Taxes on calculated on profits. Corporate tax does not increase the cost, nor does it change the selling price, it just decreases the profit made by a company. The impact on the consumer price is by definition zero.
Not so fast. Corporate tax does not directly change the selling price but might do so indirectly.
Corporate tax reduces the amount of profit available for investors. If that's too low then prices will rise, if possible, to increase profit to a level that is satisfactory - after the tax is taken out.
Pricing impact might be zero but is not necessarily so. I agree that this is not the scenario in the case of Apple but I wasn't about to let this pass unremarked.
You forget that Apple excessively reduces its profits for Apple Germany by IP costs imposed by Apple Ireland.
There is a subtle difference in what Apple is doing.
Consider a hypothetical scenario where Ford has its headquarters and designers located in Ireland. They design and specify plans for the Fiesta and then "sell" those plans to Ford Germany for manufacture in Cologne. That selling price would be "IP costs". In some instances, that would be set quite high in order to move profit from the manufacturing operation in Cologne to the headquarters in Ireland.
Apple does not do that. Apple Ireland sells finished products, such as iPhones, to Apple Germany for resale. There's no manufacturing in Germany, only sales and support. The IP cost was already incorporated into the wholesale price of the finished goods.
The real failure here is the American government allowing a corporation traded on an American stock exchange to report earnings as required by the SEC without levying a tax.
Corporations don't pay taxes, YOU pay the taxes in higher costs of the product. maybe the Government is already doing way to much!!! I know some of you like the whole Government taking care of you Cradle to Grave, but I don't.
There is a subtle difference in what Apple is doing.
Consider a hypothetical scenario where Ford has its headquarters and designers located in Ireland. They design and specify plans for the Fiesta and then "sell" those plans to Ford Germany for manufacture in Cologne. That selling price would be "IP costs". In some instances, that would be set quite high in order to move profit from the manufacturing operation in Cologne to the headquarters in Ireland.
Apple does not do that. Apple Ireland sells finished products, such as iPhones, to Apple Germany for resale. There's no manufacturing in Germany, only sales and support. The IP cost was already incorporated into the wholesale price of the finished goods.
Well I think in the end we are talking about the same thing. Apple Ireland imposes a high IP cost on the wholesale price for the iPhone to transfer profits from Germany to Ireland.
Ford is imposing a high IP cost on the service of doing the engineering and drawing of the parts.
I own a little software company and the company does pay a corporate tax on the profits it makes, which has nothing to do with my personal income tax. This is not fiction, it is real money the company has to pay.
And as owner of the (European) company I think it is only fare that every company should comply to the same tax rules, and not avoiding the taxes like Apple did until now with the Double irish with Dutch Sandwich, because the current situation is unfair for other companies who have to pay the correct amount.
Quote:
Originally Posted by ktappe
And you're not thinking this through. Your proposal applies to companies who use the WalMart model of high volume low margin and exclusively sell physical products. Tell me how banks who make most of their $ not from selling things but by margins an hedges should also not be taxed?
What part of the word 'consumers' don't you guys understand?
cropr, are you your company's consumer or owner?
ktappe, who do you think a hedge buyer is, if not a consumer of the hedge? (And incidentally, what's wrong with hedges? Companies, farmers, etc use them to protect against foreign exchange swings, raw material and commodity price swings etc. all the time. Heck, every time you buy insurance, you're, in effect, buying a hedge).
Well I think in the end we are talking about the same thing. Apple Ireland imposes a high IP cost on the wholesale price for the iPhone to transfer profits from Germany to Ireland.
Ford is imposing a high IP cost on the service of doing the engineering and drawing of the parts.
But that is in fact absolutely correct and moral behavior. It would be illegal to charge more to Apple retail than other retails, but it doesn't look like Apple is doing that. Its totally incorrect to say that Apple are moving profits to Ireland, all cases against Apple are that they are not paying tax in Ireland ( EU) or America (US Senate).
But that is in fact absolutely correct and moral behavior. It would be illegal to charge more to Apple retail than other retails, but it doesn't look like Apple is doing that. Its totally incorrect to say that Apple are moving profits to Ireland, all cases against Apple are that they are not paying tax in Ireland ( EU) or America (US Senate).
Corporations don't pay taxes, YOU pay the taxes in higher costs of the product. maybe the Government is already doing way to much!!! I know some of you like the whole Government taking care of you Cradle to Grave, but I don't.
