Australian government is latest to grill Apple, Google, others over tax loopholes
Following in the footsteps of the U.S. and the E.U., the Australian government has declared that American technology giants Apple, Google and Microsoft are all under investigation for their use of multinational corporations to pay lower taxes.
The Australian Tax Office declared on Wednesday that the trio of companies are officially "under review" for their tax practices, according to Reuters. As part of the public inquiry, the government questioned Apple executive Tony King, who oversees the company's operations in Australia and New Zealand.
All three companies denied shifting profits or avoiding government taxes in Australia. But the executives representing Apple, Google and Microsoft also reportedly declined to provide full details about their financial structures.
The most well-known tax loophole is the so-called "Double Irish" provision, which allows companies with operations in Ireland to route profits to another Irish subsidiary, which then has tax residency in a tax-free nation, such as the Cayman Islands.
In Ireland, only companies that are managed and controlled in Ireland are considered tax residents. Apple Operations International is incorporated in Ireland, but is not managed and controlled there.
Ireland's finance minister announced late last year that the country would end the "Double Irish" accounting scheme starting in 2015 for new companies. Those currently leveraging the strategy -- including Apple, Google and others -- will have until 2020 to find another country with favorable tax provisions.
The U.K. also responded with a new tax passed earlier this month, directly targeting companies such as Apple. The so-called "Diverted Profits Tax" sees multinationals owe 25 percent on offshored profits, above the nation's Corporation Tax of between 20 and 21 percent.
Apple has also faced scrutiny from the European Union, though the iPhone maker has continued to categorically deny any wrongdoing. Apple's executives were also grilled in front of a U.S. Senate panel about taxes, and during that meeting Apple CEO Tim Cook said the company pays every dollar it owes.
Still, the administration of President Barack Obama has proposed a one-time 14 percent levy on earnings held by U.S. companies overseas. Those funds would be allocated into a $478 billion public works plan.
The Australian Tax Office declared on Wednesday that the trio of companies are officially "under review" for their tax practices, according to Reuters. As part of the public inquiry, the government questioned Apple executive Tony King, who oversees the company's operations in Australia and New Zealand.
All three companies denied shifting profits or avoiding government taxes in Australia. But the executives representing Apple, Google and Microsoft also reportedly declined to provide full details about their financial structures.
The most well-known tax loophole is the so-called "Double Irish" provision, which allows companies with operations in Ireland to route profits to another Irish subsidiary, which then has tax residency in a tax-free nation, such as the Cayman Islands.
In Ireland, only companies that are managed and controlled in Ireland are considered tax residents. Apple Operations International is incorporated in Ireland, but is not managed and controlled there.
Ireland's finance minister announced late last year that the country would end the "Double Irish" accounting scheme starting in 2015 for new companies. Those currently leveraging the strategy -- including Apple, Google and others -- will have until 2020 to find another country with favorable tax provisions.
The U.K. also responded with a new tax passed earlier this month, directly targeting companies such as Apple. The so-called "Diverted Profits Tax" sees multinationals owe 25 percent on offshored profits, above the nation's Corporation Tax of between 20 and 21 percent.
Apple has also faced scrutiny from the European Union, though the iPhone maker has continued to categorically deny any wrongdoing. Apple's executives were also grilled in front of a U.S. Senate panel about taxes, and during that meeting Apple CEO Tim Cook said the company pays every dollar it owes.
Still, the administration of President Barack Obama has proposed a one-time 14 percent levy on earnings held by U.S. companies overseas. Those funds would be allocated into a $478 billion public works plan.
Comments
Who put these tax loopholes in the first place? Oh that's right, the Governments!!! Now that they need money, they look at who has it and then attack!!! The fact is corporations don't pay taxes!!! Well they do, but they don't. YOU the consumer pays the taxes. You want to taxes these so called EVIL company's that supposedly don't pay taxes, and all you really are doing is taxing yourself even more. Apple and others won't eat it, they'll raise prices to cover it. It's the round about way of getting people to pay more in taxes. You don't tax people more directly. They see that a mile away and bitch. Call them a EVIL non paying tax skipping company, oh ya, go after them. In the end YOU are the one paying for it.
I wonder how much taxes foreign companies pay in the US? Do they shelter their sales and profits in Mexico or Canada? Turn about is fair play. The worst part is too many companies are able to show some kind of offsetting loss, especially American ones, so they end up paying very little taxes in the US anyway. Apple makes money, probably the highest percentage, and pays a lot of taxes in the US while all the big name US companies figure out a way to reduce their taxes to a point where they're effectively paying nothing.
I agree, why are Apple and the other two, the only ones named? Do Wal-Mart and Exxon pay taxes on foreign sales or are they "sheltering" them?
