Apple, like many large companies wholly owns other corporations [e.g. Apple Computer Trading (Shanghai) Co Ltd] which are incorporated with a board of directors, etc. under the laws of the country it operates in. Just like any investment in any other incorporated company the money does not come back to Apple Inc. until the other company pays a dividend.
If you were to turn around and change the rules of the IRS to "force" an imaginary dividend payment or gain/loss calculation at the end of the financial year to tax the corporation on world-wide income..... many large companies would have no real option other than to invert and move their headquarters over to somewhere like Canada that does not tax on world-wide income. It is a case of shooting yourself in your foot. If you reverted to a VAT/GST tax and reduced corporate taxes or eliminated them, and offset that with a tax-credit check to low income families to cover any potential increase in prices..... you would create a situation where you make it difficult to move where you earn services income or manufacturing income around. Additionally since VAT/GST is typically levied only on internal consumption, you would create a more competitive landscape for manufactures since you have basically cut the cost of manufacturing in the US by up to 35%. Often Income tax rises - which are offset for large companies by loopholes and other government handouts to lift the economy but all that ends up doing is giving a disproportionate advantage to connected large companies and handicapping new smaller companies that don't have the same clout.
Additionally since the VAT/GST is a stable revenue stream vs Income it is a more reliable source of funds to cover necessary operational costs of the government. What happens is that you have some really good years and the government is flush in new Income tax and goes wow -- great we can spend all this money on new programs and the voters will be happy..... then the economy goes into recession and income tax revenues all but disappear but the obligations the government have still exist and the government runs up a massive debt.... (sound familiar).
Tax should be about a necessary source of funding for funding essential services done by the government, not about being some sort of social engineering experiment....
You aren't getting the point - Apple Computer Trading (Shanghai) Co Ltd profits will be taxed at Apple Inc hands only after the dividend is received. However, under Transfer Pricing guidelines that cover transactions between related parties, Apple Computer Trading (Shanghai) Co Ltd has to pay royalties to Apple Inc for using its IP and selling products made by Apple Inc. This is typically done before or soon after the product is sold, and in any case, in every fiscal year.
Apple has been ingeniously declaring that royalty to be zero, and keeping entire profit in the hands of Apple Shanghai. Which is not acceptable under almost any law, including IRS.
There is a simple test for transfer pricing - whether Apple will offer the same terms to third parties, as it does to related parties. If it is offering special terms to related parties, then they are trying to hoodwink the law.
Imagine a scenario were Apple Ireland bought all the iPhones made by Foxconn, and sold them to various Apple entities around the world at a price higher than retail price. So all these other entities would declare a loss, whereas Apple Ireland would declare a huge profit - and take advantage of Irish law to pay very low taxes. I am painting an extreme case, but I think now you understand what is wrong with what Apple is doing?
It would actually be illegal for Apple Ireland to sell to its Apple stores in other countries at a higher price than it does to its competitors. That's transfer pricing to avail of Irish law but selling at a standard wholesale price is legal. I don't see any indication that Apple is doing the former.
Also Apple Ireland doesn't buy iPhones from Foxconn, It licences Foxconn to build them.
Humans Need Not Apply [15:00] on how robots are replacing humans in the Economy. Robots will put an end to the idea that one should work to 'earn a Living'. Imagine e.g. how self driving cars in the not so distant future will dramatically change the transportation economy.
We Can Do It Ourselves [59:00] a thought provoking documentary about a democratic cooperative way of doing business.
1. There’s no evidence that machines will, in any meaningful timeframe, be able to replace humans in this regard, if ever. 2. Link seems broken. 3. So still pushing for the ‘everyone starves and society collapses’ angle, huh? You don’t deserve the fruit of my labor for doing no labor of your own. End of story.
>>> charge a VAT on all goods and services sold in the US
The trouble with a VAT tax is that it is a flat tax: everyone pays the same percentage. It is only fair that the rich, and rich corporations—those better abled to pay—should pay a higher percentage than the poor or less well-off.
Why is a graduated rate "fair"? Do you mean "morally" better? Perhaps a graduated rate makes society more egalitarian? Is your goal to have everyone on an equal financial footing?
