I listened to Tim Cook trying to defend Apple's pitifully low tax rate on the BBC news this morning and it just sounded bad. Very bad PR. Attacking the EU is very unwise. All the people whose businesses pay tax at 20% are looking at this and saying why should Apple pay tax at less than 1%. As a life-long Apple evangelist, even I find this Apple hard to swallow.
It is called envy. Yes, Apple is smart in optimising their taxes. All other smart companies did the same as Apple. And paid the same taxes as Apple.
Now, those who didn't do it, envy them. And since Apple is one of the biggest players, they express that envy through hate directed at Apple.
This is like the kid of wealthy parents in a school - bullies take (want to) take the money from him/her. The same is in this case - EU is the bully and want to punish one of smart companies for optimising their taxes.
So you're saying you don't believe in a level playing field for large and small companies?
Small companies cannot afford the international accountants that exploit these loopholes.
Um... Any guesses on who created these loopholes? I'll give you one.
The EU has a VAT - value added tax system, where the taxes are allocated based on where the value to the product was added.
They do not have a sales tax based system.
No value is added in the EU, they are just a consumer. So the taxes should rightfully be applied upstream - either to the US, where the product was designed and developed, or in China where the product was built. (or Ireland where the R&D is performed *cough*).
Outstanding point. Most anti-Apple, pro-EU types here would have no clue as to what you're talking about, I am guessing. If they did, they would understand that the Commission's claim that taxes are owed somehow based on the sales in a country is a complete lie.
It assumes the level of understanding of a 6 year old on how corporate tax works.
Srice is wrong about China. Manufacturing is just a cost so Apple taxes wouldn't apply there. Foxconn is taxed on whatever revenue it gets from Apple, which is a cost to Apple.
Cook also agreed with comments made by U.S. Secretary of Treasury Jack Lew, who said the tax ruling is a blatant grab at taxes owed to the U.S. government.
"I think that's exactly what it is," Cook said. "I think it's a desire to reallocate taxes that should be paid in the U.S. to the EU."
The above part is complete and utter BS. Yes, Apple and Ireland made agreements on the amount of tax that Apple would have to pay if they'd choose to use Ireland as their Eu-base of operations. But in no way is that tax owed to the US government. Technically it's not owed to anyone since there's an agreement. But even íf there's tax owed to anyone, then Ireland and Apple need to specify what amount of profit/income was made based on EU-sales. Because there's no way that áll of the taxes made in Ireland, are owed to the US government.
Having said that: I despise the EU for charging outrageous taxes like that. Ireland made a deal with Apple to improve Ireland's economy. That was done befóre the EU made a vow to stop tax-deals in the EU. If the EU implements these plans after Ireland's deal with Apple, they need to take it up with Ireland. Apple shouldn't be involved or punished for political turbulence (in the EU in this case).
I despise the EU, even more so because of how they try to punish companies for deals made with countries. But I think Apple is completely missing the point here. Just because you paid 400mil in taxes doesn't mean you're paying a proper amount. 0,005% is still 0,005%, and not the norm for most other companies in Ireland. And the US government certainly doesn't have any right to taxes made by products sold to EU citizens.
I generally agree except for the point you make regarding Ireland making a deal with Apple and the EU changing the rules afterwards. These was a rule in place that said that governments have their own tax authority BUT (Except) that they have to give exactly the same deal to everyone.
You seem not to be aware that 31 years ago Apple was not the huge company it is today. That it was near bankruptcy, and therefore had no significant sway with Ireland or anywhere else. That the tax status put in place at that time and that has endured since certainly was available to any company, as you'll soon see. Amazon and MacDonald's are next in the EU Competition Committee's crosshairs for this same issue, and the list of businesses that apply the same tax structure as Apple in Ireland is long. By definition, that deal was open to all, and taken by many.
Interesting that only US companies are being targeted. We know that some British companies pay little or no taxes using Bermuda, or Jersey etc. All legal in the UK. Not investigated by the EU.
Apple had zero plans to ever 'bring it on home". Taxes on it were not deferred.
You are quite wrong about that. Cook is already suggesting that Apple will bring a lot of it back to the US in 2017. You can look it up, if you wish.
