Maestri deserve recognition for being two of the sharpest multinational corporate finance managers around.

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post #20 of 188

If Apple isn't breaking any laws, then good for them.

post #21 of 188

The "spirit of the law" when spoken by a politicians to me sounds like "we'll grab every last cent we can get away with" 

 

Quote:
As is well known, Apple employs an accounting method, dubbed the "Double Irish with a Dutch Sandwich," that leverages multiple international laws to sidestep taxes. 

 

It may be well know that all corporations do what they can to minimized expenses across the board, not just "tax burden" (ever wonder why the word burden is used?) but I must be traveling in the wrong circles because I have never before seen the phrase "Double Irish with a Dutch Sandwich" before and had someone asked me what that phrase meant corporate tax law would likely have been my first thought.

 

Odd that you never hear any of these stories about prosecuting companies who followed exactly the same practices but who do NOT have billions of dollars in the bank. It sounds more like the stories of folks who win the lottery who then have every one and their cousin asking them for money or to invest or loan etc etc. Apple's, or any corporation's, SEC filing that lists a cash in the bank value should not be seen as an invitation to governments and others to try to take it away through lawsuits. 

post #22 of 188
Quote:
Originally Posted by foad View Post

Great post. The problem is that Apple being Apple gets the headlines even though pretty much any large corporation worth anything is operating under the same rules. If Apple as an entity didn't take advantage of laws, whether people like them or not, they could be held liable by shareholders for not upholding their fiduciary responsibilities. If people think Tim Cook is being dragged over hot coals now, imagine what would happen if Apple didn't operate this way.

While I don't necessarily agree with the fact that these loopholes exist, they do at this point in time.
Thanks. You understood perfectly.
post #23 of 188
Change the law you say? Well it looks like that is exactly what's going to happen...

http://mobile.abc.net.au/news/2014-03-06/government-commits-to-chasing-lost-corporate-taxes/5302686

Regarding ethics, Tim has already gone on record speaking about issues such as the environment and gay rights. So not everything at Apple has to be done for profit...
Quote:
Originally Posted by macaholic_1948 View Post

When ethics and law are at cross purposes, one must follow the law. That is good corporate governance. It is a fiduciary responsibility that must be met. It is ethical behavior. And, most importantly, it supports the rule of law. If you don't like that ethics and the law are at odds, change the law to suit your ethical purpose. If you can't do that, accept that others' views of what is ethical are at odds with yours. If that is still unsettling, either change your ethical values or work to change others'.
post #24 of 188
Quote:
Originally Posted by s.metcalf View Post
 
Quote:
Originally Posted by snova View Post
 

if it was done illegally, then Australia should prosecute. If it was done legally according to the rules of the tax code, then someone is doing their job well at Apple finance department. 

 

I agree.  It's only natural that any business will do what it can to minimise tax, but...

 

What's clear is that there's growing public discontent over the situation and just how low the rates of tax actually are.  The fact that a conservative financial newspaper conducted and published this research is evidence of that.  The rates are so low that Apple and others could be thought of as having tax-free status in the countries in which they operate and make massive multi billion-dollar profits.

 

What's more, the tax avoidance functions to stifle innovation and competition.  Young and smaller companies that can't afford to set up and manage offshore tax havens have a higher burden so it's therefore not a level playing field.  They also can't afford to defend themselves vigorously in courts the way the likes of Apple can and does so they're more of a target.  The balance is clearly skewed too far towards the big multinationals.  I'd prefer to see support and concessions for smaller business instead of the biggest and most profitable companies.

 

If there's any blame it lies with the government and Tax Office for allowing it.  It should be very simple to close the loopholes but they seemingly don't want to.  In the end, as always, it'll be the public that forces any kind of change.  I think this will happen slowly but there are rumblings of change afoot.

completely agree with everything you wrote above. perfect.

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post #25 of 188
So? It's Legal, who cares? They found a loop hole! Lucky!!!
post #26 of 188
Quote:
Originally Posted by aussiepaul View Post

Regarding ethics, Tim has already gone on record speaking about issues such as the environment and gay rights. So not everything at Apple has to be done for profit...
 

 

I bet that many people buy more Apple products because they want to support Apple's ethics. People really respond when companies support popular causes.

post #27 of 188
Successful companies are just the next in line to get the shakedown from tax-happy government grabbers.

