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Apple's Web of Tax Shelters
May 21, 2013 5:25 AM   Subscribe

How Apple Used Shell Companies to Save $44 Billion in Taxes
Congressional investigators found that some of Apple’s subsidiaries had no employees and were largely run by top officials from the company’s headquarters in Cupertino, Calif. But by officially locating them in places like Ireland, Apple was able to, in effect, make them stateless — exempt from taxes, record-keeping laws and the need for the subsidiaries to even file tax returns anywhere in the world…In prepared testimony expected to be delivered to the Senate committee by Mr. Cook and other Apple executives on Tuesday, the company said it “welcomes an objective examination of the U.S. corporate tax system, which has not kept pace with the advent of the digital age and the rapidly changing global economy.”
Slate's Dave Weigel has a link to the complete Senate report.
posted by Elementary Penguin (205 comments total) 24 users marked this as a favorite

 
This apparently no longer just applies to ABC Bank!

I know a winner when I hear it!

“There is a technical term economists like to use for behavior like this,” said Edward Kleinbard, a law professor at the University of Southern California in Los Angeles and a former staff director at the Congressional Joint Committee on Taxation. “Unbelievable chutzpah.”
posted by Nanukthedog at 5:32 AM on May 21, 2013 [1 favorite]


You're gonna need a bigger wall
posted by fullerine at 5:34 AM on May 21, 2013 [8 favorites]


I always wondered if there's a point when company accountants look at their schemes and think "maybe we're taking the piss now".

Apparently not.
posted by sodium lights the horizon at 5:36 AM on May 21, 2013 [7 favorites]


Why not wait until there's actual testimony? Or in a minimum give both sides and link to Apple's prepared testimony [PDF] where they refute this?
Apple does not use tax gimmicks. Apple does not move its intellectual property into offshore tax havens and use it to sell products back into the US in order to avoid US tax; it does not use revolving loans from foreign subsidiaries to fund its domestic operations; it does not hold money on a Caribbean island; and it does not have a bank account in the Cayman Islands. Apple has substantial foreign cash because it sells the majority of its products outside the US. International operations accounted for 61% of Apple’s revenue last year and two-thirds of its revenue last quarter. These foreign earnings are taxed in the jurisdiction where they are earned (“foreign, post-tax income”).
If Apple pays a dime more in taxes than they are supposed to or legally obligated to they would be in egregious violation of their mission and responsibility to the shareholders. They are not a charity. If Congress doesn't like the laws, Congress needs to change them. If Apple is doing something illegal they need held accountable. Otherwise there's no story here other than an American sucess story.
posted by cjorgensen at 5:39 AM on May 21, 2013 [48 favorites]


I've read (can't find a link) that Rupert Murdoch's annual tax returns always feature silly numbers of taxes owed, like 123,123, which is accountantese for "Fuck You".
posted by Elementary Penguin at 5:40 AM on May 21, 2013 [8 favorites]


cjorgensen: I had meant to link that as well, so thanks. (I had mistakenly thought it was included in the Slate link, but I was mistaken)
posted by Elementary Penguin at 5:41 AM on May 21, 2013 [1 favorite]


At the heart of the issue is that when Apple makes a computer in China and sells it to France, it makes income "in Ireland" and pays no US income taxes.

On one hand it's not even clear that it's wrong that the system works this way.

On the other hand, as US citizens abroad have to pay US income taxes on untaxed or undertaxed income. If corporations are people, why shouldn't they be treated the same way as a person with foreign income?
posted by cotterpin at 5:43 AM on May 21, 2013 [42 favorites]


So, on the one hand, I don't quite see why the US has the right to tax transactions that take place in other countries. If I make something in China and sell it in Germany, why should the US get a cut? Let China and Germany keep those taxes. China, at least, needs them more.

On the other hand, the Irish tax havens are clearly a different beast and it will be interesting to watch Apple fanboys (who are mostly quite liberal) defending them.
posted by anotherpanacea at 5:43 AM on May 21, 2013 [1 favorite]


I can't get heated up about this.

Apple is doing the same thing every other company does -- chasing fiduciary responsibility to its utmost.

At least they're not digging carbon out of the ground and destroying the planet (like Exxon and Chevron) or exploiting low class workers to ruin the national economy (like Walmart) or exploiting the middle class's finances and ruining the world economy (like JP Morgan or Chase), all of which are activities of Apple's neighbours on the "multiple billions of dollars in taxes paid despite every tax shelter in the world" list. But, yeah, fuck Apple because white gizmos.

If corporate tax finance is to change, the laws must change. But I bet the laws won't change much.
posted by seanmpuckett at 5:45 AM on May 21, 2013 [8 favorites]


Double Irish Tax Arrangement.
posted by His thoughts were red thoughts at 5:47 AM on May 21, 2013 [1 favorite]


IIRC, it is mainly the EU countries that are getting screwed over by Ireland's infamous tax shenanigans, For instance. The US is just collateral damage here since Apple is a US company.
posted by smackfu at 5:47 AM on May 21, 2013 [1 favorite]


iDon'tPayMyTaxes
posted by popcassady at 5:49 AM on May 21, 2013 [4 favorites]


If corporations are people, why shouldn't they be treated the same way as a person with foreign income?

Corporations are RICH people. VERY VERY rich people. Who make campaign donations.

I hope this answers your question.
posted by DU at 5:51 AM on May 21, 2013 [40 favorites]


I can't get heated up about this.

Apple is doing the same thing every other company does -- chasing fiduciary responsibility to its utmost.

At least they're not digging carbon out of the ground and destroying the planet (like Exxon and Chevron) or exploiting low class workers to ruin the national economy (like Walmart) or exploiting the middle class's finances and ruining the world economy (like JP Morgan or Chase), all of which are activities of Apple's neighbours on the "multiple billions of dollars in taxes paid despite every tax shelter in the world" list. But, yeah, fuck Apple because white gizmos.


Some serious cognitive dissonance going on right there.
posted by DU at 5:52 AM on May 21, 2013 [57 favorites]


When rich people avoid taxes, it is an outrage. When rich companies avoid taxes, that's just doing business?
posted by smackfu at 5:53 AM on May 21, 2013 [31 favorites]


At least they're not digging carbon out of the ground and destroying the planet (like Exxon and Chevron)

Extracting and processing the rare earths used in smartphones and other electronics is terrible for the environment.

or exploiting low class workers (like Walmart)

What about their Chinese workers? They're not getting great treatment.
posted by His thoughts were red thoughts at 5:54 AM on May 21, 2013 [36 favorites]


On the other hand, as US citizens abroad have to pay US income taxes on untaxed or undertaxed income.

Only above a pretty high bar.

If corporations are people, why shouldn't they be treated the same way as a person with foreign income?

They are. They are legally required to pay the taxes owed. 35% to take the money home. Or they can leave it where it is (legally) and not pay until they want it back in the US. Considering Apple makes 61% of it's money from non-US sources, why not leave the money where youo can best leverage it? Sure politicians and your average bloke doesn't think it's fair that Apple has so much money, but why does that mean the US government should get it if it wasn't earned here? Why should the US get any? What did they do to earn their share? And yes, I actually think they do deserve a share, since they did sign treaties and such, but 35%? That's robbery.
posted by cjorgensen at 5:54 AM on May 21, 2013 [1 favorite]


> What about their Chinese workers? They're not getting great treatment.

You linked an article from 2011 on this topic? Really?
posted by seanmpuckett at 5:57 AM on May 21, 2013


When rich people avoid taxes, it is an outrage. When rich companies avoid taxes, that's just doing business?

Lets just recognize that Apple is known for their innovation. Why would we expect that if their company is worth billions, their products are innovative, and that they are capable of hiring the absolute best minds in the world that that they wouldn't hire the most innovative finance and accounting wing possible? Right and wrong have really no place in post-postmodern society. Hamburger.
posted by Nanukthedog at 5:57 AM on May 21, 2013 [2 favorites]


This is basically inter-corporate warfare with the political system as the stage and nothing else. Google is getting hammered in the UK, so now Apple gets hammered in the US. Surprise, surprise.

The same idiots acting so indignant today were, just yesterday, scheming ways to put bigger loopholes into the law for their favored cronies. And we're all supposed to fall for the act?

Or, in fewer words, yawn.
posted by aramaic at 5:57 AM on May 21, 2013 [7 favorites]


> What about their Chinese workers? They're not getting great treatment.

You linked an article from 2011 on this topic? Really?


Fine, here's a 2013 one.

The point is, Apple are not some benevolent angels. They are the same as any other big company. They just have better marketing.
posted by His thoughts were red thoughts at 5:59 AM on May 21, 2013 [31 favorites]


That overseas cash pile is a distinct issue, I believe. Apple seems to accept that they have to pay 35% to bring it back to the US to the parent company, so they just aren't going to. I think what they are doing now is issuing US bonds with that as part of the collateral, then using those bonds to fund dividends and stock buybacks. This lets them essentially use the money while deferring the taxes and hoping for another amnesty for overseas income. And borrowing rates are so low now that it doesn't really cost them much.
posted by smackfu at 6:00 AM on May 21, 2013 [4 favorites]


They are. They are legally required to pay the taxes owed. 35% to take the money home

US Citizens must pay income tax on foreign income, even if that money is not returned to the US, and even if the person is a fulltime resident for another country. That's right, if you live in France and work in France, and you're a US citizen, you are responsible for paying income tax to the US if the US thinks that you didn't pay France enough.

That is, if you're a person. If it's a corporation and you paid 2% tax on billions, then as you say, you pay those taxes if you ever bring the money back to the US.
posted by cotterpin at 6:00 AM on May 21, 2013 [10 favorites]


On comments like :
If Congress doesn't like the laws, Congress needs to change them. If Apple is doing something illegal they need held accountable.

These comments rely on a rather simplistic notion of "laws" and legality. Or more what is actually achievable by law. There are a number of problems and difficulties with actually drafting laws that make these sort of structures illegal but do not have unintended side-effects on other businesses.

The problem is that there is no way to draft laws to stop these cross border tax "arbitrage" actions unless every country had exactly the same tax rates.
posted by mary8nne at 6:01 AM on May 21, 2013 [3 favorites]


When rich companies avoid taxes, that's just doing business?

Again, we're talking about money made on goods sold outside the US to people outside the US. And so far no one has claimed Apple has done anything illegal?

When you filed your taxes last did you throw a couple extra thousand in there for kicks? Why should Apple? It has nothing to do with avoiding taxes and everything to do with paying what you owe. Again, don't like the laws, change them, but don't scapegoat one company for being successful.

US Citizens must pay income tax on foreign income, even if that money is not returned to the US, and even if the person is a fulltime resident for another country. That's right, if you live in France and work in France, and you're a US citizen, you are responsible for paying income tax to the US if the US thinks that you didn't pay France enough.

Above a fairly large number. I know quite a few professionals that have worked abroad and not one made enough to have to pay US taxes as well.
posted by cjorgensen at 6:02 AM on May 21, 2013 [1 favorite]


This is basically inter-corporate warfare with the political system as the stage and nothing else. Google is getting hammered in the UK, so now Apple gets hammered in the US. Surprise, surprise.

It wouldn't surprise me if politicians start throwing new laws at the big companies and that the outcome is that the only ones to feel the pinch are the small companies and part time developers.
posted by popcassady at 6:03 AM on May 21, 2013 [3 favorites]


Apple is doing the same thing every other company does -- chasing fiduciary responsibility to its utmost.

Oh, well, that makes it alright then.
posted by Pope Guilty at 6:03 AM on May 21, 2013 [19 favorites]


If Congress doesn't like the laws, Congress needs to change them. If Apple is doing something illegal they need held accountable. Otherwise there's no story here other than an American success story.

That's fine except that the big corporations have a hell of a lot more influence over how congress writes tax law than you or I do. The corporations lobby the hell out of congress to get just such loophole put in so that they can then exploit them. They're still making a hell of a lot of money here in the US and not paying tax on it while you and I still have to pay our share of taxes.
posted by octothorpe at 6:05 AM on May 21, 2013 [5 favorites]


Ireland's infamous tax shenanigans

Let he who is without sin...How Delaware Thrives as a Corporate Tax Haven
posted by Damienmce at 6:05 AM on May 21, 2013 [6 favorites]


Again, we're talking about money made on goods sold outside the US to people outside the US. And so far no one has claimed Apple has done anything illegal?

