Yup. They won't close the loopholes that allow companies to pay (much much less) tax in Singapore instead of here because it would upset all their mates in the mining industry.
All countries do this. The UK ignored thousands of non tax paying non doms, which makes it a tax haven, and defends that position while dragging Apple in to talk.
Companies like Apple can only owe corporation tax where they are based. Not paying that tax in Ireland is wrong but it doesn't mean the tax is owed in Oz.
No tax minimisation is legal, tax avoidance and tax evasion are the same thing.
Thats what is being debated here. One issue is that because it is a multinational one issue is that treaties on taxes between countries (sharing info etc) come into play and that may be a bigger issue in the long term.
Cheers Dr Hawk (not any form of Solipsism)
No tax avoidance is legal. Tax evasion is illegal. They are not the same.
I can legally avoid paying taxes on $5000 (on this years income at least.) by putting it into a tax deferred IRA. Or I can illegally evade paying taxes on $5000 just by not declaring it on my income. You can legally avoid paying taxes but there's no such thing as legally evade paying taxes.
Here's what the US government can't do. (Can't speak for the Australian government though.) They can not change the tax laws today and apply it retroactively to 3 years back. They can't decide today that taxed deferred IRA are illegal, so that the $5000 that you legally avoided paying taxes on 3 years ago, is now tax evasion and you now owe taxes on it. It's one thing to change the tax law today and enforce it from now on forward and it's another to change the tax law today and make it retroactive. So that now you're on the hook for doing something illegal when it wasn't illegal when you did it.
I think a lot of the investigation has already happened. According to newspaper articles here in Australia they embedded tax officers in these companies and watched what they were doing, and based on that they are now instituting these changes.
And the ATO has a history of retroactively applying tax law changes to people who were using a loophole to follow the letter of the law but not the spirit. So if Apple is found to be recording Australia profits against their Singapore operations they may indeed get a back-tax bill.
In fact, speaking as an Apple Australia customer, when I used to rent movies on iTunes they would show up my credit card as "Apple Singapore," how blatant is that! (but they changed that a year ago at least).
They did to same thing to Apple, Inc in the US. And the US Senate special committee found that Apple was not doing anything illegal, even though they have not paid any US tax on over $100B they have in foreign holdings. The committee recommended changing the tax codes.
However, in the US, they can't make any changes in the tax code retroactive. If they close a loophole, it's close from when the new tax code takes effect and can not be enforced on any past tax year. That would be like if they decided that the fine for a overtime parking ticket has been to low for the past 3 years, so they raise the price of a parking ticket from $15 to $25 and made it retroactive to 3 years back. So now all of the people that got $15 parking tickets in the past 3 years now owes another $10 per ticket.
No tax avoidance is legal. Tax evasion is illegal. They are not the same.
I can legally avoid paying taxes on $5000 (on this years income at least.) by putting it into a tax deferred IRA. Or I can illegally evade paying taxes on $5000 just by not declaring it on my income. You an legally avoid paying taxes but there's no such thing as legally evade paying taxes.
Here's what the US government can't do. (Can't speak for the Australian government though.) They can not change the tax laws today and apply it retroactively to 3 years back. They can't decide today that taxed deferred IRA are illegal, so that the $5000 that you legally avoided paying taxes on 3 years ago, is now tax evasion and you now owe taxes on it. It's one thing to change the tax law today and enforce it from now on forward and it's another to change the tax law today and make it retroactive. So that now you're on the hook for doing something illegal when it wasn't illegal when you did it.
In the UK, HMRC reserves the right to retroactively declare tax avoidance schemes illegal. In fact any avoidance scheme has to be checked first by HMRC.so it can be fine then not and a big demand for cash arrives.
They did to same thing to Apple, Inc in the US. And the US Senate special committee found that Apple was not doing anything illegal, even though they have not paid any US tax on over $100B they have in foreign holdings. The committee recommended changing the tax codes.
However, in the US, they can't make any changes in the tax code retroactive. If they close a loophole, it's close from when the new tax code takes effect and can not be enforced on any past tax year. That would be like if they decided that the fine for a overtime parking ticket has been to low for the past 3 years, so they raise the price of a parking ticket from $15 to $25 and made it retroactive to 3 years back. So now all of the people that got $15 parking tickets in the past 3 years now owes another $10 per ticket.