If the price is too high people won't buy, therefore what you write isn't technically true. Sure they try to get out of everything possible. After all, profits above all else....laws need to be changed.
Well I think in the end we are talking about the same thing. Apple Ireland imposes a high IP cost on the wholesale price for the iPhone to transfer profits from Germany to Ireland.
Ford is imposing a high IP cost on the service of doing the engineering and drawing of the parts.
As I said, it's close but not the same. In the Ford case (hypothetical), the profit on manufacturing IN GERMANY is being moved out. Ford Germany buys steel, etc etc, employs lots of people in factories and turns this into cars. And adds a lot of value to the raw materials with which it started. The high price of the designs is then the way to move that locally-generated profit out of Germany.
In the Apple case, there is NO manufacturing etc in Germany, so no profit attributable to anything but sales. Apple Germany is buying iPhones in shrink-wrapped boxes, and selling those same boxes - unchanged. One could argue about the appropriate profit for a retail operation but this is not the place. It's just retail - like buying bananas from Central America and selling them in Cologne. There's no value added to the bananas other than the convenience and availability of having them at a retail store. There's no value added to an iPhone by Apple Germany other than the convenience and availability of having them at an Apple Store, or phone carrier store.
Another way to look at it is to imagine that Apple does not operate in Germany, and there are no Apple Stores. All the phone carriers have to get their iPhones from Apple Ireland, at the same price they pay today. They still sell iPhones in those stores at the same price as today, yet there is obviously no discussion about "IP cost" or "exporting profits". That's because there's very little value added to the finished product - just convenience and availability.
But that is in fact absolutely correct and moral behavior. It would be illegal to charge more to Apple retail than other retails, but it doesn't look like Apple is doing that. Its totally incorrect to say that Apple are moving profits to Ireland, all cases against Apple are that they are not paying tax in Ireland ( EU) or America (US Senate).
Here’s how it works according to testimony and documents submitted by Apple and other sources during Senate hearings, and as reported by the Washington Post::
"Apple Operations International is registered in Cork, Ireland, but has “no physical presence at that or any other address,” according to the report. Indeed, the corporate entity has existed for 30 years and apparently never had a single employee. Of the three people on its board, all Apple employees, two live in California; 32 of its last 33 board meetings took place in Cupertino, and the Irish director participated in seven of them. Its assets are managed by a Nevada company, and held in bank accounts in New York.
It falls in a strange loophole: Because it is not managed and controlled in Ireland, that nation does not tax its earnings, even at the low Irish corporate income tax rate. And because it is not registered in the United States, it has owed no American taxes. It would be a little like an individual living in America and earning a living from investments in Ireland and thus being able to avoid paying taxes to either government—a strategy that decidedly would not work, by the way.
From 2009 to 2012, the Irish affiliate received $29.9 billion in dividend income. The upshot, according to the report: "According to Apple, AOI’s net income made up 30% of Apple’s total worldwide net profits from 2009-2011, yet Apple also disclosed to the Subcommittee that AOI did not pay any corporate income tax to any national government during that period."
There is another clever strategy that Apple uses that the new report documents — holding a large chunk of its intellectual property in low-tax Irish affiliates as well. Think of it this way: If you live in, say, Germany and buy an IPhone, you are buying a physical object that was assembled in China from parts that come from all over. But you are also buying a piece of the intellectual property of Apple — a benefit from the labor of thousands of designers and programmers and marketers who are in California.
But Apple has no desire to pay high California and U.S. income tax on all its intellectual property. So instead, Apple Inc. shares that cost with its Irish affiliates in proportion to their sales. As the report puts it: “By structuring its intellectual property rights and distribution operations in the manner it did, Apple Inc. was able to avoid having worldwide Apple sales revenue related to its intellectual property attributed to itself in the United States where it would be subject to taxation in the year received. Instead, Apple Inc. arranged for a large portion of its worldwide sales revenue to be attributed to [Apple Service International] in Ireland. As explained earlier, according to Apple, Ireland has provided Apple affiliates with an income tax rate of less than 2% and as low as 0.05%."
So to put things in better perspective take at look at 2012 specifically. Apple Sales International had revenue of over $63.9 billion that year. How much did they pay in taxes? They claimed taxable income of around €50 million for that year, and paid less than €10 million to the Irish in taxes.
