macarena

bkkcanuck said:

macarena said:

I really don't think the real picture is being seen here by ANYONE. This should not be about where the money is kept, or where the money is earned.

The simple point is this - Apple does almost all of its Research and Development in the US. They give a contract to Foxconn to build devices matching specs they have set. Foxconn loads the software for this on the phone, and charges Apple for the hardware, the assembling costs, etc. All of these are legitimate expenses to Apple.

Now, irrespective of wherever in the world those phones are sold, the profit is belongs to, and is due to Apple in the US. If Apple has structured itself in such a way that there is an entity that is selling the products in a particular jurisdiction, then that entity should either be treated as a wholly owned subsidiary, with the profits rolling up to Apple in the US, or it should be treated as an arms length transaction, with the foreign entity paying Apple in the US a royalty for the rights to use its IP to sell devices somewhere.

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?

When people consider Apple using its A-series Silicon in Mac Lines, they forget a few critical points.

- The 12" MacBook resurrection has been done with a reason. This will be the product that eventually gets converted to the ARM processor and serve as a beachhead for the rest of the Mac Line. And this transition will take place over roughly 2-3 years.

- And Apple will retain Intel based Macs in a premium MacBook Pro avatar forever. This should take care of Windows compatibility issues. If you are ready to pay top dollar to Microsoft for a Windows license, why should Apple not get some premium as well?

- There are some very major reasons why Apple came out with Metal - and how Apple has a huge advantage in how A series processors use the same contiguous memory for both CPU and GPU - which means there is no need to transfer blocks from RAM to VRAM and vice versa to do computation on the GPU. The modification on PowerVR is already so huge, that this no longer is anywhere close to PowerVR. They are just retaining some basic compatibility at the interface layer to allow easy upgrades. And in couple of versions, even that will be dropped.

- In terms of software, Apple is well positioned. Its entire development stack is on XCode, and XCode has moved entirely to CLANG based compilation nearly 3 years back. Plus Swift is taking off big time as the way to code for Apple, and that is entirely CLANG based from the ground up. After the introduction of ARC, most of the legacy code in Apple has been converted to modern code to take advantage of ARC 3 years back - all this is CLANG based. Plus any software that is running on Intel processors is just 10 years old - so this is not that big a problem for Apple. In any case, the serious growth in Apple adoption in enterprise has happened only in the last 5 years - so Apple doesnt have nearly as big a problem with legacy code as people may think.

- Apple has a ready Universal Binary format that can support ARM and Intel based code for transition purposes - and this can be generated from both Intel and ARM based Mac's because of CLANG.

- XCode already generates the code for running the same project on Intel as well as iOS (Simulator is on Intel, whereas the device is on ARM). And to the programmer this is totally transparent and automatic.

I think it is simply a matter of time till Apple gets comfortable and confident to switch to ARM entirely. Quite obviously there are Mac systems inside Apple that run on ARM.

And people are already holding in their hands the first ARM based Mac. For the iPad Pro, it is just a software upgrade that adds a few extra OS components from Mac OS into iOS to make iOS into a full Mac. These software upgrades will come over time.

maestro64 said:

I would not characterize your typical India consumer as "value conscious" this implies you are getting the highest value for the money you spend. Most India consumer are cheap, I would not even say frugal, they put no value on anything and their expectation is they want it for free if all possible.

The issue Apple has in India is the fact they do not value Apple's ecosystem. They will dump Apple in a second if they thing they can get something cheaper.

You have no clue about India, and you are only advertising your ignorance and your bigotry.

Apple has made close to zero effort to woo Indian customers with its ecosystem - whether it is the ability to understand Indian accents/pronunciation in Siri, or fixing issues in Maps. It is only recently that they have started adding Indian movies and music to iTunes - and even that is quite outdated. I have an Apple TV here, and I can only use Youtube for all my content - because iTunes doesn't  have much in Hindi, and nothing in Tamil or Telugu. Apple phones sell here significantly higher price than what iPhones sell in the US! Quite a lot of Indians do pony up full price, plus a lot more. The cheapest iPhone 6s in India is about $850, and it still has takers.

Forget customers in India - there are million plus Indians who are engineers and doctors in America, who would love to consume Indian content in iTunes, but Apple hasn't bothered to target them.

And just for your information - there may be many Indians who are poor, but there are also a lot of Indians who are quite rich. Most Americans would find it expensive to buy decent property in the major cities of India. Pretty much any one who owns a home outright in one of the major cities in India can sell his home here, and buy a much better home outright in the US - and have cash left over! Even Indians who appear poor and struggling are probably richer than many Americans who are so much in debt that they have negative net worth.

And even the poorest Indian probably has a bigger heart than people like you.