In the Australian legislation you may be following the letter of the law, but if the aim of the scheme is principally to avoid paying tax then the Tax Office is well within its rights to examine those arrangements, and then go back and amend your returns for you so you are correctly liable had the scheme not existed. You might even get a little penalty for your mischievousness. One is not at odds with the other. The parking example you provide couldn't happen here either.
They did to same thing to Apple, Inc in the US. And the US Senate special committee found that Apple was not doing anything illegal, even though they have not paid any US tax on over $100B they have in foreign holdings. The committee recommended changing the tax codes.
However, in the US, they can't make any changes in the tax code retroactive. If they close a loophole, it's close from when the new tax code takes effect and can not be enforced on any past tax year. That would be like if they decided that the fine for a overtime parking ticket has been to low for the past 3 years, so they raise the price of a parking ticket from $15 to $25 and made it retroactive to 3 years back. So now all of the people that got $15 parking tickets in the past 3 years now owes another $10 per ticket.
In many cases, but not always, the test is whether a specific structure was set up by a company with the specific aim to avoid taxes that the tax provision was not set up for. This includes tax arbitrage (double Irish), shifting profits, transfer pricing, etc. thus type of tax loophole is frequently closed retroactively.
'Apple is complying with the letter of the law and paying every cent of tax they owe. It's stupid useless and corrupt governments that are to blame for not doing something about the loopholes.'
The Australian government changes the law and closes the loophole.
'The greedy pack of useless vultures... Apple should pull out of the country... How dare they...'
In many cases, but not always, the test is whether a specific structure was set up by a company with the specific aim to avoid taxes that the tax provision was not set up for. This includes tax arbitrage (double Irish), shifting profits, transfer pricing, etc. thus type of tax loophole is frequently closed retroactively.
But most of those examples are not true "retroactive". In most (if not all) of those cases, it seems as though the laws only went back to the date the change was proposed and it took the government several months to over a year to actually pass the law. The corporation most likely knew the law was going to change on those "retroactive" dates if they pass. It's not like the corporation didn't know that what they're doing, tax wise, might be illegal, if the new tax code proposal is passed, when it's brought up to a committee for vote in the near future.
It's more like the government propose a change in the tax law, with the effective date stated as the date of the proposal. Even if it takes a year and a half for it to come up for vote, pass and enacted into law. The government didn't set out to make the new tax code retroactive from the date of proposal. It's only retroactive from the date of passing to the date they propose the change.
Kind of reminds me of the time Apple got in trouble for the backdating options they gave to Steve Jobs when he first returned to Apple. If I recall, the board propose to give Steve some options at the price of AAPL at the time. However, they didn't get to vote on it for months because of some wording that Steve wasn't too happy about and by that time AAPL, had shot up considerably. The board didn't think it was fair for Steve to miss out on any AAPL increase (and I'm sure Steve wasn't too happy either), from the time of proposal, so they backdated his options to the nearest date that was closes to the price of AAPL at the time it was proposed to Steve. They couldn't use the date of the actual meeting when it was proposed because that meeting took place in the previous fiscal year. Everything would have been fine and dandy if it weren't for the fact that there was no board meeting on the date they supposedly voted and issued those options to Steve. Now, backdating options is not illegal if the paperwork is done correctly. But no way was the paperwork done correctly with Steve options.
I love my AAPL, but for god's sake folks, just how far are you willing to bend over in defending capitalism's inalienable right to make money from the social infrastructure that makes it possible?
As the so called hardworking types used to say, 'Ain't no Free Lunches', and the biggest pigs at the free lunch counter are corporations.
(And please spare me the "they're just following the letter of the law" BS... talk about a low moral bar.)
With all due respect, what the fk do you propose? That companies that are complying with the letter of the law just donate money to these governments? If the countries don't like the current tax regime, simply change it. But don't cry foul and threaten fines. Of course, whoever claimed that our governments are run by the smartest people on the planet?
