1) Openly documented 2) Viewable by all 3) Accountable to the people not the highest bidder
Exactly as the Founding Fathers wrote and spoke of it? They were pre-capitalist, saw the origins of capitalist philosophy beginning, and wrote of their fears about where that will lead a country of free people; straight into the back pockets of the elite (remember the crown was essentially the same way, owned/controlled all, required the masses to entertain them and provide value for THEM).
You seem convinced contributing to your government is a scam, and you should go shovel whatever for some rich wanker.
You got something else to add? Or are you going to just regurgitate the banal fear mongering of the last 200 years?
Control of the society
How do you make the government accountable, transparent and openly documented ? Mystery to me
Sure but less of a mystery than how we can make corporations transparent, accountable and openly documented.
Corporations are accountable of the wrong they do to third parties. It's the whole point of having a judicial system.
How do you control a govt ? By rioting and voting every 4 years ? Here's how it can work for companies : http://www.econlib.org/library/Enc/MarketforCorporateControl...
At that time...
Buuuut we now live in the age of the internet, and knowledge is a pure commodity. There are authoritarians looking to muddy the waters and make knowledge more difficult to acquire, but for those interested in learning (like the kids I've worked with), there are plenty of free options I couldn't dream of at the public library I went to as a kid.
We still have an issue of poor education, don't get me wrong, though it is not a result of elitism (quite the contrary).
I think a lot of the contention is putting faith in the "the market" (but I would hope even staunchest libertarians realize at times that can be disproportionately large companies) or governments. I feel like the extremes on both sides put too much faith in one or the other. To keep each other in check one can't be too much larger, or wield too much power over the other.
When companies become multinational, things can get weird because they can evade single governments. I'm not saying it's always bad, but it is hard to keep them in check.
The first word that comes to my mind is 'free market', not 'huge government'..
"Free market" is just an illusionary goal--there's no such thing in practice. Every aspect of reality creates some bias to one party or another. Governments try to encourage competitive entreprises, innovative ideas and good mechanisms of check and balances by eliminating monopolies, reducing dynasties/incumbencies and other barriers of entry, in addition to other things like maintaining a fair legal system.
Every aspect of reality creates some bias to one party or another
Have youbever seen govt reducing barriers of entry ? I need examples
Only govt can create monopolies, unless you're talking about mafias.
https://en.wikipedia.org/wiki/Captive_market
The only example there that could be remotely tied to the government is cable companies (I think the last-mile expense barrier to entry is the main contributor to those monopolies). All of them prevent a "free market" and the idea is that governments break those things up or regulate them. Breaking up a monopoly reduces barrier to entry. After the breakup of at&t, long distance rates dropped due to the new competition.
A few things most governments do to reduce the barrier of entry when starting or running a business: maintain a legal system to facilitate agreements between parties, educate a workforce so there's a pool of citizens with basic skills you can hire or sell things to, maintain open access roadways for transport of workforce and goods, maintain a trusted currency for the exchange of goods and services. All of those would be huge hurdles if I wanted to open a lemonade stand.
> unless you're talking about mafias.
So they're the only fly in the ointment if governments didn't exist? What is the solution to mafias if the government just steals resources?
I'm earnestly curious, if governments only oppress a market, where your best or ideal example? Is there any free market that doesn't have a government? How come when governments fail (or countries without strong governments) a strong free market doesn't develop to overtake the EU or US?
All of them prevent a "free market" and the idea is that governments break those things up or regulate them
maintain a legal system to facilitate agreements between parties
maintain a trusted currency for the exchange of goods and services
if governments only oppress a market
Who said government is the solution to every single problem? I implied too much government intervention was also bad in my original post. I do think the phone call situation in US prisons are exploitative and I hope it does get addressed. Jail/prisons being the responsibility of the government, economic arguments don't apply and they shouldn't exploit prisoners (I'm also not a fan of the "slavery" exemption for prisoners). Just because a captive market exists, doesn't mean it's bad and it has to exploit them...capitalism just tends to push it in that direction. Teddy Roosevelt, who started the "trust busting" didn't have a problem with monopolies, only the monopolies that exploited their position. That still applies to today's anti-trust laws.
> If their currency was so great, why would it need force to make it mandatory ?
Because too many people cause shenanigans when they don't? I'm kind of surprised you were cool with a single legal system, but not with currencies.
> I didn't say that.
You said, "every government action steals resources from someone and prevents them to do it on their own." Maybe I should have been explicit and said "free market" but I figured it was implied. How is "every action steals resources" not oppressing the free market you describe?
So some regulations definitely work.
The reason large corporations have more power is ... they have more power. They can afford to not only find loopholes, but also exploit ones with higher barrier-to-entry, AND lobby for additional ones.
Many corporations probably DON'T want loopholes that are "too easy" because then smaller businesses would be able to use them as well and become potential competitors. Kind of like how Comcast sues any potential competitor into oblivion using frivolous lawsuits. The cost to entry into the ISP market? The price of a good legal defense that can defeat Comcast. (Read: Nothing to do with the actual hardware/manpower)
It's simply a consumption tax that people do not realize they are paying because it is built into the products citizens are buying.
I didn't intend to "assert" that, and I think it's fair to ask you to elaborate, as I believe there are assumptions embedded in your interpretation of what I wrote.
edit: Grammar.
edit1: Do you think Apple incorporates the cost of the tax burden into the price of an iPhone? I think it really comes down to whether you think Apple would reduce their unit price if it would ultimately result in gross profit increases. It's like taking VC financing, "Do you want to own 100% of a $500K/yr revenue company or 49% of a $3M/yr revenue company?"
Then, a 10% corporate income tax rate is put in place.
Does Apple raise the price of the phone to $1,100? Is that now the profit maximizing decision?
According to your claim "Ultimately, only people pay taxes," the answer is yes - Apple would immediately raise the price of the iPhone to offset the loss incurred by the new tax. Except that then, fewer people would buy iPhones. We already know that $1,100 is not the profit maximizing price point for a phone. So, the amount Apple would increase its price is a function of the price sensitivity of iPhone buyers.
This is a little tricky to explain, but khan academy has a video that explains it quite well.
https://www.khanacademy.org/economics-finance-domain/microec...
