Print 19 comment(s) - last by Nephiorim.. on May 22 at 5:28 AM

He's proposing that U.S. rates be lowered

Apple CEO Tim Cook will appear before Congress this week to offer proposals regarding corporate tax laws. 

Cook, who is testifying for the first time this Tuesday, will present proposals that discuss companies bringing back foreign earnings to the United States. Furthermore, he's suggesting that this money be invested in research and development and creating jobs in the U.S. 

Large companies like Apple have come under fire for dodging heavy tax payments by profit shifting. For example, Apple made an estimated £6B ($9.50B USD) in Britain last year, but paid only £10M ($15.8M USD) in taxes.  Apple was able to do this because of the British tax code's rule that largely exempts companies based in Ireland from paying British taxes.

In April 2012, The New York Times accused Apple of dodging millions of dollars in taxes in California and 20 other U.S. states (and dodging billions of dollars in taxes worldwide) by routing its money through other locations. Even though Apple is based in Cupertino, California, it put an office in Reno, Nevada which allows Apple to escape California's 8.84 percent tax rate for Nevada's 0 percent. Apple has also sold digital content from low-tax countries anywhere around the world, and has used the "Double Irish With a Dutch Sandwich," which allows Apple to cut taxes by directing profits through low-cost Irish subsidiaries, the Netherlands and the Caribbean.

Aside from that, Apple manufactures its iPads, iPhones and iPods in China -- as many electronics companies do. 

But Apple isn't alone in doing this. Google recently came under fire for dodging about $1.6 billion USD (£1 billion) in taxes by way of the island Bermuda. Google sent £6 billion through Bermuda over the course of last year, which halved its 2011 tax bill. In fact, Google funneled 80 percent of its global revenue through the island and ended up paying about £1 billion less to the government.

Now, U.S. Congress is having a Senate hearing Tuesday to talk about companies that shift profits overseas in an effort to skip large tax bills -- and Cook will be there to share his thoughts.

“If you look at it today, to repatriate cash to the U.S., you need to pay 35 percent of that cash. And that is a very high number,” Cook said. “We are not proposing that it be zero. I know many of our peers believe that. But I don’t view that. But I think it has to be reasonable.”

A JPMorgan report said over 1,000 U.S. companies keep $1.7 trillion in earnings over seas. 

Source: The Washington Post

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death and taxes
By Motoman on 5/20/2013 1:57:52 PM , Rating: 3
First of all...something something something death to Apple.

Now that that's out of the way, don't point fingers just at Apple on this issue. All corporations behave this way.

Secondly...all corporations behave this way because they HAVE TO.

If you're in charge of a publicly-traded corporation, it is your DUTY to your stockholders to maximize revenue and minimize expenses. Taxes are an are beholden to your shareholders to minimize them. Within legal boundaries, of course.

And therein lies the rub: none of these corporations are doing anything illegal. All corporations play these same games with their money because the existing tax laws create the game. The corporations are simply following the law - to the letter - in order to minimize the amount of tax they have to pay. Legally.

As I've stated before...if you don't like what the corporations are doing, stop pointing your fingers at them. It's not their fault. If said corporations *didn't* play these games with their money in order to minimize the amount of tax they have to pay, the shareholders would sue them and get all the executives and BOD thrown out on their a$$e$. They can either play the game, or they can lose their jobs and get sued. There's no middle ground.

So if you want this game to change...change the tax law. Period.

RE: death and taxes
By BRB29 on 5/20/2013 2:06:40 PM , Rating: 5
I hate to agree with Tim Cook, but he is right. These current tax laws does not promote growth. If you want to keep everything in the US, you are nowhere near competitive.

RE: death and taxes
By ERROR666 on 5/20/2013 2:21:11 PM , Rating: 2
This has nothing to do with what Cook says. He makes it look like it's a voluntary decision the company makes. It is not. And you cannot expect any company to make a decision to pay extra taxes just because they feel so. They will only pay it if they are required by law, and there's no other way to escape it.
What he's trying to do right now is to negotiate. Good for him that he's in a position where he can negotiate.

RE: death and taxes
By BRB29 on 5/20/2013 2:29:06 PM , Rating: 2
If there is lower taxes, it is possible for companies to actually stay in the US and still make comparable profits. It depends on comparing the overall costs. When you shift your labor and products overseas, you have to pay more for logistics and shipping along with other expenses. Quality is arguably lower and time to market is slower.

I'm not saying all companies can, but some. The difference between paying people $1/hour vs $10+/hr is quite large to make up but it is possible depending what % of TC is labor.