Frankly, in the US the IRS should be shutdown and a flat tax (with no write offs) should be enacted. As far as Australia goes, sounds like someone's trying to make points with the ever gullible public by demonizing Apple.

Proud AAPL stock owner.

 

GOA

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GOA

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post #28 of 188
post #29 of 188
Quote:
Originally Posted by GTR View Post

And to quote the great Kerry Packer:

"I am not evading tax in any way, shape or form. Now of course I am minimizing my tax and if anybody in this country doesn't minimize their tax they want their heads read because as a government I can tell you you're not spending it that well that we should be donating extra."

Donating extra would be paying above the expected rate. The rate in Australia is 30% so worst case, Apple pays $2.4b out of the $8b and they still get $5.6b.

We all know governments spend too much money and rarely spend it all the right way but the wealthiest earners skipping paying just passes the costs down to lower earners. There's a breakdown for Australia here:

http://www.abc.net.au/news/2013-05-09/interactive-budget-2013-where-will-your-tax-go/4682404

Apple's $2.4b tax payment alone won't make much of dent in ~$400b ($360b USD) but it helps. $122b of that is for elderly, disabled and kids. $65b for healthcare. $30b education. There's a huge $74b section marked 'other'. Maybe that's for buying no-brand Android tablets and should be scrapped but most of the expenses are beneficial to people and Apple gets the benefit of having a healthy, educated workforce and transport/communications infrastructure to conduct their business.

Their revenue was $26.7b so customers will have paid roughly 10% to the government in sales tax so ~$2.7b. Employees have tax deducted from their salaries before they get it, most retail staff will be paying 19%. Staff costs are in the millions though so the amount is small.

Governments are not a cause of the above expenses, the costs exist as an effect of the needs of the people in the country. If life expectancy goes up, social security goes up and healthcare goes up. If more people have kids, child support and education costs go up. Governments project the needs for the year and set the tax rates for all earning parties to ensure the best quality of life for everyone. When the wealthiest skip paying, the statement they make is that they deserve better than everyone else despite already being far better off than everyone else. The tax payment makes no difference to them, Apple can't even spend the cash fast enough. They dropped $12b on a stock buyback for very little benefit, $2.4b is a fraction of that.
Quote:
Originally Posted by DaveN 
That said, our politicians made it legal.

The problem is international law so no single government has the responsibility. That's what the international companies rely on. They are playing governments against each other to drive down the rates. This doesn't work though because you can't use a free market tactic to drive down rates via competition and magically remove the needs of the people in a given country. The country of Ireland has a population 1/10th the size of the state of California, the tax needs can't be the same for both, Luxembourg population of 530k, Cayman Islands population of 57k. If the money passing though a country vastly exceeds the population then the tax rates to support them can be dramatically lower.

What international companies are doing is relying on the workforce and sales from large bodies of people, funnelling the massive profits through small countries that have low populations and they get the best rates while depriving the large bodies of people from support that comes from their taxes.

It is up to the government to stop them doing this but it's not a trivial matter when it involves multiple countries and when companies go to such lengths as having no tax residency at all, that's not something to be applauded. They aren't minimising their taxes for growth, they are avoiding paying what's expected in order to hoard the cash for nobody's benefit.

Governments need to start taxing profits based on point of sale rather than the location of the business. If they do it on a country-wide basis, that's not a problem. Businesses don't have to track individual sales locations between regions/states if they don't want to, they would just be taxed at the highest rate if they don't and the taxes divided between the areas. Apple sells to 31 countries, I don't think it would be hard to track 31 tax rates considering they are mostly the same anyway when they manage to track 100 million+ sales per year.
post #30 of 188
I have absolutely no reason to believe that Apple did anything illegal in Australia, but what it has done is certainly not ethical. Nor is it good business practice because it risks a consumer and government backlash in many countries, particularly Australia. And Apple really doesn't need to take that sort of risk with its brand.

Apple would be wise to admit that these taxation policies are unethical, and make very significant payments to countries that have been 'diddled' out of taxation revenue by transfer pricing practices. It would be interesting to see how Google and Microsoft responded to this.
post #31 of 188
Haha. I have this feeling Apple will be paying a lot more tax in Australia in the future.
post #32 of 188
Quote:
Originally Posted by Marvin View Post


Donating extra would be paying above the expected rate. The rate in Australia is 30% so worst case, Apple pays $2.4b out of the $8b and they still get $5.6b.