$1,000 is a profit maximizing price point with 0 % taxes. With 10 % taxes it would be different.
(1) You really think Apple cares about the discussions on one thread of Hacker News ?
(2) Even if they did how would it be an effective use of resources. It may shift a handful of people at most. When instead that time could be spent speaking with journalists or writing press releases that could actually shift a lot of people.
(3) It's a slippery slope to keep calling everyone you disagree with shills or employees of a company. Especially since on an anonymous forum they could never be able to defend themselves.
You must have missed seeing this a few years ago...
> Members of Apple PR seek tabloid photos of celebrities holding iPhones, while others read Apple-focused blogs actively, and keep tabs on prominent Apple beat writers using anonymized social media accounts. A former Apple PR employee notes that the team enjoys being an “overall watchdog,” monitoring what the media is saying about the company every day.
https://9to5mac.com/2014/08/29/part-3-strategies-the-art-of-...
Are you really suggesting the management and board of every major company in the world should meet to decide how much tax they should choose to pay each year? Even if they did, where should they choose to pay it? Should Apple Pay more tax in China where the phones are assembled? In America where they are designed? In the countries where they are sold? What criteria do they use to decide?
That might conceivably work for one company, on some tax issues, for a while. These are companies that operate simultaneously in multiple countries with different tax systems. They can’t be expected to choose to pay more tax here or there.
I do agree these companies pay too little tax, but expecting them to pay more voluntarily is never going to work.
Unfortunately, governments like fine-grained taxes because it gives them the illusion of control.
[0] https://www.theguardian.com/society/2017/feb/22/mexico-sugar...
[1] http://journals.plos.org/plosone/article?id=10.1371/journal....
This is based on the complete abhorrence of "scope creep" mixed with near total surveillance and control over the use of force. Those with that much power should not be able to enforce social mores, even if they reflect the will of the people at the time.
/s
What else are laws for?
VAT is a trivial tax to avoid since it involves the business letting the tax department know how much tax they collected. So what happens is that they under report either (a) by flat out lying or (b) doing more business in cash or through a barter system.
Also it is incredibly regressive rewarding the rich (who are generally hoarding money not spending) and punishing the poor (who spend a larger portion of their wealth on consumable spending which is subject to VAT).
That's why many countries have a VAT but none of them solely rely on it.
edit: What I'm thinking is some sort of total asset valuation placing one in a given bracket, rather than income level. While income tax is income tax, regardless of short-term/long-term capital gains (35%/15%, USA), or salary.
Given how Prop 13 was enacted to not push existing homeowners out of their homes if their property values increased significantly, would there be a similar push under such a system?
"Fine-grain taxes" are what let a government tax people equivalently to their ability to pay. Income tax being one of the easiest ways to do that...
And if every nation agreed to have identical tax laws, we wouldn’t have a problem with lawful multinational tax minimisation in the first place, because there would be no advantage to it.
It begs the question why it does not happen already?
If I had to guess, I’d suggest haven’t already done what you suggest for at least one of these reasons:
1) because it’s economic mutually assured destruction
2) because tax codes are long and complicated (and sometimes deliberately written as political favours), and they’re as afraid of touching it as PayPal are of touching whatever Musk wrote 20 years ago.
3) because businesses that have revenue (Apple, $229bn) comparable to the GDP of the nations whose tax systems they are exploiting (Ireland, $293bn; Luxembourg, $59bn) is novel and governments are slow to adapt.
Private citizens don’t generally get to threaten governments by moving abroad to withold their taxes — and even when they do (I kinda am!) it’s so completely irrelevant it isn’t worth the government’s time to bother to check if it’s actually happening or just a loudmouth blowing off steam by saying they will.
On the other hand, there are countries out there that do very well out of having tax codes that wouldn't work for big industrialized countries, or countries part of a big unified trading bloc. They have strong incentives to keep their tax codes the way they are.
In terms of the actual money collected, the two are the same. An X% tax rate results in the retail buyer paying X% more.
The US system is a moderately progressive tax system but less progressive spending (not no progressive spending, but not nearly as much).
The argument is that you "buy off" the wealthy interests (both wealthy individuals and corporations) by using a regressive tax system, so they are happier to let you spend the money progressively, while in the US they are constantly fighting any progressive spending, because any tax cut will benefit them greatly.
I suspect that you and your partner have significantly more control over your enterprise than the officer of a public company does though. If you didn't your investors wouldn't suck it up, they would do as they see fit, which may be agree with your position or may be replace you.
Public companies are controlled by their share price more than they like to admit. Even if you are like Zuck and maintain complete management control of your public company, if that share price takes a huge hit it becomes very hard to attract and maintain talent/future investment/etc. Everyone has some authority to answer to.
I think we ought to use the power of the executive to straight up revoke charters to businesses that are American that engage in these schemes. Something I learned about while reading about the British and Dutch east India companies.
OTOH, by paying taxes you make sure there is a talent pool to recruit from in the future.
In a box filled with air, molecules moving to one side leave a gap which results in increased pressure for molecules to move the other way. The same is true of big companies and taxes. You might be able to find some companies who would do this, and investors who prefer money to vague morality (and there's a lot of them) would abandon those companies and put more money into companies who avoid taxes as much as legally possible.
If we want to stop this behavior, the solution must be to make it illegal. Appealing to morality isn't going to get it done.
Consider that many industries literally kill people by poisoning the air or water. Not killing people as a moral principle is a lot more universally held than the idea of paying more tax than you're legally required to, but moral pressure didn't work there. Laws did.
Beyond that, there's Corporate Social Responsibility, but of course that is downstream from the corporation's main objective, which is to maximize profits.
The corporation is to be understood as an "individual" and is legally so, but one which has limited legal liability.
Then some yahoo slipped in some legal precedent declaring corporations were legally natural persons, weaponizing the 14th amendment. And here we are today pretending that corporations are super persons, with more rights than actual people, but none of those profit sapping responsibilities.
Until we get to a Star Trek-like unlimited resources, it is the best way to allocate our resources to properly incentivize progress and innovation.
There is no progress or innovation without qualifiers.
