The NYT article does not show any illegal or immoral acts by Apple. Apple's name could have been replaced with any of hundreds of Fortune 500 companies that follow the same tax strategies.
I used the post publication sell-off to add more shares to my IRA.
That's overly simplistic, as well. While there is no DIRECT link between taxes and selling price, taxes clearly influence selling prices. Consider a basic Econ 101 supply/demand chart.
Taxes are a cost of doing business. If everyone has to pay taxes, that increases the cost of doing business and shifts the supply curve to the right. If I make 1 million widgets and pay $10 M in taxes, then that adds $10 per widget to my cost, so I am willing to make 1 million widgets only if the selling price is at least $10 higher than if there were no taxes.
Yes, taxes are a cost of doing business. But contrary to the assertion that they are the single big factor is laughable. In the case where taxes are only applied on profits....corporations cannot play with the price. I hope you get the point. Whether I sell you a 1$ pen or the same pen for 200$, if i'm taxed on profits, I would have no reason to jack the price up.
Quote:
Originally Posted by MyDogHasFleas
It's technically true that corporations don't directly pass taxes on to consumers. However, in effect they do. This is because corporate taxes are built into the business model of the competitors who are out there in the market pricing their products against each other (and, BTW, it's not just "supply and demand", but that's a longer discussion). And so they ALL factor that into their pricing model. One corporation can't come along and NOT factor in the taxes, because then they would not be profitable. (Old joke: "I'm losing money on every sale, but I make it up in volume!")
The American Dollar fluctuating has little to do with anything in this discussion. In fact, the ridiculously high corporate tax level in the USA leads to corporations essentially bifurcating their operations between the USA and internationally, and never repatriating the profits earned outside the country.
"They simply don't want to pay taxes but are dishonest about it?" So you think that if corporate taxes were reduced to zero, prices would not be lower, profits would just zoom? Um, no. There's this little thing called competition that would take care of that. Somebody out there would see that they could lower prices, have a smaller profit margin, sell a zillion of them, and make more profit at the lower price point. Not to mention get an upper hand in the market in terms of recognition and leadership (which BTW are some of the things other than "supply and demand" that determine pricing. High tech goods are not oats in a barrel at the general store.)
Good to have someone who knows it stuff. I oversimplified my assertations but its understandable since it' a message board However, the world is so interconnected that it is in fact true that taxes would play a big part in prices, you would see drastic price differences between different countries for the iPad. It is not the case.
Canada has much higher taxes than the US. The iPad or any other product for that matter is not necessarily more expensive. Maybe a few dollars but mostly due to the exchange rate fluctuations. Like I said above, if you tax on profits, corporation cannot pass it to the consumer.
My biggest point is not the divergent views. However, my problem lies in the simplified rhetoric present in the political sphere, including those boards around such a topic.
"You tax more so price will go up or you tax more so the economy will be bad." It's not the case. Since Reagan, taxes have been the lowest since at least a century and except for a defined period of time during Clinton (whatever the merits) the USA has been digging itself more and more in the ground. Most big corporations pay close to nothing and they don't pass along the savings to the consumer or to the country which results in bad education, bad jobs...
What's more interesting will be the next elections, where the level of the discourse will be even lower than on those boards. Everything will be simplified to soundbites. "No more taxes" "Taxes will destroy the economy".....
Yes, taxes are a cost of doing business. But contrary to the assertion that they are the single big factor is laughable. In the case where taxes are only applied on profits....corporations cannot play with the price. I hope you get the point. Whether I sell you a 1$ pen or the same pen for 200$, if i'm taxed on profits, I would have no reason to jack the price up.
You're completely missing the point - and misstating the comments that you're trying to refute.
If EVERYONE has to pay higher taxes, then it is likely to increase the market price. Companies want to make a reasonable profit after tax (where 'reasonable' depends on the circumstances). So higher taxes across the board is likely to increase the consumer's price.
A published report claims that Apple uses subsidiary companies around the world to limit the amount of corporate taxes it pays annually - a practice the company staunchly defends in a rebuttal.
A New York Times report shines the spotlight on how Apple Inc. dodges a potentially large tax bill by using subsidiary companies located around the world.
The practice is not only perfectly legal, it's used by many other corporations as well.
'Apple has conducted all of its business with the highest of ethical standards, complying with applicable laws and accounting rules.'
One such Apple subsidiary is based in Reno, Nev., 200 miles away from the company's Cupertino headquarters.
There, a small staff collects and invests the iPhone maker's profits - and avoids paying an 8.84 percent California state income tax on this money in the process, since Reno's tax rate is zero.
"Setting up an office in Reno is just one of many legal methods Apple uses to reduce its worldwide tax bill by billions of dollars each year," the report revealed.
"As it has in Nevada, Apple has created subsidiaries in low-taxes places like Ireland, the Netherlands, Luxembourg, and the British Virgin Islands - some little more than a letterbox or an anonymous office - that help cut the taxes it pays around the world."
Apple's defense
Apple had no comment on the story, and subsequently published a rebuttal in which the company cites the creation of "an incredible number of jobs" in the U.S. over the past several years, with more than 47,000 full-time employees in all 50 states.
"Apple also pays an enormous amount of taxes which help our local, state and federal governments," the company explained.
"In the first half of fiscal year 2012 our U.S. operations have generated almost $5 billion in federal and state income taxes, including income taxes withheld on employee stock gains, making us among the top payers of U.S. income tax.
"Apple has conducted all of its business with the highest of ethical standards, complying with applicable laws and accounting rules," the statement concluded. "We are incredibly proud of all of Apple's contributions."