Humans Need Not Apply [15:00] on how robots are replacing humans in the Economy. Robots will put an end to the idea that one should work to 'earn a Living'. Imagine e.g. how self driving cars in the not so distant future will dramatically change the transportation economy.
We Can Do It Ourselves [59:00] a thought provoking documentary about a democratic cooperative way of doing business.
1. There’s no evidence that machines will, in any meaningful timeframe, be able to replace humans in this regard, if ever. 2. Link seems broken. 3. So still pushing for the ‘everyone starves and society collapses’ angle, huh? You don’t deserve the fruit of my labor for doing no labor of your own. End of story.
End of story? Not quite. Let's speak again in 2020. From my self driving Apple car.
Even with a large scale, multi-country economic collapse–meaning conditions that would lend themselves to the bottom-up supplanting of an economy that UBI ostensibly requires–it will not happen, because UBI is nothing more than a continuation of the ideologies that led us to said collapse.
Do not say I haven't warned you.
At least you recognize it’s something that warrants warning.
EDIT: Why do the emoticons break when you edit your post? Why not just open up the list of accepted characters to include the standard Unicode emoji, remove the prepackaged ones from the site, and just let us use OS X’s Character Viewer to insert whatever we want, emotion-wise? I understand the need to block certain characters–we don’t want people dropping tables, do we–but this seems a broken solution.
No. Not from the point of view of rationality, and not from the point of view of legal precedent. Both sides can actually agree on this, even though one can never admit it to itself.
Back on that Nesta’s thing, at least the points made are interesting, even when they’re wrong. Experiential retail? Ew. I want to get in, get my crap, and get out. With the expansion of automation, we’ll be moving ever further away from this instead of toward it. I still like my old idea where Apple takes advantage of localized payments, NFC, and a complete digitization of the restocking process (I’ll never find the post again…), but here’s a general thought for the future of retail.
I have a grocery list on my iPhone. Let’s say it knows the brands I prefer based on my past purchases (still giving me the option of going with something else or cheaper, if it exists), so I can just add the individual item without having to tell it explicitly what I want. I add things to my list as I go about my life and then walk into the store. Through NFC, my phone tells the store what I want. Helper robots go and pick the items from the shelves and bring them to me. Even bag them for me. I confirm my purchase (Apple Pay or other means) and walk out. As I leave, NFC charges my digital service if I didn’t already pay with cash (I would). Meanwhile, the store has already updated its inventory and shot off what sold and what didn’t to the companies in question. Every single day, a company can see what’s selling and what isn’t. They can adjust brands instantaneously, saving time, cash, and human effort in making garbage people don’t want.
“Food hacking” sounds like a near-term expansion of the application of “built on site” drinks you’re starting to see everywhere. Rather than having a dispenser of 15 premixed drinks, you can get an entire company’s product line in a single machine by mixing the ingredients right there. Movie theaters and Five Guys have this, at least, already. 3D food printing means you’d be able to do the same thing with solids. So yeah, you could “hack” whatever ingredients together you wished.
As to cybersecurity, I want a tiny quantum computer that sits on my network between my router and my computers. Heck, make a router with quantum encryption. Even if that’s the only use of the thing, I’d feel a little better.
I recoil at the “gameification” of things in life that aren’t games. I view such things more than just suspicion; I reject them entirely.
Universities that assign problems based on real-world (local, even, to prevent nationalization of education, please?) solutions rather than just prepackaged education? Great idea. And it gives kids work experience that they now “need” when instantly out of school.
Blockchain… I don’t know enough about it to say anything other than it won’t be the end all be all that people claim. It’s not going to revolutionize the way the economy works or the way that currency is managed, certainly.
But yeah, I love futurist stuff. Thanks for sharing!
Read Page 17 (Page 11 in the CBO PDF Document excluding the frontmatter)
Effective Tax Rates for Capital Income on Corporate side vs. Labor Side.
In short, Labor is being hosed two fold over that of Capital.