> safest, most prosperous
And most depressed, most suicidal, most alienated, most amok running, most hysterical, most sophistry laden, most marketing raped, most mass produced, most polluted times ever. Millionaires today are poorer than paupers, artists today are more cloned and out of touch with themselves and the world than random citizens of other times and places. The ones who aren't 100% market whores, anyway, who at least pretend to themselves they're artists. We went from turning our world into meaninglessness to turning our selves into meaningless, mass produced objects.
We can't even afford to make something for the sake of craftsmanship, or leave a blank space blank instead of smearing marketing. We went from everybody and their dog being a member of 20 and running 5 forums to everybody being on Facebook. We went from RSS to fucking Twitter, who "let users express themselves". Companies openly brag about wanting to create "compelling experiences", marketing people dog food their own idiotic slogans and are now honest when repeating them ad nauseam, because they're now actually this small and weak to actually believe actually all of it. We went from browser makers doing whatever to user agents and back to browser makers doing whatever and users just sitting there and hoping some of that will be fun for them, too. We went from metacrawlers to Google. We went from Apple, Atari, Amiga, IBM-PC to -- a few player essentially all doing the same user hostile, uninspired shit. How many newspapers are owned by how many conglomerates? And look at company names. Herply this, derply that. Look at people's names. Are you meaning to look me in the eye and tell me we're not approaching Idiocracy? 500 years was the science-fiction part about it. Give it 20.
But safety and prosperity? Heh. It's the safety of securely being born dead. The biggest threat used to be death, now there is less and less difference between existing for a while, to shove some franchises in the mental and physical orifices, and not having been born. What does it profit a man? What does a man lose? I can't tell you the answer, but I can tell you who you shouldn't ask for that answer; the man who did lose his soul to gain the dissolution of the world, like some Midas turning things to poop. Nietzsche was right about some things, Erich Fromm was right about others, Hannah Arendt was right about everything, Einstein was right about people and who gives two shits about physics anyway, Orwell and Huxley were on to it, and then there's the thousands of others who I don't know but who all said the same things in various ways. Safety and prosperity? Fuck that. Life isn't safe, the whole universe isn't. Only death wants safety, only fear wants more, life wants to live. And yes, life is more fun when it's not reckless, when it is intentional. Food and shelter and medicine are great. That we focus on power and alienation while pretending they have anything to do with safety and prosperity, that we killed the point of living in the first place, that's the problem.
Sorry for ranting, but you don't get to tell me what I've been told or how I judge things. If it's the safest and best in your opinion, fine. But if you simply state that as fact, you brought nothing to an everything fight.
While being a poor translation of what I wrote, based on facts you are completely incorrect.
Just tell me what you are for.
I am using statistics. Do I need to cite sources for you to believe that this is the safest and most prosperous time in the history of humanity?
Then how come we all just sit there and "hope" something will be done about climate change or nuclear proliferation? How come rising drug deaths? How come the need for a dedicated WP page about the suicide problem in Japan? How come the best we can hope for is for some to condemn war criminals - instead of their brothers and fathers and children disowning them as they rot in jail? How come Trump is president and Snowden can't go home? Prosperity? We cannot even afford same rights and laws applying to all period. We shine the boots of crazy sadists who get nothing out of it but a prolonging of their suffering and the damage they cause, and we just bite our lips and give a sympathetic shrug to those who should be in their place, or at least not get trampled in the dirt.
Not that I'm saying there was ever justice for all, but we know a lot these days, we can do a lot these days, we have a lot these days; we could technically afford a striving towards instead of away from justice, just like we could afford everybody on the planet having food and shelter. Just like there is no need to plunder and mutilate language and thought, but we still do it. Workers used to be proud of reading and educating themselves, now even so called intellectuals can't face weighty authors. We truncate at best, and usually ignore outright. Not because that's milk and we now have meat, but because that's meat and we no longer have teeth.
I hardly see anyone who can afford to just take in their surroundings and the people they are faced with. We now actually call movies franchises ourselves, as if the soulless way was the more advanced and correct one. Something "making sense" always has to take the backseat to "making business sense", and boo on anyone daring to more than shrug their shoulder and bite their lip. I see a lot of people who individually have and are nothing, who always have to refer to someone or something other than themselves. My main criticism isn't historical, it's that I see people getting weaker and lamer by the year, more and more without thoughts that are truly their own, everything is being handed off.
I remember that recent discussion about tech "taking Saudi money", and many pointing out that it's just money. We cannot afford to distinct between 10$ taken from the purse of an elderly woman, and 10$ earned by fixing a chair. That's the biggest destruction of information I can think of. Oh, and we no longer can afford to print things on paper, and what we print on paper today often doesn't last as long as older books, kind of like houses. Please download the manual from a website that will be gone in N time units. Please upload your "culture" to YouTube, and put all your means of contact into the hands of Gmail and Facebook, put your free time into the black holes of EA and Disney and stream your reactions [sic, it should be called facial expression plus mouth noises] on Twitch. Those who do can't afford to talk in the first person singular just because we can't afford anything too grounded, since that would attract other grounded things and before you know it someone is turning on the light in the insane asylum torture chamber, and we can't have that.
You cannot afford owning anything, and oh, we updated the terms of our license, you'll have to agree again to continue using our "services". We serve you. Just like in "the industry", we're being industrious.
We no longer can afford to be alone with our thoughts and creations, and judge their value freely. Yet if that goes for everybody else, with what authority do we outsource judgement? And if it doesn't, with what authority do we let our own ability to judge to rot?
> I am using statistics. Do I need to cite sources for you to believe that this is the safest and most prosperous time in the history of humanity?
No, you need to put forward your own definitions, and you haven't even attempted to make the argument why only countable things should count. That in itself is the poverty of thought I am also referring to. You might say you're making part of my point for me.
Since you're mentioning statistics, I'll mention the "Polli di Trilussa", whereby if the average says everyone has a chicken to eat and you're not getting any, don't worry because there's someone gorging on two.
I'd suggest "The three laws of Robotics" should also apply for them.
If they were, they would already be acting in the way you think they should.
Only children and the very slow still believe in "democracy", which is obviously just another name for the rule of those who own the media and/or are rich enough to bribe politicians.
What other recourse is left but the threat of violence to the physical individuals that in reality control the imaginary legal persons called corporations?