To be fair Google along with dozens of other companies use similar tax avoidance strategies. I think Apple is being profiled simply because they are the largest and wealthiest of the group.
Comments
Taxes on calculated on profits. Corporate tax does not increase the cost, nor does it change the selling price, it just decreases the profit made by a company. The impact on the consumer price is by definition zero.
Not so fast. Corporate tax does not directly change the selling price but might do so indirectly.
Corporate tax reduces the amount of profit available for investors. If that's too low then prices will rise, if possible, to increase profit to a level that is satisfactory - after the tax is taken out.
Pricing impact might be zero but is not necessarily so. I agree that this is not the scenario in the case of Apple but I wasn't about to let this pass unremarked.
Apple should start a moonbase, keep some employees there. They have the money.
Since no one owns the moon, how can they be taxed?
Or Antarctica! It's a lot closer!
You forget that Apple excessively reduces its profits for Apple Germany by IP costs imposed by Apple Ireland.
There is a subtle difference in what Apple is doing.
Consider a hypothetical scenario where Ford has its headquarters and designers located in Ireland. They design and specify plans for the Fiesta and then "sell" those plans to Ford Germany for manufacture in Cologne. That selling price would be "IP costs". In some instances, that would be set quite high in order to move profit from the manufacturing operation in Cologne to the headquarters in Ireland.
Apple does not do that. Apple Ireland sells finished products, such as iPhones, to Apple Germany for resale. There's no manufacturing in Germany, only sales and support. The IP cost was already incorporated into the wholesale price of the finished goods.
Corporations don't pay taxes, YOU pay the taxes in higher costs of the product. maybe the Government is already doing way to much!!! I know some of you like the whole Government taking care of you Cradle to Grave, but I don't.
There is a subtle difference in what Apple is doing.
Consider a hypothetical scenario where Ford has its headquarters and designers located in Ireland. They design and specify plans for the Fiesta and then "sell" those plans to Ford Germany for manufacture in Cologne. That selling price would be "IP costs". In some instances, that would be set quite high in order to move profit from the manufacturing operation in Cologne to the headquarters in Ireland.
Apple does not do that. Apple Ireland sells finished products, such as iPhones, to Apple Germany for resale. There's no manufacturing in Germany, only sales and support. The IP cost was already incorporated into the wholesale price of the finished goods.
Well I think in the end we are talking about the same thing. Apple Ireland imposes a high IP cost on the wholesale price for the iPhone to transfer profits from Germany to Ireland.
Ford is imposing a high IP cost on the service of doing the engineering and drawing of the parts.
I own a little software company and the company does pay a corporate tax on the profits it makes, which has nothing to do with my personal income tax. This is not fiction, it is real money the company has to pay.
And as owner of the (European) company I think it is only fare that every company should comply to the same tax rules, and not avoiding the taxes like Apple did until now with the Double irish with Dutch Sandwich, because the current situation is unfair for other companies who have to pay the correct amount.
And you're not thinking this through. Your proposal applies to companies who use the WalMart model of high volume low margin and exclusively sell physical products. Tell me how banks who make most of their $ not from selling things but by margins an hedges should also not be taxed?
What part of the word 'consumers' don't you guys understand?
cropr, are you your company's consumer or owner?
ktappe, who do you think a hedge buyer is, if not a consumer of the hedge? (And incidentally, what's wrong with hedges? Companies, farmers, etc use them to protect against foreign exchange swings, raw material and commodity price swings etc. all the time. Heck, every time you buy insurance, you're, in effect, buying a hedge).
Well I think in the end we are talking about the same thing. Apple Ireland imposes a high IP cost on the wholesale price for the iPhone to transfer profits from Germany to Ireland.
Ford is imposing a high IP cost on the service of doing the engineering and drawing of the parts.
But that is in fact absolutely correct and moral behavior. It would be illegal to charge more to Apple retail than other retails, but it doesn't look like Apple is doing that. Its totally incorrect to say that Apple are moving profits to Ireland, all cases against Apple are that they are not paying tax in Ireland ( EU) or America (US Senate).
What cases against Apple? This is political.
What cases against Apple? This is political.
There is a EU case against Ireland ( I meant to say) re: Apple. The US was a hearing. I should have said "claims".
cropr, are you your company's consumer or owner?
I am the owner of my company, not a consumer of my company
A "claim" is a legal term. I believe what we have here are accusations and political grandstanding.