Some of it had taxes deferred. Those are the funds they expect to someday "bring home". At least $100B of it as of 2012, which at the time was the majority of Apple's cash holdings, was considered permanently invested overseas with no allowance for future US taxes. You can look it up for yourself if you're so certain I'm wrong. I think you find you are the one mistaken.
Your post makes no sense at all. I mean that in full honesty. I have no idea what you're talking about! And I think I know a little bit about this stuff. Are you taking about temporary differences or permanent differences? What part of those 'funds' is the former, what part the latter? Where can I find that distinction in Apple's financials?
Does a company make an allowance for US deferred taxes on funds that are permanently invested overseas? I don't believe so. Why would they? Permanent is certainly not temporary.
I agree you know a little about this stuff. You might benefit by looking into it more if you are so certain of your position. I have but I remember you don't like, or at least have time for, following links I offer you. Just look it up when you have the free time. I will give you a hint on where to start looking tho. First find Apple's 10K for fiscal 2012 (ending Sept/12), and secondly Apple's 10Q that covered the first half of 2013 (ending March/13)
Again, your post makes no sense at all. Do you know that deferred taxes cause only two two types of difference between disclosure books (what they say they paid) and tax books (what they actually paid)? Temporary and permanent. Please take a moment to understand what they mean, what types of transactions fall into which category, and then tell us how "Apple might keep its money abroad forever" (whatever the heck that means).
If anyone should be looking up some basic links, it is you I am afraid.
Talk about not connecting dots (ref. your post #81 above). Sheesh...
Just look for those two documents Anant. Other tax professionals have already done the math on it but you should look for yourself. I'm certainly no authority and if you find something different there than Apple stating $102B is indefinitely (even permanently)invested overseas, not subject to US taxes (and thus no allowance for deferred taxes) then let me know.
In the meantime I stand by the documented evidence from Apple themselves that they have no intention of repatriating the bulk of their foreign held cash, at least as of 2013. If something changed and they suddenly and massively increased their deferred tax allowance in anticipation of bringing it all back to the US then simply point it out. I'm not so arrogant that I won't permit myself to learn something I did not know when we started the conversation.
Apple had zero plans to ever 'bring it on home". Taxes on it were not deferred.
You are quite wrong about that. Cook is already suggesting that Apple will bring a lot of it back to the US in 2017. You can look it up, if you wish.
Some of it had taxes deferred. Those are the funds they expect to someday "bring home". At least $100B of it as of 2012, which at the time was the majority of Apple's cash holdings, was considered permanently invested overseas with no allowance for future US taxes. You can look it up for yourself if you're so certain I'm wrong. I think you find you are the one mistaken.
Your post makes no sense at all. I mean that in full honesty. I have no idea what you're talking about! And I think I know a little bit about this stuff. Are you taking about temporary differences or permanent differences? What part of those 'funds' is the former, what part the latter? Where can I find that distinction in Apple's financials?
Does a company make an allowance for US deferred taxes on funds that are permanently invested overseas? I don't believe so. Why would they? Permanent is certainly not temporary.
I agree you know a little about this stuff. You might benefit by looking into it more if you are so certain of your position. I have but I remember you don't like, or at least have time for, following links I offer you. Just look it up when you have the free time. I will give you a hint on where to start looking tho. First find Apple's 10K for fiscal 2012 (ending Sept/12), and secondly Apple's 10Q that covered the first half of 2013 (ending March/13)
Again, your post makes no sense at all. Do you know that deferred taxes cause only two two types of difference between disclosure books (what they say they paid) and tax books (what they actually paid)? Temporary and permanent. Please take a moment to understand what they mean, what types of transactions fall into which category, and then tell us how "Apple might keep its money abroad forever" (whatever the heck that means).
If anyone should be looking up some basic links, it is you I am afraid.
Talk about not connecting dots (ref. your post #81 above). Sheesh...
Just look for those two documents Anant. Other tax professionals have already done the math on it but you should look for yourself. I'm certainly no authority and if you find something different there than Apple stating $102B is permanently invested overseas, not subject to US taxes (and thus no allowance for deferred taxes) then let me know.
Apple tends to state it's effective tax rate as about 25%. Since it is supposedly paying nothing overseas that indicates it's deferring some but not all of overseas revenue
Pay taxes like anyone else, Tim Cook, and shut up. Glad you're creating jobs, but so is anyone else and they have to pay double digit taxes, not less than 1%.