Too bad what passes for the "left" these days is busy fawning over Tim Cook's homosexuality while the sick become homeless and the globalists vacuum the earth for profits. It almost makes me long for the days when the left was Marxist and we had the Red Army Faction and the Red Brigades, instead of blue hair lesbians and postmodern identity politics.
As a citizen of the USA, this is quite a scary thing to read. We may not have attained perfection (or even satisfaction), but it is a process. Each iteration has ultimately improved the world and the underlying principles are sound. It's all about optimization priorities, and I'd prefer to optimize for liberty, not authority.
Government has a monopoly on sanctioned violence, and the only reason it is justified is because of democracy. "We the people," are the first words in the US Constitution.
If you want to give up on democracy, move to a dictatorship. The earth does not have to have the same forms of government in every country/state.
edit: Tell me what you are for, instead of what you are against?
That's not the case. There is no way a company's management could be sued for "gross negligence in tax planning".
If shareholders are unhappy about this issue, their recourse is the same one that's always available to them: elect a new Board of Directors and hire new management that will follow the board's guidance on tax evasion schemes.
The greatest example of board negligence in this industry (that I can think of) in recent years would be when Hewlett-Packard's board hired Léo Apotheker as CEO in 2010. The board members had never met the man and his career had been on a different continent, yet they didn't even interview him in person before giving him the job!
Apotheker spent $10.2 billion to buy a British company named Autonomy. Soon after he was fired. Only a year later, HP was forced to write down $8.8 billion of Autonomy's purchase price.
That enormous loss was directly the fault of HP's board for hiring such a terrible CEO and letting him do the terrible deal. But shareholders didn't have any recourse; the best they could do is vote on a new board.
Here is a list of hundreds of such open lawsuits:
HP actually paid $100 million in such a lawsuit for the Apotheker/Autonomy flop:
http://www.reuters.com/article/us-hp-classaction-pggm/hp-pay...
The 2010 Board of Directors who created and permitted the $8.8 billion loss paid nothing. They kept their compensation, and most stayed on the board.
https://www.delawarelitigation.com/2012/07/articles/chancery...
What if the reason big companies avoid tax is that the shareholders ensure someone values fiscal results over supporting the country they earned the finance in is in the directors chair.
It's not a legal obligation though. Shareholders could choose to have corporations managed differently. That kind of "pro-tax" activist shareholders don't exist, but it's not inconceivable that large public funds (pensions etc.) could become such.
The problem isn’t Apple, the problem is the government can’t get its act together to pass tax reform.
But there's nothing in the (US, at least) legal definition of a fiduciary that proscribes increasing share holder profits by any means necessary. That's simply a convenient myth spread to normalize cutthroat, profit-seeking behavior at all levels of business.
What you’re saying is impossible and the law needs to fix this, not appeal to emotion.
The least they could do is report these tax loopholes: post them publicly to make it easier for the government to close them. Instead, they are kept a secret. Why do you think that is?
Apple can't return their foreign profits into the US or they lose this deferral, so where should they keep those profits until they do? Germany? France? Why on earth would you keep your money in higher tax countries? Why wouldn't you keep it in Ireland or the Channel Islands instead? It's not illegal, it's not even unethical.
It would be the height of stupidity to leave those profits in a high tax country. And the taxes they save are relatively minor overall. It works like this.
Apple earns about two thirds of it's profits in foreign countries. Over the last decade or so that's been around $225 Billion. They've paid about $25B in income taxes on those amounts (we'll ignore the huge amounts of VAT and employee taxes they've paid), so there is about $200B left.
If they brought it all back to the US, they'd owe the state of CA around $20B in taxes, and the Federal government around $63B in taxes. If they paid the $117B remaining as dividends, their shareholders would pay over $20B more in state and federal dividend taxes.
Let's recap. They made $225B, bringing it all back would mean mean various governments would get $128B in taxes, and the owners of the company $97B, a tax rate of over 60%.
So instead they keep the $200B in the lowest tax rate location possible while they wait for a US repatriation holiday with lower tax rates. They might earn 5% on that money, or $10B a year. If they kept it in a high rate european country, they might pay another $2B a year in taxes on the interest, but instead they got a deal from Ireland where they paid less than 1%. So they save $2B a year, but they will eventually pay nearly $100B more in taxes when they repatriate it. That's trivial in the grand scheme.
And that was a screaming deal for Ireland, because they didn't have to pay anyones unemployment benefits, or build any roads, or give Apple any "incentives" to build something. Ireland just let them make huge bank deposits in Irish banks, which turned around and lent the money out again, mostly to Irish companies, which created a massive amount of jobs and more taxes.
Not only is Apple doing nothing wrong, but they are doing a great deal of good too.
Dividends, income taxes are a separate matter. If you think the combined tax rate of corporate + dividend + income taxes is too high, then you should say that directly and have the discussion be about that.
This discussion has been about whether Apple is taking advantage of the tax code in order to not have to pay the 35% federal corporate tax rate. They could easily bring things back to Nevada (they do already to some extent is my understanding) and avoid the California corporate tax.
So all that being separated out your argument basically strikes me as: the corporate tax rate is too high so of course Apple is going to take advantage of tax shelters in order to avoid paying it.
I think this story is getting people upset because multinationals should not be free to leverage countries against one another in order to avoid paying corporate taxes. On paper Apple is a multinational corporation but both you and I know that it was American taxpayers who educated most of their employers. It was American taxpayers who provided a safe and prosperous environment for the corporation to flourish. And therefore, morally speaking, if the U.S. wants to tax Apple at a rate of 35%, then it should be able to. Unfortunately the world's tax codes have enough complexities still in them that all multinational corporations can avoid paying these taxes, while smaller corporations such as the one alluded to by the first comment in this thread do not have the capacity to avoid the taxes. This is what strikes me as against the "spirit" of the law. At the very least, multinationals should be more white-hat: sure, find and exploit complexity in the international tax code. But then you should report these things to the federal government. Maybe if there was a bounty :)
Effectively if your tax arrangements are weird enough they have to be submitted to a judicial-like body to determine whether they are for some sort of legitimate business purpose or purely for the purpose of tax avoidance. An example: https://www.gov.uk/government/uploads/system/uploads/attachm...
