How Apple Minimizes its Corporate Tax Burden

[FloatingBones]

And who is the judge? You? I suspect that then all analogies will fail.

THe better question would be to ask why those three analogies failed. In all three cases that johndoe98 described, the corporations were hiding something. In this case, Apple is hiding nothing. The numbers are there, publicly, for anyone to see. Fail, fail, and fail.

Do you understand now?

It sort of like asking corporations to police themselves.

So my criteria for judging those analogies makes me fundamentally evil? Wow. You really jumped the shark with that sentence.

I'll ask you the question that JD wouldn't answer: where is the line? What tax rate would have made you happy?

Then tell us: exactly why is the answer you gave us completely dogmatic? Please answer those two questions.

Also, still waiting for your "rich people pay" message that was deconstructed here. If you now agree that your reasoning was flawed in your original 5 points, please acknowledge that. Thank you.

They generally don't like to do it.

Corporations like clear black-and-white tax rules. Simple rules -- rules that didn't cost them billions of dollars to execute. They would be ecstatic with something like the FAIR tax. But the beuracrats will probably never go to such a system that's so dazzlingly simple.

Do you have any analogies that aren't a FAIL?

 

[woodbine]

Why?

If store A sells you a product for $20 and store B sells you the same product for $5, you would buy it from store B, right? You don't feel bad about taking business away from store A, you don't feel like you're doing wrong, you just evaluate the options and take the cheapest route. Perhaps to get the cheaper price from store B you need to set up a membership account or jump through a few hoops, but you'd do it if it saved you enough money.

too simplistic

 

[Judas1]

I'm tired of hearing the argument that a higher corporate tax will be passed on to the consumers. Its not even remotely true. First the tax is on profit made. Regardless of what the tax rate is, companies will want to get the most profit they can. Lets see what happens when they try to gain profit by increasing the price of their products. When they increase price, the sales volume will go down in proportion to the price increase. This is because an increased price makes it less competitive with similar products. The net is no gain in profit or probably a reduction in profit, because the original price was already priced to be competitive. This is the case for low margin items.

Now for the case of high margin items like Apple's products. The price is set by the company based on the consumer's perceive value. The price is not determined by the manufacturing costs (which is low compared with the price itself) or other overhead like tax (which only applies to profit.) The price will remain the same as long as consumers perceive the value to be the same. Now argument, be gone!

edit: In the case of companies like Apple that has both high margin and high volume, the above is true. For companies that have high margin but low volume, the price is based more on remaining profitable at the projected sales volume.

 

[cosmichobo]

That about sums it up...I agree completely. It's amusing to see the number of Apple apologists defending Apple and criticizing the government for instituting "corrupt" laws. Do you people really think the government purposefully put in loop holes so they could get screwed out of billions of dollars in income?!?! The loopholes were found and exploited by opportunists like Apple...it's as simple as that.

Also... imagine the fury all of you fanboys would unleash on Google if a similar story were released claiming Google did the same....

Well, 1 out of 8 agreeing with me... Not bad.

Just because it's not illegal, doesn't mean you should do it.

Yes, the government/s involved should amend their laws to stop these loopholes, but I dare say they wont, as they realise it would potentially push business away... but it is not fair that larger business can get away with things like this.

I guess I just like things to be fair.

 

[KPOM]

Commerce clause! That means they can do pretty much anything... Every aspect of your life is governed by commerce.

We'll see about that. During the first 150 years of the Constitution the Commerce Clause was interpreted very narrowly. It wasn't until FDR threatened to pack the court with cronies that they started including everything under the sun as "regulating commerce among the several states and the Indian tribes." Since 1995 they have begun to dial that back. There's a real possibility that they will strike down all or part of the health care law that was passed in 2010 under the guise of "regulating interstate commerce."

It's pretty simple. Look at your infrastructure and services. Are they working well? Yes or no? I think most would agree they are in a terrible state and only getting worse.

Most of the infrastructure is actually built at the state level. The federal government lacks the jurisdiction. Even interstates are state highways (that the feds partially pay for).

