I can't downvote, but I believe the HN sentiment is that you should contribute to the conversation or not post at all. Your post is pretty much a "+1" in a code review (not helpful).
During the height of the Iraq/Afghanistan wars, for every dollar you paid in tax, 50 cents went to buying bullets [edit: incorrect?]. Let's just say you and I disagree on whether or not people should be paying more or less tax. I respect your dissenting opinion and don't believe that mine is objectively superior, but your use of "dirty" and "bastard" implies that the respect and humility is not mutual.
Sorry, looks like it is +/- 50% of 'discretionary spending'.[1] Wikipedia adds: "The U.S. Department of Defense budget accounted in fiscal year 2010 for about 19% of the United States federal budgeted expenditures and 28% of estimated tax revenues. Including non-DOD expenditures, military spending was approximately 28–38% of budgeted expenditures and 42–57% of estimated tax revenues." So, more than I'd like, but also significantly less than I claimed. My bad.
But the point I was fumbling to make is that there are a lot of people who minimize their tax and honestly believe that they are doing the morally right thing in doing so.
I've become even more skeptical of "the government needs more money, think of the children" after learning a bit more about how the sausage is made in The Box (about containerization). Subsidies and the games that go around them create a world that incents gaming the government and regulatory capture. If you think $59 billon wouldn't attract more sharks, you're really not paying attention.
Everyone in my family except me works for the government, and most of my friends do as well (I was born and raised in DC). Lots of them (the friends) are contractors who work from home, smoking weed all day, literally working 30 minutes per nine hours of billable time. I have friends who were hired (and paid six-figures) but not even given any work for their first year and a half. Everyone constantly talks about how easy their jobs are. My sister works in a Diblert-esque office where nobody actually knows what their role is or what specifically they are supposed to be doing. My brother got his job through nepotism.
Government lives in an alternate reality without the pressures and incentives of free market competition. Ninety-nine percent of its revenues come, at the end of the day, from people robbed at gunpoint (try not paying your taxes and then refusing to go to be locked in a cage). It doesn't operate at all similarly to how small businesses operate. And no, I don't have a better idea.
My point is that I'm all for people paying less tax because I think there's a decent probability that that's literally more beneficial than paying more. The government is like a fat pig. Giving it more food doesn't help. Giving it less (to a point) forces it to operate more efficiently.
You give examples of contractors you personally know that rob the government and then go on to say the govt steals money from its people and wastes it. You say the govt is a fat pig that needs less money to operate more efficiently, but fail to see that means your friends will be out of a job if that were true.
Seems like every time there is a story about govt waste, there is a greedy private company that was contracted to do the work. They charge rates only the govt can stomach to pay, because their choices are limited to a small number of approved companies in the procurement process. Who's fault is that?
I've lived in DC too and have friends that work in and around the government. Yes, it is inefficient and bureaucratic. Yes, the work culture is Office Space. Everyone wants the govt to save money, but no one wants to vote themselves into unemployment.
> You say the govt is a fat pig that needs less money to operate more efficiently, but fail to see that means your friends will be out of a job if that were true.
I don't fail to see that at all. It would be better if some of the people I used as examples were out of work, and I am all for that, even though I personally would be worse off for it.
I'm also a supporter of totally Open Borders... I'm not trying to benefit from unfair systems.
I worked for the Federal government for a number of years, and those employees are not stealing anything. It is how the government works. It is the most wasteful, incompetent organization I have ever had the misfortune of working for. I too fully support anything companies and people can do, within the law, to avoid paying taxes because the Federal government is capable of living on much, much less. They just refuse to do it.
This is a subject in dire need of some non-partisan, fact-based reporting. This piece is not remotely close.
I'm not a tax lawyer, but as I understand the recent spate of "tax inversions," that is when a US company buys a foreign company and make the non-US entity the new HQ are much less of a dodge than is often reported.
My understanding is that the US company still pays the full US tax rate (which is the highest in the world) on all sales in the US. They then pay the prevailing tax rates in the countries in which they operate.