"Paragraph C5.6.7 of the Guid ance states “[the GAAR] rejects the proposition that taxpayers have unlimited freedom to use their ingenuity to reduce their tax bills by any lawful means"
"The reward was structured in the following way: a purchase of gold for the Employees was funded by the Company; that gold was immediately sold by the Employees ; the Company’s liability to pay the third party gold supplier was settled by the Employees in return for a director’s loan account credit in favour of the Employees; in connection with the purchase of the gold a long term obligation was created under which the Employees were required in the future to pay to the trustees of the EBT an amount at least equal to the purchase price of the gold (plus indexation)."
Obviously this arrangement is nonsense and is purely for tax avoidance, so the GAAR cuts through the complexity and rules it unacceptable.
One only needs to look at the other leaks in this dump to see the attraction of these locations (Formula 1 driver Lewis Hamilton stashing his private jet on the Isle of Man to avoid a substantial VAT bill etc).
If you're planning on using exploits, you keep try and them secret. Once they are common knowledge they get patched (hopefully).
1) They make huge foreign profits and pay substantial income taxes to those foreign countries. 2) They don't repatriate the remaining profits so they don't have to immediately pay the massive US taxes they'd owe if they did so. 3) They record a tax liability for the repatriation taxes they'll owe when they bring the money back. 4) They document they keep the money offshore in the lowest possible tax rate location, as is their legal right, so that they minimize the tax on the interest their funds earn, which is relatively trivial by comparison.
The Paradise Papers doesn't tell you anything other than the specific location. The only thing that would be unethical or immoral would be if they kept the money in London, Paris, or Bonn, because they'd be paying higher taxes on the interest (not the profits) for no reason at all. And since it's not their money, and belongs to shareholders, that would be very wrong.
Please point to a reference to the isle of jersey in Apple's public financials document. I want to know about evading corporate tax by rerouting profits to tax havens.
1) Most non multinational corporations produce both corporate and income tax revenues. Why shouldn't Apple? 2) Ditto 3) This is like apple writing "IOU" on a piece of paper. That money could be getting used to fund schools, to rebuild infrastructure and it has a time value. All of which Apple is capturing.
You seem to think that money which should be getting taxed by the corporate tax rate somehow "belongs" to the shareholders in some ethical (not legal) sense, and I think this is the root of our disagreement. Ethically, Apple is an American corporation and it was American taxpayers who allowed the company to flourish. Perhaps also some European countries played a role here. Therefore if they want to impose a corporate tax they should be able to, separate from the income and dividends tax.
I think the only way is for companies to make strong commitments to doing so, so in the case of future leaks like this or further investigative journalism, we would all have something to point to.
There's a huge amount of wiggle room and discretion possible even within the obligations to share-holders.
[0] https://www.investopedia.com/terms/c/corporatecharter.asp
OK, but that doesn't really matter. Legality and morality diverge further the higher up you go in scale.
There was a thread on here a month ago about how, at the size of the Moon, solids don't behave like solids anymore. They behave more like fluids. The Moon wouldn't shatter into bits if you "broke" it, it would just stick together. It is a good analogy for law: the bigger you go, the more malleable and "un-law like" it is. It becomes a fluid.
Multinationals can bend law. They can influence it. Law bends around their gravitational pull.
(edit: I think you meant your comment slightly differently to what I interpreted, I'll leave it up.)
A company is just a legal construction but we let people transgress the legal constrains that should rule its behavior.
The much simpler solution is not to bother taxing these things you can't see. Why don't we set the corporate profit tax to zero, and then this whole argument goes away.
Tax is collected every time they sell a computer in Germany. Tax is collected every time they employ someone. Tax is collected every time someone sells shares and profits. These seem like good things to tax, as they involve actual people and take place unambiguously in particular countries. If you'd like to collect more tax, then by all means adjust the rates.
This is done a lot in anti-trust settlements. You can sell your IP to Apple Germany, but then Apple Germany is independent and could go sell that/licence that however they see fit. Including selling to competitors of Apple US.
If you're transferring IP but the receiving organisation is basically under your control.... are you really transferring anything?
What's needed are international agreements how to handle those licenses, that you can't simply push them to tax heavens, but tax has to be paid where they are created or used or whatever.
"tax has to be paid where they are created or used"
Yes exactly. When they sell a cool computer for E2000, they have used their brand to sell it, and there tax is collected. The sale took place in an apple store in Berlin. Angela can adjust the tax rate to anything she pleases.
And to create that brand, they had to pay some guy $200K to write jingles, and this transaction is also taxed. This guy works in a spaceship which has landed in San Francisco. Donald can adjust this rate to anything he pleases.
Neither of these ends can easily move to a tax haven. Everything in between happens in the financial equivalent of the cloud. It seems to me a fool's errand to argue about which bits of that cloud were in whose territory.
Anyway I will shut up now!
... because they offset all local profits to expenses incurred in licensing the brand.
> When they sell a cool computer for E2000, they have used their brand to sell it, and there tax is collected.
But tax is supposed to be collected there and it's not, because Apple accountants immediately declare all profits as debits towards AParadise, so there is $0 profit. That $2000 laptop is now sold at cost, so there is nothing to tax - unless you start taxing expenses, and good luck with that (you'll kill half the economy overnight). All profit goes to AParadise, and the European economy is now at net negative: it pays for the roads that Apple trucks use to deliver their China-made wares, it pays for the social security that frees disposable income for Euro citizens to buy laptops, and in exchange it gets a big fat $0.
The solution is to do away with the "IP licensing" regime altogether, or tax it at absurd rates to discourage these moves. Otherwise you might as well give up and turn into Somalia.
You could argue it should be higher, or lower. It's frequently adjusted.
My point is that this transaction is what certainly happened in Germany. Taxing this is very clear, transparent, and fair.
Whether or not the global empire turned a profit that quarter (maybe you bought a Samsung!), and which bits of the global empire were losing money or making money... and which bits are independent or not really independent... these are much harder to pin down, perhaps impossible. And attempting to do so (as we do now) encourages all sorts of strange behaviour, which requires lots of fancy lawyers, and can't be copied by smaller competitors. I don't know why we do this.