With all due respect, what the fk do you propose? That companies that are complying with the letter of the law just donate money to these governments? If the countries don't like the current tax regime, simply change it. But don't cry foul and threaten fines. Of course, whoever claimed that our governments are run by the smartest people on the planet?
I think he means that "the letter of the law" is not always the correct yardstick. If it was, countries would not have Constitutional Courts (indeed any courts) whose job is to interpret "the letter of the law" on a daily basis. If Australia, or the EU, have the legal right to change tax laws retro-actively, then I am sure Apple's smart tax lawyers were aware of that and Apple/Google/Starbucks et al have made the appropriate reserves. After all, it will be stated in the letter of the law; somewhere.
I doubt anyone here is an international tax accountant or an expert on jurisprudence; so the debate is actually moot. Ultimately, politics trumps business, and military might trumps politics. It is such the way of the world as it was made by God.
I acknowledge the existence of Obama hate on the internet, but why is there a picture of Obama next to an article about Australia levying fines on Apple? What on earth could POTUS have to do with that??
>Here's what the US government can't do. (Can't speak for the Australian government though.) They can not change the tax laws today and apply it retroactively to 3 years back.
In the UK, HMRC reserves the right to retroactively declare tax avoidance schemes illegal. In fact any avoidance scheme has to be checked first by HMRC.so it can be fine then not and a big demand for cash arrives.
This is called an "ex post facto" law. Literally, "after the fact," and it is generally not considered moral in modern jurisprudence systems. This is because those being accused of the new laws had no way of knowing the new law and its consequences at the time they committed the act. Ex post facto laws are expressly forbidden by the U.S. Constitution (Article 1, Section 9, Clause 3.) In some nations that follow the Westminster system of government, such as the UK, ex post facto laws are technically possible, because the doctrine of parliamentary supremacy allows Parliament to pass any law it wishes. In nations with bills of rights or written constitutions, ex post facto legislation are commonly prohibited.
This is called an "ex post facto" law. Literally, "after the fact," and it is generally not considered moral in modern jurisprudence systems. This is because those being accused of the new laws had no way of knowing the new law and its consequences at the time they committed the act. Ex post facto laws are expressly forbidden by the U.S. Constitution (Article 1, Section 9, Clause 3.) In some nations that follow the Westminster system of government, such as the UK, ex post facto laws are technically possible, because the doctrine of parliamentary supremacy allows Parliament to pass any law it wishes. In nations with bills of rights or written constitutions, ex post facto legislation are commonly prohibited.
It's interesting that Westminister type systems haven't then promoted more tyranny. Blighty seems free enough to me.
This is called an "ex post facto" law. Literally, "after the fact," and it is generally not considered moral in modern jurisprudence systems. This is because those being accused of the new laws had no way of knowing the new law and its consequences at the time they committed the act. Ex post facto laws are expressly forbidden by the U.S. Constitution (Article 1, Section 9, Clause 3.) In some nations that follow the Westminster system of government, such as the UK, ex post facto laws are technically possible, because the doctrine of parliamentary supremacy allows Parliament to pass any law it wishes. In nations with bills of rights or written constitutions, ex post facto legislation are commonly prohibited.
I might have missed some nuance here in the Australian context but the anti-avoidance provisions are baked into the law. It's right there now and has always been there. Basically, if it looks like a duck....
Is this ex-post-facto? Genuinely curious as one who has completed legal study but never pursued it as a career.
It's not just Apple. There are 30 companies being targeted in this measure. The double-irish-with-a-dutch-sandwich might be legal but it is not ethical. Company profit is a BENEFIT of being able to conduct business in countries with a stable economy and infrastructure. Companies which profit ought to reinforce the stability of those same economies through appropriate taxation. It goes both ways: there is no point in governments supporting business activity that doesn't generate positive fiscal impacts on the society. We are not corporate quarries to be pillaged of profit and beg for scraps of employment.
In the last 30 years international corporations just pulled up stumps and decided to set up elaborate business structures to avoid giving back. They merely offloaded this tax burden onto mums and dads, people who don't have the capacity or flexibility to rearrange their personal finances in tax-optimal ways at the stroke of a pen. The chair of the IMF declined to put an exact on the amount of international taxation being forgone through these loopholes but went on the record stating that it was a massive problem and that all estimates of the numbers are "very big". If we can't appeal on ethical grounds (we can't) our only recourse is to restructure tax law to close the loopholes. I don't actually think companies enjoy playing "hide the revenue". It's only something they have to engage with because their competitors do it and if they didn't they'd be at a competitive disadvantage.