We all know governments spend too much money and rarely spend it all the right way but the wealthiest earners skipping paying just passes the costs down to lower earners. There's a breakdown for Australia here:

http://www.abc.net.au/news/2013-05-09/interactive-budget-2013-where-will-your-tax-go/4682404

Apple's $2.4b tax payment alone won't make much of dent in ~$400b ($360b USD) but it helps. $122b of that is for elderly, disabled and kids. $65b for healthcare. $30b education. There's a huge $74b section marked 'other'. Maybe that's for buying no-brand Android tablets and should be scrapped but most of the expenses are beneficial to people and Apple gets the benefit of having a healthy, educated workforce and transport/communications infrastructure to conduct their business.

Their revenue was $26.7b so customers will have paid roughly 10% to the government in sales tax so ~$2.7b. Employees have tax deducted from their salaries before they get it, most retail staff will be paying 19%. Staff costs are in the millions though so the amount is small.

Governments are not a cause of the above expenses, the costs exist as an effect of the needs of the people in the country. If life expectancy goes up, social security goes up and healthcare goes up. If more people have kids, child support and education costs go up. Governments project the needs for the year and set the tax rates for all earning parties to ensure the best quality of life for everyone. When the wealthiest skip paying, the statement they make is that they deserve better than everyone else despite already being far better off than everyone else. The tax payment makes no difference to them, Apple can't even spend the cash fast enough. They dropped $12b on a stock buyback for very little benefit, $2.4b is a fraction of that.
The problem is international law so no single government has the responsibility. That's what the international companies rely on. They are playing governments against each other to drive down the rates. This doesn't work though because you can't use a free market tactic to drive down rates via competition and magically remove the needs of the people in a given country. The country of Ireland has a population 1/10th the size of the state of California, the tax needs can't be the same for both, Luxembourg population of 530k, Cayman Islands population of 57k. If the money passing though a country vastly exceeds the population then the tax rates to support them can be dramatically lower.

What international companies are doing is relying on the workforce and sales from large bodies of people, funnelling the massive profits through small countries that have low populations and they get the best rates while depriving the large bodies of people from support that comes from their taxes.

It is up to the government to stop them doing this but it's not a trivial matter when it involves multiple countries and when companies go to such lengths as having no tax residency at all, that's not something to be applauded. They aren't minimising their taxes for growth, they are avoiding paying what's expected in order to hoard the cash for nobody's benefit.

Governments need to start taxing profits based on point of sale rather than the location of the business. If they do it on a country-wide basis, that's not a problem. Businesses don't have to track individual sales locations between regions/states if they don't want to, they would just be taxed at the highest rate if they don't and the taxes divided between the areas. Apple sells to 31 countries, I don't think it would be hard to track 31 tax rates considering they are mostly the same anyway when they manage to track 100 million+ sales per year.
 

Then what you are referring to is not a problem with Apple transferring legally obtained funds from one area to another but an issue with the way the world works.

 

That, I suspect, belongs in a wholly separate thread...

 

(By the way, I agree with you, but I also believe that a single company should not be held responsible for providing the entire R&D of the world, nor it's income either. That's something that should be shared among many ;))

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post #33 of 188
An alternate title for this story might be "Australia law allows companies to legally avoid paying taxes." That is more to the point.

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post #34 of 188
Quote:
Originally Posted by GTR View Post

And to quote the great Kerry Packer:

"I am not evading tax in any way, shape or form. Now of course I am minimizing my tax and if anybody in this country doesn't minimize their tax they want their heads read because as a government I can tell you you're not spending it that well that we should be donating extra."

Good old Kerry, when he survived a heart attack he equipped all the ambulances in NSW with defibrillators.
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post #35 of 188
This report and most of the comments are spurious.

1) companies don't owe tax on revenue you owe it on profits.
2) companies are taxed where they are based not where they sell.
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post #36 of 188
The journo who wrote this, Chenoworth, has form. He did a similar hatchet job on news ltd a few weeks ago as last year it won an $800 million court case against the ATO. As was clear com the court case, these companies are following the law and maximising benefit to the shareholder, who also pays taxes btw. He is clearly of the school of thought that all your money belongs to the government and whatever it leaves you you should be grateful.
I agree with Kerry Packer. You should pay as little tax as possible as the government will never spend Other Peoples' Money as well as the Other People that earnt it.
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post #37 of 188
Quote:
Originally Posted by hill60 View Post

Good old Kerry, when he survived a heart attack he equipped all the ambulances in NSW with defibrillators.