I'm very much not arguing for zero taxes, I do not want to live in Somalia.
I'm arguing for a tax system which doesn't reward stupid tricks --- the financial equivalent of moving your email server 100m across some border. Instead of ever stricter rules about where your server is located, we just have to get used to the idea that the cloud exists, and if the cloud is in Somalia or on the moon who cares? It's where the human beings are that matters.
> I don't know why we do this.
We do this because we know that global companies are sociopathic, and left to their own devices would never contribute to the societies they benefit from. So we try to drag them kicking and screaming back into human decency; and they try to escape in more and more creative ways. It's like asking why we pursue burglars.
> I'm very much not arguing for zero taxes
But you are; you are arguing for zero taxes for international companies, leaving only individuals and geo-restricted entities to deal with the task of paying for the cost of living in a civilized society. That's increasingly what happens in practice already, and it's a huge part of the problem. The best case in point is VAT, a regressive tax that is paid almost entirely by consumers - the same people who are also paying income tax, which is still the primary source of funds for any government. So individuals get hammered twice, while wealthy corporations stash away piles of money. That isn't right.
No, you should think of the tax man standing between the customer and the seller. Whether he takes the bank notes from the customer's hand just before, or from the seller's hand just afterwards, really doesn't matter.
The legal incidence of the tax is that the shop writes a check to the taxman, but this is not very interesting. The economic incidence is fuzzier and more interesting, and depends on the elasticities -- if the tax were made 500 euros, would the customer fork out more or would Apple collect less? This obviously depends on lots of things. It seems bizarre to me that when we discuss VAT as a consumption tax we follow neither of these things, and instead assign it to the purchaser -- but this is just some convention.
(I'm imagining sales tax not VAT for simplicity. Or that the company made the goods entirely from scratch. I think VAT will be collected on the wholesale price when the computer crosses the border from China, and then on the retail mark-up when it's sold... but no change to the moral of the story.)
By "sociopathic" you mean amoral. Like plants in your garden. The weeds will take over if you let them. Personifying them doesn't help with understanding this. But whether you pay the gardener by handing him the cash, or by pinning it to the thorn bush for him to collect, really really doesn't matter.
The issue is that VAT, in practice, ends up being a game where the purchaser hands money to the company, they hand part of it to the taxman, then immediately get most of it back anyway (by maximizing their tax claim). That's why it's assigned to the purchaser: in the end, it's the only subject that is actually out of pocket for the full amount, the company having reclaimed most of it back from the taxman. This is why governments love VAT: because it's a tax on people, not on companies. I understand why somebody arguing for flat or nonexistent taxes might like it, but it certainly is not part of the solution from the perspective of making businesses pay their fair share - the opposite, in fact. In that sense, it's pointless to use it to model anything beyond price pressure on consumers; and that is not what the problem is about.
> Or that the company made the goods entirely from scratch.
That's one of the problems of economic theory (or rather Econ 101, as we discussed earlier): everything is so simplified that it ends up bearing to resemblance with reality. Nobody makes anything from scratch anymore, and the mess that is IP law (or other rules around "services") makes it so that a company can basically decide how much of this or that tax they actually want to pay by moving entities around the world and making up enough input vat to offset most of their output vat. And of course, they want to pay barely enough to avoid jail, so in the end, the high-tax societies from which they extract most profit are actually the ones that end up out of pocket.
> The weeds will take over if you let them.
Weeds is a good parallel except it isn't, since I cannot extract money for the gardener from weeds - whereas I absolutely can extract money from companies to shore up the impact they have on the societies they benefit from. That's the problem.
This would likely have the positive side-effect of protecting smaller national brands from foreign competition, but might make the country less appealing to foreign investors, so it can't be done willy-nilly - but it's the only way. This is not unlike what China does - money goes in but it's not allowed to go out.
Similarly, the ability to borrow against assets which are domiciled in a different country is pretty much how international banking works, not a loophole.
The US created this quagmire by choosing (unlike all other modern countries) to tax profits in all territories. Then they combined this with only taxing the profits when they're repatriated.
This legislative own-goal is the root of the problem, it seems to me.
I'd love to see journalists doing a better job of explaining the failures of the tax system rather than peddling pointless outrage, but I suppose that they too are following their incentives rationally; outrage gets more clicks.
Journalists already do try and explain the failures of the tax system. For example, check out this graphic: http://www.nytimes.com/interactive/2012/04/28/business/Doubl...
The tax code is complicated and boring and people would much rather read articles with outrage directed specifically at companies.
Should I say that you're silly for getting angry at journalists for following their incentives rationally?
That logic doesn't work because people do get mad at things they view as wrong even if they are currently legal (or were legal when they happened). In this case, people thing Apple has done wrong regardless of the legality of the action.
What we mean by Apple operating in (say) Germany is these things: they make sales there, and they have employees there.
Where the letterhead says they're incorporated... isn't this just an implementation detail? It's like asking where their datacenter is located. It's in the cloud, who cares? It seems to me that making the tax laws care about this is crazy... why do we this?
Why not simply tax the things which cannot move, transactions involving real people who live in particular places?
that's already happening. Unless you're implying increasing consumption tax (VATS, GST etc), or higher income tax for individuals (payroll tax, capital gains tax etc).
The tax that's "missing" (read: dodged) is corporate income tax - which is a tax on the profits a corporation makes. But if you don't make any profits (read: hide profits using legal schemes), then what _do_ you tax?
To prevent tax-havens, you'd need to impose sanctions against doing business with any entity that is incorporated in said tax haven. But that's a nuclear option, which can cause damage beyond just stopping tax dodge (like harming the citizen of the tax-haven country, since they now cannot import food, for example).
We tax the money going from a human being into the corporation (VAT etc). And we tax the money coming out (Payroll etc).
The idea that we must tax the company's profits too (if they made any) is what seems strange to me. Because it depends then on defining which bit of a multinational made the profit, and there's no good way to do this. All it seems to do is encourage complicated schemes which the little guys can't afford. And I don't see the advantage over just taxing both ends of the pipe.
I know there are economists who disagree with me, and I don't understand their reasons. But all I'm seeing in the letter (and this thread) is personification, saying "the pipe must pay his share!" but the pipe isn't a person.