If it were illegal, it would be the FBI or IRS involved, not the Congress.

The reason this report is coming out of Congress is because it is not illegal, and these Senators think it should be. This report is educating others about how the laws are being avoided, and how they need to be fixed.

This makes sense to me. It doesn't need to be illegal for us to think it is wrong.
posted by smackfu at 6:06 AM on May 21, 2013 [31 favorites]


Apple looking for a dialog on tax laws is like BP looking for a dialog on using Liberian registered oil tankers.
posted by surplus at 6:09 AM on May 21, 2013 [5 favorites]


The tax system is broken and it is unrealistic and stupid to expect one person or business to assume tax burdens that similarly situated others will not.

I am nonetheless dismayed to see that Apple fanboys rely on special pleading, tu quoque, and other specious arguments (here as elsewhere) instead of admitting that Apple is no different from said similarly situated others.
posted by Inspector.Gadget at 6:10 AM on May 21, 2013 [10 favorites]


The corporations lobby the hell out of congress to get just such loophole put in so that they can then exploit them.

I've long thought that one solution here is to create a turnkey solution that lets people "incorporate" themselves so that they can perform jurisdictional arbitrage as well.

Once Joe Citizen becomes able to disperse "his" lifestyle across a half-dozen jurisdictions for the low-low price of $50/month, things get interesting. With smartphones in every pocket, this should be doable.
posted by aramaic at 6:10 AM on May 21, 2013 [9 favorites]


cjorgensen: "When you filed your taxes last did you throw a couple extra thousand in there for kicks? Why should Apple? It has nothing to do with avoiding taxes and everything to do with paying what you owe. Again, don't like the laws, change them, but don't scapegoat one company for being successful."

No, but I also didn't lobby my Congressional representative for special-treatment tax laws, didn't hire the largest accounting and legal firms I could find to set up convoluted schemes for being paid in obtuse ways, and didn't scour the globe to find (buy?) a government to subsidize my being technically paid in a 0% jurisdiction.

There's following the plain letter of the law ("oh, got a 1098-T, should really write off my tuition for this semester") and doing the level best to ensure that nothing is paid ("hmm, if I go independent contractor and have my now-ex-employer pay me in another currency through this shell corporation in St. Kitts and then immediately wire the money to Luxemburg...").

It truly surprises me that the people who thought up our system of law (Justice Blackstone, et al, I'm sorry) really believed that we could forever get away with the "reasonable person" standard.
posted by fireoyster at 6:12 AM on May 21, 2013 [24 favorites]


Again, we're talking about money made on goods sold outside the US to people outside the US. And so far no one has claimed Apple has done anything illegal?

Ordinary human beings living in America have to pay American tax on money they earn abroad. In fact the IRS mandates that any bank operating in America extensively violate the privacy of their customer's foreign bank accounts both forwards and backwards in time from the moment they take up even temporary residence in the United States.
posted by srboisvert at 6:14 AM on May 21, 2013 [2 favorites]


admitting that Apple is no different from said similarly situated others

It is different, or this post would have included those others you left un-named.
posted by aramaic at 6:15 AM on May 21, 2013 [2 favorites]


You know, it's a lot easier for a conversation to remain civil and grown-up without deliberately inflammatory words like "fanboy" being flung around.

Speaking as an American who lives outside the US but who has to file with the IRS every year just in case I make enough for the US to feel entitled to some of my already-taxed-abroad money (and don't get me wrong, I am more than a little in favor of paying my share in taxes), I kind of fail to see how keeping overseas income overseas is a huge scandal.
posted by DoctorFedora at 6:16 AM on May 21, 2013 [4 favorites]


When you filed your taxes last did you throw a couple extra thousand in there for kicks?

Well, I don't comb the tax code for every last deduction I could legally take. Does that mean my answer is yes? Does it mean I'm "egregiously violating" my responsibility to my kids?

Why should the US get any? What did they do to earn their share?

We created the circumstances under which Apple could exist, right?

If Congress doesn't like the laws, Congress needs to change them. If Apple is doing something illegal they need held accountable. Otherwise there's no story here other than an American success story.

"If Congress doesn't like the laws, Congress needs to change them" is the story. As far as I can tell from the New York Times piece, nobody in Congress is saying that Apple is breaking the law, or demanding that Apple retroactively pay lots of taxes they haven't paid. McCain was extremely careful to call Apple a "tax avoider," not a "tax evader." You are absolutely right that Apple is doing what it is legally allowed to do. Congress's job is to figure out whether it's a good idea that Apple is legally allowed to do that, and that's what they're doing.
posted by escabeche at 6:21 AM on May 21, 2013 [21 favorites]


It is different, or this post would have included those others you left un-named.

Every other multinational corporation that uses a series of entities split across "location of incorporation" and "location of revenue" to avoid taxation otherwise owed. You can start with the usual suspects.
posted by Inspector.Gadget at 6:22 AM on May 21, 2013


I should mention that the US is apparently one of three countries that requires citizens to file their taxes when living abroad full-time. American exceptionalism, indeed.
posted by DoctorFedora at 6:24 AM on May 21, 2013 [5 favorites]


Once Joe Citizen becomes able to disperse "his" lifestyle across a half-dozen jurisdictions for the low-low price of $50/month, things get interesting. With smartphones in every pocket, this should be doable.

Accelerando... (first part)
posted by jkaczor at 6:25 AM on May 21, 2013


Apple looking for a dialog on tax laws is like BP looking for a dialog on using Liberian registered oil tankers.

Well, not really. This is the first moment in time since the 1986 rewrite of the Code that Congress seems to be gathering momentum for tax reform. Between Rep. Camp's House Ways and Means efforts, and Sen. Levin retiring and making tax reform a priority before he leaves office, I think there is a real possibility for meaningful change. In my experience, many companies would prefer to have more certainty with respect to uncertain positions, to be able to repatriate funds more easily (or move capital around more generally), and avoid the cost and effort involved in establishing and maintaining an efficient tax structure.

International is one area under review, as are financial products, passthoughs, etc. I think we may see significant changes that will bring home a lot more offshore capital and end a lot of planning. Of course, it's likely that there will be new kinds of planning available, but as Viva Hammer of Brandeis testified before W'n'M a couple of months ago, Congress and the IRS needs to give more frequent guidance and laws to stay on top of current developments.

The Supreme Court determined long ago that tax planning (within the law) is perfectly legal. They have a great opportunity right now to change the landscape.

Very exciting.
posted by Admiral Haddock at 6:25 AM on May 21, 2013 [3 favorites]


You linked an article from 2011 on this topic? Really?

You're right. Positive social change happens at a blistering fucking pace.
posted by liketitanic at 6:28 AM on May 21, 2013 [28 favorites]


Well since I can't buy Apple products anymore since they don't pay their faire share I guess I'll just shift to a HP Laptop featuring Windows 8. Shit. Or maybe a Dell? No wait.

Can someone tell me which laptop maker pays their fucking taxes so I can just buy one already?
posted by Talez at 6:30 AM on May 21, 2013 [4 favorites]


The Slate headline is misleading. Apple avoided having to pay taxes on $44 billion of income. They did not avoid paying $44 billion in taxes.
posted by birdherder at 6:32 AM on May 21, 2013


I just decided to make my 2010 MacBook Pro last one more year, Mr. Cook.
posted by spitbull at 6:32 AM on May 21, 2013


If Apple pays a dime more in taxes than they are supposed to or legally obligated to they would be in egregious violation of their mission and responsibility to the shareholders.

Is this actually the case? If a company just pays their taxes without using shelters and stuff, have there ever been any consequences? Is the contention that it is somehow wrong and disallowed for a company to act as a good corporate citizen?
posted by smackfu at 6:33 AM on May 21, 2013 [6 favorites]


Apple defense force is in full effect this morning.

Keep in mind that testifying to Congress is not a court of law, it's one of the responsibilities of Congress to investigate businesses, government agencies, individuals that are using existing laws in a way that wasn't intended in order to show light on those impacts in order to get the public to demand to change them.

As such investigating one of the largest technology companies for their business practices is perfectly acceptable and should be encouraged regardless of whether they are adhering to the letter of the law or not.
posted by vuron at 6:35 AM on May 21, 2013 [4 favorites]


Accelerando... (first part) actually sounds like the worst sort of hell society I can even imagine (short of actually being physically tortured on a daily basis). It turned my stomach. Couldn't finish.
posted by Steely-eyed Missile Man at 6:35 AM on May 21, 2013 [1 favorite]


"Apple fanboy"

Is there a flag for egregious misspelling? When snidely dismissing anyone who disagrees with you, I though everyone knew it was supposed to be spelled "fanboi."
posted by los pantalones del muerte at 6:36 AM on May 21, 2013 [5 favorites]


Elementary Penguin: I think you mean Bravo l'artiste from the LRB.
posted by claudius at 6:36 AM on May 21, 2013 [2 favorites]


No one is claiming that Apple did anything illegal. No one is claiming that Apple violated its fiduciary responsibility to its shareholders.

The reason to highlight these problems in the tax code is not to claim that Apple is immoral, but to build support for changes in the tax code. It's part of the democratic process.

Saying, "hey, they're following the law so shut up," is really missing the point.
posted by alms at 6:36 AM on May 21, 2013 [14 favorites]


But also I am totally down with a cheap and easy legal solution that allows individuals to play jurisdictional arbitrage too. If the playing field is level and people are corporations too (not just vice versa) it's a whole different conversation. I'd pay a few hundred a year to be incorporated in the Caymans, sure. I already keep my money in a Canadian bank on purpose. (Which is not tax avoidance, btw... I pay over 55% of my income in various taxes, including the AMT in most years.)
posted by spitbull at 6:37 AM on May 21, 2013


It is different, or this post would have included those others you left un-named.

Why? Everyone in this thread is intelligent enough to know that Apple is an example and that other companies do exactly the same thing. We'd have to write over 1000 pages to include mention of every other company that does this as well. I don't see this in any other threads about corporations so why does it have to be the case in this one?

Can someone tell me which laptop maker pays their fucking taxes so I can just buy one already?

Most likely none, but I'm sure everyone knows this.
posted by juiceCake at 6:40 AM on May 21, 2013 [2 favorites]


The US tax laws about personal income earned overseas are just inane. When I was considering a job overseas, and encountered that uniquely US twist to the tax code, I next looked up what it would take to change citizenship. Not only are US taxes ridiculously ovecomplicated, you can't avoid that tax code.

Clearly the US tax laws on corporate income earned abroad are similarly inane? I'm not sure, honestly. Apple keeps its piles of cash overseas, out of investors hands, and not invested in US buildings, wages, or billion dollar Tumblr acquisitions. But is that so bad? They're not building factories overseas instead of in the US because their pile of good is 35% larger in Ireland than it is in the US. So are un-repatriated profits a huge loss to the US? And if they're not a loss to the US, why not just keep the current situation?

And that's why Apple is the wrong company to put as the face of this issue, if you want the tax code to change. Apple has so much money that they can't wisely reinvest it, and they are still able to provide investors a large dividend. It's a crazy situation, but there's no obvious loss to anyone in the US right now. While Apple was the perfect face of mistreated tech assembly workers, which was an industrial problem that needed a personified villian, Apple is a much less convincing reason to change tax code. They need someone who is actually hampered by having piles of profits in other countries, or whose corporate personality exudes unattractive greed to the majority of people.
posted by Llama-Lime at 6:41 AM on May 21, 2013 [1 favorite]


As such investigating one of the largest technology companies for their business practices is perfectly acceptable and should be encouraged regardless of whether they are adhering to the letter of the law or not.

All of them are being pulled in before Congress. But Apple is the only one that actually gets people clicking for those ad impressions.

The same strategy is employed by Greenpeace with their Greener Electronics schtick. Remember when Nintendo was totally on the Guide to Greener Electronics pre-2007 before the Wii hit despite making Gamecubes? Then the Wii hit, everyone was crazy about it and all of a sudden, holy fucking shit, Nintendo scored a ZERO?!? And they're still totally on the list now despite the fact that they haven't changed a fucking thing. Oh wait, they're totally fucking not.

