APPLE's Untaxed Billions

Practical and Practice issues for Professionals who practice in the area of taxation. Moral, social and economic issues relating to taxes, including international issues, the U.S. Internal Revenue Code, state tax issues, etc. Not for "tax protestor" issues, which should be posted in the "tax protestor" forum above. The advice or opinion given herein should not be relied on for any purpose whatsoever. Also examines cookie-cutter deals that have no economic substance but exist only to generate losses, as marketed by everybody from solo practitioner tax lawyers to the major accounting firms.
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Number Six
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APPLE's Untaxed Billions

Postby Number Six » Tue May 21, 2013 1:54 am

WASHINGTON —"Even as Apple became the nation’s most profitable technology company, it avoided billions in taxes in the United States and around the world through a web of subsidiaries so complex it spanned continents and went beyond anything most experts had ever seen, Congressional investigators disclosed on Monday."

http://www.nytimes.com/2013/05/21/busin ... ml?hp&_r=0

I look forward to the hearings....
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Re: APPLE's Untaxed Billions

Postby AndyK » Tue May 21, 2013 2:09 am

So, all the congress critters who wrote the laws to which Apple is adhering are scheduling a posturing session.

Perhaps it would be a better use of their time to examine and revise the corporate portions of the tax code to eliminate the perfectly legal strategies which Apple, and many other multi-national corporations, use.

Nah. It will look much better to their constituents for them to express OUTRAGE (Shut it down. There's gambling going on in there.) rather than to do anything constructive.

Then again, it's an excellent smokescreen to conceal that ALL the congress critters are more concerned with getting reelected than in actually governing the country.
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Re: APPLE's Untaxed Billions

Postby JamesVincent » Tue May 21, 2013 2:47 am

It's never been much in the way of news that Apple is one of the largest tax cheats in the world. There were even statements from Apple employees as to how they regarded it as their right to find new ways to NOT pay money to anyone. IIRC the Chinese government has come down on them before over tax issues and other monies owed them ( maybe their baksheesh was late... who knows). I believe we talked about it awhile ago as an off-topic issue when Steve Jobs passed.

That said I have to agree with Andy. Congress coming out with a statement like that just proves they really don't want to do their jobs, they want to be re-elected by creating outrage and by "doing something". Apple did not come up with these loopholes, they just seemed to exploit them better and in more nations then most other companies. There should be outrage that it can happen, not that it did.
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Re: APPLE's Untaxed Billions

Postby Dezcad » Tue May 21, 2013 2:12 pm

JamesVincent wrote:It's never been much in the way of news that Apple is one of the largest tax cheats in the world. There were even statements from Apple employees as to how they regarded it as their right to find new ways to NOT pay money to anyone.


I don't think it is appropriate to call a company that practices legal tax avoidance as a "tax cheat". One of the many functions of proper tax planning and tax advice is to find ways (new or otherwise) of legally reducing your tax liability and finding new ways to lower or avoid taxes.

Apple did not come up with these loopholes, they just seemed to exploit them better and in more nations then most other companies. There should be outrage that it can happen, not that it did.


Now, this I agree with. And by legally availing itself of proper tax strategies (which you call loopholes), Apple is not a tax cheat.

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Re: APPLE's Untaxed Billions

Postby wserra » Tue May 21, 2013 2:18 pm

AndyK wrote:So, all the congress critters who wrote the laws to which Apple is adhering are scheduling a posturing session.


That is the best one-sentence summary of anything that I've read in a while.
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Re: APPLE's Untaxed Billions

Postby JamesVincent » Tue May 21, 2013 4:07 pm

Dezcad wrote:I don't think it is appropriate to call a company that practices legal tax avoidance as a "tax cheat". One of the many functions of proper tax planning and tax advice is to find ways (new or otherwise) of legally reducing your tax liability and finding new ways to lower or avoid taxes.