1 out of 4 American companies pay ZERO taxes.
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Corporations don't pay taxes, YOU pay the taxes in higher costs of the product. maybe the Government is already doing way to much!!! I know some of you like the whole Government taking care of you Cradle to Grave, but I don't.
If the price is too high people won't buy, therefore what you write isn't technically true. Sure they try to get out of everything possible. After all, profits above all else....laws need to be changed.
Well I think in the end we are talking about the same thing. Apple Ireland imposes a high IP cost on the wholesale price for the iPhone to transfer profits from Germany to Ireland.
Ford is imposing a high IP cost on the service of doing the engineering and drawing of the parts.
As I said, it's close but not the same. In the Ford case (hypothetical), the profit on manufacturing IN GERMANY is being moved out. Ford Germany buys steel, etc etc, employs lots of people in factories and turns this into cars. And adds a lot of value to the raw materials with which it started. The high price of the designs is then the way to move that locally-generated profit out of Germany.
In the Apple case, there is NO manufacturing etc in Germany, so no profit attributable to anything but sales. Apple Germany is buying iPhones in shrink-wrapped boxes, and selling those same boxes - unchanged. One could argue about the appropriate profit for a retail operation but this is not the place. It's just retail - like buying bananas from Central America and selling them in Cologne. There's no value added to the bananas other than the convenience and availability of having them at a retail store. There's no value added to an iPhone by Apple Germany other than the convenience and availability of having them at an Apple Store, or phone carrier store.
Another way to look at it is to imagine that Apple does not operate in Germany, and there are no Apple Stores. All the phone carriers have to get their iPhones from Apple Ireland, at the same price they pay today. They still sell iPhones in those stores at the same price as today, yet there is obviously no discussion about "IP cost" or "exporting profits". That's because there's very little value added to the finished product - just convenience and availability.
"Apple Operations International is registered in Cork, Ireland, but has “no physical presence at that or any other address,” according to the report. Indeed, the corporate entity has existed for 30 years and apparently never had a single employee. Of the three people on its board, all Apple employees, two live in California; 32 of its last 33 board meetings took place in Cupertino, and the Irish director participated in seven of them. Its assets are managed by a Nevada company, and held in bank accounts in New York.
It falls in a strange loophole: Because it is not managed and controlled in Ireland, that nation does not tax its earnings, even at the low Irish corporate income tax rate. And because it is not registered in the United States, it has owed no American taxes. It would be a little like an individual living in America and earning a living from investments in Ireland and thus being able to avoid paying taxes to either government—a strategy that decidedly would not work, by the way.
From 2009 to 2012, the Irish affiliate received $29.9 billion in dividend income. The upshot, according to the report: "According to Apple, AOI’s net income made up 30% of Apple’s total worldwide net profits from 2009-2011, yet Apple also disclosed to the Subcommittee that AOI did not pay any corporate income tax to any national government during that period."
There is another clever strategy that Apple uses that the new report documents — holding a large chunk of its intellectual property in low-tax Irish affiliates as well. Think of it this way: If you live in, say, Germany and buy an IPhone, you are buying a physical object that was assembled in China from parts that come from all over. But you are also buying a piece of the intellectual property of Apple — a benefit from the labor of thousands of designers and programmers and marketers who are in California.
But Apple has no desire to pay high California and U.S. income tax on all its intellectual property. So instead, Apple Inc. shares that cost with its Irish affiliates in proportion to their sales. As the report puts it: “By structuring its intellectual property rights and distribution operations in the manner it did, Apple Inc. was able to avoid having worldwide Apple sales revenue related to its intellectual property attributed to itself in the United States where it would be subject to taxation in the year received. Instead, Apple Inc. arranged for a large portion of its worldwide sales revenue to be attributed to [Apple Service International] in Ireland. As explained earlier, according to Apple, Ireland has provided Apple affiliates with an income tax rate of less than 2% and as low as 0.05%."
So to put things in better perspective take at look at 2012 specifically. Apple Sales International had revenue of over $63.9 billion that year. How much did they pay in taxes? They claimed taxable income of around €50 million for that year, and paid less than €10 million to the Irish in taxes.
To be fair Google along with dozens of other companies use similar tax avoidance strategies. I think Apple is being profiled simply because they are the largest and wealthiest of the group.
Then I suggest you reread my original post. I was talking solely about consumers.