Comments
The NYT article does not show any illegal or immoral acts by Apple. Apple's name could have been replaced with any of hundreds of Fortune 500 companies that follow the same tax strategies.
I used the post publication sell-off to add more shares to my IRA.
Quote:
Originally Posted by jragosta
That's overly simplistic, as well. While there is no DIRECT link between taxes and selling price, taxes clearly influence selling prices. Consider a basic Econ 101 supply/demand chart.
Taxes are a cost of doing business. If everyone has to pay taxes, that increases the cost of doing business and shifts the supply curve to the right. If I make 1 million widgets and pay $10 M in taxes, then that adds $10 per widget to my cost, so I am willing to make 1 million widgets only if the selling price is at least $10 higher than if there were no taxes.
Yes, taxes are a cost of doing business. But contrary to the assertion that they are the single big factor is laughable. In the case where taxes are only applied on profits....corporations cannot play with the price. I hope you get the point. Whether I sell you a 1$ pen or the same pen for 200$, if i'm taxed on profits, I would have no reason to jack the price up.
Quote:
Originally Posted by MyDogHasFleas
It's technically true that corporations don't directly pass taxes on to consumers. However, in effect they do. This is because corporate taxes are built into the business model of the competitors who are out there in the market pricing their products against each other (and, BTW, it's not just "supply and demand", but that's a longer discussion). And so they ALL factor that into their pricing model. One corporation can't come along and NOT factor in the taxes, because then they would not be profitable. (Old joke: "I'm losing money on every sale, but I make it up in volume!")
The American Dollar fluctuating has little to do with anything in this discussion. In fact, the ridiculously high corporate tax level in the USA leads to corporations essentially bifurcating their operations between the USA and internationally, and never repatriating the profits earned outside the country.
"They simply don't want to pay taxes but are dishonest about it?" So you think that if corporate taxes were reduced to zero, prices would not be lower, profits would just zoom? Um, no. There's this little thing called competition that would take care of that. Somebody out there would see that they could lower prices, have a smaller profit margin, sell a zillion of them, and make more profit at the lower price point. Not to mention get an upper hand in the market in terms of recognition and leadership (which BTW are some of the things other than "supply and demand" that determine pricing. High tech goods are not oats in a barrel at the general store.)
Good to have someone who knows it stuff. I oversimplified my assertations but its understandable since it' a message board
Canada has much higher taxes than the US. The iPad or any other product for that matter is not necessarily more expensive. Maybe a few dollars but mostly due to the exchange rate fluctuations. Like I said above, if you tax on profits, corporation cannot pass it to the consumer.
My biggest point is not the divergent views. However, my problem lies in the simplified rhetoric present in the political sphere, including those boards around such a topic.
"You tax more so price will go up or you tax more so the economy will be bad." It's not the case. Since Reagan, taxes have been the lowest since at least a century and except for a defined period of time during Clinton (whatever the merits) the USA has been digging itself more and more in the ground. Most big corporations pay close to nothing and they don't pass along the savings to the consumer or to the country which results in bad education, bad jobs...
What's more interesting will be the next elections, where the level of the discourse will be even lower than on those boards. Everything will be simplified to soundbites. "No more taxes" "Taxes will destroy the economy".....
Funny times we live in.
Quote:
Originally Posted by geniusbate
Yes, taxes are a cost of doing business. But contrary to the assertion that they are the single big factor is laughable. In the case where taxes are only applied on profits....corporations cannot play with the price. I hope you get the point. Whether I sell you a 1$ pen or the same pen for 200$, if i'm taxed on profits, I would have no reason to jack the price up.
You're completely missing the point - and misstating the comments that you're trying to refute.
If EVERYONE has to pay higher taxes, then it is likely to increase the market price. Companies want to make a reasonable profit after tax (where 'reasonable' depends on the circumstances). So higher taxes across the board is likely to increase the consumer's price.
A published report claims that Apple uses subsidiary companies around the world to limit the amount of corporate taxes it pays annually - a practice the company staunchly defends in a rebuttal.
A New York Times report shines the spotlight on how Apple Inc. dodges a potentially large tax bill by using subsidiary companies located around the world.
The practice is not only perfectly legal, it's used by many other corporations as well.
'Apple has conducted all of its business with the highest of ethical standards, complying with applicable laws and accounting rules.'
One such Apple subsidiary is based in Reno, Nev., 200 miles away from the company's Cupertino headquarters.
There, a small staff collects and invests the iPhone maker's profits - and avoids paying an 8.84 percent California state income tax on this money in the process, since Reno's tax rate is zero.
"Setting up an office in Reno is just one of many legal methods Apple uses to reduce its worldwide tax bill by billions of dollars each year," the report revealed.
"As it has in Nevada, Apple has created subsidiaries in low-taxes places like Ireland, the Netherlands, Luxembourg, and the British Virgin Islands - some little more than a letterbox or an anonymous office - that help cut the taxes it pays around the world."
Apple's defense
Apple had no comment on the story, and subsequently published a rebuttal in which the company cites the creation of "an incredible number of jobs" in the U.S. over the past several years, with more than 47,000 full-time employees in all 50 states.
"Apple also pays an enormous amount of taxes which help our local, state and federal governments," the company explained.
"In the first half of fiscal year 2012 our U.S. operations have generated almost $5 billion in federal and state income taxes, including income taxes withheld on employee stock gains, making us among the top payers of U.S. income tax.
"Apple has conducted all of its business with the highest of ethical standards, complying with applicable laws and accounting rules," the statement concluded. "We are incredibly proud of all of Apple's contributions."