True. I have never beat around the bush my dislike of Apple's business practices. I use the term "cheat" loosely to describe someone actively looking for something to exploit, whether it's tax issues or gaming or anything else in life.
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Re: APPLE's Untaxed Billions

Postby Famspear » Wed May 22, 2013 1:52 am

Avoiding taxes legally is not "cheating." There is no moral or legal duty to pay a certain amount of tax. There is a legal duty to obey the law.

If Apple has "untaxed billions," that's no different from me having "untaxed thousands," as long as both Apple and I are following the law.

EDIT: I realize that James and I are using the verb "cheat" in different ways.
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Re: APPLE's Untaxed Billions

Postby Burzmali » Wed May 22, 2013 1:11 pm

Famspear wrote:Avoiding taxes legally is not "cheating." There is no moral or legal duty to pay a certain amount of tax. There is a legal duty to obey the law.

If Apple has "untaxed billions," that's no different from me having "untaxed thousands," as long as both Apple and I are following the law.

EDIT: I realize that James and I are using the verb "cheat" in different ways.


It's more the old belief that "is you make enough money, you don't have to pay taxes". It's not that Apple isn't following the law, it's that Apple is choosing the laws it wants to follow, which I would be willing to bet it had a hand in writing in some more "receptive" countries.

Can Congress legislate away this behavior? I doubt it, even if they banned every trick Apple is using, next year they would have a whole new set and the fallout on all the companies the current laws were meant to address would be enough to knock some folks out of office.

Basically, Apple just took a lesson from the banking industry. Burrow in deep and attach yourself to an artery, that way ripping you out is more damaging than leaving you there. It's the same trick any smart parasite uses.

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Re: APPLE's Untaxed Billions

Postby Number Six » Wed May 22, 2013 2:38 pm

"Timothy Cook came to the lion’s den on Capitol Hill on Tuesday, prepared to face down lawmakers furious over evidence that Apple, the famous company he runs, had avoided paying billions in taxes. By the time Mr. Cook walked out, the big cats on a Senate committee were practically eating out of his hand." http://www.nytimes.com/2013/05/22/techn ... iness&_r=0

Among its most ardent government defenders was the scrawny Rand Paul, ever a lover of corporations and their incessant greed:

“I’m offended by the spectacle of dragging in Apple executives,” he said. “What we need to do is apologize to Apple and compliment them for the job creation they’re doing.”

Instead of “bullying” Apple executives, Mr. Paul said, “we should have brought in a giant mirror to look at the reflection of Congress. If you want to assign blame, look in the mirror and see who created this mess.

“Apple hasn’t broken any laws, yet Apple is forced to sit through a show trial,” he said. That was too much for Mr. Levin, who organized the investigation and the hearing.

“Apple is a great company,” Mr. Levin said. “But they don’t have a right to decide in my book how much in taxes they are going to pay and to whom they are going to pay them.”
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Re: APPLE's Untaxed Billions

Postby AndyK » Wed May 22, 2013 6:43 pm

As much as I have with Mr Paul, I have to totally agree with bis statements. He is one of the few to raise the mirror in front of Congress.

As to Mr Levin: "Apple is a great company, but they don’t have a right to decide in my book how much in taxes they are going to pay and to whom they are going to pay them.” he has the 're-elect me' blinders on. According to the tax code, any person -- naturel or artificial -- has the right to decide how much in taxes they are going to pay as long as they don't cross the line from laudable avoidance to illegal evasion.

As the senior tax partner of Price Waterhouse (Philadelphia) once told me: "If you don't feel a little bit wary when you drop the tax return in the mailbox, you've over paid."
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Re: APPLE's Untaxed Billions

Postby Burzmali » Wed May 22, 2013 8:42 pm

I guess it is a matter of perspective. If I did the same thing as Apple (i.e. funneling revenue through an offshore tax haven to minimize the profit from by work), I'd be in jail for tax evasion. Sure it's legal, but don't go expecting folks to throw them a ticker-tape parade for abusing loopholes that aren't available to everyone else.