If they didn't have the foreign entity, they would have to pay the full US rate on sales they make in China, Spain, and South Africa—all of which have lower rates.
In that light, Apple isn't dodging taxes, rather they're just not additional taxes on sales that happen outside the US. There's still an argument that can be made that they should still pay the US, but I think it strikes people as less fair. So instead we get amorphous reports designed to stoke fear, uncertainty, and doubt with regard to these companies.
If nothing else, the reporting should be clear that the US wouldn't be getting all that money back, just the portion that exceeds the tax rate in the various countries they operate in.
Like I said, I'm no lawyer, or even accountant, but this piece is garbage from a logical perspective.
I also think your parent overplayed that one, but you are conflating the basic tax schedule with the actual taxes paid. There is a big difference, which is the point of the article.
"Out of the 34 countries in the OECD, America ranks first with a 39.1 percent corporate tax rate, compared to an OECD average of 24.1 percent. The OECD figure is what’s called the statutory rate, meaning the base rate applied to corporate profits."
There is a parallel for US persons living abroad. The US is one of the few countries in the world which expects to collect income tax from its nonresident citizens. As in the corporate world, this makes Americans less competitive in the global marketplace, because people from almost any other country take home a greater fraction of their income.
To some people in the US this is a desirable outcome, because anyone doing business overseas is a dirty tax dodger and ought to come back home.
> There is a parallel for US persons living abroad. The US is one of the few countries in the world which expects to collect income tax from its nonresident citizens. As in the corporate world, this makes Americans less competitive in the global marketplace, because people from almost any other country take home a greater fraction of their income
In countries with higher incomes taxes than the US (which seems to be most first world countries...), how come the foreign earned income exclusion and the foreign tax credit do not result in US workers in such countries paying the same total income tax as that country's native workers?
In some scenarios you're right, for people who live in countries with higher income tax than the US. But there are several first-world countries which do not fit that description, which if you make 200K USD in 2015 probably includes Switzerland, Japan, Oman, Hong Kong, Singapore, and Russia.
That's ignoring a huge number of not-so-first-world countries which are nonetheless nice places to work, plus countries like Greece where the actual income tax paid by local people is much less than the official rate.
When I lived in NL I rarely had to pay anything to the USG. The problem was in creating the 70+ page document that the IRS required every year. For that I had to hire someone and pay them close to 1000eu every year.
The problem for US citizens in developed countries WRT to the US taxes is not the taxes themselves. Rather it is the burden of complying with the law, and the cost of finding competent tax preparers knowledgeable in both US tax law, and local tax law.
Everyone's circumstances are different. So there is no single/repeatable method for resolution.
Tax on sales? Are you sure you're not confusing sales tax with other corporate taxes? Sales tax in the US is certainly not the highest in the world. No idea about other taxes.
This is such a big deal, and I feel like we are so powerless against it.
If it was easy for governments to get the money owed, it would allow them to cash in votes for finally lowering taxes (in France especially...).
The fact that they did not succeed so far is proof that we need the system to evolve against these abuses. My only way of going in that direction is to scrutinize officials' campaigns and vote for the ones who want to tackle that problem, but that's so little it feels cowardly.
I disagree with your opinion, but tossing an upvote because it seems you were downvoted and I can't tell why other than some people disagreed with you.
I'm curious though, how much of this offshore cash was earned in the US?
For example although Google's advertising algorithms and engineering may be largely based in the US, its advertising revenues come from all over the world. Generally it's required to have a presence in the places where it operates, with revenue accounted for there and taxed by the local governments.
Are these people arguing that that revenue needs to end up in the US and be taxed there too instead of taxing it once then investing it elsewhere (like treasuries)?
Anyhow, the companies in question aim to increase their profit as much as possible within the law and are required to do so [0] by said law. If people don't like it, change the law.
I've heard the "change the law argument" a lot but there is a problem. The politicians are bought and paid for, people like the Koch brothers write the laws. Or their lobbyists do. So the laws are rigged in favor of corporations. Didn't use to be like this but it is now, it's crazy how skewed things are for big money.
