Multinational tech giants like Apple often 'pay taxes nowhere,' says German minister
The world's biggest multinational tech companies, Apple among them, are escaping much of their fair tax burden, German Finance Minister Olaf Scholz said in an interview this week.
"My biggest concern with the tech companies is that they tend to pay taxes nowhere," Scholz told CNBC. The European Union has been debating a continent-wide digital tax that would mainly target the "GAFA" group -- that is, Google, Apple, Facebook, and Amazon. Sweden, Finland, Ireland, and Denmark blocked a draft proposal last weekend.
Proponents of a GAFA tax have pointed out that a lot of online business, such as advertising, isn't being taxed. That's posing a problem for government budgets as more and more transactions move from physical space to the internet.
Major tech companies have also regularly exploited loopholes to minimize their tax payments. Apple, for instance, is known to have funneled billions of dollars in international revenue through Irish subsidiaries, paying little tax in that country or where sales actually took place. A 2016 European Commission ruling found that the Irish government had for years arranged preferential treatment -- something illegal under E.U. law. Apple has already paid over $15 billion to comply with that ruling, though both it and the Irish government are working to appeal.
France is meanwhile advancing the prospect of a national 3 percent tax on tech firms with global revenues exceeding 750 million euros ($843 million) per year. The U.K. could potentially impose a 2 percent tax on companies generating 500 million pounds ($653 million).
Scholz concurred with E.U. Competition Commissioner Margrethe Vestager, who recently said that a "global solution" to weak digital tax laws was needed.
"I think we should find a global agreement on that question, this would help a lot," Scholz commented.
The minister suggested in fact that a "common approach" is being taken in the U.S. There are some efforts in the country to secure a minimum tax rate on multinationals that operate in low-tax regions.
Apple CEO Tim Cook has famously insisted that "We pay all of the taxes we owe," and moreover that it not only complies with laws but "the spirit of the laws." In February however, Apple agreed to pay the French government about 500 million euros ($571 million) in back taxes following a years-long audit.
"My biggest concern with the tech companies is that they tend to pay taxes nowhere," Scholz told CNBC. The European Union has been debating a continent-wide digital tax that would mainly target the "GAFA" group -- that is, Google, Apple, Facebook, and Amazon. Sweden, Finland, Ireland, and Denmark blocked a draft proposal last weekend.
Proponents of a GAFA tax have pointed out that a lot of online business, such as advertising, isn't being taxed. That's posing a problem for government budgets as more and more transactions move from physical space to the internet.
Major tech companies have also regularly exploited loopholes to minimize their tax payments. Apple, for instance, is known to have funneled billions of dollars in international revenue through Irish subsidiaries, paying little tax in that country or where sales actually took place. A 2016 European Commission ruling found that the Irish government had for years arranged preferential treatment -- something illegal under E.U. law. Apple has already paid over $15 billion to comply with that ruling, though both it and the Irish government are working to appeal.
France is meanwhile advancing the prospect of a national 3 percent tax on tech firms with global revenues exceeding 750 million euros ($843 million) per year. The U.K. could potentially impose a 2 percent tax on companies generating 500 million pounds ($653 million).
Scholz concurred with E.U. Competition Commissioner Margrethe Vestager, who recently said that a "global solution" to weak digital tax laws was needed.
"I think we should find a global agreement on that question, this would help a lot," Scholz commented.
The minister suggested in fact that a "common approach" is being taken in the U.S. There are some efforts in the country to secure a minimum tax rate on multinationals that operate in low-tax regions.
Apple CEO Tim Cook has famously insisted that "We pay all of the taxes we owe," and moreover that it not only complies with laws but "the spirit of the laws." In February however, Apple agreed to pay the French government about 500 million euros ($571 million) in back taxes following a years-long audit.
Comments
Just another political blabbering to stay in the news and be at least a little bit relevant.
Neither of them price their products to include corporate taxes on the profits from those sales.
There's some years they've owed no taxes whatsoever, many more that they have. Pricing in the tax expected at the end of a year based on what profits those corporations factually realize and then adding to each of the products doesn't happen. If we could price our products higher and still maintain our sales goals we would just as EVERY corporation would. We all love profit. We can't compute "what the market will bear" and then add another fee on top for corporate taxes. That would end up counterproductive If we have already priced properly then adding the tax on top would logically result in fewer sales and in all likelihood LESS profit.
People that make up these stories that corporations don't pay taxes, consumers do, don't run corporations.
So, one possible reading for Tim Cook's claim is that yes, they pay everything they owe, but as they can actually decide what to make available for taxation in the first place, the whole claim is worthless.
"Therefore, only a small percentage of Apple Sales International's profits were taxed in Ireland, and the rest was taxed nowhere"
http://europa.eu/rapid/press-release_IP-16-2923_en.htm
As for taxes I pay the legal bare minimum, no less and no more. I am not a scofflaw nor am I offering up charity for the government. Those who complain about this need to speak to their government officials about changing the tax laws. I'll add that the definition of loop-hole has become skewed implying that what is done to capitalize on a poorly written tax law is somehow cheating or paying less than you owe, which it is not.
The He corporation is an entity. Though not s human, a corporation receives funds and pays funds just like an individual. Sure Apple takes in money. But it doesn’t get to keep it all. It must cut checks to various governments and pay billions in taxes.
The “tax” you say customers are paying is simply not so, regardless of expected tax being built into product price.
An individual works, receives income, and pays tax out of that income.
Same with a corporation.
Youre trying to argue semantics without any logical thought or understanding of the real world.
anything you pay a government set percentage of from income received is... GASP... TAX...
just because you adjust pricing to make sure your peofit margins are still healthy after tax in no way means you aren’t paying by tax.
Its simply a lie.
If one can increase pre-tax profit when the applicable income tax rate would be 30%, without unacceptable consequences (e.g. doing long term damage to a brand or negatively affecting install base), then they can increase pre-tax profit when the applicable tax rate would be 20%. So if they would in the former case, why wouldn't they in the latter case? That is unless the goal is to produce a set amount of after-tax profit and they don't want to produce any more than that even if they know how to (and, of course, there aren't other unacceptable consequences to doing so.) That is not the goal of most corporations. They don't, e.g, desire to make exactly $1 billion in after-tax profit and intentionally choose not to do things which might increase that amount.
Regardless of the applicable tax rate, the way to increase after-tax profit is to increase pre-tax profit.
As someone else said, change the tax laws and close those loopholes.
And as others have said, if taxes go up in the EU, so will the price of goods.
Let's say the applicable income tax rate is 21%. With that applicable rate a given corporation makes $1 billion in pre-tax profit, so it has $790 million in after-tax profit.
Let's say the applicable income tax rate is instead 35%. To achieve an after-tax profit of $790 million it would need $1.215 billion in pre-tax profit.
If it could change its practices - e.g., by increasing consumer prices - such that it would have $1.215 billion in pre-tax profit, then why wouldn't it do that in the first case just as it would in the second? Then, in the first case, it would have $960 million in after-tax profit rather than $790 million. To paraphrase, if it wouldn't that would just be irresponsible.
The ways in which income taxes function are different from the ways in which, e.g., excise taxes function. They come at different points in various (e.g. pricing) considerations. They affect, e.g., margins and market competition in different ways. Because of that the consequences of them - and the decisions made based on them - are different.
If you're selling yourself short by not already optimizing prices sans taxes on profits you're not doing your job very well.