Ah, good then. I thought you were arguing that you didn't believe Apple to be doing anything wrong in your view. I've misunderstood your position. You think they're wrong not to be paying tax to the Irish on their $40B+ in realized profits.
Legally yes. Morally I think that companies should be able to transfer IP but taxes should be paid where the IP is actually produced. So Apple should pay on the US. Hard to enforce that.
This isn't transfer pricing. In no case here is the importing country owed corporation tax.
Corporation tax 101.
Well that's obviously not true since Apple Australia have paid $193 million in corporation tax in the past ten years. Because Apple Australia is a company based in Australia that logs profits.
And since the parent company should logically be Apple USA, the spirit of tax law would expect Apple USA to be logging the value add profits from manufacturing and realising the IP. But they don't, ASI in Ireland does, because the value add was transferred out of the expected arrangement and into this holding company in a tax haven, with an ephemeral tax status.
I think we're broadly in agreement, except for these weird "Apple Australia owes nothing" and "no profits have been transferred" hang ups that you have.
You seem quite happy to be covering a tiny bit of what Apple and other wealthy entities would (should) have paid in taxes with your own personal hard-earned money. No doubt they appreciate it. I'm not as pleased when April inevitably rolls around each year and the rich get even richer.
Some things you can change, others you can't that's why poor saps like myself have no say in the matter.
Yes it would be nice if I can negotiate with my employer to pay an offshore entity my wages as a contractor.
Yes it would be nice if I worked for that offshore entity for a fraction of the contract with my employer.
Yes it would be nice to own that overseas entity in a country like Liechtenstein where the ATO has no jurisdiction to find out who the owner is.
Yes it would be nice to transfer my real pay as a series of loans and to pay rent to the overseas entity for the house they own.
Unfortunately I just don't have the type of money that allows the setting up of such schemes.
Like most of the suckers who are left footing the bill.
The US drug prices are the result of the supposed free market utopia. They aren't cheaper because they monopolise the supply.
I don't think the US has a free market in health care, if you want to see how a free market works you have to look at consumer electronics or food.
I personally think private hospitals give better care than public hospitals and private schools give better education that public schools. But I am not a Libertarian, I don't think the public hospitals/schools should be closed, I think we are too early in history for that, in the sense that people's incomes grow over time.
I think the government should focus on policies that favour the growth of the middle class, and then the middle class themselves will automatically buy private services as soon as they can afford them, because they will want the best for their family in terms of medical and education services. In the mean time, the public services should remain.
For example in Australia we have public hospitals and schools, but 33% of people send their kids to private high school and 55% of people have a private health insurance policy, just because they have reached middle class and can afford it. This is good for the government too because when people take care of themselves, it leaves more money for the truly needy. My preference is that over time, as more people join the middle class, the need for public services will slowly fade away (not to nothing, but to some minimum baseline), rather than be legislated away by a Libertarian politician.
I am willing to bet that Apple have acted legally in all countries & jurisdictions regarding their tax obligations.
Tax law is extremely & unnecessarily complex - here is a link (http://www.ato.gov.au) to Australia's taxation office (for those who could be bothered trying to wade through thousands of pages of Policy & legal precedent discussions).
The headline of the article might have asked "Is it morally OK for companies or individuals to legally avoid paying a fair share of tax." Then the article would need to define what a fair share is.
Lots of people dream of revolutionising the tax system around the world. Lots of other people dream about having enough clean water or food to survive the next day. These two dreams are probably related somewhere along the line.
This isn't transfer pricing. In no case here is the importing country owed corporation tax.
Corporation tax 101.
Apple should pay its taxes in Ireland or repatriate to the us. But that's all.
It wouldn't be transfer pricing if they weren't reselling the goods between different incorporated companies but they are. They have no other reason to resell goods internally at a markup once they pay the manufacturing costs in China. If the Australian company wasn't due to pay income tax, they wouldn't pay any but they do pay some income tax. Apple is even hiring a Tax Manager to specifically handle transfer pricing:
If payments were made directly to Ireland, they would be due income tax in Ireland. This is what they do with iTunes, which is registered in Luxembourg. No matter where you are in Europe, the iTunes receipts are to Luxembourg.
I would guess that the sale of physical goods by billing direct from Ireland would incur extra costs, potentially they wouldn't be able to hold stock in Australia, which is where the requirement for physical offices and transfer pricing comes in.
I don't think the US has a free market in health care, if you want to see how a free market works you have to look at consumer electronics or food.