It's not about the issue, otherwise people would have made a giant fuss about this shit in 2012 when the first new set of hearings started, or at any point over the last forty years this shit has been going on. But now it's 2013 and Apple have made the hit list so it's time for tax avoiders to be god damned crucified.

Or in hipster terms: I've been hating on corporate tax avoidance since before it was cool.
posted by Talez at 6:43 AM on May 21, 2013 [1 favorite]


They need someone who is actually hampered by having piles of profits in other countries, or whose corporate personality exudes unattractive greed to the majority of people.

Facebook it is.
posted by His thoughts were red thoughts at 6:44 AM on May 21, 2013 [3 favorites]


This makes sense to me. It doesn't need to be illegal for us to think it is wrong.

Exactly. Legal codes don't just grow on trees. We make them and define them to suit our collective needs as a society. In psychological circles, this mindless "well, if it's not illegal, it's not a problem" attitude used to be considered the hallmark of the lowest stage of moral development in human beings. It's literally the way children view moral problems.
posted by saulgoodman at 6:45 AM on May 21, 2013 [15 favorites]


Why should the US get any? What did they do to earn their share?

Enforcing patent laws is a partnership that should net up to half of anything earned, because the state is effectively putting everyone else out of business so a company can generate revenue. What interest would we have otherwise?

I also note that we own the money supply and subsidize everything imaginable in the stream of production and distribution.
posted by Brian B. at 6:46 AM on May 21, 2013 [6 favorites]


The reason to highlight these problems in the tax code is not to claim that Apple is immoral, but to build support for changes in the tax code...

But what is the problem they are trying to highlight, other than "this is a mess" which is cover for more big-business-backed edits to the tax code (keeping in mind that until recently, Apple's lobbying efforts were best described as "minimal").

As far as I can tell*, the problem that Levin, et. al have with Apple is that they make and spend money overseas without bringing it home. Is that the problem they want to solve? How do they want to solve it? Or do they just want to get some pr juice out of going after a company that doesn't make enough campaign donations to get off the hook?

*I haven't read any of the analyses, just the two PDFs and think this is the most succinct summary of the conflict between them:

page 5 of the exhibit charges: "Apple’s cost sharing agreement (CSA) with its offshore affiliates in Ireland is primarily a conduit for shifting billions of dollars in income from the United States to a low tax jurisdiction. From 2009 to 2012, the CSA facilitated the shift of $74 billion in worldwide sales income away from the United States to Ireland where Apple has negotiated a tax rate of less than 2%."

page 2 of apple's prepared remarks: "Apple uses its foreign cash for business operations, geographic expansion, acquisitions and capital investments, and to fund other expenses required by its overseas operations, such as the capital-intensive construction of retail stores in Europe and Asia and the purchase of customized tooling equipment. If the Company repatriated these funds, they would be reduced by a 35% US corporate tax rate."

and later: "To meet the needs of Apple’s expanding overseas operations, the Company’s Irish subsidiaries have distributed active foreign, post-tax income as dividend payments within Apple’s foreign corporate structure. These dividends represent profit that was previously taxed in accordance with the laws of the local jurisdiction in which it was earned. Under US tax law, these dividends are not taxable."

posted by frijole at 6:47 AM on May 21, 2013


At least they're not digging carbon out of the ground and destroying the planet

The parts, factories, and even how the products get to their consumers via the smug self-satification device shown on the American documentary The Simpsons. (That name must be some kind of high art or sum'tn - the documentary was about a guy named Max Power and showed Ed with his smugness powered automobile.)

exploiting low class workers to ruin the national economy

Yea! And the new robot factories will be able to work without needs of suicide nets, tea breaks for alertness, and will be happy just to get electricity and maintenance, The low-class workers just won't have the job to exploit anymore.

exploiting the middle class's finances and ruining the world economy

Yea! Them Apple products are expensive.

yeah, fuck Apple because white gizmos.

yea, their white cases turn yellow over time.

I got a better idea! Why not download Buycott for your portable device so you can scan bar-codes and then know what are Apple products and show the Ghost of Steve who's not a sucker and not buy the products!

If corporate tax finance is to change, the laws must change. But I bet the laws won't change much.

The laws exist they way they do because the corporations are able to buy the laws they want. With something like buycott, you could opt to make decisions at the time of purchase about what you will or will not buy because of the actions of the Corporations who make that product.
posted by rough ashlar at 6:52 AM on May 21, 2013 [1 favorite]


Why should the US get any? What did they do to earn their share?

They allowed Apple to have overseas subsidiaries, and they allowed Apple to transfer goods and IP to those subsidiaries without recognizing that as a taxable transaction.
posted by smackfu at 6:54 AM on May 21, 2013 [2 favorites]


Can someone tell me which laptop maker pays their fucking taxes so I can just buy one already?

I'm guessing system 76 - but only if you get it loaded with FreeBSD.
posted by rough ashlar at 6:56 AM on May 21, 2013


Maybe the answer is to tax the export of American intellectual property into overseas factories and subsidiaries.

Apple claiming that they didn't export the IP into tax havens seems like the shadiest dodge in their statement. The plans to make iPhones, Macbooks, etc HAD to leave Cupertino at some point.

Build it in the US, or tax it when it leaves.
posted by JoeZydeco at 6:58 AM on May 21, 2013 [6 favorites]


The laws exist they way they do because the corporations are able to buy the laws they want.

No, they most adamantly do not have the laws they want, what they want is to be able to bring those "Irish" profits, taxed at 2%, back into the US without paying the remainder that the US gov wants. They ask for these tax holidays regularly, with little success so far.
posted by Llama-Lime at 6:59 AM on May 21, 2013


Legal codes don't just grow on trees. We make them

Where exactly is the collective "WE" involved?

When drafted by reps?
When signed by The Pres/Gov with a signing statement?
When the enforcement arm writes up policy?
When a judge makes a ruling?
Or when the individual who makes a determination at inspection/enforcement time says 'that is illegal' and fine/detention at your liberty happens?
posted by rough ashlar at 7:01 AM on May 21, 2013 [2 favorites]


But Apple is the only one that actually gets people clicking for those ad impressions.

So these other companies that get tax breaks or practice tax avoidance that we've discussed here or had links to don't count, only Apple does? posted by juiceCake at 7:07 AM on May 21, 2013 [3 favorites]


So these other companies that get tax breaks or practice tax avoidance that we've discussed here or had links to don't count, only Apple does?

90 minutes and we're already at the same comment count at the GE thread. If it keeps up when CA wakes up we'll probably beat the combined comment count of GE and Ikea combined in a couple of hours. Notice how when it's Apple everyone suddenly stands up and gives a shit?
posted by Talez at 7:11 AM on May 21, 2013 [2 favorites]


Lot more people will defend Apple then GE, and contention drives comment counts.
posted by smackfu at 7:12 AM on May 21, 2013 [3 favorites]


If Apple pays a dime more in taxes than they are supposed to or legally obligated to they would be in egregious violation of their mission and responsibility to the shareholders.
And there you have it folks... the crux of the problem: people believe that an individual corporation, and/or individual shareholders are entitled to money that they did not rightfully earn. They do not care about the ill effects of their actions, you know, things like causing the state of California to go bankrupt. Instead, it's all about making money and screwing everybody else.

I hate paying taxes as much as the next guy, but I live on a paved street, with street lights, and every once in a while am thankful for the things that my taxes go to. The kids in my neighborhood go mostly to public schools, the trash truck shows up every Tuesday, and there's a nice greenway within walking distance from my house. These are all things that taxes paid for, that I get to take advantage of.
posted by Blue_Villain at 7:13 AM on May 21, 2013 [12 favorites]


Fanboy perspective: if talking to Apple about eventually leads to Halliburton paying more taxes I'm all for it.
posted by mazola at 7:13 AM on May 21, 2013 [2 favorites]


So, what is the point of this anyways. Does the Congress/IRS not know/understand how this sort of accountancy works? They do have the powers to make this illegal (if it is already not so). If this is bothering them so much, why are they not acting in a consequential manner.
posted by asra at 7:14 AM on May 21, 2013


Where exactly is the collective "WE" involved?

You're right. It's not even possible to conceive any kind of system designed for collective decision making and we could never, ever reach consensus about anything and it's always been this way. And there is no such thing as the public interest and society is a myth. Just like the Koch's and their ilk have been pushing for several decades for no reason whatsoever--through non-profit organizations that enjoy tax exempt status for serving a public interest mission as that's defined under the law for absolutely no reason because of course there's no such thing when you really think about it. We've been so badly duped we've forgotten what the concepts most fundamental to our system of governance and way of life even mean, all to provide political and cultural cover for "innovators" who don't give a damn about the public good or the commonwealth.
posted by saulgoodman at 7:15 AM on May 21, 2013 [2 favorites]


If this is bothering them so much, why are they not acting in a consequential manner.

First step in changing the laws is to do internal investigations, and then bring people to testify. Then they decide what laws to change, and then write bills. This is how the hot dog gets made.

(Then the bills fail to pass because Congress gets nothing done, but the rest of it is SOP.)
posted by smackfu at 7:16 AM on May 21, 2013 [1 favorite]


Fanboy perspective: if talking to Apple about eventually leads to Halliburton paying more taxes I'm all for it.

Wouldn't the fanboy perspective be "Apple has transcended the hating corporate tax avoidance market while simultaneously reinventing it" or something like that?
posted by Talez at 7:17 AM on May 21, 2013


So, what is the point of this anyways. Does the Congress/IRS not know/understand how this sort of accountancy works? They do have the powers to make this illegal (if it is already not so). If this is bothering them so much, why are they not acting in a consequential manner.

Because they need an overwhelming public consensus equal to the consensus among those who fund their political careers in order to justify taking action. If they can't go to their industry contributors and make the argument they have no chance of election or reelection if they don't take action, those contributors won't give any money to their campaigns but will fund challengers instead.
posted by saulgoodman at 7:17 AM on May 21, 2013 [1 favorite]


90 minutes and we're already at the same comment count at the GE thread. If it keeps up when CA wakes up we'll probably beat the combined comment count of GE and Ikea combined in a couple of hours. Notice how when it's Apple everyone suddenly stands up and gives a shit?

No.
posted by juiceCake at 7:20 AM on May 21, 2013 [1 favorite]


hate paying taxes as much as the next guy, but I live on a paved street, with street lights, and every once in a while am thankful for the things that my taxes go to.

"I'm a simpleton, I've always had this feeling that... that we pay taxes and the city should do those things... " -- Steve Jobs
posted by mazola at 7:21 AM on May 21, 2013 [3 favorites]


Because they need an overwhelming public consensus equal to the consensus among those who fund their political careers in order to justify taking action. If they can't go to their industry contributors and make the argument they have no chance of election or reelection if they don't take action, those contributors won't give any money to their campaigns but will fund challengers instead.


So this largely is for public consumption?
posted by asra at 7:23 AM on May 21, 2013


as Viva Hammer of Brandeis testified before W'n'M

Who else wants to play D&D at lunch
posted by samofidelis at 7:27 AM on May 21, 2013 [3 favorites]


cotterpin: "On the other hand, as US citizens abroad have to pay US income taxes on untaxed or undertaxed income. If corporations are people, why shouldn't they be treated the same way as a person with foreign income?"

Cuz JERBS!
posted by symbioid at 7:28 AM on May 21, 2013 [2 favorites]


"On the other hand, as US citizens abroad have to pay US income taxes on untaxed or undertaxed income. If corporations are people, why shouldn't they be treated the same way as a person with foreign income?"


The US is one of the only countries in the world that taxes its citizens on foreign earned income that is not repatriated.

I think that's a good thing, but the US is an outlier, and non-repatriated Foreign income for corporates is not taxed in the US, or nearly anywhere else. The issue with Apple and these sorts of dodges isn't if the foreign income was taxed, but rather if the profits were actually made in the domicile AAPL claims they were. That is basically the crux of the issue. You use these sort of corporate structures to place your profits in domiciles with low tax rates. If AAPL wanted to repatriate that money into the US so it could repay shareholders or buy back shares they would have to be taxed at the statutory tax rate.
posted by JPD at 7:33 AM on May 21, 2013 [4 favorites]


Apple does not use tax gimmicks.