Corporations add the cost of taxes to the retail price that consumers pay. Corporations raise their prices to cover the cost of the taxes.
Consumers pay taxes.
"Proper taxes", "fair share"... buzz words for blackmail and extortion by corrupt politicians and governments.
"Proper taxes", "fair share"... buzz words for blackmail and extortion by corrupt politicians and governments.
"Fair share" is what they are currently paying. They follow the laws that the government made then the government gets mad when they do.
I don't see the elites in society paying extra in taxes, they will structure their money in such a way to minimize the tax they have to pay.
Nothing wrong or unpatriotic to follow the laws and minimize the tax you pay. Individual or Corporation (who gets the money from the customer anyway).
"Proper taxes", "fair share"... buzz words for blackmail and extortion by corrupt politicians and governments.
You're right. It's just that these same politicians and governments gave Apple and the others tax breaks, just like we do in the US, to put their businesses in those countries. Now that they're there, these same politicians are being questioned for these tax breaks by other corrupt politicians and are having to justify the initial tax breaks. They're taking the easy way out and going after Apple instead of looking in the mirror to see who gave them those breaks in the first place.
Taking the Australian money, running it thru essentially tax-free Singapore businesses, then on to Irish ownership where the money itself gets safely deposited tax-free still for the most part in New York banks doesn't sound quite proper or "in the spirit of the law" does it?
A pack of wild libertarians appears!
Don't worry guys, at some point you will get past your 17 year old white male point of view and learn some social contract theory, political science, ethics, etc. and realize that governments are just the tools societies use to implement their will and keep chaos from happening.
Wrong. Apple already made "allowances" for the taxes owed so the cost has already been factored in. They state the deferred amounts in their financials filed with the SEC. They just haven't paid them, hoping at some point the tax owed on those profits will be reduced by legislative action. As is they just won't pay it. They can wait it out.
"Proper taxes", "fair share"... buzz words for blackmail and extortion by corrupt politicians and governments.
You are like a broken record with your endless railing against the 'evil' of governments. As it so happens, I would say blackmail, extortion and corruption are next to non-existent in Australian politics. The US seems to have an absolutely nonsensical electoral system seemingly designed to disenfranchise voters. some Stanford university researchers have concluded that US is effectively not a democracy. Perhaps you and your fellow Americans should do something about that. You could start with a strict term limit for both houses.
Australia has one of the cleanest and most transparent political systems, ranking 11th. The US ranks at 17th. http://www.transparency.org/cpi2014/results
Apple is not in any way being singled out. The ongoing inquiry is looking at all the big corporate players active in Australia that appear to not be paying taxes commensurate with their earnings. There is currently a very large global problem with multinationals putting in great efforts to exploit tax loopholes for purposes for which they were never intended. I think it is the single biggest reason so many western countries have governments running at incredible deficits. Companies have been absolutely milking globalization while governments have become impoverished. I for one am glad to see some action being taken to address the problem.
Who put these tax loopholes in the first place? Oh that's right, the Governments!!! Now that they need money, they look at who has it and then attack!!! The fact is corporations don't pay taxes!!! Well they do, but they don't. YOU the consumer pays the taxes. You want to taxes these so called EVIL company's that supposedly don't pay taxes, and all you really are doing is taxing yourself even more. Apple and others won't eat it, they'll raise prices to cover it. It's the round about way of getting people to pay more in taxes. You don't tax people more directly. They see that a mile away and bitch. Call them a EVIL non paying tax skipping company, oh ya, go after them. In the end YOU are the one paying for it.
You have a weird way of looking at it. Actually, consumers are currently paying a far higher proportion of taxes than they probably should precisely because many of the largest corporations that can use multi-national exploits to dodge taxes, do precisely that.
Apple avoids an immense amount of tax in Australia and effectively pays bugger all. Apple products are not so much as even 0.5% cheaper as a result. Apple isn't passing on it's tax savings to consumers, otherwise it wouldn't have more cash-on-hand than the US government has.
If Apple were paying their fair share of taxes, Apple product pricing would not be any higher, but investors might get lower dividends and the stock price might not appreciate so much. If Apple were to increase the price of their products by 25-35% to compensate for actually having to pay some taxes, sales would drop drastically as they are already priced on a what-the-market-will-bear basis, so there isn't any margin to increase them.
The US is a republic, not a democracy. It has never been a democracy.
The reason for all these sudden tax investigations is obvious: They can't operate under the radar anymore. Too many in the public now know about it and many of them are angry and asking unpleasant questions. Since the politicians aren't voted in by corporations but by people they can't be seen as not reacting at all. It's not good for their careers.