There is no part of free market trading that prevents a monopoly on the supply of goods. Just look at Comcast/Time Warner Cable. You can't say it's not the free market just because it fails. Food and consumer electronics have enough diversity that there's enough competition. This isn't the case with everything. If someone takes control or ownership of a supply of a limited resource like drugs or oil then there is no possibility for competition and that's when people run to the government to break up the monopoly. If there's a lot of competition, profits are driven down to unsustainable levels and it prevents new competitors. This is what happened with ebooks. Competitors in the free market never try to encourage competition, they try everything they can to prevent it with patents/trademarks/copyrights, buying up smaller rivals, undercutting prices and so on. If this was completely unregulated, we'd end up with a handful of companies controlling everything.
Marvin...back to his old anti-free market competition drivel...
Competition led to the creation of the iPhone, personal computers and so many of the modern conveniences you regularly rely on. I often wonder if you take the position you've staked out just to avoid boredom, because it makes no sense to me.
Marvin...back to his old anti-free market competition drivel...
Competition led to the creation of the iPhone, personal computers and so many of the modern conveniences you regularly rely on. I often wonder if you take the position you've staked out just to avoid boredom, because it makes no sense to me.
And government research, support, and regulation led or contributed to the creation of the internet, the telephone network, the electricity grid, and the business and skills environment and standardisations that the iPhone, personal computers and so many modern conveniences rely on.
Both are important, and both are problematic when they are unmoderated.
I'm not the arbiter of moderation, and don't have a fully-formed book o' policy handy.
Off the top of my head, you do want an authority to police/prevent illegal cyber activity, including but not limited to: illegal money transfers, sale of illegal goods, spreading of illegal media (child pornography etc).
Other things you might want them to do: enforce net neutrality, educate children on use of the internet.
And government research, support, and regulation led or contributed to the creation of the internet, the telephone network, the electricity grid, and the business and skills environment and standardisations that the iPhone, personal computers and so many modern conveniences rely on.
Both are important, and both are problematic when they are unmoderated.
Enforcing net neutrality and education efforts are not moderation activities. As to the rest: you have entered slippery slope territory and the slope is very slick.
Marvin...back to his old anti-free market competition drivel...
Competition led to the creation of the iPhone, personal computers and so many of the modern conveniences you regularly rely on. I often wonder if you take the position you've staked out just to avoid boredom, because it makes no sense to me.
I notice you didn't comment on how the free market can't prevent anti-competitive monopolies. I have nothing against the free market in its entirety, my objection is to it being applied to everything under the assumption that it's a perfect system. Ignoring instances when it fails doesn't make those failures go away.
If you had a completely unregulated market then as soon as the iPhone came out, Apple's competition would have cloned it, like this:
[VIDEO]
and they'd have been able to sell it side by side in stores with the original at a fraction of the price. As soon as you introduce any form of regulation then the results are not solely defined by competition. It's competition within a set of necessary boundaries for fair competition.
These regulations for fair competition include the tax rates. They can't be zero and they can't be fixed value. They have to be setup to promote growth in order to prevent anti-competitive/monopolistic scenarios. If a big company can get away with paying low single digit taxation, it's harder for a new company to compete in the same market. If the normal rate of profit increase was the same for both but one pays 1/5th of the tax rate, the bigger company's profits would grow faster year on year as they'd have more capital to reinvest.
This is the same issue you see with income differences between the wealthy and poor. The wealthy have no reason to be in debt, can reinvest income and they lower their tax rates too so their assets grow faster. This is a danger to liberty because it puts too much power into the hands of too few people. Just look at Samsung's level of control in Korea:
Is one family owning so much to be considered a success or failure of the free market considering the importance of competition? Contrary to popular belief, it doesn't regulate itself.
Comments
Legally yes. Morally I think that companies should be able to transfer IP but taxes should be paid where the IP is actually produced. So Apple should pay on the US. Hard to enforce that.
This isn't transfer pricing. In no case here is the importing country owed corporation tax.
Corporation tax 101.
Well that's obviously not true since Apple Australia have paid $193 million in corporation tax in the past ten years. Because Apple Australia is a company based in Australia that logs profits.
And since the parent company should logically be Apple USA, the spirit of tax law would expect Apple USA to be logging the value add profits from manufacturing and realising the IP. But they don't, ASI in Ireland does, because the value add was transferred out of the expected arrangement and into this holding company in a tax haven, with an ephemeral tax status.
I think we're broadly in agreement, except for these weird "Apple Australia owes nothing" and "no profits have been transferred" hang ups that you have.
Interesting how the spirit of the law - Apple's argument changes into just being legal.
We all know it's legal. But is it right? According to the spirit of the law (everybody pays his fair share of taxes), clearly not.