"Change the law" assumes that the politicians are working for all of us. They aren't.
The tech companies benefit hugely from being based here. If you don't believe that then please recreate Silicon Valley in another country and show me how well that works (spoiler, been tried, didn't work). So long as they benefit from being based here they should pay their taxes.
Source: CEO of a Silicon Valley company that is 18 years old and has paid every penny of tax owed without whining and without trying to off shore it or hide it in any way.
There's an implicit assumption in these articles that the US Government should maximize its revenue by revising tax law to capture these funds. That's not obviously true.
If Apple provides more value to US citizens with those funds than the US Government would, then these tax management tactics are beneficial to US citizens.
I don't think I understand what the complaint is. Let me see if I understand this right:
Tech is developed in the US, and then licensed to a subsidiary in a different country, for a fee. The US entity pays taxes on the income produced by these fees. Then the subsidiary sells products based on this tech, and pays taxes on the profits in the country where this happens.
Is the complaint that the fee charged to its subsidiaries too low? The article itself addresses that by saying that the fee is set in an "arm's length" transaction.
Or is the complaint something much stronger, namely that Apple should pay taxes on all the income produced everywhere in the world? If so, what is the reasoning behind that? Is it because the software is written and hardware is designed in the US?
The issue is more that companies should pay US taxes on profits made in the US. However they can use IP to move those profits to countries with lower tax rates.
The way it should work is:
- Apple makes an iPhone for $200 in China
- Apple sells the iPhone in the US for $600
- Apple pays US taxes on the $400 profit
The way it actually works is:
- Apple creates Apple of Ireland as a PO Box in Ireland
- Apple gives one of its iPhone patents to Apple of Ireland
- Apple makes an iPhone for $200 in China
- Apple sells the iPhone in the US for $600
- Apple pays $400 to Apple of Ireland to "license" the patent
- Apple pays $0 of US taxes because it sold the iPhone "at cost"
- Apple of Ireland pays negligible taxes on the $400 profit due to low tax rates
Not quite. Apple's Irish entity owns the IP for non-US sales only. US sales fall under Apple Inc and are not subject to IP transfer, royalty or licensing and therefore attract the full tax rate. Minus whatever incentives apply of course.
What's actually happening is that Apple (and other companies using this system) are paying significantly less tax in countries outside the US where they operate.
This arrangement arguably benefits the US government, as it makes US-based companies stronger at the expense of the rest of the world's tax revenues.
It's worth pointing out that Apple's overall operation in Ireland is significantly more than a PO Box. Like European headquarters with 4000 employees (expanding soon to 5000) kind of significant.
From the article itself: "a company sells or licenses its foreign rights for intellectual property developed in the United States to a subsidiary in a country with lower tax rates."
Note the 'foreign rights' part. This has nothing to do with iPhones sold in the US.
This is not true at all. The correct way of stating matters would be :
If Apple paid out all of it's $181B to shareholders, it would owe $ about half the claimed amount in US taxes. Apple however has not made this decision not to pay out to shareholders, and it would be extremely impractical to attempt to force it.
Note that Apple hasn't actually paid out this money to shareholders, so it probably will do so at some point in the future, and still pay these taxes. These taxes are deferred, not "avoided". It's just doing so at a slower rate (and probably waiting until negotiations with the IRS yield a better deal)
If it was outlawed to hold this tax overseas, Apple would still not pay it out to shareholders. Instead it would simply invest it, in overseas real estate, overseas data centers, overseas financial holdings or whatever. It seems to me very unlikely that it would make a different decision (not pay out vs. pay out) simply because the US govt. would try to force them.
Or worse, Apple would do what companies did before WWII. Never pay out profits. Instead have a deal that roughly amounts to this : "if you have $xx of apple stock, you get a director position within Apple, which comes with an expense account, free disneyworld access, a yacht, ..." and never pay out anything (and then have 10 tiers of this deal ...). And yes, that is legal.