If they could have kept it on the down-low few if any governments would be publicly chiming in. They were OK with it and knew exactly what was going on. They couldn't hide it anymore so it's now time for the public dog-n-pony show. That's my opinion anyway.
Wrong. Apple already made "allowances" for the taxes owed so the cost has already been factored in. They state the deferred amounts in their financials filed with the SEC. They just haven't paid them, hoping at some point the tax owed on those profits will be reduced by legislative action. As is they just won't pay it. They can wait it out.
That is just for repatriating the money back into the US and the taxes due at that time. The article is about taxes in the countries the products are sold.
And as for who "pays" the taxes? The customer always pays the taxes. If a companies tax burden increases, the cost of the product goes up to offset it. Basic economics.
If they actually pay the Australians or Brits or whoever any corporate taxes it would be deducted from what's owed to the US government. It's not additional taxes. So yes they've already made allowances for any corporate taxes due, no matter who they're paid to.
That is just for repatriating the money back into the US and the taxes due at that time. The article is about taxes in the countries the products are sold.
And as for who "pays" the taxes? The customer always pays the taxes. If a companies tax burden increases, the cost of the product goes up to offset it. Basic economics.
It's not basic economics. Apple products are essentially priced liked luxury goods. They have a very large mark-up relative to their cost to produce. The market would unlikely wear significant price increases. It's more likely Apple would have to pay the taxes and just tolerate a lower after-tax profit.
A perfect example of this is the recent large appreciation in the value of the Swiss Franc when the SNB stopped artificially fixing its exchange rate relative to the Euro. As a result, a slew of expensive luxury brands have lowered their prices to counteract what would have been price increases for their customers. If the price increase had been the result of tax increases instead, the result would have been the same - the luxury brands would have absorbed the tax and put up with lower margins, just as they are having to do due to the currency fluctuation.
Tag Heuer, French luxury group LVMH's biggest watch maker, plans to freeze prices in some markets and cut them elsewhere in a move to balance out the impact of the recent jump in the Swiss franc and the euro's weakness.
Several luxury goods makers, including watch makers such as Richemont's Cartier as well as privately owned Patek Philippe and fashion house Chanel, have resorted to similar measures to erase major price discrepancies between markets resulting from currency fluctuations.
http://www.scmp.com/business/companies/article/1742107/tag-heuer-latest-swiss-brand-adjust-prices-face-currency
Corporations do not pay taxes.
Corporations add the cost of taxes to the retail price that consumers pay. Corporations raise their prices to cover the cost of the taxes.
Consumers pay taxes.
It is time you learn some corporate financials 101, because what you say is just plain wrong. Because corporates taxes are calculated on profits made on all products sold in the past, they can never impact the cost of a single product a company sells now or in the future. On top of that profits are impacted by investments in buildings, interests on loans, acquisations, other products, ... all things that have no impact on the cost and the selling price of a product.
Example: Suppose Apple would expect to sell less iPads in 2015, or to close an acquisition of an interesting start up in Q3 2015. While both points will negatively impact the profit figures of 2015, Apple cannot increase the selling of the iPhone 6 on 1st of Jan 2015 to compensate the lost profits, because on the 1st Jan, Apple simply does not know how many iPads wil actually be sold in 2015 and what will be the final cost of the acquisition.
For the same reason a company cannot anticipate a corporate tax level increase, simply because there are too many unknown factors that can change the profit and thus the tax. It would be commercially very unwise to increase the selling price of a product and risking a lower demand and sales, if eventually it tuns out that the company did not have to pay more taxes.
I think you still misunderstand. Apple allowed for the taxes due on their profits realized outside of the US, to be paid when the money comes Stateside. In truth much if not most of it is already Stateside but technically under foreign ownership so not yet subject to the taxes that would be due.
If they actually pay the Australians or Brits or whoever any corporate taxes it would be deducted from what's owed to the US government. It's not additional taxes. So yes they've already made allowances for any corporate taxes due, no matter who they're paid to.
That part I can agree with...
It's not basic economics. Apple products are essentially priced liked luxury goods. They have a very large mark-up relative to their cost to produce. The market would unlikely wear significant price increases. It's more likely Apple would have to pay the taxes and just tolerate a lower after-tax profit.
...I made the post then went to my local pizza shop for lunch. I friend with the owner so asked a direct questions..."If the government increases taxes on your business, what would you do?" His answer was immediate..."raise my prices."
That is about as basic as you can get. Now...there may be a whole slew of factors to consider which you pointed out but those do not apply to everyone all the time. Still, if a business owner needs to shell out more money from his pocket to pay taxes (especially small businesses), increasing price is one way to do it so they can maintain their current income level. Once governments change the laws, companies will find new ways to reduce their tax burden.