The letter wants you to compare this rate to _your_ rate of income tax and be shocked. But this is stupid, the corporation is not a human being.
For those profits to be enjoyed by anyone, they have to be paid out again as salary, or dividend, or recovered by selling shares... and these transactions are all taxed. And, of course, all of this money which is now profit was taxed when whoever bought the computer was charged VAT.
(Who signs the check to the tax man on each of these transactions is irrelevant, but another common way to mislead people for outrage. The tax man stands between you and Apple and demands VAT... and between Apple and their employee and demands income tax... how this is collected is, again, an implementation detail.)
First, they have to pay corporate income taxes in all their foreign countries. Then, they owe 9% to state of California on what’s left. Then they owe 35% to the US treasury on what’s left. Then they pay the remainder as dividends, and shareholders owe up to 10% to their stars, and then 15-20% to the federal government.
We could likely generate as much or more in tax revenues by eliminating the corporate income tax and treating individual dividend payments as regular income (taxed at 28-38% normally).
This way reinvested profits aren’t taxed, leading to more investment, which leads to more profits and more dividends. And the return on investing for individuals increases, leading to more investment. More investment means more jobs, higher productivity and higher pay.
And hundreds of thousands of corporate tax accountants can now actually be switched to work that benefits society.
You could just as well argue that anything Apple sells should be free on account of them wanting more sales, not less. And the goal of government is not to maximize corporate income. For that matter, companies don't really have a right to make more money, only to participate in a fair economy.
What they then choose to do with the money after that, and what taxes individuals pay on their own investments, are not part of Apple's tax rate.
Also, good luck getting dividends taxed as normal income rather than capital gains!
https://www.apple.com/newsroom/2017/11/the-facts-about-apple...
And the real rate is actually higher because it doesn't count the deferred taxes they owe and will pay when they repatriate.
IOW, that 24.6% absolutely does include the money they say they expect to owe when they eventually repatriate those earnings.
In the meantime, they earn returns on the money they've set aside that they "owe" for taxes they aren't actually paying, so deferring the payments is very profitable for them. They've even taken out large loans in the U.S. to pay dividends, because it was cheaper for them to borrow money and pay it back with interest than repatriate this money.
It's fair to say I love Apple, and I've been described as too ardent a defender of their, but they're being ridiculously disingenuous here, and it's clearly working, as you took that sentence from their statement at face value.
There is no law that requires US corporations to repatriate their profits; not choosing to do so means they're deferring a tax liability. What's disingenuous about that?
It's not part of Apple's rate, it's part of the rate at which the entire investment is taxed. The US taxes profits on corporate investments in the range of 35-70%, do you really think that's realistic? A business owner has a large number of countries they can just re-incorporate in to be able to keep 3/4s of their profits instead of less than half.
The profits were taxed as VAT or something on the way into Apple. They will be taxed again as income tax or something on their way out again. We are free to adjust these rates as we wish.
But trying to tax intermediate steps which seem to be largely accounting fictions (like exactly which puzzle piece of the global empire actually made that profit) seems like a fool's errand.
Just hoping that the fix isn't perceived as "going after apple". Going after existing law, tax havens, etc, is more productive.
They and their cronies write the laws.
Where governments aren't amazingly corrupt and can just bribed outright, corporations spend millions of dollars on lobbyists to get favorable legislation, and corporate exec and government official positions are revolving doors where the one goes to work for the other all the time and the one serves the interests of the other.
When government officials retire they regularly get cushy, high paying jobs at the very companies they favored while in office. They also regularly invest in the very companies their laws and policies favor.
Not to mention that high government positions and corporate executive positions are both staffed by the wealthy who look after the interests of the wealthy: to stay wealthy and become even wealthier.
As Alan Moore observed recently, "while in the West after many years of arduous struggle we are now allowed to elect women, non-white people and even, surely at least in theory, people of openly alternative sexualities, I am relatively certain that we will never be allowed to elect a man or woman of any race or persuasion who is poor."[1]
[1] - https://slovobooks.wordpress.com/2014/01/09/last-alan-moore-...
The solution is to fix the tax code problem. If the moral "rules" don't apply to _everyone_ then they are worthless.
But our congress is highly dependent on campaign contributions, and corporations (and the individuals they make rich) can contribute. The result is that the tax code tends to be skewed in various ways.
If we don't solve campaign financing, other problems are probably hopeless.
Legislation doesn't do anything if actors don't see a moral responsibility to abide by it. Case in point: There are laws against murder but murder still happens.
Does that mean we need better laws in regards to murder? Imho it rather means that some parts of society still have a "moral debt" in recognizing the value of human life.
Same pretty much applies to paying taxes. For some people it's something they do out of a sense of responsibility to the society they live in, to others it's an unfair burden they need to evade at all costs.
And because the latter behavior isn't even that criminalized, there are large sectors of society where nobody feels a moral responsibility to pay taxes. Heck in many of these circles people actually boast about how much taxes they evaded/how much money they got out of the government. In that regard, there might be quite a cultural angle to this whole issue.
One that's probably more relatable is itemized deductions for US taxpayers. I can deduct the property taxes and mortgage interest for my house from my Federal income tax. Do people take advantage of that and deduct the costs for ridiculous mansions? Sure. Shaming them for it is silly. If that exemption isn't fair, then put a cap on it.
The analogy was more to demonstrate that harsher regulation ain't always the only solution. And with something as abstract as "taxation" I think it's usually a rather bad approach because new regulations will only result in new loopholes being created, it's an endless cat&mouse game wasting a lot of resources for everybody involved.
That's why I mentioned that "moral debt". Across the whole world there exists lots of behavior that's technically not "illegal", but still frowned upon by large parts of societies, tax evasion rates among them.
Imho if you want people to follow the "rules of society", and not use every chance they get to circumvent financial legislation (which is what a lot of tax evasion effectively boils down to), then you first need to convince them that paying taxes isn't just a burden to them but also of use to them.
> I can deduct the property taxes and mortgage interest for my house from my Federal income tax.
If that's an easy and obvious process, open and evident to everybody who'd it be relevant to, then that's a-okay. Sadly that often ain't the case which is in large parts the result of the above-mentioned cat&mouse game.