Of course they don't. Gimmicks are meant to attract attention.
posted by mazola at 7:33 AM on May 21, 2013


So, what is the point of this anyways. Does the Congress/IRS not know/understand how this sort of accountancy works? They do have the powers to make this illegal (if it is already not so). If this is bothering them so much, why are they not acting in a consequential manner.

This is a systemic problem that requires a holistic solution. Congress is not competent to solve it, and will find it's much easier to put on a dog and pony show to make it look like they're doing something: Put Apple in the stockade and jeer. At the end of the day, band-aid legislation will be passed that prohibits one very specific tax evasion technique; to compensate, corporations will move their shell companies from Ireland to the Comoros, and business as usual will resume. The New York Times will write a clever article titled "Shell Games" and some congressmen will tout their reputations as tough-on-tax-evasion mavericks. The public will forget about it in two weeks and nothing significant will have changed.
posted by qxntpqbbbqxl at 7:45 AM on May 21, 2013 [4 favorites]


Who else wants to play D&D at lunch

I like to attribute much of my ability to fill out bureaucratic forms (including tax forms) to the untold numbers of RPG character sheets I filled out back in the day.

Once you've created an entire Traveller solar system using dice and arcane rule books filled with dense text and complicated tables, tax day seems much less daunting. ;)
posted by Celsius1414 at 7:47 AM on May 21, 2013 [4 favorites]


The same Congress that's acting all shocked and surprised and outraged today has been approving and enabling these tax arrangements for years, all the while collecting campaign contributions from the companies that are doing this. And of course it's not just Apple, it's Google, Facebook, GE, Microsoft, Oracle, Adobe, etc.

The core of the Double Irish is that you move your intellectual property to an Irish company which is tax resident in a tax haven like the Caymans. Paper profits are moved around, through the Netherlands typically, and Ireland skims a little off the top. Every country wins! And if you're a company primarily trading in intellectual property, you'd be crazy not to be doing this now.

The drawback with these arrangements is the profits are trapped in Europe. That's why every few years companies lobby for a tax holiday to repatriate the income. "Gosh, Mr. Congressmen, we'd love to invest in America and we have all this money just sitting in an Irish account, can you help us bring it back in?" Why, Apple is proposing a tax holiday right now.

The entire system is corrupt and broken. From the US tax code with its enormous 35% corporate tax rate married to giant loopholes, to European countries perfectly willing to participate in tax games as long as they get to keep a slice of the action, to Caribbean countries whose entire economy depends on dodgy corporate paperwork. But the true corruption is in Congress, which on one day allows this kind of nonsense and on the next day puts up some theater about how outraged they are, right before pocketing the campaign donations. Congress is competent to solve this, they just don't want to.
posted by Nelson at 7:50 AM on May 21, 2013 [28 favorites]


Can the US Congress really do anything about the EU / Irish stuff? It seems like trapping the profits in Europe means that the US tax laws are doing some good here.
posted by smackfu at 7:52 AM on May 21, 2013


The drawback with these arrangements is the profits are trapped in Europe. That's why every few years companies lobby for a tax holiday to repatriate the income. "Gosh, Mr. Congressmen, we'd love to invest in America and we have all this money just sitting in an Irish account, can you help us bring it back in?" Why, Apple is proposing a tax holiday right now.

The cynic in me sees this hearing as kabuki, with the final act being a strong push from conservatives for a permanent lowering of the corporate tax rate.
posted by eddydamascene at 7:54 AM on May 21, 2013 [1 favorite]


For me the key issue is that Apple (and Google, and Starbucks, and Amazon, and every other multinational company that uses complicated offshoring tax schemes) are eating their seed corn.

All these big companies depend on social infrastructure (roads, postal systems, universities, public research, an educated workforce, health systems - in the EU anyway, police, courts, contact enforcement, etc) that are the result of tax. Tax paid by people and companies who don't try and freeload.

Multinationals, and other tax freeloaders, are seeking to destroy the structure of democratic society for the sake of a bit of extra money. Without tax all the things that support their profits cease to exist.

Off course corporate entities, not being human, are stupid, shortsighted and driven to maximise quarterly profit at the expense of long term sustainability. We are human, and we shouldn't accept it.
posted by Gilgongo at 8:06 AM on May 21, 2013 [3 favorites]


Can the US Congress really do anything about the EU / Irish stuff? It seems like trapping the profits in Europe means that the US tax laws are doing some good here.

Well you could try to tax foreign income with a deduction for tax paid. I'd guess that would lead to lots of companies re-incorporating outside of the US. The main barrier to that ordinarily is that it creates a taxable event for your shareholders - which for something like AAPL would be quite meaningful as your shareholders would have to pay cap gains tax on their appreciated shares.
posted by JPD at 8:07 AM on May 21, 2013


"If Apple pays a dime more in taxes than they are supposed to or legally obligated to they would be in egregious violation of their ... responsibility to the shareholders."

I've heard this argument many times. It's like saying that if a server or cashier in a restaurant is not trying their hardest to rip off the customer and defraud the government then they are doing an egregious disservice to the restaurant owner.

It is a fiction that every shareholder just wants money however unethically it is obtained. I am, like many people, a shareholder in many companies and I definitely desire that the companies I own a part of conduct themselves ethically and not merely by the barest possible legal technicalities.
posted by splitpeasoup at 8:12 AM on May 21, 2013 [8 favorites]


well the irony is that because of how AAPL avoids taxes shareholders can't actually get it.
posted by JPD at 8:14 AM on May 21, 2013 [1 favorite]


I'm not sure about that. I think shareholders can't get it simply because AAPL has decided they don't want to repatriate the income and pay the 35% tax. That's not really tax evasion or anything, just a choice that has its own negative impacts.
posted by smackfu at 8:25 AM on May 21, 2013


well yes - but if they repatriated it and paid the 35% then what's the point of this whole thread?
posted by JPD at 8:29 AM on May 21, 2013


Everybody has to pay taxes...
posted by mazola at 8:31 AM on May 21, 2013


smackfu; the evasion is in not paying the 35% up front, when the profit is initially made. Along with the legal fiction that Apple's intellectual property is in Ireland, despite "designed in Cupertino" being printed right on every damn product. (Or Google's, or Facebook's, or...)
posted by Nelson at 8:41 AM on May 21, 2013 [1 favorite]


Here's Dealbreaker's take on the matter, interesting as always.
posted by Perplexity at 8:57 AM on May 21, 2013 [2 favorites]


I hate paying taxes as much as the next guy, but I live on a paved street, with street lights, and every once in a while am thankful for the things that my taxes go to. The kids in my neighborhood go mostly to public schools, the trash truck shows up every Tuesday, and there's a nice greenway within walking distance from my house. These are all things that taxes paid for, that I get to take advantage of.

And how much of what you are enjoying there is local taxes? Local taxes that only get dodged if the business is big enough to get the local political critters to go along with waving the taxes "as an incentive to relocate or stay". (Say, how much weight does one have to put on for the local government to make such a decision for individuals?)

Oh and when did a service that is billed separate like trash become "taxes"?

"I'm a simpleton, I've always had this feeling that... that we pay taxes and the city should do those things... " -- Steve Jobs

Yes, old honest Steve Jobs.
posted by rough ashlar at 9:01 AM on May 21, 2013


Anyone taken a look at how much Apple actually does pay in taxes? I'd be interested in seeing such a number.
posted by cjorgensen at 9:12 AM on May 21, 2013


[Folks, loosely stick to the topic and maybe don't just make random trollish seeming comments?]
posted by jessamyn at 9:13 AM on May 21, 2013


Anyone taken a look at how much Apple actually does pay in taxes?

Per this blog post, $6B federal in 2012, $1.3B in sales and use tax payments, $830M in state income tax payments, and $327M in employer payroll taxes.
posted by Admiral Haddock at 9:28 AM on May 21, 2013


Google's Double Irish and Dutch Sandwich tax strategies were discussed in the media a couple of years ago.
posted by discopolo at 9:38 AM on May 21, 2013


cjorgensen, take a look at the Apple testimony and congressional report. Apple claims it paid $6 billion in taxes in fiscal 2012, but if you look at the report, in previous years Apple reported on its financial statements that it paid $3 billion in 2009, $3.8 billion in 2010, and $6.9 billion in 2011. But it told the subcommittee investigators that it actually paid $1.6 billion, $1.2 billion and $2.5 billion each year, respectively, on its tax return.
posted by ultraviolet catastrophe at 9:41 AM on May 21, 2013



II have a dream that one day every dollar shall be exalted, every tax and social system shall be made low, the regulations will be made hollow, and the people will be made robots, and the glory of the Capital shall be revealed, and all corporations shall see it together.
posted by srboisvert at 9:46 AM on May 21, 2013 [1 favorite]


Per this blog post, $6B federal in 2012, $1.3B in sales and use tax payments, $830M in state income tax payments, and $327M in employer payroll taxes.

While the NYTimes and Congress go on their witch hunt, it pays to know to be skeptical on the basis of previous claims. That's not to say that Google, Amazon, Apple and other successful companies shouldn't pay their fair share of taxes like the rest of us, but the NYTimes and Congress have an agenda that is less about truth, once the numbers are researched.
posted by Blazecock Pileon at 9:55 AM on May 21, 2013


they would be in egregious violation of their mission and responsibility to the shareholders

I love this. I dig that there is some echo of the tales that have reached us from Classical antiquity in the relationship between corporations and the Shareholders.

Just as even Zeus the Thunderer, he of the unconquerable hands, could not defy the Fates, so too must these mighty corporations, who otherwise demand a bended knee from all mortals, bow before the implacable and eternal Shareholders.

It makes stomaching all of the bullshit done to the planet, to tax bases, and to my fellow mortals in the name of satisfying The Shareholders much easier if I imagine them as beings akin to the Moirai, white-robed and mysterious, instead of picturing them as the stupid, greedy, short-sighted fucks they are.
posted by lord_wolf at 10:05 AM on May 21, 2013 [3 favorites]


Meanwhile, to avoid taxes, Google reports that it sells all advertising in the UK, France and Germany from its Dublin office. Yet a industry magazine survey of 80 ad buyers and digital agencies about their dealings with Google's London office and their interaction with the office in Dublin revealed that "Almost 80 percent of respondents said they dealt with London when buying Google advertising. Around 14 percent said they used Dublin, the remainder said they did not know."

So here we have Apple using holding companies to manage overseas revenue and investments, while Google is actively lying to HMRC about their business operations to avoid tax liability. One of these things is not like the other...
posted by frijole at 10:28 AM on May 21, 2013 [1 favorite]


Felix Salmon's take: make public companies file public tax returns

MacRumors' Live blog

From which:

- Rand Paul (R-KY) is up and saying he is "offended" by the hearing. "Tell me a politician who is up here and doesn't try to minimize his taxes… Tell me what Apple has done is illegal. I am offended by a government… that convenes a hearing to bully one of America's greatest success stories… If anyone should be on trial here, it should be Congress. I frankly think the committee should apologize to Apple."

- Instead of Apple executives, we should have brought in a giant mirror. This problem is solely and completely caused by our tax code. This committee should look in the mirror. "I find it abominable."

- Paul: I have a bill that would tax repatriated money at 5% and target that money to infrastructure. We need to apologize to Apple, compliment them for the job creation they're doing, and get on with our job and redo the tax code.

- Senator Levin is angry and fired up: Senator Paul, you can apologize if you wish but that isn't what this hearing is about. No company should be able to determine how much tax to pay and use gimmicks to pay lower taxes in this country. This subcommittee is not going to apologize to Apple. We did not drag them, they have come here willingly. We intend to hear from them and some experts.

posted by So You're Saying These Are Pants? at 10:31 AM on May 21, 2013


One option would be to eliminate the corporate income tax entirely and replace it with a higher tax on dividends and capital gains. To be revenue neutral would require a dividend and capital gains tax rate somewhere in the mid forties. This would be more efficient and eliminate the distortions caused by the corporate income tax.