FYI- Capital income IS NOT corporate income. Capital income is the income derived from investment. From both individuals and corporations. Dividends, interest, sale of stocks or properties for example. The effective tax rate the Federal government sees in Capital income is about 15%. Which, after deductions, is in line with the Capital Gains tax being 20%.
Labor income is income from working and is subject to marginal tax rates from 10% to 39%. Thus the average effective tax rate the the Federal government sees would fall somewhere in the mid 20's range.
What this article is comparing is the average effective tax rate of the taxes that government collects over the years. So even if the Capital Gains tax rate is 20%, the government only sees an effective tax rate of about 15%. The same with labor income taxes. The government is only collecting an effective tax rate of 28% for all labor income tax collected.
About 45% of income earners pays no Federal income tax because they don't make more than the standard deduction and exemptions they get or have enough in itemized deductions to bring their AGI to $0 or less. This lowers the total effective marginal tax rate that the Federal government sees for both total labor income and total capital income tax collected. Those are the numbers you are looking at in this article. But the effective tax rate for those 45% of income earners is 0%.
Just to add- If those 45% paid any payroll taxes, then their effective tax rate would be about 6% as it pertains to this article. That's because the labor income in this article includes payroll taxes paid by the individual. But most people don't include payroll taxes when calculating effective tax rate. That's because for most individuals, payroll tax is more of an investment, as it is returned as SS and medicare when one retires.
"So, if I were a member of Congress, I’d be asking Mr. Cook a simple question. If U.S. tax policy were to fall in line with virtually every other country on the planet and you could repatriate foreign-earned profits to the U.S. without taxation, might you locate your Apple car assembly plant in the U.S.? Which would support the U.S. manufacturing base. Which would be employing U.S. workers. Which would foster economic growth in the U.S."
Obviously not. It's not just US taxes that make mass manufacturing uneconomical. Skilled labor costs make mass manufacturing uneconomical.
Reaching global multilateral agreements on taxation of the "global economy" seems astronomically unlikely. Heck, even in the US there is no enforceable agreement on the taxation of online sales between states. Even sites like AI host ads that boldly advertise how much sales tax you'll save if you purchase products from companies that don't have nexus in your state. The fine print they don't tell you up front is that you as an individual living in a state that collects sales tax are fully responsible for paying the sales taxes on your online purchases whether or not the retailer put them on the invoice. It's understandable why online retailers wouldn't want to collect sales tax in states that they have no nexus. But that doesn't get you off the hook. If you don't pay them you are a tax cheat, unlike Apple which pays all of its taxes in the states and countries where it has tax liability. I'd bet that nearly 100% of the people accusing Apple of not paying its "fair share" of taxes are serial tax cheaters themselves. Whether it's paying a contractor under the table, not reporting income, not paying sales tax for online purchases where no sales tax was collected, over-claiming expenses and deductions, manipulating company structures to qualify for loans or subsidies that would not otherwise be obtainable, skipping out on student loan repayments, and a million other ways to "cheat the system." It's basic human nature to cheat and this is no more pervasive than when people view "the system" as an amorphous blob of uncaring bureaucrats who are lining their pockets by padding their taxpayer reimbursed expense accounts. It's easy to screw the system when you don't see yourself as being part of the system.
Kudos to Apple for paying what they owe. All companies and individuals should aspire to do the same.
As far as US jobs are concerned it's the lack of useful skills in sufficient quantities that make modern manufacturing on the scale that Apple requires unattainable in the US. Some of this could be dealt with using advanced manufacturing automation, e.g., advanced robotics. But those systems aren't cheap and are never going to be as flexible and adaptable as humans. Then the question of automation becomes one of what to do with all the idled workers? The US simply doesn't have a master plan for prosperity or even a faint concept of how to move towards full employment in times of (relative) peace. Mobilizing the hundreds of millions workers and manufacturing capability to deal with global threats has never proven to be a challenge for the US but what do you do with all that capacity during interim/inter-war periods? The USA is inundated with over educated, debt ridden, aimless recent college graduates with little purposeful calling and no hard skills. China on the other hand has an army of workers with far less post secondary formal education, typically zero, but with the vocational training and hard skills needed to take on the jobs that are in high demand in a robust manufacturing economy. I'd bet that very few of those FoxConn workers have a Masters Degree in Art History and owe $200K in student loans. The root cause of the problem is that China has a plan to take advantage of the modern manufacturing economy and the US is clueless about anything other than what to do with anything other than the 1/1000th of one percent sports figures and celebrities who dominate the popular culture, and of course the 25-40% of the workforce who are effectively still on the government dole either directly or indirectly through subcontracting or supplying products and services to government agencies.