I realize that my whole point might come across naive in a kinda "if people were just good we wouldn't need laws" way, but that's not at all my intention. I just think there's a real cultural rift here in terms of how seriously some people take their responsibilities towards the society they are living in, historically that's never been something you could fix through "legislation".
Nike, for example, has a company in a tax haven that owns the intellectual IP for "the swoosh". It receives payments from other Nike companies for the "right to use".
That loophole has to exist, as any company, in any country, could be an IP holder.
Exactly, that's why it's probably more useful to appeal to conscience then trying to enforce compliance through regulation.
In the case of multinational corporations that might be a lost cause, but these corporations are also just made up of real people, so there's still a very slim chance.
The other alternative would be a straightforward global taxation system, eliminating a lot of the "multinational" loopholes.
But that sounds awfully a lot like a "World Government" and people who don't like paying taxes usually ain't exactly keen on NWO sounding ideas either.
And by trying to do this we'll see creatures come out of the woodwork and previously virtue signaling personalities going strangely MIA.
Actually that makes me wonder when we'll see the first companies starting their own countries.
A public corporation doesn't have morals. It isn't a thing that thinks and feels, it's a social construct designed single-mindedly around the creation and accumulation of wealth.
You cannot shame one of these companies. You can enforce the law against them, or you can expose them to such bad PR that they change their ways.
The only "morals" internal to a corporation are their fiduciary duty to shareholders. We either need to fundamentally change the nature of corporations, or accept this and adjust our laws to compensate for immoral agents.
The only way froward is to cut regulation - to be understandable and as equally applied as possible.
But then, the issue that many businesses and corporations don’t consider fairness and moral as factor in their decisions and behavior is an urgent one.
I think it’s a big problem that leaders of a company might even be sued by shareholders for taking a morally good decision (as long as the other option is just bad in terms if moral, but still legal) that leads to even a slight loss in financial gain for the company and shareholders.
This goes for such tax avoiding schemes but also for any other decision with effects on society and nature. Being fair and sustainable in society, social and environmental aspects simply is not a goal for any company that way.
Shaming worked pushing dolphin safe fishing practices, for example.
Laws just codify society's morals. Sometimes by leading, mostly by lagging behind social norms.
Some of these accounting and financial advisory companies are also large campaign contributers with revolving doors with relevant government departments.
There is an inevitability about it, but many are either on koolaid or demonstrate an intentional naivete.
If the company position is that the right fix is to plug the loopholes then by all means be consistent about it.
Most often the companies are acting precisely as the law is intended to work, and criticism is based on a misunderstanding of what is turnover and what is profit, and how taxes should be calculated. Very commonly the complaint is that Nike (for instance) pays no corporate income tax to a country even though it sells a lot of goods there. This is a misunderstanding: the vehicle for collecting sales-based taxes is VAT, not corporate income tax. Corporate income tax is paid where the company operates.
A major thing people don't seem to understand is that within EU, it is perfectly OK for a company operating in one EU country to sell goods and services to another country. Free movement of goods and capital.
The very foundation of EU which infuriates people.
In my view, the real problem when you do not respect the spirit of the law is that you do not respect the people themselves, even if you're not doing anything illegal. And I fear that some of those people, when they learn of another case like this one in 6 months, one year or two years, could consider using violence. In the past, several terrorist groups had targeted economic or corporate symbols (the Baader group for example), so we shouldn't forget histoire. These affairs will feed those enclined to follow that path again, but against what are now documented possibilities. That is why the states across the world need to act: it is not only about getting countries' money back, it is also to avoid future violence.
A taxation race to the bottom is not what the fundamental principles of the EU are about. At best they are an unwanted side-effect.
For example, I am customer of a German branch of a French bank. The company is based in Paris and all contracts clearly state that. The actual service is provided from a German office building. That's where almost all employees responsible for the German customers are located and where you sent letters to. That company pays "income" tax according to German rules to the German government for all services provided from that building even though it's based in France. (Surely they do some tax avoidance as well but this doesn't change the point.) Thanks to the EU freedoms they could just open up an office in Germany, employ people there, and provide services.
I am also a customer at a Dutch bank based in Amsterdam and that's where the service is provided from. They don't have a presence in Germany and don't pay German taxes. Thanks to the EU freedoms they can provide services to me across the border.
(For the record: Apple does have legal entities in Germany. For every transaction they just happen to use the most tax-efficient entity of theirs without much consideration of the real-life transaction.)
As I said, the very point of EU (free movement of goods and capital) is that it is perfectly OK to have just a mailbox presence (e.g. to handle warranty claims and such, a service which is sold to the actual operating company in another EU country) and have the actual operation done somewhere else.
I take benefit of this all the time; for instance, I buy things from amazon.de which has much lower prices than domestic companies. They just pay VAT, based on sales, to my country, on my country's tax rate, but they don't operate here.
And yes, Amazon operates in Germany. They have engineering offices, customer service, and warehouses all located in Germany. Every company from Luxembourg should be able to. But taxing income derived from that is still possible under EU rules (and actually done).
Of course in recent years the EU got cold feet on the whole "four freedoms". Services never really happened. Capital is a joke - France and Germany ban foreign investments all the time and Greece had capital controls within recent memory. It's only migration the EU is really, really keen on, probably because that's the one that suits their political objectives the best.
Uh, this is demonstrably, extraordinarily untrue.
50 years ago the law said I could beat you with a mtop handle, didn't make it right.
To really fix you'd have to have all countries coordinate on tax law which makes this a really hard problem to solve in our current world especially when a lot of companies with a lot of money are able to push for legislation that's in their best short-term interest, but not necessarily the best interest of the group.
Outside of that you get what we have currently which is a stable equilibrium of governments trying to write laws to create the incentives they want and companies hiring armies of accountants to avoid paying taxes (as well as pushing for legislation changes that benefit themselves).
There are many cases where legal != moral, an that's the very point of the article.
Legality != Morality
The fix for this can't be trying to appeal to their morals. It would have to be something else that just limits the legal choices.
Edit: If you disagree, are you saying that shaming them into not doing this solely on some moral compass is the right fix? Does that scale?