To prevent individuals from gaming the corporate tax exemption, you would have to treat C-corp earnings as pass-through income just like S-corps do now.
posted by JackFlash at 10:36 AM on May 21, 2013 [2 favorites]


> > If corporations are people, why shouldn't they be treated the same way as a person with foreign income?

> They are. They are legally required to pay the taxes owed. 35% to take the money home. Or they can leave it where it is (legally) and not pay until they want it back in the US.

I believe that this is completely wrong.

I'm a UK citizen, born in London, with a "Green Card". According to my accountant, a pretty serious guy who's been very reliable for me, because of this Green Card the United States would expect to tax me if I were working in London, for a British company. They expect to get taxed even if I earn the money in the UK and save it in a UK bank; if I don't comply, I would be guilty of tax evasion and all sorts of bad consequences could happen - for example, they could confiscate any money I had in the United States, or I could be refused entry.

My wife is a US citizen and it's even worse for her. In many places in Europe (like Germany) she'd have great trouble finding a bank that would allow her to open a bank account, even if she lived there. Why? Because the US requires detailed reporting of pretty well any transaction involving a US citizen anywhere in the world, and many European banks simply don't have the manpower or the knowledge to jump through these hoops - particularly when the consequences of non-compliance could be dire.

So when you make a statement like this:

> Or they can leave it where it is (legally) and not pay until they want it back in the US.

absent any hard evidence that this is true for US citizens, or even non-citizens with Green Cards, I have to believe you just made it up.
posted by lupus_yonderboy at 10:38 AM on May 21, 2013 [1 favorite]


sodium lights the horizon: "I always wondered if there's a point when company accountants look at their schemes and think "maybe we're taking the piss now"."

Given that US-based corporations are currently hiding around $2 Trillion of dollars in "overseas" accounts and refusing to pay tax on them, when in reality much of that cash is actually deposited in US banks, I'd say "no". They're just playing a waiting game, figuring that eventually they can bribe enough US pols to declare another "tax holiday" and repatriate the money. It's basically a Capital Strike, as envisaged by in Atlas Shrugged only without any of the overt sadomasochism.

I do actually feel sorry for Ireland. In a single generation it's gone from a poor, plucky contender with a reputation for domestic graft but international respectability into a kind of sketchy tax pirate like a Caribbean tax tax sinkhole metastasized, lurking on the periphery of Europe that can easily launder vast sums of corporate or mob monies. It's rapidly exhausting any reservoirs of goodwill it still had with the current political heavyweights of Europe, and it's even managing to increasingly piss off the UK. Ireland's political class is now bifurcating into a nationalist fixer faction now devoted to servicing the laundering schemes of transnational entities, and a professionalist Europhile faction that finds itself trying to work out EU harmonisation while being called on to facilitate the graft schemes back home through preferential treaty knobbling. A generation ago Ireland's EU bureaucrats were being exhorted to secure and defend Ireland's "special" character through secret EU treaty clauses (such as a ban against travel for abortions). Now it's basically been re-focussed on maintaining the lax tax provisions against EU harmonisation.
posted by meehawl at 11:04 AM on May 21, 2013 [1 favorite]


One option would be to eliminate the corporate income tax entirely and replace it with a higher tax on dividends and capital gains. To be revenue neutral would require a dividend and capital gains tax rate somewhere in the mid forties. This would be more efficient and eliminate the distortions caused by the corporate income tax.


increases the incentive for companies to retain earnings and invest them - maybe not always a great idea.

L_Y - you are correct. The US taxes personal income globally. That even pertains to GC holders.
posted by JPD at 11:04 AM on May 21, 2013


Given that US-based corporations are currently hiding around $2 Trillion of dollars in "overseas" accounts and refusing to pay tax on them, when in reality much of that cash is actually deposited in US banks

I don't think this is true. That would be a violation of the tax laws. Can you point me to a source for this?

Or do you mean the offshore banks owned by US bank holding companies? Which is probably true, but isn't the same thing as what you are implying.
posted by JPD at 11:06 AM on May 21, 2013


JackFlash: "One option would be to eliminate the corporate income tax entirely and replace it with a higher tax on dividends and capital gains. To be revenue neutral would require a dividend and capital gains tax rate somewhere in the mid forties. This would be more efficient and eliminate the distortions caused by the corporate income tax."

Matthew Yglesais makes exactly this argument in a Slate article today; "Decide what people you want to tax—ideally rich executives and large shareholders—and then tax them. It won’t make as good political theater, but it’ll be simpler and fairer in the end."
posted by Perplexity at 11:12 AM on May 21, 2013


> L_Y - you are correct. The US taxes personal income globally. That even pertains to GC holders.

What I'm interested in is the following question.

If I moved back to the UK and started to work there, the United States government would expect me, born and raised in England, a UK citizen, not a USA citizen, to pay my taxes to the US government, a government that would not be providing me any services or value of any type - and would be willing to actually jail me for not doing so (in theory, though my accountant said that in practice they'd probably take all my money instead) - unless I renounced my Green Card (which I have a legal right to as my father was a US citizen).

I'm actually a triple citizen - Australia, the UK and Canada. None of these countries tries to collect any taxes on earnings I make in other countries - as far as I know the United States is the only country in the world that does this.

Is there any explanation as to why this is true? How this can possibly be fair - particularly since US corporations, also nominally people, can hide all the money they want and all we get is people saying, "Well, they aren't a charity"?

I'm not a fucking charity either. Why should I pay when Apple doesn't?
posted by lupus_yonderboy at 11:13 AM on May 21, 2013 [4 favorites]


Above a fairly large number. I know quite a few professionals that have worked abroad and not one made enough to have to pay US taxes as well.

The essentially mandatory fee you pay to your accountant every year is effectively a tax.
posted by one more dead town's last parade at 11:15 AM on May 21, 2013


> Or do you mean the offshore banks owned by US bank holding companies? Which is probably true, but isn't the same thing as what you are implying.

The difference is a minor technicality. A US company owns them. Why should it make any difference that they're "offshore banks owned by a bank holding company"?
posted by lupus_yonderboy at 11:15 AM on May 21, 2013


> I know quite a few professionals that have worked abroad and not one made enough to have to pay US taxes as well.

I'm very curious as to how that would work, when you're supposed to start paying taxes starting at somewhere below $10K a year earnings?

As far as I know, the last time I looked (late last year) the US doesn't distinguish between money earned in the United States and elsewhere - it's all just "earnings" to them.
posted by lupus_yonderboy at 11:21 AM on May 21, 2013 [1 favorite]


Um, if you're not using the Foreign Earned Income Exclusion, you're probably overpaying this tax guy of yours?
posted by aramaic at 11:23 AM on May 21, 2013 [3 favorites]


> Um, if you're not using the Foreign Earned Income Exclusion, you're probably overpaying this tax guy of yours?

I live in New York City, but am planning a move to Europe. Once I move I was planning to renounce my Green Card anyway - a good chunk of my very reason for leaving is to stop supporting the United States.

However, I did not know about this Foreign Earned Income Exclusion, which seems pretty dishy to me - and means that a lot of my foreign income would be sheltered!

And I'm pretty pissed at my tax guy for not telling me this - even though it's only been so far theoretical discussions. An email to him follows...

Thanks, aramaic. This is really helpful information for me!!
posted by lupus_yonderboy at 11:28 AM on May 21, 2013


If I moved back to the UK and started to work there, the United States government would expect me, born and raised in England, a UK citizen, not a USA citizen, to pay my taxes to the US government, a government that would not be providing me any services or value of any type.

The U.S. is providing you with a valuable Green Card, which you apparently value very highly since you seem unwilling to give it up.
posted by JackFlash at 11:31 AM on May 21, 2013


What's the point of even talking about this? All companies do it and it's evil as hell, but it's not like talking about its going to change anything. Many F500 companies have 0 or negative tax rates for years. When we talked about it last time did anything change?

It's just populist theatre. Either some apple exec forgot a certain bribe (I mean "campaign donation") to the right politician or someone's up for election next term. They're not going to change anything so why bother?

My last comment was deleted for being too trolly, but I guess my irony was lost on people.
posted by ishrinkmajeans at 11:32 AM on May 21, 2013


my Green Card (which I have a legal right to as my father was a US citizen)

Are you sure you're not a U.S. citizen? More importantly, are you sure the IRS has no reason to think you're a U.S. citizen?
posted by one more dead town's last parade at 11:37 AM on May 21, 2013


> The U.S. is providing you with a valuable Green Card, which you apparently value very highly since you seem unwilling to give it up.

As I wrote above your comment: "Once I move I was planning to renounce my Green Card anyway - a good chunk of my very reason for leaving is to stop supporting the United States."

And thanks to aramaic (very much appreciated!) we have established that the first ~100K is exempt given certain very reasonable conditions so I'm mostly in the clear anyway.

But I have a legal right to that card. Why, exactly, should I be paying for it? What's the explanation? What services am I receiving from the US government that entitles them to tax me?

As I pointed out, I have actual citizenship in three countries, and none of them have ever tried to tax me for that privilege when I wasn't living there. What make the United States special?
posted by lupus_yonderboy at 11:41 AM on May 21, 2013


Enough people want to be citizens that it is feasible to tax non-residents?
posted by Justinian at 11:45 AM on May 21, 2013


The idea that all countries should work the same is what lead to the EU.
posted by smackfu at 11:46 AM on May 21, 2013


Is there any explanation as to why this is true?

It's true because without it rich people will bullshit their way into "living" in Bermuda or Mexico or some other place that won't tax them.

Taxing global income, subject to exclusions that are at the level of "a middle class salary" and with one-for-one credits for taxes paid to a foreign state, is a wonderful thing that fucks rich people's attempts to be tax exiles. I wish everywhere did it.

As I pointed out, I have actual citizenship in three countries, and none of them have ever tried to tax me for that privilege when I wasn't living there. What make the United States special?

An ability to see through rich people's bullshit? It's weird to think that there are occasions where the US, of all places, isn't falling all over itself to grant bullshit tax bonuses to rich jackholes, but even a digital clock displaying random digits will be right occasionally.
posted by ROU_Xenophobe at 11:47 AM on May 21, 2013 [5 favorites]


> Are you sure you're not a U.S. citizen? More importantly, are you sure the IRS has no reason to think you're a U.S. citizen?

I'm absolutely sure I'm not a US citizen. The INS is sure I'm not a US citizen and so I assume that's what the IRS thinks too.

Neither I nor my father was born in the United States - indeed, my father had no idea he was a US citizen until he was about 50 years old. At the time, he wanted to go and spend six months in New York City studying computer programming (the course that NYU gave him was in hindsight a criminal ripoff - I found the notes later - but that's another story).

He went into the consulate and asked about getting a visa. They asked him about his parents, and then when he mentioned his father, a Canadian born in WA, asked, "Do you have any proof?" He said, "No," and they said, "Well, we accept census records..."

He came back a few weeks later with the records and handed them to a clerk and a little later the head of the consolate came out and shook his hand. "Does this mean I get a visa?" he said. "Oh, no - you're a US citizen! You have been since you were born."

The treaty under which Washington State entered the union said that anyone born in Washington State between years X and Y automatically gave US citizenship to their children. My grandfather was born there between X and Y, so my father was automatically a citizen, which automatically gave me a green card.

In order to be a US citizen my father would have had to register me at birth.

It's a real grandfather clause!
posted by lupus_yonderboy at 11:48 AM on May 21, 2013 [1 favorite]


One option would be to eliminate the corporate income tax entirely and replace it with a higher tax on dividends and capital gains


JPD: increases the incentive for companies to retain earnings and invest them


Retained earnings increase the stock price and thereby capital gains, which are taxed every time a share is traded. That is why both dividend and capital gains rates would need to be increased.
posted by JackFlash at 11:54 AM on May 21, 2013 [1 favorite]


> The idea that all countries should work the same is what lead to the EU.

The idea that one country has the right to do whatever they like led to the Iraq War.

And what, exactly, are you arguing? That the United States is special and thus can take liberties that no other country can? That seems hard to justify... or...?


> > As I pointed out, I have actual citizenship in three countries, and none of them have ever tried to tax me for that privilege when I wasn't living there. What make the United States special?

> An ability to see through rich people's bullshit?