43 comments
[ 4.9 ms ] story [ 85.7 ms ] threadOr maybe better any downvoters care to justify Apple's behaviour?
Link?
[1] https://www.nationalpriorities.org/campaigns/military-spendi...
But the point I was fumbling to make is that there are a lot of people who minimize their tax and honestly believe that they are doing the morally right thing in doing so.
Government lives in an alternate reality without the pressures and incentives of free market competition. Ninety-nine percent of its revenues come, at the end of the day, from people robbed at gunpoint (try not paying your taxes and then refusing to go to be locked in a cage). It doesn't operate at all similarly to how small businesses operate. And no, I don't have a better idea.
My point is that I'm all for people paying less tax because I think there's a decent probability that that's literally more beneficial than paying more. The government is like a fat pig. Giving it more food doesn't help. Giving it less (to a point) forces it to operate more efficiently.
Seems like every time there is a story about govt waste, there is a greedy private company that was contracted to do the work. They charge rates only the govt can stomach to pay, because their choices are limited to a small number of approved companies in the procurement process. Who's fault is that?
I've lived in DC too and have friends that work in and around the government. Yes, it is inefficient and bureaucratic. Yes, the work culture is Office Space. Everyone wants the govt to save money, but no one wants to vote themselves into unemployment.
I don't fail to see that at all. It would be better if some of the people I used as examples were out of work, and I am all for that, even though I personally would be worse off for it.
I'm also a supporter of totally Open Borders... I'm not trying to benefit from unfair systems.
The rest of the budget is SS, healthcare, defense, interest.
Lazy govt workers are a tiny portion of the federal budget.
http://www.peterleeson.com/Better_Off_Stateless.pdf
I'm not a tax lawyer, but as I understand the recent spate of "tax inversions," that is when a US company buys a foreign company and make the non-US entity the new HQ are much less of a dodge than is often reported.
My understanding is that the US company still pays the full US tax rate (which is the highest in the world) on all sales in the US. They then pay the prevailing tax rates in the countries in which they operate.
If they didn't have the foreign entity, they would have to pay the full US rate on sales they make in China, Spain, and South Africa—all of which have lower rates.
In that light, Apple isn't dodging taxes, rather they're just not additional taxes on sales that happen outside the US. There's still an argument that can be made that they should still pay the US, but I think it strikes people as less fair. So instead we get amorphous reports designed to stoke fear, uncertainty, and doubt with regard to these companies.
If nothing else, the reporting should be clear that the US wouldn't be getting all that money back, just the portion that exceeds the tax rate in the various countries they operate in.
Like I said, I'm no lawyer, or even accountant, but this piece is garbage from a logical perspective.
not really.
" the Congressional Research Service put the U.S. effective rate at 27.1 percent, slightly lower than the OECD average of 27.7 percent."
( source : http://www.politifact.com/punditfact/statements/2014/sep/09/... ).
Actual corporate taxes paid are below the average developed country
"Out of the 34 countries in the OECD, America ranks first with a 39.1 percent corporate tax rate, compared to an OECD average of 24.1 percent. The OECD figure is what’s called the statutory rate, meaning the base rate applied to corporate profits."
To some people in the US this is a desirable outcome, because anyone doing business overseas is a dirty tax dodger and ought to come back home.
In countries with higher incomes taxes than the US (which seems to be most first world countries...), how come the foreign earned income exclusion and the foreign tax credit do not result in US workers in such countries paying the same total income tax as that country's native workers?
That's ignoring a huge number of not-so-first-world countries which are nonetheless nice places to work, plus countries like Greece where the actual income tax paid by local people is much less than the official rate.
The problem for US citizens in developed countries WRT to the US taxes is not the taxes themselves. Rather it is the burden of complying with the law, and the cost of finding competent tax preparers knowledgeable in both US tax law, and local tax law.
Everyone's circumstances are different. So there is no single/repeatable method for resolution.