We should be turning to Apple for advice, not questioning their operations and motivations. They get it, we don't.
Kudos to Apple for paying what they owe. All companies and individuals should aspire to do the same.
Of course all companies that wish to survive long-term "pay what they owe". Even if just a smidge late they pay penalties and interest as Apple did in China. So kudos out to all of them if kudos are deserved simply for paying your taxes. Don't pay and you're out of business.
Now with that out of the way the richest companies on the planet seem to be the ones with the most creative and aggressive tax avoidance structures. Little guys don't have the same opportunities and options. We just pay a higher percentage since we ain't using absolutely tax-free Irish shell companies or can afford incorporation in the Caymens to take advantage of their banking/tax laws or have IP we can give our own "overseas" branches to license at exorbitant rates to make it appear they lose money. .
Apple’s accounts for its year to the end of September show that the multinational’s effective tax rate, ie the average rate at which its profits are taxed given it books profits in various jurisdictions with varying tax rates, increased to 26.4 per cent, from 26.1 per cent in 2014. The equivalent figure in 2013 was 26.2 per cent.
If it was 2%, and "substantially all" foreign profit was generated in Ireland, then the average Apple paid would not be 26.4%.
The 2% confirmation comes from Apple's own documents, submitted under subpoena a couple years back. It's been discussed here too many times already IMO.
Proof that Apple hasn't been paying any more than 2% on that Irish money? Look no further than Apple's most recent 10K:
"Substantially all of the company’s undistributed international earnings intended to be indefinitely reinvested in operations outside the US were generated by subsidiaries organized in Ireland, which has a statutory tax rate of 12.5%. As of 26 Sept, 2015, US income taxes have not been provided on a cumulative total of $91.5bn of such earnings. The amount of unrecognized deferred tax liability (Profits Apple has not reported in it's taxable income statements, no allowance made for taxes at all. Otherwise it would have been noted as a deferred tax obligation) related to these temporary differences is estimated to be $30.0bn. As of 23 Sept, 2015 and 27 Sept, 2014, $186.9bn and $137.1bn, respectively, of the company’s cash, cash equivalents and marketable securities were held by foreign subsidiaries and are generally based in US dollar-denominated holdings. Amounts held by foreign subsidiaries are generally subject to U.S. income taxation on repatriation to the US.
Not generally reported for whatever reason is the "stateless corporation" setup that allowed Apple and others to completely avoid taxes on its profits is no longer available to them as of this year. Not sure what tax avoidance structure is replacing it tho I've seen various subsidiaries of Apple Asia mentioned, and Shanghai is said to be offering Apple quite favorable tax advantages in Ireland's stead.
Comments
Also Apple Ireland doesn't buy iPhones from Foxconn, It licences Foxconn to build them.
2. Link seems broken.
3. So still pushing for the ‘everyone starves and society collapses’ angle, huh? You don’t deserve the fruit of my labor for doing no labor of your own. End of story.
There has been a lot of great discussion from all sides.
Well played AI members.
I don't want to hijack the thread, but reading through the now 7 pages of comments made me think of the latest episode of the Freakonomics podcast.
http://freakonomics.com/2015/12/17/is-migration-a-basic-human-right-a-new-freakonomics-radio-podcast/
Might be worth a listen for anyone who is interested in these kinds of things.
Well, 2040. That’s a lot harder than people say it is.Even with a large scale, multi-country economic collapse–meaning conditions that would lend themselves to the bottom-up supplanting of an economy that UBI ostensibly requires–it will not happen, because UBI is nothing more than a continuation of the ideologies that led us to said collapse.