There were other relevant changes in the budget speech that were not mentioned in this article: for instance some digital services being sold within Australia will be forced to attract a compulsory sales tax. Apple is unaffected by this change because they have always done the right thing and collected this sales tax on digital services like iTunes.
If you believe that corporations are doing nothing unethical then you have absolutely nothing to worry about by governments investigating corporate tax structures. Expect a lot more of this.
The Australian government passes tax laws that companies have to abide by. So how is it even remotely legal on any-level that a government can now come back and fine a company for using tax laws / loopholes? They did nothing wrong?
Ah right... election year must be coming. Politicians have to fluff their feathers.
It's unlikely that it's a retroactive thing. I think that's just ambiguity in the way it's reported. Their tax policy overall should be consistent and as free of unintentional edge cases as possible. This is obviously separate from the amount assessed.
Comments
You got me!
I've been posting in these forums for years before you joined so pipe down newb.
All countries do this. The UK ignored thousands of non tax paying non doms, which makes it a tax haven, and defends that position while dragging Apple in to talk.
Companies like Apple can only owe corporation tax where they are based. Not paying that tax in Ireland is wrong but it doesn't mean the tax is owed in Oz.
No tax minimisation is legal, tax avoidance and tax evasion are the same thing.
Thats what is being debated here. One issue is that because it is a multinational one issue is that treaties on taxes between countries (sharing info etc) come into play and that may be a bigger issue in the long term.
Cheers Dr Hawk (not any form of Solipsism)
No tax avoidance is legal. Tax evasion is illegal. They are not the same.
I can legally avoid paying taxes on $5000 (on this years income at least.) by putting it into a tax deferred IRA. Or I can illegally evade paying taxes on $5000 just by not declaring it on my income. You can legally avoid paying taxes but there's no such thing as legally evade paying taxes.
Here's what the US government can't do. (Can't speak for the Australian government though.) They can not change the tax laws today and apply it retroactively to 3 years back. They can't decide today that taxed deferred IRA are illegal, so that the $5000 that you legally avoided paying taxes on 3 years ago, is now tax evasion and you now owe taxes on it. It's one thing to change the tax law today and enforce it from now on forward and it's another to change the tax law today and make it retroactive. So that now you're on the hook for doing something illegal when it wasn't illegal when you did it.
I think a lot of the investigation has already happened. According to newspaper articles here in Australia they embedded tax officers in these companies and watched what they were doing, and based on that they are now instituting these changes.
And the ATO has a history of retroactively applying tax law changes to people who were using a loophole to follow the letter of the law but not the spirit. So if Apple is found to be recording Australia profits against their Singapore operations they may indeed get a back-tax bill.
In fact, speaking as an Apple Australia customer, when I used to rent movies on iTunes they would show up my credit card as "Apple Singapore," how blatant is that! (but they changed that a year ago at least).
They did to same thing to Apple, Inc in the US. And the US Senate special committee found that Apple was not doing anything illegal, even though they have not paid any US tax on over $100B they have in foreign holdings. The committee recommended changing the tax codes.
However, in the US, they can't make any changes in the tax code retroactive. If they close a loophole, it's close from when the new tax code takes effect and can not be enforced on any past tax year. That would be like if they decided that the fine for a overtime parking ticket has been to low for the past 3 years, so they raise the price of a parking ticket from $15 to $25 and made it retroactive to 3 years back. So now all of the people that got $15 parking tickets in the past 3 years now owes another $10 per ticket.
They did to same thing to Apple, Inc in the US. And the US Senate special committee found that Apple was not doing anything illegal, even though they have not paid any US tax on over $100B they have in foreign holdings. The committee recommended changing the tax codes.
However, in the US, they can't make any changes in the tax code retroactive. If they close a loophole, it's close from when the new tax code takes effect and can not be enforced on any past tax year. That would be like if they decided that the fine for a overtime parking ticket has been to low for the past 3 years, so they raise the price of a parking ticket from $15 to $25 and made it retroactive to 3 years back. So now all of the people that got $15 parking tickets in the past 3 years now owes another $10 per ticket.