Next question, who isn't paying enough? There are only two options. Either (A) the rich aren't paying enough, or (B) the lower wages aren't paying enough.

Can the poor and low waged pay more, given the times? Again, I think the answer more often than not is no. So we rule out (B). Well then we have by means of a proof by elimination the conclusion (A) needs to pay more since they aren't paying their fair-share.

Actually, this is where the law of numbers works against you. The US already has one of the most progressive tax codes in the world. Thanks to the expansion of the earned income tax credit under Bill Clinton and the across-the-board lowering of tax rates under Bush, millions were effectively taken off income tax rolls over the past 15-20 years. The middle class have the most stable income (corporate and upper class income is far more volatile and sensitive to economic conditions). That means that if we are to tax our way of debt it can't just be "the rich."

Now you can eliminate the problem by cutting out a bunch of services and infrastructure if you want. But then our argument isn't about who is or isn't paying a fair share, but whether or not we are collectively paying for too much. Is that what you want to debate? We need to cut social security, medicaid, etc?

We do need to fundamentally reform Social Security and Medicare, which are ticking time bombs from a fiscal standpoint. They can't continue in their current form, which several bipartisan Congressional committees have already said. No one wants to take any realistic action for political reasons, but if they don't we'll run into the same problem that Europe is running into now (too many retirees and not enough workers).

 

[MikeELL]

Do you have that much money to buy a product that is four times more expensive?

Not everyone is rich enough to be that 'ethical'

You do realise that if company B was actually paying their fair share of tax, company A wouldn't be that expensive? Of course whether or not a company chooses to do that is like the prisoner's dilemma. Apple is arguably creating enough value/jobs for it to be worth it in my opinion. Many of the other companies which do this however... not so much.

 

[robstahl]

Greed is the inordinate desire to possess wealth, goods, or objects of abstract value with the intention to keep it for one's self, far beyond the dictates of basic survival and comfort. It is applied to a markedly high desire for and pursuit of wealth, status, and power.

 

[Zonz]

You misunderstood...

Because even if it's legal it's still unethical. If store A has a higher price because they take their moral responsibility while store B does not, allowing them to reduce the price, I would feel bad for buying from store B instead of store A, and that's why consumers should be made aware.
I don't see how your example is even relevant.

You misunderstood his argument. Apple is the consumer in the analogy. Apple is the "consumer". It is the one jumping through hoops to get a cheaper price so it doesn't have to spend as much in taxes. It makes complete business sense. That's how it is relevant.

The goal of the business is not to be ethical, although it would be nice if the executives would act as such. That is why there are laws put in place to regulate businesses to be ethical.

Its international companies like Apple taking advantage of loopholes in the system that are pushing (more forcing) our world to have a global government to regulate such things. It makes me sick to my stomach, as it is only "necessary", but it leads us ever closer to 1984. The cheaters make everyone suffer.

Its not like Apple is passing on its savings in taxes to making its products any cheaper.

 

[needfx]

611th comment in less than 24hrs

 

[Shasterball]

It's the fault of our corrupt Congress who write a corrupt tax code.

Huh? I thought they were avoiding local and state taxes, not federal taxes?

 

[Les Kern]

Good for Apple. Businesses help society by providing great products and giving jobs to members of that society so that they in turn may buy from other businesses.

If Apple saves money from not paying a lot of taxes, then Apple has more incentives to offer top engineering/management/marketing talent to make their products even better and to make their employees/customers even happier.

Apple pays its "fair share" to society simply by existing.

HAHAHAHAHAHAHAHAH!!!!!!
Oh god, sorry, I lost it there for a sec.

 

[Pigumon]

Why?

If store A sells you a product for $20 and store B sells you the same product for $5, you would buy it from store B, right? You don't feel bad about taking business away from store A, you don't feel like you're doing wrong, you just evaluate the options and take the cheapest route. Perhaps to get the cheaper price from store B you need to set up a membership account or jump through a few hoops, but you'd do it if it saved you enough money.

It's called ethics.

Buying the same product from a store that sells it for less is not even CLOSE to evading taxes, which is what this is.