At least you recognize it’s something that warrants warning.
EDIT: Why do the emoticons break when you edit your post? Why not just open up the list of accepted characters to include the standard Unicode emoji, remove the prepackaged ones from the site, and just let us use OS X’s Character Viewer to insert whatever we want, emotion-wise? I understand the need to block certain characters–we don’t want people dropping tables, do we–but this seems a broken solution.
No. Not from the point of view of rationality, and not from the point of view of legal precedent. Both sides can actually agree on this, even though one can never admit it to itself.
Back on that Nesta’s thing, at least the points made are interesting, even when they’re wrong. Experiential retail? Ew. I want to get in, get my crap, and get out. With the expansion of automation, we’ll be moving ever further away from this instead of toward it. I still like my old idea where Apple takes advantage of localized payments, NFC, and a complete digitization of the restocking process (I’ll never find the post again…), but here’s a general thought for the future of retail.
I have a grocery list on my iPhone. Let’s say it knows the brands I prefer based on my past purchases (still giving me the option of going with something else or cheaper, if it exists), so I can just add the individual item without having to tell it explicitly what I want. I add things to my list as I go about my life and then walk into the store. Through NFC, my phone tells the store what I want. Helper robots go and pick the items from the shelves and bring them to me. Even bag them for me. I confirm my purchase (Apple Pay or other means) and walk out. As I leave, NFC charges my digital service if I didn’t already pay with cash (I would). Meanwhile, the store has already updated its inventory and shot off what sold and what didn’t to the companies in question. Every single day, a company can see what’s selling and what isn’t. They can adjust brands instantaneously, saving time, cash, and human effort in making garbage people don’t want.
“Food hacking” sounds like a near-term expansion of the application of “built on site” drinks you’re starting to see everywhere. Rather than having a dispenser of 15 premixed drinks, you can get an entire company’s product line in a single machine by mixing the ingredients right there. Movie theaters and Five Guys have this, at least, already. 3D food printing means you’d be able to do the same thing with solids. So yeah, you could “hack” whatever ingredients together you wished.
As to cybersecurity, I want a tiny quantum computer that sits on my network between my router and my computers. Heck, make a router with quantum encryption. Even if that’s the only use of the thing, I’d feel a little better.
I recoil at the “gameification” of things in life that aren’t games. I view such things more than just suspicion; I reject them entirely.
Universities that assign problems based on real-world (local, even, to prevent nationalization of education, please?) solutions rather than just prepackaged education? Great idea. And it gives kids work experience that they now “need” when instantly out of school.
Blockchain… I don’t know enough about it to say anything other than it won’t be the end all be all that people claim. It’s not going to revolutionize the way the economy works or the way that currency is managed, certainly.
But yeah, I love futurist stuff. Thanks for sharing!
FYI- Capital income IS NOT corporate income. Capital income is the income derived from investment. From both individuals and corporations. Dividends, interest, sale of stocks or properties for example. The effective tax rate the Federal government sees in Capital income is about 15%. Which, after deductions, is in line with the Capital Gains tax being 20%.
Labor income is income from working and is subject to marginal tax rates from 10% to 39%. Thus the average effective tax rate the the Federal government sees would fall somewhere in the mid 20's range.
What this article is comparing is the average effective tax rate of the taxes that government collects over the years. So even if the Capital Gains tax rate is 20%, the government only sees an effective tax rate of about 15%. The same with labor income taxes. The government is only collecting an effective tax rate of 28% for all labor income tax collected.
About 45% of income earners pays no Federal income tax because they don't make more than the standard deduction and exemptions they get or have enough in itemized deductions to bring their AGI to $0 or less. This lowers the total effective marginal tax rate that the Federal government sees for both total labor income and total capital income tax collected. Those are the numbers you are looking at in this article. But the effective tax rate for those 45% of income earners is 0%.
Just to add- If those 45% paid any payroll taxes, then their effective tax rate would be about 6% as it pertains to this article. That's because the labor income in this article includes payroll taxes paid by the individual. But most people don't include payroll taxes when calculating effective tax rate. That's because for most individuals, payroll tax is more of an investment, as it is returned as SS and medicare when one retires.