What an arrogant attitude.
This is probably a good time to repeat myself:
The EU has a VAT - value added tax system, where the taxes are allocated based on where the value to the product was added.
They do not have a sales tax based system.
No value is added in the EU, they are just a consumer. So the taxes should rightfully be applied upstream - either to the US, where the product was designed and developed, or in China where the product was built. (or Ireland where the R&D is performed *cough*).
actually sales tax is exactly the same as VAT, just a different name. Apple generates profits in the EU and those profits have to be taxed properly (corporate Tax) somewhere. Apple has a choice of taxing it in Europe if they leave the profits there, or move it back to the US and tax it there. Key is that they managed to make the profits "without nation" so to speak and pay nowhere. This is what have to change globally and Apple just happened to be in the spotlight here because they are big and did it most blatantly
Apple generates profits in the EU and those profits have to be taxed properly (corporate Tax) somewhere. Apple has a choice of taxing it in Europe if they leave the profits there, or move it back to the US and tax it there. Key is that they managed to make the profits "without nation" so to speak and pay nowhere. This is what we have to change globally and Apple just happened to be in the spotlight here because they are big and did it most blatantly. So this s not a trade war or anything, its simply the EU commission finally cracking down on exactly what the US government was trying to do for years as well
I just can't back Cook or Apple on this one, they are in the wrong. Also, if by 'anti-American', Cook means, 'anti-American *corporation*', then I don't think that's necessarily a bad thing. We already have enough co-mingling of corporate and political interests here in the States (and the definition of 'corporate' very much includes Silicon Valley), I've been happy to see the resistance in other countries to efforts on the part of Google etc. at infiltration.
I very much agree with JoeBanks, this smacks more of being petulant than being some kind of ethical crusade.
If the US Government wanted to tax Apple at a higher percentage, they should have worked to change the law so they could legally pursue the company for the money they believe they are owed.
I also run a business in California and pay 12-13% in taxes. I do not have the legal power to look for loopholes in the tax legislation that would allow me to launder my money through Ireland.
It's disappointing that Tim Cook doesn't appear to know the difference between what is legal and what is ethical.
It wasn't long ago that homosexuality was illegal in the United States. Would Mr. Cook have modified his personal life to abide by these laws or would he consider them unethical?
And as for the anti-US sentiment, I call total bullshit... and a shame that he would pull this card at a time when countries in Europe are being hit by terrorist attacks.
Pay the fine and stop protesting your innocence. It makes Apple look really, really bad.
And it makes me wonder if Apple's work to "improve the rights of foreign workers" or to "protect the environment" are only being pursued because it is to Apple's fiscal advantage.
If it matters, I was born and raised in Ireland, have an Apple tech business and a sister I love who was recently married to her longtime female partner.
With all that sh*t going on, you'd think I'd be able to swing a better tax deal.
You don't get Apple's tax deal because your business does not bring Ireland what Apple brings them. Your business may belong to you but Tim Cook is just an Apple employee. Apple belongs to its shareholders.
As a US citizen seeing how the EU is trying to stiff me with a tax bill for Ireland's tax laws, I say don't give them a penny. Since Ireland greatly benefitted from their own law, the Irish citizens should pay the tax bill or save themselves by exiting the crumbling EU.
I just can't back Cook or Apple on this one, they are in the wrong. Also, if by 'anti-American', Cook means, 'anti-American *corporation*', then I don't think that's necessarily a bad thing. We already have enough co-mingling of corporate and political interests here in the States (and the definition of 'corporate' very much includes Silicon Valley), I've been happy to see the resistance in other countries to efforts on the part of Google etc. at infiltration.
I very much agree with JoeBanks, this smacks more of being petulant than being some kind of ethical crusade.
With you 100%. Apple and Apple fans should stop taking this personally. There needs to be a worldwide clampdown on aggressive tax avoidance for ALL corporations. It's right and fair.
If Apple ever has to pay a penny towards this embezzlement scheme, then Apple should promptly raise the prices of virtually all Apple products sold in the EU zone by an appropriate amount, no matter how high the percentage is increased, to compensate for any loss.