The "spirit of the law" is that everyone has the right to legally avoid paying taxes.
Otherwise there wouldn't be so many loopholes.
You seem quite happy to be covering a tiny bit of what Apple and other wealthy entities would (should) have paid in taxes with your own personal hard-earned money. No doubt they appreciate it. I'm not as pleased when April inevitably rolls around each year and the rich get even richer.
Some things you can change, others you can't that's why poor saps like myself have no say in the matter.
Yes it would be nice if I can negotiate with my employer to pay an offshore entity my wages as a contractor.
Yes it would be nice if I worked for that offshore entity for a fraction of the contract with my employer.
Yes it would be nice to own that overseas entity in a country like Liechtenstein where the ATO has no jurisdiction to find out who the owner is.
Yes it would be nice to transfer my real pay as a series of loans and to pay rent to the overseas entity for the house they own.
Unfortunately I just don't have the type of money that allows the setting up of such schemes.
Like most of the suckers who are left footing the bill.
btw our financial year ends June 30.
So if you want to set up design + build for "Australia's Own Phone" - go right ahead.
I hear that there's a site in Fisherman's Bend and another in SA that'll be available soon.
...and Mascot.
You don't have to guess at it:
http://www.theguardian.com/commentisfree/2013/nov/25/america-canada-freedom-of-choice-public-healthcare
The US drug prices are the result of the supposed free market utopia. They aren't cheaper because they monopolise the supply.
I don't think the US has a free market in health care, if you want to see how a free market works you have to look at consumer electronics or food.
I personally think private hospitals give better care than public hospitals and private schools give better education that public schools. But I am not a Libertarian, I don't think the public hospitals/schools should be closed, I think we are too early in history for that, in the sense that people's incomes grow over time.
I think the government should focus on policies that favour the growth of the middle class, and then the middle class themselves will automatically buy private services as soon as they can afford them, because they will want the best for their family in terms of medical and education services. In the mean time, the public services should remain.
For example in Australia we have public hospitals and schools, but 33% of people send their kids to private high school and 55% of people have a private health insurance policy, just because they have reached middle class and can afford it. This is good for the government too because when people take care of themselves, it leaves more money for the truly needy. My preference is that over time, as more people join the middle class, the need for public services will slowly fade away (not to nothing, but to some minimum baseline), rather than be legislated away by a Libertarian politician.
I am willing to bet that Apple have acted legally in all countries & jurisdictions regarding their tax obligations.
Tax law is extremely & unnecessarily complex - here is a link (http://www.ato.gov.au) to Australia's taxation office (for those who could be bothered trying to wade through thousands of pages of Policy & legal precedent discussions).
The headline of the article might have asked "Is it morally OK for companies or individuals to legally avoid paying a fair share of tax." Then the article would need to define what a fair share is.
Lots of people dream of revolutionising the tax system around the world. Lots of other people dream about having enough clean water or food to survive the next day. These two dreams are probably related somewhere along the line.
It wouldn't be transfer pricing if they weren't reselling the goods between different incorporated companies but they are. They have no other reason to resell goods internally at a markup once they pay the manufacturing costs in China. If the Australian company wasn't due to pay income tax, they wouldn't pay any but they do pay some income tax. Apple is even hiring a Tax Manager to specifically handle transfer pricing:
http://www.linkedin.com/jobs2/view/6671734
When someone buys goods in Australia, they are billed by Apple pyt ltd, based in Australia:
http://store.apple.com/au/help/payments
If payments were made directly to Ireland, they would be due income tax in Ireland. This is what they do with iTunes, which is registered in Luxembourg. No matter where you are in Europe, the iTunes receipts are to Luxembourg.
I would guess that the sale of physical goods by billing direct from Ireland would incur extra costs, potentially they wouldn't be able to hold stock in Australia, which is where the requirement for physical offices and transfer pricing comes in.
There is no part of free market trading that prevents a monopoly on the supply of goods. Just look at Comcast/Time Warner Cable. You can't say it's not the free market just because it fails. Food and consumer electronics have enough diversity that there's enough competition. This isn't the case with everything. If someone takes control or ownership of a supply of a limited resource like drugs or oil then there is no possibility for competition and that's when people run to the government to break up the monopoly. If there's a lot of competition, profits are driven down to unsustainable levels and it prevents new competitors. This is what happened with ebooks. Competitors in the free market never try to encourage competition, they try everything they can to prevent it with patents/trademarks/copyrights, buying up smaller rivals, undercutting prices and so on. If this was completely unregulated, we'd end up with a handful of companies controlling everything.