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Re: APPLE's Untaxed Billions

Postby JamesVincent » Wed May 22, 2013 9:39 pm

Number Six wrote:“Apple is a great company,” Mr. Levin said. “But they don’t have a right to decide in my book how much in taxes they are going to pay and to whom they are going to pay them.”


As long as the laws are what they are and companies can do things like that and get away with it, yes they do. Everything Apple does is designed around avoiding liabilities of any type. Most companies pay "pennies on the dollar", Apple pays "pennies on the billion". And, IMO, Apple is far from a great company. Any company still using sweat shops knowingly and willingly, not so great in my book.
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Re: APPLE's Untaxed Billions

Postby Duke2Earl » Wed May 22, 2013 10:05 pm

I am not under the impression that Apple has done anything illegal but I hardly think they need or deserve congratulations either. They hardly fit the model of a good corporate citizen. It's not just about minimizing taxes. They are also famous for refusing to contribute to charity or to the communities where the reside. They also refuse to pass out any of the enormous horde of money they amass to their shareholders. And their use of sweatshops in China has been well documented. Their business practices are hardly the model of an enlightened corporate citizen but rather those of a 19th century robber baron. Again... nothing illegal I am aware of, but perhaps customers should think more about who they are doing business with.
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Re: APPLE's Untaxed Billions

Postby Arthur Rubin » Wed May 22, 2013 11:56 pm

I think we're veering into political speech, here. Watch it. I don't feel competent to redact anything, but I'd consider deleting the thread if things go further wrong.
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Re: APPLE's Untaxed Billions

Postby Burzmali » Thu May 23, 2013 1:17 am

Arthur Rubin wrote:I think we're veering into political speech, here. Watch it. I don't feel competent to redact anything, but I'd consider deleting the thread if things go further wrong.

I'll pose a question then:

Apple's biggest tax dodge is basically pretending to be an Irish company. An Irish subsidiary buys all their products from their Chinese sub-contractor and sells it to the American operation at a huge markup, swallowing the lion's share of the profit. Since Ireland has 0% tax, the entire profit is tax free. Then, the Irish subsidiary is able to spend the money for the benefit of the rest of the organization. How can this be changed so that Apple can't negate profit by shifting it from one pocket to another without drastically altering the financial operations of every business that legitimately operates in multiple countries?

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Re: APPLE's Untaxed Billions

Postby Judge Roy Bean » Thu May 23, 2013 4:35 am

The overlooked point in all of this is what potential influence did Apple's lobbyists and corporate actors have in ensuring the tax regulations they were taking advantage of were left in situ. :wink:
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Re: APPLE's Untaxed Billions

Postby Number Six » Fri May 24, 2013 4:11 pm

Floyd Norris made an interesting observation appropos of Dr. Paul's observation that it would actually be "malpractice" for APPLE to overpay on their taxes:

"But no other Republican senator seemed interested in that analysis. They praised Apple for avoiding taxes, saying that benefited its shareholders. Senator Rand Paul of Kentucky, a physician, suggested it would “probably be malpractice” for a chief financial officer not to do everything possible to minimize the corporate tax bill.

"If that is the standard, perhaps Senator Paul, instead of apologizing to Apple for the fact that the hearing was being held, should have joined in what he called the “vilification” of the company, but for an entirely different reason. As Tim Cook, Apple’s chief executive, testified, there is a whole range of tactics Apple has chosen not to use.

“'Apple does not hold money on a Caribbean Island, does not have a bank account in the Cayman Islands, and does not move any taxable revenue from sales to U.S. customers to other jurisdictions in order to avoid U.S. taxation,” he said.

"I asked Jeffrey M. Kadet, who spent a career with large accounting firms helping companies to minimize their international tax payments — working in places like China, Japan, Hong Kong, Singapore and Russia — and now teaches tax law at the University of Washington, to review the subcommittee’s report on Apple."
http://www.nytimes.com/2013/05/24/busin ... lowfinance
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