Considering most of Apple's EU sales are in the UK, which will be leaving soon, I don't think anyone would even notice a further 100% mark up on Apple products in the EU. People that especially wanted them would buy them from outside the EU and ironically the closest non-EU market would be the UK. Besides, Apple doesn't set prices like that, Amazon would buy their products centrally and charge what they like in each country.
Where did you get the figures that most EU sales of Apple are in the UK. In terms of population the UK represents less than 15% of the EU, it is hard to believe that the UK would generate most of the EU sales for Apple, even if the iPhone marketshare in the UK is the highest in Europe. Buying a phone in a foreign country is not without hurdles (warranty, languages issues, travel expenses, exchange rate, ...)
Apple's share in UK is 37% compared to 20% in France, 15% in Germany and under 10% in most markets. As a rule of thumb, those three countries make up at least half of most EU markets regardless of population but for Apple, they are massively weighted towards UK.
Buying a phone from the UK wouldn't be a major issue if someone is desperate for an iphone. Amazon could easily sell from their UK web site if Apple somehow could fix EU prices, and ship from Germany/France/Italy. Language, travel, exchange rate don't make a difference in this case, maybe warranty but even then, Amazon could handle that easily enough. But more likely, people just wouldn't care enough and would buy Android. The EU wouldn't care.
The EU has a VAT - value added tax system, where the taxes are allocated based on where the value to the product was added.
They do not have a sales tax based system.
No value is added in the EU, they are just a consumer. So the taxes should rightfully be applied upstream - either to the US, where the product was designed and developed, or in China where the product was built. (or Ireland where the R&D is performed *cough*).
You can repeat yourself as many times as you wish but it doesn't make your statement correct about no value being added within the EU. The distribution and retail processes are all adding value in a VAT system.
You don't get Apple's tax deal because your business does not bring Ireland what Apple brings them. Your business may belong to you but Tim Cook is just an Apple employee. Apple belongs to its shareholders.
As a US citizen seeing how the EU is trying to stiff me with a tax bill for Ireland's tax laws, I say don't give them a penny. Since Ireland greatly benefitted from their own law, the Irish citizens should pay the tax bill or save themselves by exiting the crumbling EU.
Ireland are part of the EU and have to abide by their laws. The laws state they are not allowed to give favourable terms to any business.
Apple's lawyers and accountants are not stupid. Apple and Ireland both have an obligation to understand and comply with EU law.
Cook also agreed with comments made by U.S. Secretary of Treasury Jack Lew, who said the tax ruling is a blatant grab at taxes owed to the U.S. government.
"I think that's exactly what it is," Cook said. "I think it's a desire to reallocate taxes that should be paid in the U.S. to the EU."
The above part is complete and utter BS. Yes, Apple and Ireland made agreements on the amount of tax that Apple would have to pay if they'd choose to use Ireland as their Eu-base of operations. But in no way is that tax owed to the US government. Technically it's not owed to anyone since there's an agreement. But even íf there's tax owed to anyone, then Ireland and Apple need to specify what amount of profit/income was made based on EU-sales. Because there's no way that áll of the taxes made in Ireland, are owed to the US government.
Having said that: I despise the EU for charging outrageous taxes like that. Ireland made a deal with Apple to improve Ireland's economy. That was done befóre the EU made a vow to stop tax-deals in the EU. If the EU implements these plans after Ireland's deal with Apple, they need to take it up with Ireland. Apple shouldn't be involved or punished for political turbulence (in the EU in this case).
I despise the EU, even more so because of how they try to punish companies for deals made with countries. But I think Apple is completely missing the point here. Just because you paid 400mil in taxes doesn't mean you're paying a proper amount. 0,005% is still 0,005%, and not the norm for most other companies in Ireland. And the US government certainly doesn't have any right to taxes made by products sold to EU citizens.
I generally agree except for the point you make regarding Ireland making a deal with Apple and the EU changing the rules afterwards. These was a rule in place that said that governments have their own tax authority BUT (Except) that they have to give exactly the same deal to everyone.