I'm sorry, are you calling me a rich person who is bullshitting?

Last year I made under $20K - less the year before. Admittedly, I have reasonable savings that I am living off while I try to start my business but I am by no means rich and will fairly soon run out of money if I don't earn more.

Exactly why is it "bullshit" to not wish to pay taxes to a country that you are not resident in, not getting services from, and not a citizen of - particularly when American corporations, nominally "people", do not have such a restriction?
posted by lupus_yonderboy at 11:54 AM on May 21, 2013 [2 favorites]


Retained earnings increase the stock price and thereby capital gains, which are taxed every time a share is traded. That is why both dividend and capital gains rates would need to be increased.

Retained earnings invested in productive assets increase share prices. If non taxation on retained earnings lower a companies cost of equity capital below the investors cost of equity capital then the value of one dollar of retained earnings is capitalized at less than a dollar. You end up with a loss of tax revenues, not to mention the negative effects of overinvestment

>The difference is a minor technicality. A US company owns them. Why should it make any difference that they're "offshore banks owned by a bank holding company"?

No. It isn't a minor technicality at all. In a bankruptcy it matters a lot it also matters a lot for where you can raise debt capital. It also matters for where you can spend the money. It is not a minor technicality at all.
posted by JPD at 12:04 PM on May 21, 2013


Exactly why is it "bullshit" to not wish to pay taxes to a country that you are not resident in, not getting services from, and not a citizen of - particularly when American corporations, nominally "people", do not have such a restriction?

Then mail in your green card. It was part of the deal. Global Taxation is a good thing. This whole AAPL thing can only exist because Corporations are not taxed on their global income. If you wanted to immediately and dramatically change the economics of tax havens around the world make global taxation part of the deal for developed countries.
posted by JPD at 12:07 PM on May 21, 2013 [1 favorite]


I have a legal right to that card. Why, exactly, should I be paying for it?

You have a legal right to the card, and you have an obligation to follow the rules of the country that gave you the card.

And what, exactly, are you arguing? That the United States is special and thus can take liberties that no other country can?

Are you arguing that a country doesn't have the right to write its own tax laws as it sees fit?
posted by ultraviolet catastrophe at 12:08 PM on May 21, 2013 [1 favorite]


Exactly why is it "bullshit" to not wish to pay taxes to a country that you are not resident in, not getting services from, and not a citizen of - particularly when American corporations, nominally "people", do not have such a restriction?

Then renounce your green card and problem solved? Because as long as you ARE a citizen of, or have a green card for, America, then you're receiving some benefits from that -- among other things, the ability to choose to work in the US if you want, which is something that many, many, many people would like to have. If you're willing to give that up, which you say you are, then you're apparently willing to trade the loss of that benefit for not having to pay those taxes. Some people make that choice. Many don't.

That American corporations are, or aren't, paying taxes in a similar way isn't necessarily an argument that you shouldn't be too; it's just as easily an argument -- as many people upthread have stated more eloquently than I could -- that those corporations should be paying more taxes.
posted by cjelli at 12:09 PM on May 21, 2013 [1 favorite]


Global Taxation is a good thing.

And since lupus_yonderboy would be paying his taxes in the UK, how exactly is he scheming to get something for free?

Because as long as you ARE a citizen of, or have a green card for, America, then you're receiving some benefits from that -- among other things, the ability to choose to work in the US if you want

And if you work in the U.S., you pay taxes to the U.S. It doesn't follow at all that you should pay taxes to the U.S. if you work outside the U.S., just because you could move to and work in the U.S. at some point in the future. It's just a way to shake down people who don't have much in the way of political clout.
posted by one more dead town's last parade at 12:16 PM on May 21, 2013 [3 favorites]


Given that US-based corporations are currently hiding around $2 Trillion of dollars in "overseas" accounts and refusing to pay tax on them, when in reality much of that cash is actually deposited in US banks

I don't think this is true. That would be a violation of the tax laws. Can you point me to a source for this?


from the nytimes article:
Atop Apple’s offshore network is a subsidiary named Apple Operations International, which is incorporated in Ireland — where Apple had negotiated a special corporate tax rate of 2 percent or less in recent years — but keeps its bank accounts and records in the United States and holds board meetings in California.
posted by ennui.bz at 12:17 PM on May 21, 2013 [1 favorite]


Retained earnings invested in productive assets increase share prices. If non taxation on retained earnings lower a companies cost of equity capital below the investors cost of equity capital then the value of one dollar of retained earnings is capitalized at less than a dollar. You end up with a loss of tax revenues, not to mention the negative effects of overinvestment

Nonsense. You are talking about second order effects. To a first order approximation, a dollar per share of retained earnings increases the share price by a dollar. Have you never noticed that when earnings are distributed as dividends that the share price goes down by precisely by the amount of the dividend -- that all open orders on the ex-div date are marked down by precisely the amount of the dividend.
posted by JackFlash at 12:24 PM on May 21, 2013


> > Exactly why is it "bullshit" to not wish to pay taxes to a country that you are not resident in, not getting services from, and not a citizen of - particularly when American corporations, nominally "people", do not have such a restriction?

> Then mail in your green card. It was part of the deal.

"America - love it or leave it."

You didn't answer my question.

Why is it "bullshit" to not wish to pay taxes to a country that you are not resident in, not getting services from, and not a citizen of - particularly when American corporations, nominally "people", do not have such a restriction?

> Are you arguing that a country doesn't have the right to write its own tax laws as it sees fit?

No. Are you arguing that having a right to make tax laws makes those laws just, fair, equitable and reasonable? That having a right to make their own tax laws guarantees that those tax laws aren't bullshit?
posted by lupus_yonderboy at 12:24 PM on May 21, 2013




And since lupus_yonderboy would be paying his taxes in the UK, how exactly is he scheming to get something for free?

I'm not saying he is, and since his UK taxes are deductible against his US taxable income and there is a pretty large standard deduction he's likely to spend very little on his taxes. As someone else said upthread the tax will mostly come in the form of his accountancy fees. Which sucks - and is something that impacts way too many Americans who are domiciled in the US as well - but that is a separate issue. But without global taxation there are all sorts of things that would happen.

Just as an example - Pretty much every hedge fund in NYC would immediately relocate to Zug and move their corporate structure out of Delaware or where ever it is to something purely offshore (probably Malta) and those guys would never pay taxes again.
posted by JPD at 12:25 PM on May 21, 2013 [1 favorite]


Just as an example - Pretty much every hedge fund in NYC would immediately relocate to Zug and move their corporate structure out of Delaware or where ever it is to something purely offshore (probably Malta) and those guys would never pay taxes again.

Weird how pretty much every other developed country has figured out ways to take care of this that don't involve needlessly burdening those citizens who use the very least in terms of government services.
posted by one more dead town's last parade at 12:29 PM on May 21, 2013 [3 favorites]


Nonsense. You are talking about second order effects. To a first order approximation, a dollar per share of retained earnings increases the share price by a dollar. Have you never noticed that when earnings are distributed as dividends that the share price goes down by precisely by the amount of the dividend -- that all open orders on the ex-div date are marked down by precisely the amount of the dividend.

Gee thanks. Yes it is a second order effect, but it has negative impact. You do understand the basic idea that paying out a dollar of dividends is the same thing as reinvesting retained earnings at the cost of equity? So if I reinvest retained earnings at less than my cost of equity my business is worth less than retained earnings? because eventually the marginal return on equity = average return on equity.
posted by JPD at 12:29 PM on May 21, 2013


> To a first order approximation, a dollar per share of retained earnings increases the share price by a dollar.

Surely resulting in a drop in tax revenues, as capital gains are taxed at a lesser rate than dividends?

----

It baffles me that people conflate a UK citizen living and working in the UK(*) and earning pounds, with the case of a US company based in the US with a wholly-owned subsidiary offshore.

Surely the corresponding case would be if I were a US citizen living in the United States and earning money consulting elsewhere?

(* - actually it's looking like Germany but the tax implications are about the same...)
posted by lupus_yonderboy at 12:31 PM on May 21, 2013


Weird how pretty much every other developed country has figured out ways to take care of this that don't involve needlessly burdening those citizens who use the very least government services.

Uhm - you know this isn't true right? That most of the guys who run offshore domiciled hedge funds out of london only pay income taxes on the money they choose to repatriate into the UK?

That the lack of global taxation is the biggest way HNW individuals in Cont Europe avoid taxes by domiciling their assets in offshore jurisdictions? What they do that gets them in trouble is things like secretly repatriating funds. Like a debit card drawn on a Swiss Bank or something like that.
posted by JPD at 12:32 PM on May 21, 2013 [2 favorites]


That most of the guys who run offshore domiciled hedge funds out of london only pay income taxes on the money they choose to repatriate into the UK?

I'm talking about individuals, not corporations.
posted by one more dead town's last parade at 12:34 PM on May 21, 2013


And what, exactly, are you arguing? That the United States is special and thus can take liberties that no other country can? That seems hard to justify... or...?

Just that "no other countries do this" isn't a very good argument. Argumentum ad populum, if wikipedia is to be believed.
posted by smackfu at 12:34 PM on May 21, 2013


> To a first order approximation, a dollar per share of retained earnings increases the share price by a dollar.

JPD: Surely resulting in a drop in tax revenues, as capital gains are taxed at a lesser rate than dividends?


And surely you aren't paying attention. Twice previously I've said that both dividend and capital gain rates need to be raised to make it work.
posted by JackFlash at 12:35 PM on May 21, 2013


It baffles me that people conflate a UK citizen living and working in the UK(*) and earning pounds, with the case of a US company based in the US with a wholly-owned subsidiary offshore. Yes, but you can give up your green card. I get why you think it isn't fair, but you get caught up in the slipstream of the US trying to make it more difficult for US citizens to evade taxation.


I'm talking about individuals, not corporations. Yes. So am I.
posted by JPD at 12:36 PM on May 21, 2013


to be clear JF - I know you said that. My concern is malinvestment. I appreciate that raising cap gains should in theory balance things out.
posted by JPD at 12:37 PM on May 21, 2013


Yes. So am I.

Then surely you know that if you put income into your pocket while you're a resident of Country X, Country X will get its cut, right?

That's like saying that people who live in Toronto and get income from an offshore-domiciled hedge fund won't have to pay Canadian income taxes on it. It's demonstrably untrue.
posted by one more dead town's last parade at 12:39 PM on May 21, 2013


JackFlash: sorry, I hadn't understood you were talking about some hypothetical. If I had realized that I wouldn't have even discussed it.


>> It baffles me that people conflate a UK citizen living and working in the UK(*) and earning pounds, with the case of a US company based in the US with a wholly-owned subsidiary offshore.

> Yes, but you can give up your green card.

What sort of argument is that?! How does this in any way answer the question:

Exactly why is it "bullshit" to not wish to pay taxes to a country that you are not resident in, not getting services from, and not a citizen of - particularly when American corporations, nominally "people", do not have such a restriction?
posted by lupus_yonderboy at 12:41 PM on May 21, 2013


l_y, nobody said that your argument was "bullshit," go back and read the thread. It's understandable that you feel the way you do, but you also don't seem to have an understanding of what the tax laws are. There is a foreign earned income exclusion, and you also get a tax credit for any taxes that you paid to a foreign country. The rules aren't designed to be onerous to someone in your situation, they're designed so that rich people pay their fair share.

And American corporations are not nominally people. Not everything Mitt Romney says is true.
posted by ultraviolet catastrophe at 12:47 PM on May 21, 2013 [1 favorite]


That's like saying that people who live in Toronto and get income from an offshore-domiciled hedge fund won't have to pay Canadian income taxes on it. It's demonstrably untrue.

You only have to pay taxes on the money you bring into the UK. Most domiciles where you would technically run your fund from will have no taxes on that sort of income. (Malta, Cayman's, BVIs, etc, etc)

Why do you think guys love Chalets in Verbier and big beach houses? As long as that money never touches the UK it is untaxed.


Exactly why is it "bullshit" to not wish to pay taxes to a country that you are not resident in, not getting services from, and not a citizen of - particularly when American corporations, nominally "people", do not have such a restriction
The problem isn't that you have that restriction its that they don't.
posted by JPD at 12:48 PM on May 21, 2013 [2 favorites]


> l_y, nobody said that your argument was "bullshit," go back and read the thread.