RE: death and taxes
By maugrimtr on 5/21/2013 11:01:31 AM , Rating: 2
The US and Britain keep rehashing the old complaints without FIXING THEIR TAX CODE. US transfer pricing underpins how US companies can move patents/licenses offshore for cheap. British tax treaties allow the exemption of companies in other countries from HM Revenue liability.

Ireland? It sets a 12.5% rate of corporation tax for everyone operating an office in the country, sets a lower rate in special agreements to "buy" jobs (e.g. Apple employs 4000 there - huge number for a small nation!) and then does...absolutely nothing out of the ordinary.

Ireland can't change its laws to solve another's country's problems outside of its jurisdiction. The problem IS everyone else's laws which are incapable of enforcing a tax liability on profits moving through their jurisdiction.

Ireland also won't change the laws because they depend on it to attract jobs. In small nations, the pittance from corporate taxes is nothing - the economic benefit of the attracted jobs is absolutely everything.

RE: death and taxes
By amanojaku on 5/20/2013 4:00:17 PM , Rating: 3
I hate to agree with Tim Cook
Why? What has Tim Cook done that you find him fundamentally disagreeable? From what I know of him, he did a hell of a job streamlining Apple's operations and expenditures, which is one of the reasons he was chosen to replace Jobs (whom I hated). Sure, Cook is steeped in the Apple Juice, but I honestly hope the guy turns Apple into a respectable company, not just a profitable one.
These current tax laws does not promote growth. If you want to keep everything in the US, you are nowhere near competitive.
Agreed. I think the total federal tax rate on corporations and individuals should top out at 15%, with a minimum rate of 5%. There should be no havens, no deductions, no credits, no refunds, no nothing. With the average American making $36,000 a year (some are way less, others are way more) and 300M Americans living in this country, a 5% tax across the board would net $540B in individual income taxes alone, not including corporate income taxes. Since the rich and corporations earn millions, if not billions, tax revenues would easily hit several trillion with a max rate of 15%.

According to the Treasury, the federal government received the following in 2010:

Individual income taxes - $899 billion
Corporation income taxes - $191 billion

If the federal government was smaller (focusing on the military, foreign relations, and collecting taxes),and more responsibilities placed onto the states (environment, economic stability, business regulation, subsidies, etc...), we would simply choose to live in states that get it right tax-wise and policy-wise. Maybe I'm just naive...

RE: death and taxes
By Samus on 5/20/2013 11:39:16 PM , Rating: 2
I agree. Apple couldn't have a more level-headed leader than Tim Cook. It's often hard to believe he even works at Apple, but its just because we were all so neutralized by the distortion field for so long we just got used to Apple treating its customers (and opponents) like crap.

RE: death and taxes
By Diablobo on 5/21/2013 1:52:56 AM , Rating: 2
Not all of the 300M you are using for your incorrect population total are workers. The actual population is 311M, but not all of them work. Only about 65 percent of the population are workers.

Your proposed tax rate is too low because it doesn't yield the numbers you think.

If the federal government is going to shift all its burdens on to the states, then they are going to have to raise their taxes, so the lower federal rates would be cancelled out and the total tax bill for the individual would be the same or higher.

The idea of shifting all the burden of governance to the states has been tried before. It was called the Articles of Confederation and it was a miserable failure.

RE: death and taxes
By JasonMick on 5/20/2013 2:27:10 PM , Rating: 2
And therein lies the rub: none of these corporations are doing anything illegal. All corporations play these same games with their money because the existing tax laws create the game. The corporations are simply following the law - to the letter - in order to minimize the amount of tax they have to pay. Legally.

The root problem is that laws (and politicians) in the U.S. are for sale to the highest special interest buyer.

Combined the cost of elections in the U.S. for Senate (~$800M USD spent by the winners alone based on 2010 costs) House (~$700M USD, winners alone), and President (~$1B USD between the winner and loser) is approaching $3B USD. The cost of House races, for example has risen nearly ten-fold in a decade.

And recent studies show that for ever $1 USD from a special interest, you get $240 USD in perfectly legal payouts/grants/tax exemptions/and other kickbacks from the feds. Because the government writes the laws. Thus every company has a strong incentive to engage in this kind of behavior, you could argue it's a duty to shareholders.

Based on the $3B and 1:240 ratio, that indicates that the feds will be diverting nearly a trillion dollars into the pockets of special interests, financed by higher taxes on the middle class and SMBs.