You seem not to be aware that 31 years ago Apple was not the huge company it is today. That it was near bankruptcy, and therefore had no significant sway with Ireland or anywhere else. That the tax status put in place at that time and that has endured since certainly was available to any company, as you'll soon see. Amazon and MacDonald's are next in the EU Competition Committee's crosshairs for this same issue, and the list of businesses that apply the same tax structure as Apple in Ireland is long. By definition, that deal was open to all, and taken by many.
Interesting that only US companies are being targeted. We know that some British companies pay little or no taxes using Bermuda, or Jersey etc. All legal in the UK. Not investigated by the EU.
This retrospective law seems arbitrarily applied.
From Bloomberg, some other companies that have had state aid cases against them and have had to cough up:
Pay taxes like anyone else, Tim Cook, and shut up. Glad you're creating jobs, but so is anyone else and they have to pay double digit taxes, not less than 1%.
What an arrogant attitude.
This is probably a good time to repeat myself:
The EU has a VAT - value added tax system, where the taxes are allocated based on where the value to the product was added.
They do not have a sales tax based system.
No value is added in the EU, they are just a consumer. So the taxes should rightfully be applied upstream - either to the US, where the product was designed and developed, or in China where the product was built. (or Ireland where the R&D is performed *cough*).
actually sales tax is exactly the same as VAT, just a different name.
Groan.... one can't compete with this level of ignorance and arrogance.
I very much agree with JoeBanks, this smacks more of being petulant than being some kind of ethical crusade.
The ethical crusade here is creating value for your owners. Europeans (with the exception of the UK and Ireland) and their governance systems don't see it the same way.
Pay taxes like anyone else, Tim Cook, and shut up. Glad you're creating jobs, but so is anyone else and they have to pay double digit taxes, not less than 1%.
What an arrogant attitude.
This is probably a good time to repeat myself:
The EU has a VAT - value added tax system, where the taxes are allocated based on where the value to the product was added.
They do not have a sales tax based system.
No value is added in the EU, they are just a consumer. So the taxes should rightfully be applied upstream - either to the US, where the product was designed and developed, or in China where the product was built. (or Ireland where the R&D is performed *cough*).
That's not how VAT works. We know from Apple's financial statements that the make, what, at least 30% margin on their phones? VAT is applied to that margin and the margin the retailers make. Otherwise Apple would have to sell iphones to their retailers at the same price as the retailer sells them (plus VAT which would be 100% rebated, i.e. zero) for and we know they don't.
Anyway, VAT has nothing to do with it. I pay VAT on everything I buy but I still have to pay income tax.
Apple had zero plans to ever 'bring it on home". Taxes on it were not deferred.
You are quite wrong about that. Cook is already suggesting that Apple will bring a lot of it back to the US in 2017. You can look it up, if you wish.
Some of it had taxes deferred. Those are the funds they expect to someday "bring home". At least $100B of it as of 2012, which at the time was the majority of Apple's cash holdings, was considered permanently invested overseas with no allowance for future US taxes. You can look it up for yourself if you're so certain I'm wrong. I think you find you are the one mistaken.
Your post makes no sense at all. I mean that in full honesty. I have no idea what you're talking about! And I think I know a little bit about this stuff. Are you taking about temporary differences or permanent differences? What part of those 'funds' is the former, what part the latter? Where can I find that distinction in Apple's financials?
Does a company make an allowance for US deferred taxes on funds that are permanently invested overseas? I don't believe so. Why would they? Permanent is certainly not temporary.
I agree you know a little about this stuff. You might benefit by looking into it more if you are so certain of your position. I have but I remember you don't like, or at least have time for, following links I offer you. Just look it up when you have the free time. I will give you a hint on where to start looking tho. First find Apple's 10K for fiscal 2012 (ending Sept/12), and secondly Apple's 10Q that covered the first half of 2013 (ending March/13)
Again, your post makes no sense at all. Do you know that deferred taxes cause only two two types of difference between disclosure books (what they say they paid) and tax books (what they actually paid)? Temporary and permanent. Please take a moment to understand what they mean, what types of transactions fall into which category, and then tell us how "Apple might keep its money abroad forever" (whatever the heck that means).
If anyone should be looking up some basic links, it is you I am afraid.
Talk about not connecting dots (ref. your post #81 above). Sheesh...