From the thread:

> > As I pointed out, I have actual citizenship in three countries, and none of them have ever tried to tax me for that privilege when I wasn't living there. What make the United States special?

> An ability to see through rich people's bullshit? It's weird to think that there are occasions where the US, of all places, isn't falling all over itself to grant bullshit tax bonuses to rich jackholes, but even a digital clock displaying random digits will be right occasionally.
posted by lupus_yonderboy at 12:50 PM on May 21, 2013


Right, the "bullshit" that is being referred to is the people who engage in tax evasion to avoid paying their share of taxes, not your argument.
posted by ultraviolet catastrophe at 12:52 PM on May 21, 2013 [1 favorite]


> And American corporations are not nominally people.

We are talking about corporate personhood, yes?
posted by lupus_yonderboy at 12:52 PM on May 21, 2013


You only have to pay taxes on the money you bring into the UK. Most domiciles where you would technically run your fund from will have no taxes on that sort of income.

You are talking about corporations (the hedge fund). I am talking about individuals (the natural persons who will be receiving income distributed from the fund). The hedge fund may not be subject to taxation by the country where its operations occur, but the people who derive income from it will be subject to taxation by the countries where they reside.

Throwing in a citizenship-based tax, especially when nobody else does, puts a huge undue burden on U.S. citizens and green-card holders resident outside the U.S.
posted by one more dead town's last parade at 12:55 PM on May 21, 2013


We are talking about corporate personhood, yes?

If you actually read the link you sent, you would see that under the heading for the United States, "U.S. courts have extended certain constitutional protections to corporations" This doesn't mean that corporations are granted all the rights afforded to citizens.
posted by ultraviolet catastrophe at 12:55 PM on May 21, 2013 [2 favorites]


"Corporate Personhood" for the sake of this discussion doesn't matter. Its a sideshow.

Either you tax income on a global basis or you do not. The US taxes personal income globally, it does not tax corporate income globally. I do not know why that is, but AFAIK it dates back quite a few years.

If you want to argue about the propriety of global taxation we can have that discussion. At the end of the day it is just preventing tax rate arbitrage for individuals. If you live in a domicile with "normal" tax rates and most of your income is in the form of ordinary income the biggest impact it has on you is the hassle of filling out tax forms.

You are talking about corporations (the hedge fund). I am talking about individuals (the natural persons who will be receiving income distributed from the fund). The hedge fund may not be subject to taxation by the country where its operations occur, but the people who derive income from it will be subject to taxation by the countries where they reside.

No - a HF is not a corporation - it is an LP or LLC that would ordinarily be consolidated on your tax return. It distributes its earnings annually to natural persons. But it distributes them to another entity that is also tax advantaged. If I'm a citizen of a country without global taxation that money is mine to spend as I please. As my firm grows I can allocate interests in this fee earning entity as well to my employees who can then set up their own structures that keep their earnings offshore.
posted by JPD at 1:01 PM on May 21, 2013


but the people who derive income from it will be subject to taxation by the countries where they reside.

Right - but only the income that they earned in their home country.
posted by JPD at 1:04 PM on May 21, 2013


Throwing in a citizenship-based tax, especially when nobody else does, puts a huge undue burden on U.S. citizens and green-card holders resident outside the U.S.

No, it does not. The Foreign Earned Income Exclusion means you pay nothing if your foreign income is less than $95,100. That excludes probably 90% of ex-pats off the bat.

And then you only pay to the U.S. the amount that your U.S. tax would exceed your local tax. If you live in a high tax country, you would pay nothing to the U.S. If you lived in a low tax country, you would only pay the difference.

For most people, the only burden is the paperwork.
posted by JackFlash at 1:07 PM on May 21, 2013 [5 favorites]


No, it does not.

Yes, it does. The fact that it costs several days' pay to have someone tell me that line 61 on my 1040 is 0, when I've known all along that it would be 0, is an undue burden.

And then you only pay to the U.S. the amount that your U.S. tax would exceed your local tax.

Assuming that your home country considers exactly the same things to be taxable income. This is a big, and possibly catastrophically wrong, assumption.
posted by one more dead town's last parade at 1:14 PM on May 21, 2013


but the people who derive income from it will be subject to taxation by the countries where they reside.
Right - but only the income that they earned in their home country.


Wrong. If you reside full-time in X, but make money in both X and Y, all of that money is taxable income with respect to X.
posted by one more dead town's last parade at 1:17 PM on May 21, 2013


smackfu: "The idea that all countries should work the same is what lead to the EU."

Not really. The EU grew out of the idea that Germany and France should stop bombing the shit out of each other to settle political differences, and instead work together to dominate Europe, the Maghreb, the near East and the Caucasus. Despite the UK's late, failing attempt to muscle into the inner club, it seems to be working out quite well so far for them. The harmonisation, democratic and free market ideologies? Well, that's congruent with its goals about as much as "democracy" was during the expansion of the American Empire through the Americas, post-Monroe. The EU-wide enactment of harmonisation through consents, assents, transpositions, directives, and consultations? That's just political theatre of the dullest sort, designed to occupy the bureaucratic classes and prevent serious disruptive change; similar to the Louis XIV's centralisation of the French Barons' bureaucracies within Versailles to distract them.
posted by meehawl at 1:30 PM on May 21, 2013 [2 favorites]


Wrong. If you reside full-time in X, but make money in both X and Y, all of that money is taxable income with respect to X.

Without using some sort of structure that depends on what your tax status is - for example. If you are an non-British living in London you only pay on X, if you are British you pay X and Y, but if you were British and moved to Geneva even if your firm had an office in London you would only pay on X.

(Actually I think its 30k or the tax due on Y)

But...I've been told you can use an offshore trust structure to defer taxes if you are are a UK citizen domiciled in the UK and the income is in the form of cap gains - which it is for a Hedge Fund.
There are some independence requirements for that and you and your spouse can be the beneficiary but I think you just pay a lawyer to be the outside trustee and that person can direct the trust.
posted by JPD at 1:43 PM on May 21, 2013


Wow. What is it about Apple that makes people identify with them so much? Seriously, replace Apple with BP or WalMart in this story, and hoo boy, just watch the Blue go all populist on their asses.

Anyway, Apple is far from the only company that does this kind of crap--every company that can do something like this does so. What the real story is is that things in general are a mess, and large corporations have too many resources to throw at the legal system to find every possible way to bend the rules.
posted by Ickster at 1:48 PM on May 21, 2013 [3 favorites]


I'm sorry, are you calling me a rich person who is bullshitting?

No, I'm saying that the US's global taxation is overwhelmingly targeted at rich people's bullshit.

To a first approximation:

If you don't make more than about twice the US's median family income, you won't owe the US any tax.

Even if you do, you would only pay net tax to the US if the place where you lived had lower taxes than you would pay in the US. Which pretty much means a tax haven, given how low US taxes are.

If you move to the UK and earn a normal middle class pay, you will not owe the US any taxes. Hell, if you move to the UK and earn lots of money and pay your taxes to the UK honestly, you will still not owe the US anything because UK tax rates are higher than US. At least over the long haul; there's this weird timing issue with how you count foreign taxes as credits against US taxes.

What you'll have to do is file a 1040.

Exactly why is it "bullshit" to not wish to pay taxes to a country that you are not resident in, not getting services from, and not a citizen of - particularly when American corporations, nominally "people", do not have such a restriction?

It's not bullshit. It's bullshit for a bunch of rich jackholes who certainly do expect to keep receiving services from a country to pretend to live somewhere else, or even actually move somewhere else after they've built a fortune using the US's government and legal structure, so that they can avoid paying taxes. The US's global taxation mechanism is heavily targeted at well-off people using tax havens, and that's good. Like any government mechanism, it's also going to catch some people it wasn't intended to, and the screening mechanism is inconvenient to live with.

Pretty much every hedge fund in NYC would immediately relocate to Zug and move their corporate structure out of Delaware or where ever it is to something purely offshore (probably Malta) and those guys would never pay taxes again.

I'm coming to feel that tax havens like that, and to a lesser extent Delaware, are basically enemies of humanity. Are we still on target for a Helvetian War?
posted by ROU_Xenophobe at 1:49 PM on May 21, 2013 [2 favorites]


JPD: " I don't think this is true. That would be a violation of the tax laws. Can you point me to a source for this?"

I believe ennui.bz already addressed this,but here's another example from the WSJ (not the world;s greatest enemy of corporatism):
There's a funny thing about the estimated $1.7 trillion that American companies say they have indefinitely invested overseas: A lot of it is actually sitting right here at home. Some companies, including Internet giant Google Inc., software maker Microsoft Corp. and data-storage specialist EMC Corp., keep more than three-quarters of the cash owned by their foreign subsidiaries at U.S. banks, held in U.S. dollars or parked in U.S. government and corporate securities, according to people familiar with the companies' cash positions. In the eyes of the law, the Internal Revenue Service and company executives, however, this money is overseas.
So to analyze this, these US-based companies use transfer pricing to shift a lot of their paper profits from the US to foreign tax dodge jurisdictions. But these foreign places are well dodgy, and the US (still) has a relatively strong Government that enforces private ownership within a low risk environment without much fear of repatriation, devaluation or nationalisation. So they then transfer their funds back into US-guaranteed accounts. They're using all the force and security of a well functioning State, while basically avoiding paying for it.
posted by meehawl at 1:59 PM on May 21, 2013 [3 favorites]


Without using some sort of structure that depends on what your tax status is - for example. If you are an non-British living in London you only pay on X, if you are British you pay X and Y, but if you were British and moved to Geneva even if your firm had an office in London you would only pay on X.

I still don't think you see what I'm getting at, so I will plug in real countries.

If you reside in Canada, and have income from Canada and the United States, all of that is taxable income as far as Canada is concerned. Your citizenship is irrelevant. What proportion of that income comes from Canada is irrelevant.
posted by one more dead town's last parade at 2:01 PM on May 21, 2013


If you reside in Canada, and have income from Canada and the United States, all of that is taxable income as far as Canada is concerned. Your citizenship is irrelevant. What proportion of that income comes from Canada is irrelevant.

I get that, but in many countries that isn't the rule. If you are a resident non-domiciled in London (Which every expat is) what you earn outside of the country is non-taxable and if you are not an American most countries do not tax what you have earned outside of your country of citizenship. Add on top of that relatively liberal rules about tax sheltering using offshore corps for people who are citizens..
posted by JPD at 2:05 PM on May 21, 2013


So to analyze this, these US-based companies use transfer pricing to shift a lot of their paper profits from the US to foreign tax dodge jurisdictions. But these foreign places are well dodgy, and the US (still) has a relatively strong Government that enforces private ownership within a low risk environment without much fear of repatriation, devaluation or nationalisation. So they then transfer their funds back into US-guaranteed accounts. They're using all the force and security of a well functioning State, while basically avoiding paying for it.

Held in Dollars and in US Securities makes sense to me. I didn't realize you could have in in a US regulated bank. That's really screwy and wrong.
posted by JPD at 2:07 PM on May 21, 2013 [1 favorite]


I'd like to add that having read a transcript of Apple's Senate dog and pony show, I think this exchange kind of sums up the proceedings:
Levin: The result of continuing that in 2008 is that most of your profits are stored in Ireland and are not taxed.

Oppenheimer: People love the iPhone and iPad around the world.

Levin: That's not the question, people love it everywhere.
posted by meehawl at 2:22 PM on May 21, 2013 [2 favorites]


It certainly sounds as if the US changing its corporate residence tax test to that of the "well where is it controlled?" rather than the formalistic "where was it incorporated?" would be a good start.

Can someone who actually understands corporate tax stuff explain what the downside is in that relatively minor change? It might not be enough, but it would seem to make it harder to avoid taxes - if the subsidiary is controlled by the parent corp in the US, then it would be US as well, so presumably they couldn't just fly to Ireland every month for a board meeting (although even that would be an improvement).
posted by Lemurrhea at 2:41 PM on May 21, 2013 [2 favorites]


And then you only pay to the U.S. the amount that your U.S. tax would exceed your local tax. If you live in a high tax country, you would pay nothing to the U.S. If you lived in a low tax country, you would only pay the difference.