If it was easy for governments to get the money owed, it would allow them to cash in votes for finally lowering taxes (in France especially...).
The fact that they did not succeed so far is proof that we need the system to evolve against these abuses. My only way of going in that direction is to scrutinize officials' campaigns and vote for the ones who want to tackle that problem, but that's so little it feels cowardly.
For example although Google's advertising algorithms and engineering may be largely based in the US, its advertising revenues come from all over the world. Generally it's required to have a presence in the places where it operates, with revenue accounted for there and taxed by the local governments.
Are these people arguing that that revenue needs to end up in the US and be taxed there too instead of taxing it once then investing it elsewhere (like treasuries)?
Anyhow, the companies in question aim to increase their profit as much as possible within the law and are required to do so [0] by said law. If people don't like it, change the law.
[0]: https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.
"Change the law" assumes that the politicians are working for all of us. They aren't.
The tech companies benefit hugely from being based here. If you don't believe that then please recreate Silicon Valley in another country and show me how well that works (spoiler, been tried, didn't work). So long as they benefit from being based here they should pay their taxes.
Source: CEO of a Silicon Valley company that is 18 years old and has paid every penny of tax owed without whining and without trying to off shore it or hide it in any way.
If Apple provides more value to US citizens with those funds than the US Government would, then these tax management tactics are beneficial to US citizens.
Tech is developed in the US, and then licensed to a subsidiary in a different country, for a fee. The US entity pays taxes on the income produced by these fees. Then the subsidiary sells products based on this tech, and pays taxes on the profits in the country where this happens.
Is the complaint that the fee charged to its subsidiaries too low? The article itself addresses that by saying that the fee is set in an "arm's length" transaction.
Or is the complaint something much stronger, namely that Apple should pay taxes on all the income produced everywhere in the world? If so, what is the reasoning behind that? Is it because the software is written and hardware is designed in the US?
The way it should work is:
- Apple makes an iPhone for $200 in China
- Apple sells the iPhone in the US for $600
- Apple pays US taxes on the $400 profit
The way it actually works is:
- Apple creates Apple of Ireland as a PO Box in Ireland
- Apple gives one of its iPhone patents to Apple of Ireland
- Apple makes an iPhone for $200 in China
- Apple sells the iPhone in the US for $600
- Apple pays $400 to Apple of Ireland to "license" the patent
- Apple pays $0 of US taxes because it sold the iPhone "at cost"
- Apple of Ireland pays negligible taxes on the $400 profit due to low tax rates
What's actually happening is that Apple (and other companies using this system) are paying significantly less tax in countries outside the US where they operate.
This arrangement arguably benefits the US government, as it makes US-based companies stronger at the expense of the rest of the world's tax revenues.
From the article itself: "a company sells or licenses its foreign rights for intellectual property developed in the United States to a subsidiary in a country with lower tax rates."
Note the 'foreign rights' part. This has nothing to do with iPhones sold in the US.
If Apple paid out all of it's $181B to shareholders, it would owe $ about half the claimed amount in US taxes. Apple however has not made this decision not to pay out to shareholders, and it would be extremely impractical to attempt to force it.
Note that Apple hasn't actually paid out this money to shareholders, so it probably will do so at some point in the future, and still pay these taxes. These taxes are deferred, not "avoided". It's just doing so at a slower rate (and probably waiting until negotiations with the IRS yield a better deal)
If it was outlawed to hold this tax overseas, Apple would still not pay it out to shareholders. Instead it would simply invest it, in overseas real estate, overseas data centers, overseas financial holdings or whatever. It seems to me very unlikely that it would make a different decision (not pay out vs. pay out) simply because the US govt. would try to force them.
Or worse, Apple would do what companies did before WWII. Never pay out profits. Instead have a deal that roughly amounts to this : "if you have $xx of apple stock, you get a director position within Apple, which comes with an expense account, free disneyworld access, a yacht, ..." and never pay out anything (and then have 10 tiers of this deal ...). And yes, that is legal.