Just look for those two documents Anant. Other tax professionals have already done the math on it but you should look for yourself. I'm certainly no authority and if you find something different there than Apple stating $102B is permanently invested overseas, not subject to US taxes (and thus no allowance for deferred taxes) then let me know.
In the meantime I stand by the documented evidence from Apple themselves that they have no intention of repatriating the bulk of their foreign held cash, at least as of 2013. If something changed and they suddenly and massively increased their deferred tax allowance in anticipation of bringing it all back to the US then simply point it out. I'm not so arrogant that I won't permit myself to learn something I did not know when we started the conversation.
Again, and in serious humility an honesty, I have completely lost you. I don't know what you're trying to say. (And apparently the same is true for you vis-a-vis my post about Apple's retained earnings and foregone investments in the EU). Let's leave it at that?
Pay taxes like anyone else, Tim Cook, and shut up. Glad you're creating jobs, but so is anyone else and they have to pay double digit taxes, not less than 1%.
What an arrogant attitude.
This is probably a good time to repeat myself:
The EU has a VAT - value added tax system, where the taxes are allocated based on where the value to the product was added.
They do not have a sales tax based system.
No value is added in the EU, they are just a consumer. So the taxes should rightfully be applied upstream - either to the US, where the product was designed and developed, or in China where the product was built. (or Ireland where the R&D is performed *cough*).
I think you are mistaken. The intellectual property is added in Ireland, otherwise Apple would be importing finished goods from outside the EU and would then have to pay a 20% import tarrif.
VAT is a tax paid by consumers to the government, it is not paid by the companies so is irrelevant to this discussion.
No value is added in the EU, they are just a consumer. So the taxes should rightfully be applied upstream - either to the US, where the product was designed and developed, or in China where the product was built. (or Ireland where the R&D is performed *cough*).
Whether 'value' is added or not is simply irrelevant. This is just what Apple want you to believe to support their argument.
Taxes are charged where profit is made. If Apple makes $XXB profit from their sales in Europe they should pay the appropriate rate of corporation tax on those profits ($XXB x 12.5% for example).
Comments
Um... Any guesses on who created these loopholes? I'll give you one.
Srice is wrong about China. Manufacturing is just a cost so Apple taxes wouldn't apply there. Foxconn is taxed on whatever revenue it gets from Apple, which is a cost to Apple.
This retrospective law seems arbitrarily applied.
In the meantime I stand by the documented evidence from Apple themselves that they have no intention of repatriating the bulk of their foreign held cash, at least as of 2013. If something changed and they suddenly and massively increased their deferred tax allowance in anticipation of bringing it all back to the US then simply point it out. I'm not so arrogant that I won't permit myself to learn something I did not know when we started the conversation.
So this s not a trade war or anything, its simply the EU commission finally cracking down on exactly what the US government was trying to do for years as well
Your business may belong to you but Tim Cook is just an Apple employee. Apple belongs to its shareholders.
As a US citizen seeing how the EU is trying to stiff me with a tax bill for Ireland's tax laws, I say don't give them a penny.
Since Ireland greatly benefitted from their own law, the Irish citizens should pay the tax bill or save themselves by exiting the crumbling EU.
Buying a phone from the UK wouldn't be a major issue if someone is desperate for an iphone. Amazon could easily sell from their UK web site if Apple somehow could fix EU prices, and ship from Germany/France/Italy. Language, travel, exchange rate don't make a difference in this case, maybe warranty but even then, Amazon could handle that easily enough. But more likely, people just wouldn't care enough and would buy Android. The EU wouldn't care.
Apple's lawyers and accountants are not stupid. Apple and Ireland both have an obligation to understand and comply with EU law.
Apple's income dwarfs that of most companies.
Anyway, VAT has nothing to do with it. I pay VAT on everything I buy but I still have to pay income tax.
Again, and in serious humility an honesty, I have completely lost you. I don't know what you're trying to say. (And apparently the same is true for you vis-a-vis my post about Apple's retained earnings and foregone investments in the EU). Let's leave it at that?
VAT is a tax paid by consumers to the government, it is not paid by the companies so is irrelevant to this discussion.
Taxes are charged where profit is made. If Apple makes $XXB profit from their sales in Europe they should pay the appropriate rate of corporation tax on those profits ($XXB x 12.5% for example).
It really is as simple as that.