Why does the amount matter? I'm offended by the principle of the matter -- as has been noted, the US is only one of a very small number of countries that taxes worldwide personal income. Nearly every other country is satisfied with taxing only locally-earned income. Why should the US be different?

Moreover, there is a significant paperwork burden for US citizens abroad with regards to reporting assets in the form of bank accounts, stocks, bonds, etc. Some companies will refuse US citizens entirely due to the additional burden. I fail to see a compelling reason why the US must be unique in this.

I have no problems paying US taxes on income earned in the US, but I do on income earned elsewhere. That income is, quite frankly, none of the IRS's business.
posted by armage at 3:57 PM on May 21, 2013 [3 favorites]


That income is, quite frankly, none of the IRS's business.

Only if you don't live in the U.S. If you live in the U.S., subjecting your worldwide income to U.S. tax is perfectly legitimate.
posted by one more dead town's last parade at 4:08 PM on May 21, 2013


If Apple pays a dime more in taxes than they are supposed to or legally obligated to they would be in egregious violation of their mission and responsibility to the shareholders.

Even though a lot of people here seem to take this as given, even Tim Cook doesn't really believe this -- or at least can't say so -- as Senator McCaskill corners him on:
McCaskill: What would it cost to move out of California or move entirely to Ireland or China? What keeps you from moving on a cost analysis basis?

Cook: We're an American company. We're proud to be an American company. The vast amount of our R&D is in California. We love it there.

McCaskill: It's an intangible?

Cook: It's who we are as people. We're an American company whether we're selling in China or Egypt. We're an American company. It has never entered my mind that we would move to another country. It's beyond my imagination and I have a wild imagination. It's beyond it.
Cook can't blithely say that it's his job to maximize profits when it would clearly maximize them the most to leave the US altogether, and just have a few R&D shops in the US if needed. The issue here goes far beyond the technicalities of the tax code, both as a matter of principle, and a matter of branding. Apple needs to look loyal to America and its principles if it wants to retain its precious brand identity. So Cook can't just say he's doing the most pragmatic thing, and has to pretend he never even thought of this obvious pragmatic alternative. But of course he has. And the reason he doesn't do it is because he knows that millions of his customers think not in terms of the technicality of the law, but the principles that underly it. And one of those principles is that if you are an American or "American company", you have certain duties to your fellow Americans, and if the rich can systematically violate these duties more than the poor, that is a deep problem.

So yes, in a deep sense, the rich have an obligation to pay unnecessary taxes. Not only is their tax rate is higher, but inasmuch as they have access to many more tax-avoidance resources than the poor, they are under a moral obligation to avoid using their vast unfair tax resources. Of course, we assume they are psychopaths and won't do this and thus we should fix the tax code. But Cook can't just say hey, we're all just a bunch of psychopaths over here, don't blame us! So he's stuck in this faux-naive never-thought-of-that position when someone actually gets a chance to corner him on it, instead of paying $610,000 to have coffee with him.
posted by chortly at 4:30 PM on May 21, 2013 [3 favorites]


Only if you don't live in the U.S.

Yes, that was the whole point.

My wife is now eligible for US citizenship and... well... I have mixed feelings about it, because we are likely to move away at some point, and it just seems so blatantly unfair that the IRS would be able to haunt her for the rest of her life. I mean, it's unfair for me too, but at least she has a choice about it.
posted by Mars Saxman at 4:35 PM on May 21, 2013 [1 favorite]


On the other hand, as US citizens abroad have to pay US income taxes on untaxed or undertaxed income.


nitpick: they have to pay tax on their income, as does Apple. its not Apple, the US company, making the money; its a foreign corp owned by Apple.

99% of the time the same rules apply to both individuals and corps; people in business for themselves (as opposed to, say, a w2 employee) are better situated to take advantage of the code.
posted by jpe at 4:44 PM on May 21, 2013


It might not be enough, but it would seem to make it harder to avoid taxes



the point here is that its easier to avoid tax. we set this system up under JFK with an eye toward making US companies as competitive abroad as possible, which means permitting tax deferral until dividended back to a US company. these are features, IOW, not bugs. (i believe "capital export neutrality" is the fancy pants tax policy term)
posted by jpe at 4:49 PM on May 21, 2013 [1 favorite]


lupus_yonderboy: Admittedly, I have reasonable savings

You may want to check out the Treasury's reporting requirements if any of it is in overseas banks (not to cast aspersions on your accountant, but he apparently didn't tell you about the Foreign Earned Income exclusion, either...)
posted by junco at 5:40 PM on May 21, 2013


If you are a resident non-domiciled in London (Which every expat is) what you earn outside of the country is non-taxable

Bearing in mind that only is the case if you're not ordinarily resident there. I've had clients miss that distinction before.
posted by jpe at 5:46 PM on May 21, 2013


- Paul: I have a bill that would tax repatriated money at 5% and target that money to infrastructure. We need to apologize to Apple, compliment them for the job creation they're doing, and get on with our job and redo the tax code.

Don't believe the tax holiday fantasy
(or anything else that Rand Paul says). Last time there was a tax holiday for corporations (in 2004), it had similar conditions placed on it which the companies did not honor:

The 15 companies that repatriated the most after the 2004 tax break on the return of overseas profits later cut a net 20,931 jobs between 2004 and 2007 and slightly decreased the pace of their spending on research and development, found the report surveying 19 companies' activity.

When Congress passed the repatriation tax holiday in 2004, the legislation specified that the funds should be earmarked for activities like hiring workers or conducting research and prohibited using the money for executive compensation or buying back stock. Companies that brought back profits earned abroad saw them taxed at roughly 5%, instead of the top 35% corporate tax rate.

"There is no evidence that the previous repatriation tax giveaway put Americans to work, and substantial evidence that it instead grew executive paychecks, propped up stock prices, and drew more money and jobs offshore," Sen. Carl Levin (D., Mich.), chairman of the subcommittee, said in a statement Monday night. "Those who want a new corporate tax break claim it will help rebuild our economy, but the facts are lined up against them."...


...The 2004 repatriation tax holiday further motivated companies to keep even more of their earnings overseas, the report found. With the exception of Pfizer, the 10 companies that repatriated the most money after the 2004 tax break have stashed increasing funds offshore every year since the 2004 tax break, the survey noted.

Honestly, if the WSJ can't even get behind your conservative no-or-low-tax fantasy, then it's probably time to sit up and take notice.
posted by triggerfinger at 6:16 PM on May 21, 2013 [3 favorites]


- Rand Paul (R-KY) is up and saying he is "offended" by the hearing. "Tell me a politician who is up here and doesn't try to minimize his taxes…

Lindsey Graham: 'It's Really American' To Avoid Taxes
posted by homunculus at 7:03 PM on May 21, 2013


Note: these politicians have never heard of Greece. Or Italy.
posted by Nelson at 7:07 PM on May 21, 2013


Only if you don't live in the U.S. If you live in the U.S., subjecting your worldwide income to U.S. tax is perfectly legitimate.

I generally agree with this however it is a bit strange that money from work I did in another country while living in that country that continues to generate a stream of revenue with no labour on my part gets taxed by America is weird. And then there is the retirement savings issue...

Being an international person is damn complicated and hard.
posted by srboisvert at 11:14 PM on May 21, 2013


Talez: "Can someone tell me which laptop maker pays their fucking taxes so I can just buy one already?"

Lenovo? Or do only US based companies need apply?
posted by pwnguin at 12:07 AM on May 22, 2013


Having seen the duty to shareholders canard rear its head in this thread, let me quote Milton fucking Friedman so we can put that shit to bed:
In a free-enterprise, private-property sys­tem, a corporate executive is an employee of the owners of the business. He has direct re­sponsibility to his employers. That responsi­bility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while con­forming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.
(emphasis mine)
posted by wierdo at 1:55 AM on May 22, 2013 [5 favorites]


Isn't there some bullshit about losing your green-card status if you leave the US without a return ticket to the US, or if you do not return to the US for a year?
posted by the cydonian at 3:22 AM on May 22, 2013


Lot more people will *attack* Apple *than* GE, and contention drives comment counts.

There, fixed that for you (twice).
posted by epo at 5:09 AM on May 22, 2013


For twice the annoyance!

I agree with you, but this is a shitty way to refute or disagree.
posted by cjorgensen at 5:44 AM on May 22, 2013


Lot more people will *attack* Apple *than* GE, and contention drives comment counts.

Fortunately this thread doesn't feature much if any Apple attacking so the statement is at best amusing and at worst completely irrelevant.
posted by juiceCake at 6:09 AM on May 22, 2013


Well, to be fair there was a bit of a rukus down here in Australia when it turned out that all of our local Google's office's income happened to be sourced from locations offshore, i.e Ireland, but all taxable expenses where, strangely enough, sourced locally.

When it comes down to it, as explained up thread so several times is that this is not some google v apple, or whatever global corporation you've bafflingly decided to barrack for, but a problematic loophole which needs to be fixed.
posted by Hello, I'm David McGahan at 6:20 AM on May 22, 2013


Anytime there's an article critical of Apple, expect to read a lot of comments from those coming to their defense, as if they were an angelic and benevolent company. They're mostly as bad as any other huge corporation, e.g., they've been in trouble recently with the EU and Australia for what were deemed deceptive warranty policies on their products.
posted by ChuckRamone at 6:51 AM on May 22, 2013


[Folks if you just want to bitch about MetaFilter in general maybe head on over to MetaTalk?]
posted by jessamyn at 7:00 AM on May 22, 2013


Being an international person is damn complicated and hard

Yeah, it is. At this point I'm convinced it's entirely intentional, to punish you for having the temerity to be less than wholly enslaved to your Mother Country (whatever that country may be, they're all bastards on this).

Money can move, you can't.

...you filthy untrustworthy traitor-person, you. Now then, sing Glory to the Motherland or I will so probe you.
posted by aramaic at 11:17 AM on May 22, 2013


At this point I'm convinced it's entirely intentional, to punish you for having the temerity to be less than wholly enslaved to your Mother Country.

Needs more spittle.
posted by JackFlash at 11:41 AM on May 22, 2013


Well of course, it's impossible to have too much spittle, how else will you lube up the probulator?
posted by aramaic at 11:45 AM on May 22, 2013


> from the nytimes article:
Atop Apple’s offshore network is a subsidiary named Apple Operations International, which is incorporated in Ireland — where Apple had negotiated a special corporate tax rate of 2 percent or less in recent years — but keeps its bank accounts and records in the United States and holds board meetings in California.

Another NYTimes piece: For U.S. Companies, Money ‘Offshore’ Means Manhattan
posted by homunculus at 8:18 PM on May 22, 2013


wierdo: Having seen the duty to shareholders canard rear its head in this thread, let me quote Milton fucking Friedman so we can put that shit to bed: [...]

Favorited once on the button and hundredfold in my heart.
posted by Anything at 12:05 AM on May 23, 2013


The Daily Show: Tax Men - Apple. Senators laud Apple CEO Tim Cook for his amazing products and outside-the-box interpretation of the American corporate tax code.
posted by homunculus at 1:22 AM on May 23, 2013


The Frontline report on Wall Street highlighted that other companies do indeed get questioned by the government, not just Apple, about their business practices. The report also highlights that these hearings are ultimately meaningless and that corporations will never come close to contributing their fair share to the countries they operate in, whether their methods are currently legal or not.
posted by juiceCake at 7:18 AM on May 23, 2013


Hearing was a shakedown?
posted by cjorgensen at 8:53 AM on May 23, 2013 [1 favorite]


Looks like it worked. Apple will double its lobbying.
posted by cjorgensen at 9:51 AM on May 23, 2013 [1 favorite]


TAX EVASION! New from Apple
posted by homunculus at 1:44 PM on May 24, 2013


Moyers & Company: It’s Not Just One Bad ‘Apple’
posted by homunculus at 10:19 PM on May 24, 2013


Across U.S. Companies, Tax Rates Vary Greatly: excellent, clear visualization of effective tax rates for US companies in 2012.
posted by Nelson at 1:30 PM on May 25, 2013


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