In the Australian legislation you may be following the letter of the law, but if the aim of the scheme is principally to avoid paying tax then the Tax Office is well within its rights to examine those arrangements, and then go back and amend your returns for you so you are correctly liable had the scheme not existed. You might even get a little penalty for your mischievousness. One is not at odds with the other. The parking example you provide couldn't happen here either.
They did to same thing to Apple, Inc in the US. And the US Senate special committee found that Apple was not doing anything illegal, even though they have not paid any US tax on over $100B they have in foreign holdings. The committee recommended changing the tax codes.
However, in the US, they can't make any changes in the tax code retroactive. If they close a loophole, it's close from when the new tax code takes effect and can not be enforced on any past tax year. That would be like if they decided that the fine for a overtime parking ticket has been to low for the past 3 years, so they raise the price of a parking ticket from $15 to $25 and made it retroactive to 3 years back. So now all of the people that got $15 parking tickets in the past 3 years now owes another $10 per ticket.
The US Congress has frequently imposed retroactive effective dates for provisions that shut down egregious tax loopholes (http://www.treasury.gov/connect/blog/Pages/Retroactive-Tax-Provisions.aspx).
In many cases, but not always, the test is whether a specific structure was set up by a company with the specific aim to avoid taxes that the tax provision was not set up for. This includes tax arbitrage (double Irish), shifting profits, transfer pricing, etc. thus type of tax loophole is frequently closed retroactively.
'Apple is complying with the letter of the law and paying every cent of tax they owe. It's stupid useless and corrupt governments that are to blame for not doing something about the loopholes.'
The Australian government changes the law and closes the loophole.
'The greedy pack of useless vultures... Apple should pull out of the country... How dare they...'
Can't win.
The US Congress has frequently imposed retroactive effective dates for provisions that shut down egregious tax loopholes (http://www.treasury.gov/connect/blog/Pages/Retroactive-Tax-Provisions.aspx).
In many cases, but not always, the test is whether a specific structure was set up by a company with the specific aim to avoid taxes that the tax provision was not set up for. This includes tax arbitrage (double Irish), shifting profits, transfer pricing, etc. thus type of tax loophole is frequently closed retroactively.
But most of those examples are not true "retroactive". In most (if not all) of those cases, it seems as though the laws only went back to the date the change was proposed and it took the government several months to over a year to actually pass the law. The corporation most likely knew the law was going to change on those "retroactive" dates if they pass. It's not like the corporation didn't know that what they're doing, tax wise, might be illegal, if the new tax code proposal is passed, when it's brought up to a committee for vote in the near future.
It's more like the government propose a change in the tax law, with the effective date stated as the date of the proposal. Even if it takes a year and a half for it to come up for vote, pass and enacted into law. The government didn't set out to make the new tax code retroactive from the date of proposal. It's only retroactive from the date of passing to the date they propose the change.
Kind of reminds me of the time Apple got in trouble for the backdating options they gave to Steve Jobs when he first returned to Apple. If I recall, the board propose to give Steve some options at the price of AAPL at the time. However, they didn't get to vote on it for months because of some wording that Steve wasn't too happy about and by that time AAPL, had shot up considerably. The board didn't think it was fair for Steve to miss out on any AAPL increase (and I'm sure Steve wasn't too happy either), from the time of proposal, so they backdated his options to the nearest date that was closes to the price of AAPL at the time it was proposed to Steve. They couldn't use the date of the actual meeting when it was proposed because that meeting took place in the previous fiscal year. Everything would have been fine and dandy if it weren't for the fact that there was no board meeting on the date they supposedly voted and issued those options to Steve. Now, backdating options is not illegal if the paperwork is done correctly. But no way was the paperwork done correctly with Steve options.
With all due respect, what the fk do you propose? That companies that are complying with the letter of the law just donate money to these governments? If the countries don't like the current tax regime, simply change it. But don't cry foul and threaten fines. Of course, whoever claimed that our governments are run by the smartest people on the planet?