The tax code needs to be rewritten. If you post 70 Billion in earnings, you pay 30 Billion in taxes. As simple as that. If your company is based in the U.S., there should be no offshore/international BS.

 

[Xeperu]

Unless you can say that you don't take advantage of any means to reduce your taxes, don't call anyone hypocritical.

Either you are illiterate or you are just a moron, because you completely failed to understand the purpose of my post. My guess, you are both.

 

[bobob]

 

[apolloa]

it almost reads like they are money laundering!! But they are not the only ones, big corporations apparently, accordion to the 9to5mac story, pay lobbyists lots of money to ensure the tax loopholes are kept open to allow this practice, that wouldn't surprise me either.
But the only reason this story is out is cause it's an American election year right? Corporations should be paying their taxes sure, but the loopholes allowing tax evasion should be shut, and corporations proved to have been involved in lobbying to ensure the loopholes remain should be seen in court for corruption.

But meh, worlds run by selfish banks, corrupt dumb governments and giant corporations anyway...

And remember the other Apple tax story last week? Where Apple is refusing to expand it's buildings somewhere in America because it isn't getting the tax breaks it wants from the government.... yeah.. welcome to the modern corporate capitalist world.

 

[Sackvillenb]

Very complicated, the interactions of laws, taxation, and "ethics". I say ethics in quotes because I'm not sure ethics really applies to a corporation. Mind you, it would be great if ethics DID matter to most corporations, but at the end of the day, these companies all have to answer to profits and their shareholders, and as a result they must take action to maximize their profits and minimize losses that include money going to taxes. Almost everybody tries to minimize their taxes, both individuals and businesses. Sure, it would be great if ultrafiche companies contributed more to society via more taxes (and they rightfully should, to an extent, as only wealthy individuals and groups are even ABLE to contribute meaningful amounts of money, as the poor are by definition incapable of doing this), but think about this, if Tim Cook changed Apple's behaviour so that they paid an additional 10 billion dollars a year in taxes, do you think the shareholders would support that? Nope. They would kick him out the door as fast as possible. In effect, companies like this have no choice but to minimize their own taxation, to maximize their profitability. There are some ethical considerations here, but I don't think the context of a corporate commerce can allow it to be relevant.

And sure, in theory, you can just "change the tax laws", but things are never so simple, especially with a company like Apple that does business in multiple countries and states, each with their own completely different tax laws...!

 

[Rodimus Prime]

.

Corporations like clear black-and-white tax rules. Simple rules -- rules that didn't cost them billions of dollars to execute. They would be ecstatic with something like the FAIR tax. But the beuracrats will probably never go to such a system that's so dazzlingly simple.

Do you have any analogies that aren't a FAIL?

The saddest part is you believe that. The so called fair tax has already been shown to be anything but fair.
Every time that they try to simply the tax code the big company fight it because that means they lose loop holes that they are exploiting. The PR department claims they want symple but they like it complex.

 

[AustinIllini]

I vote to lock this thread. It has become a ideological pissing match. So many illogical, uneducated posts makes my eyes bleed.

Post a political story, get political discussion. And I hope you talk to an opthamologist about your eyes.

 

[marksman]

Perfectly legal, but this is the kind of behaviour that should get alot of attention in order to bring badwill to the companies doing it.

Said like someone who has never owned a business and probably never will. I am more than happy to pay all the taxes my businesses legally owe but that does not mean I will not fully avail myself of legal opportunities to minimize that that burden.

Anyone taking issue with this does not own a successful business and never has. In my world there is one person who gets paid before anyone else and that is the tax man. That does not mean I need to overpay them.

----------

Not just Congress and the federal tax code are to blame. Apple seems to negotiate deals on local taxes almost everywhere in the US when they build a new facility. They simply pack up and move to another location if the local government holds its ground. Personally I'd like to see Apple engage in a little less tax avoidance, for whether it is legal or not is irrelevant. It is immoral.

As for the rich getting richer, I'd love to see a scatterplot showing net worth of individuals and corporations in the US on the x-axis and taxes paid on the y-axis.... I'd like to see the same in the UK, where I reside.