Apple is not a charity is a business working for the shareholders and customers so thank you apple
This type of tax avoidance is enabled by moving the rights to intellectual property generated in Cupertino to an offshore tax haven.
Subsequently the (large fraction) of sales and their profits ascribed to intellectual property can be assigned to the tax haven entity.
It is up to you decide if its legal and appropriate.
For a brief summary see slides or talk of 26 Feb, 2014 at http://www.stanford.edu/class/ee380/
or if you really care, rather than just holding forth without nay background,
then get all the ghastly detail, quantified, with a score of recommendations, by reading
Valuing Intellectual Capital, Multinationals and Taxhavens
(http://www.springer.com/business+%26+management/accounting/book/978-1-4614-6610-9).
Most computer nerds however, don't care what happens to their work, as observed in
http://wp.sigmod.org/?author=17
This level of tax avoidance not only applies to Australia, but all countries and all high tech businesses.
This type of tax avoidance is enabled by moving the rights to intellectual property generated in Cupertino to an offshore tax haven.
Subsequently the (large fraction) of sales and their profits ascribed to intellectual property can be assigned to the tax haven entity.
It is up to you decide if its legal and appropriate.
For a brief summary see slides or talk of 26 Feb, 2014 at http://www.stanford.edu/class/ee380/
or if you really care, rather than just holding forth without nay background,
then get all the ghastly detail, quantified, with a score of recommendations, by reading
Valuing Intellectual Capital, Multinationals and Taxhavens
(http://www.springer.com/business+%26+management/accounting/book/978-1-4614-6610-9).
Most computer nerds however, don't care what happens to their work, as observed in
http://wp.sigmod.org/?author=17
This level of tax avoidance not only applies to Australia, but all countries and all high tech businesses.
Great comment & links.
You have one of the best comments in this thread.
Note though that by Ireland just paying for its share of costs in the US the US is selling its research at no markup.
No rational independent investor would ever agree go that, because they would expect a leverage of typically 2 to 5 for such investments.
Competition led to the creation of the iPhone, personal computers and so many of the modern conveniences you regularly rely on. I often wonder if you take the position you've staked out just to avoid boredom, because it makes no sense to me.
Marvin...back to his old anti-free market competition drivel...
Competition led to the creation of the iPhone, personal computers and so many of the modern conveniences you regularly rely on. I often wonder if you take the position you've staked out just to avoid boredom, because it makes no sense to me.
And government research, support, and regulation led or contributed to the creation of the internet, the telephone network, the electricity grid, and the business and skills environment and standardisations that the iPhone, personal computers and so many modern conveniences rely on.
Both are important, and both are problematic when they are unmoderated.
I'm not the arbiter of moderation, and don't have a fully-formed book o' policy handy.
Off the top of my head, you do want an authority to police/prevent illegal cyber activity, including but not limited to: illegal money transfers, sale of illegal goods, spreading of illegal media (child pornography etc).
Other things you might want them to do: enforce net neutrality, educate children on use of the internet.
He wants government oversight of free enterprise and private oversight of government intervention.
I notice you didn't comment on how the free market can't prevent anti-competitive monopolies. I have nothing against the free market in its entirety, my objection is to it being applied to everything under the assumption that it's a perfect system. Ignoring instances when it fails doesn't make those failures go away.
If you had a completely unregulated market then as soon as the iPhone came out, Apple's competition would have cloned it, like this:
[VIDEO]
and they'd have been able to sell it side by side in stores with the original at a fraction of the price. As soon as you introduce any form of regulation then the results are not solely defined by competition. It's competition within a set of necessary boundaries for fair competition.
These regulations for fair competition include the tax rates. They can't be zero and they can't be fixed value. They have to be setup to promote growth in order to prevent anti-competitive/monopolistic scenarios. If a big company can get away with paying low single digit taxation, it's harder for a new company to compete in the same market. If the normal rate of profit increase was the same for both but one pays 1/5th of the tax rate, the bigger company's profits would grow faster year on year as they'd have more capital to reinvest.
This is the same issue you see with income differences between the wealthy and poor. The wealthy have no reason to be in debt, can reinvest income and they lower their tax rates too so their assets grow faster. This is a danger to liberty because it puts too much power into the hands of too few people. Just look at Samsung's level of control in Korea:
http://www.independent.co.uk/news/world/asia/tax-evasion-bribery-and-pricefixing-how-samsung-became-the-giant-that-ate-korea-8510588.html
Is one family owning so much to be considered a success or failure of the free market considering the importance of competition? Contrary to popular belief, it doesn't regulate itself.
Copying products is piracy