I think he means that "the letter of the law" is not always the correct yardstick. If it was, countries would not have Constitutional Courts (indeed any courts) whose job is to interpret "the letter of the law" on a daily basis. If Australia, or the EU, have the legal right to change tax laws retro-actively, then I am sure Apple's smart tax lawyers were aware of that and Apple/Google/Starbucks et al have made the appropriate reserves. After all, it will be stated in the letter of the law; somewhere.
I doubt anyone here is an international tax accountant or an expert on jurisprudence; so the debate is actually moot. Ultimately, politics trumps business, and military might trumps politics. It is such the way of the world as it was made by God.
I acknowledge the existence of Obama hate on the internet, but why is there a picture of Obama next to an article about Australia levying fines on Apple? What on earth could POTUS have to do with that??
>Here's what the US government can't do. (Can't speak for the Australian government though.) They can not change the tax laws today and apply it retroactively to 3 years back.
In the UK, HMRC reserves the right to retroactively declare tax avoidance schemes illegal. In fact any avoidance scheme has to be checked first by HMRC.so it can be fine then not and a big demand for cash arrives.
This is called an "ex post facto" law. Literally, "after the fact," and it is generally not considered moral in modern jurisprudence systems. This is because those being accused of the new laws had no way of knowing the new law and its consequences at the time they committed the act. Ex post facto laws are expressly forbidden by the U.S. Constitution (Article 1, Section 9, Clause 3.) In some nations that follow the Westminster system of government, such as the UK, ex post facto laws are technically possible, because the doctrine of parliamentary supremacy allows Parliament to pass any law it wishes. In nations with bills of rights or written constitutions, ex post facto legislation are commonly prohibited.
It's interesting that Westminister type systems haven't then promoted more tyranny. Blighty seems free enough to me.
Is this ex-post-facto? Genuinely curious as one who has completed legal study but never pursued it as a career.
Please do explain why exactly should these firms be allowed to avoid corporate taxes?
Because they follow the laws of that country which allow them pay what they are supposed to.
Are you suggesting Apple and other companies have broken some law to avoid taxes?
That is not for me to decide.
Really?
You decided in your previous post you thought they were doing something wrong/bad.
Why stop now?
It's not just Apple. There are 30 companies being targeted in this measure. The double-irish-with-a-dutch-sandwich might be legal but it is not ethical. Company profit is a BENEFIT of being able to conduct business in countries with a stable economy and infrastructure. Companies which profit ought to reinforce the stability of those same economies through appropriate taxation. It goes both ways: there is no point in governments supporting business activity that doesn't generate positive fiscal impacts on the society. We are not corporate quarries to be pillaged of profit and beg for scraps of employment.
In the last 30 years international corporations just pulled up stumps and decided to set up elaborate business structures to avoid giving back. They merely offloaded this tax burden onto mums and dads, people who don't have the capacity or flexibility to rearrange their personal finances in tax-optimal ways at the stroke of a pen. The chair of the IMF declined to put an exact on the amount of international taxation being forgone through these loopholes but went on the record stating that it was a massive problem and that all estimates of the numbers are "very big". If we can't appeal on ethical grounds (we can't) our only recourse is to restructure tax law to close the loopholes. I don't actually think companies enjoy playing "hide the revenue". It's only something they have to engage with because their competitors do it and if they didn't they'd be at a competitive disadvantage.
There were other relevant changes in the budget speech that were not mentioned in this article: for instance some digital services being sold within Australia will be forced to attract a compulsory sales tax. Apple is unaffected by this change because they have always done the right thing and collected this sales tax on digital services like iTunes.
If you believe that corporations are doing nothing unethical then you have absolutely nothing to worry about by governments investigating corporate tax structures. Expect a lot more of this.
Quote:
The Australian government passes tax laws that companies have to abide by. So how is it even remotely legal on any-level that a government can now come back and fine a company for using tax laws / loopholes? They did nothing wrong?
Ah right... election year must be coming. Politicians have to fluff their feathers.
It's unlikely that it's a retroactive thing. I think that's just ambiguity in the way it's reported. Their tax policy overall should be consistent and as free of unintentional edge cases as possible. This is obviously separate from the amount assessed.