 

Another one of those beautiful ironic examples that we find in life, where one individual's selfishness benefits the many.

 

For another example, see 'Steve Jobs'.

 

And no doubt many others.

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post #38 of 188
Quote:
Originally Posted by GTR View Post


Another one of those beautiful ironic examples that we find in life, where one individual's selfishness benefits the many.

For another example, see 'Steve Jobs'.

And no doubt many others.

Brilliant!
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post #39 of 188
Quote:
Originally Posted by s.metcalf View Post
 

 

I agree.  It's only natural that any business will do what it can to minimise tax, but...

 

What's clear is that there's growing public discontent over the situation and just how low the rates of tax actually are.  The fact that a conservative financial newspaper conducted and published this research is evidence of that.  The rates are so low that Apple and others could be thought of as having tax-free status in the countries in which they operate and make massive multi billion-dollar profits.

 

What's more, the tax avoidance functions to stifle innovation and competition.  Young and smaller companies that can't afford to set up and manage offshore tax havens have a higher burden so it's therefore not a level playing field.  They also can't afford to defend themselves vigorously in courts the way the likes of Apple can and does so they're more of a target.  The balance is clearly skewed too far towards the big multinationals.  I'd prefer to see support and concessions for smaller business instead of the biggest and most profitable companies.

 

If there's any blame it lies with the government and Tax Office for allowing it.  It should be very simple to close the loopholes but they seemingly don't want to.  In the end, as always, it'll be the public that forces any kind of change.  I think this will happen slowly but there are rumblings of change afoot.

 

 

Quote:
Originally Posted by SpamSandwich View Post

Successful companies are just the next in line to get the shakedown from tax-happy government grabbers.

Frankly, in the US the IRS should be shutdown and a flat tax (with no write offs) should be enacted. As far as Australia goes, sounds like someone's trying to make points with the ever gullible public by demonizing Apple.

How would you account for inventory under such a system? Many companies would have to massively rethink distribution, yet under your suggestion they wouldn't be able to write off those costs. This is a problem with scrapping everything and starting over, not to mention the conceptual problems with your entire theory Mr. Economist. You also ignore why the article was published. If they use a big brand like Apple, it gets attention. Apple is incredible at managing PR and attracting media attention, so some of that that will be negative. The net effect of such attention remains in their favor.

 

  Quote:

Originally Posted by Marvin View Post


Governments need to start taxing profits based on point of sale rather than the location of the business. If they do it on a country-wide basis, that's not a problem. Businesses don't have to track individual sales locations between regions/states if they don't want to, they would just be taxed at the highest rate if they don't and the taxes divided between the areas. Apple sells to 31 countries, I don't think it would be hard to track 31 tax rates considering they are mostly the same anyway when they manage to track 100 million+ sales per year.

 

Much of the time the issue comes down to how profits are calculated. If allowed companies will mess with transfer pricing so that it appears they made nothing.

post #40 of 188
Quote:
Originally Posted by Marvin View Post

Governments are not a cause of the above expenses, the costs exist as an effect of the needs of the people in the country. If life expectancy goes up, social security goes up and healthcare goes up. If more people have kids, child support and education costs go up. Governments project the needs for the year and set the tax rates for all earning parties to ensure the best quality of life for everyone.

They are the cause of some of the expense. In economics class in primary school they tell you that the maker of a good works out his costs, adds a little profit for himself, and sells it at that price. But in realty goods are sold at whatever price the market will bear, even many times cost. There was an article on this site a few years ago about software price gouging in Australia, Abode CS 6 being sold for $1,299 in the US but up to $2,699 in AU. That is simply because people here are quite wealthy and can afford it.

 

So given the tendency of producers to sell at whatever price the market will bear, what will happen to prices in any market the government enters? They have the most money of any organisation, due to taking up to 40% of everyone's income in taxes. So I think those health care costs would be a lot lower if the sellers of health care goods and services knew they were selling to individuals and not the government.

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