Nothing immormal about it. Sometime start a company and put you and your entire family on the line and be responsible for your tens or tens of thousands of employees. Your position is one of complete inexperience and total lack of understanding. What apple is doing here is neither unethical or immormal.

----------

Legal or not, this is a burden on society.

We all have no choice but to pay taxes, yet corporations like Apple avoid paying their fair share while brainwashing the masses to buy their iPods and iPhones, and we know none of it is going to help California or the USA.

I love Apple, and I'm looking to get a new 15" (or 17" if they are still here this Fall), so I'm not an Apple basher.

This is as bad as Romney. Sigh.

Only very dumb people pay more personal income tax than they need to pay.

 

[marksman]

Ahem. Only the rich can afford that, which is why the average person loses in this game and the rich win. It has nothing to do with the cleverness or work-ethic of the rich.

I hope one day we will wise up and start the tax code from scratch. I'd also like to see economic embargoes on the countries that allow their banking systems to be used for tax evasion.

Actually the majority of people would save more money then the cost of using a trained tax perperer versus do it yourself.

 

[KPOM]

Huh? I thought they were avoiding local and state taxes, not federal taxes?

They are delaying the payment of federal taxes, which most multinationals do, by keeping their non-US earnings outside the US. The US is unique in that it eventually taxes foreign earnings (most other countries just tax companies on domestic earnings). Since Apple has plenty of cash for its needs here, it can effectively delay paying taxes as long as it wants. Apple, like many other companies, is petitioning the federal government to change the tax law to allow them to bring foreign earnings home without taxes or at a low rate.

----------

And remember the other Apple tax story last week? Where Apple is refusing to expand it's buildings somewhere in America because it isn't getting the tax breaks it wants from the government.... yeah.. welcome to the modern corporate capitalist world.

Asking for tax breaks from local governments is fairly routine. Remember, state and local governments compete for businesses, jobs, and people.

People do this all the time, too. For instance, lower taxes is one reason people live in New Jersey or Connecticut instead of New York, or New Hampshire instead of Massachusetts. The net effect of all this is that it prevents a single state from going overboard in terms of taxation. That's actually good for all of us. It means we have 50 states engaged in a mostly friendly competition to run their governments as efficiently as possible. It's not a panacea to be sure, but "voting with your feet" is a time-honored tradition.

 

[samcraig]

What's amusing is the same people declaring that what Apple is doing is perfectly legal because there are loopholes will be the first people complaining when/if congress closes these loopholes. If they are indeed loopholes (i.e. unintended but legal "outs") and they are closed - that's perfectly reasonable. Yet I can already imagine the outrage here...

 

[Boston007]

Good for Apple. Businesses help society by providing great products and giving jobs to members of that society so that they in turn may buy from other businesses.

If Apple saves money from not paying a lot of taxes, then Apple has more incentives to offer top engineering/management/marketing talent to make their products even better and to make their employees/customers even happier.

Apple pays its "fair share" to society simply by existing.

And if it was Microsoft you would be lambasting them to no end for doing this.

The hypocrisy is just OOZING from your elitist post.

----------

what's amusing is the same people declaring that what apple is doing is perfectly legal because their are loopholes will be the first people complaining when/if congress closes these loopholes. If they are indeed loopholes (i.e. Unintended but legal "outs") and they are closed - that's perfectly reasonable. Yet i can already imagine the outrage here...

exactly.
Hypocrisy

 

[SallyAnne]

I think it's perfectly fine that Apples reduces it's tax expense. Taxes in most Western countries are too high, discouraging businesses to keep their books in that country.

Sally
http://www.alacraft.com.au/

 

[Apple Corps]

Couldn't agree more.

Taxes are created and collected for good reason, and companies/people who dodge them are cheating that system. This puts pressure on those who do pay taxes, and/or causes governments to have less funds to achieve their goals.

Bad Apple, bad.

And what goals might those be??

Oh, $600 toilet seats for the military, hooter / booty parties in Las Vegas, Solyndra fiasco, bridges to nowhere, waste and fraud beyond belief...

Good Apple, Good