Until there's serious campaign reform, this will only get worse.

After all, the cost of elections (and payouts) have increased ten-fold over the last decade -- imagine where we'll be in 2023!! Hurray for dumbocracy!

RE: death and taxes
By retrospooty on 5/20/2013 2:38:09 PM , Rating: 4
"The root problem is that laws (and politicians) in the U.S. are for sale to the highest special interest buyer."

You are absolutely right, but its really more of a "human" issue than a U.S. issue. Its not really any better anywhere else... and if you have an example of it working elsewhere, I will show you an example of a politicians that have hidden it better.

RE: death and taxes
By Nephiorim on 5/20/2013 3:21:32 PM , Rating: 2
A multi party system would work better, as the 'investment cost' rises exponentially due to more possible winners. It also helps break stalemates. Still plenty of flaws left in multi-party democracy, but it's not as divisive as what I perceive the two party system to be.

RE: death and taxes
By retrospooty on 5/20/2013 6:39:27 PM , Rating: 2
I dunno... It makes sense, but really what we have isnt a 2 party system. Its one party, acting as 2 with the intent to divide and keep us bickering over the small stuff while they rob us blind. Adding a 3rd party to that doesnt fix the underlying problems that people are in charge. It is what always has been, human nature.

RE: death and taxes
By Nephiorim on 5/21/2013 3:22:56 AM , Rating: 2

We have roughly 10 parties to choose from. These more or less cover the entire political spectrum, progressive to conservative and left to right wing. Majority coalitions are formed and they govern based on the consensus they reach on principles and major issues (gay rights, abortion, what to do about the housing market, health care reform, education, etc.). Still has its flaws but from a voter standpoint having more choice allows for a better fine-tuning in what you vote for, so to speak. And here I thought most Americans were all for having freedom of choice ;). Technically you do have three parties though, but the third one doesn't really count in my book. Roseanne Barr for president? Hard to take that seriously.

Anyhow, I sense a deep distrust of government in general in your post. Doubt any political system would make you happy, but do correct me if I'm wrong in making that assumption :)

RE: death and taxes
By retrospooty on 5/21/2013 8:21:51 AM , Rating: 2
Not so much a distrust in "govt" as it is just realizing human nature. Those with power tend to take advantage. It's been that way since civilization began. Longer really, we know how other primates act, usually the stronger take advantages over the weaker. There isnt anything you can do about it, its just part of being human.

RE: death and taxes
By Nephiorim on 5/21/2013 8:40:44 AM , Rating: 2
Democracy exists to protect minorities from the majority, so everyone can be free. What you're talking about can be "solved" by the appropriate checks and balances. Government should be by the people and for the people, with people having the power to hold government accountable (and not only through voting once per 4 years). Instead of losing all faith in government and saying oh it's just human nature, why not focus on improving on those checks and balances? If people are going to get all defeatist about it and say well that's nature then we'll soon descend into anarchy once more. Easy tie-in to the American right to bear arms would be possible here, but I don't want to completely derail the convo ;)

RE: death and taxes
By rountad on 5/21/2013 10:51:39 AM , Rating: 2
A democracy does no such thing. It is majority rule.

What we have is a republic (at least we're supposed to...) that protects the rights of the minority.

How badly perverted our system has become is another topic of conversation.

RE: death and taxes
By Nephiorim on 5/22/2013 5:28:57 AM , Rating: 2
You're right. I should've said democracies are allowed to exist only when minority rights are protected. Once these rights get trodden on, well, I need only refer to Germany in the decade leading up to WW2. In the case of the USA these minority rights are guaranteed by the Bill of Rights. Rest of the post still stands.

RE: death and taxes
By FITCamaro on 5/20/2013 3:35:18 PM , Rating: 2
Even the entire middle class doesn't pay as much in taxes as all of the very wealthy combined. So don't pretend it is the middle class paying for corporate loopholes. The middle class has thousands of loopholes of its own that the smart use to not pay taxes.

All sides game the system to their benefit. Everyone wants lower taxes on themselves and higher taxes on the other guys.

That's why we should have a Fair Tax.

By fteoath64 on 5/21/2013 4:40:28 AM , Rating: 2
Apple just wanted a smaller tax slice so they can bring in the foreign money and invest more on US soil. This would be a good thing for America. You can see Apple raising $100B in the market recently. Then you ask, why do they do that if they has tens of billions "in cash equivalents"??. Oh, those tens of billions are overseas and liable to this high tax if moved back!. So they cannot really touch those without diluting its value ....

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