Kudos to Apple for paying what they owe. All companies and individuals should aspire to do the same.
As far as US jobs are concerned it's the lack of useful skills in sufficient quantities that make modern manufacturing on the scale that Apple requires unattainable in the US. Some of this could be dealt with using advanced manufacturing automation, e.g., advanced robotics. But those systems aren't cheap and are never going to be as flexible and adaptable as humans. Then the question of automation becomes one of what to do with all the idled workers? The US simply doesn't have a master plan for prosperity or even a faint concept of how to move towards full employment in times of (relative) peace. Mobilizing the hundreds of millions workers and manufacturing capability to deal with
global threats has never proven to be a challenge for the US but what do you do with all that capacity during interim/inter-war periods? The USA is inundated with over educated, debt ridden, aimless recent college graduates with little purposeful calling and no hard skills. China on the other hand has an army of workers with far less post secondary formal education, typically zero, but with the vocational training and hard skills needed to take on the jobs that are in high demand in a robust manufacturing economy. I'd bet that very few of those FoxConn workers have a Masters Degree in Art History and owe $200K in student loans. The root cause of the problem is that China has a plan to take advantage of the modern manufacturing economy and the US is clueless about anything other than what to do with anything other than the 1/1000th of one percent sports figures and celebrities who dominate the popular culture, and of course the 25-40% of the workforce who are effectively still on the government dole either directly or indirectly through subcontracting or supplying products and services to government agencies.
We should be turning to Apple for advice, not questioning their operations and motivations. They get it, we don't.
Now with that out of the way the richest companies on the planet seem to be the ones with the most creative and aggressive tax avoidance structures. Little guys don't have the same opportunities and options. We just pay a higher percentage since we ain't using absolutely tax-free Irish shell companies or can afford incorporation in the Caymens to take advantage of their banking/tax laws or have IP we can give our own "overseas" branches to license at exorbitant rates to make it appear they lose money. .
Just as it usually is the rich get richer.
As for that 26% tax rate that Apple notes, that's made possible by a quite unusual (for a tech at least) reserve accounting method Apple uses which takes into account taxes that might be due IF Apple were to repatriate all their "overseas" (not really) cash horde. Of course there's no intention to do so making the true tax rate somewhat less, often estimated to be 10% lower or around 14% over recent years. Here's one older article and one from just a month ago.
http://www.ft.com/intl/cms/s/0/9f9f2738-c0a3-11e2-8c63-00144feab7de.html
http://www.finfacts.ie/Irish_finance_news/articleDetail.php?Ireland-Apple-s-foreign-tax-rate-rises-to-6-from-2-in-2012-336
Proof that Apple hasn't been paying any more than 2% on that Irish money? Look no further than Apple's most recent 10K:
"Substantially all of the company’s undistributed international earnings intended to be indefinitely reinvested in operations outside the US were generated by subsidiaries organized in Ireland, which has a statutory tax rate of 12.5%. As of 26 Sept, 2015, US income taxes have not been provided on a cumulative total of $91.5bn of such earnings. The amount of unrecognized deferred tax liability (Profits Apple has not reported in it's taxable income statements, no allowance made for taxes at all. Otherwise it would have been noted as a deferred tax obligation) related to these temporary differences is estimated to be $30.0bn. As of 23 Sept, 2015 and 27 Sept, 2014, $186.9bn and $137.1bn, respectively, of the company’s cash, cash equivalents and marketable securities were held by foreign subsidiaries and are generally based in US dollar-denominated holdings. Amounts held by foreign subsidiaries are generally subject to U.S. income taxation on repatriation to the US.
Not generally reported for whatever reason is the "stateless corporation" setup that allowed Apple and others to completely avoid taxes on its profits is no longer available to them as of this year. Not sure what tax avoidance structure is replacing it tho I've seen various subsidiaries of Apple Asia mentioned, and Shanghai is said to be offering Apple quite favorable tax advantages in Ireland's stead.