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Post by Sapphire Capital on Nov 8, 2013 5:50:36 GMT 4
for those planning to play in the big league: Apple's International Tax Planning J. Richard (thingy) Harvey Villanova University School of Law and Graduate Tax Program October 1, 2013 Villanova Law/Public Policy Research Paper No. 2013-3061 Presentation to the Villanova School of Law Tax and Corporate Law Societies on Wednesday, October 26, 2013. Abstract: In May 2013 the US Senate Permanent Subcommittee on Investigations held a hearing surrounding Apple Inc.’s international tax planning. As the first expert witness at the hearing, Prof. Harvey only had 10 minutes to summarize his thoughts on Apple’s tax planning. Thus, he prepared this slide deck for a 90 minute presentation to the Tax and Corporate Law Societies of Villanova School of Law. The slides summarize (i) the results of Apple’s international tax planning, (ii) international tax planning basics, (iii) and various tax policy options. Number of Pages in PDF File: 34 source: papers.ssrn.com/sol3/papers.cfm?abstract_id=2342319 |
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Post by lairezippert on Nov 15, 2013 8:00:41 GMT 4
Tech giant Apple is making the news with another case of massive tax evasion; Italy claims that Apple has shielded 1 billion euros ($1.34 billion US) in profits from being taxed in 2010 and 2011. First reported by Italian magazine L’Espresso (http://espresso.repubblica.it/affari/2013/11/13/news/apple-sotto-inchiesta-a-milano-per-frode-fiscale-di-oltre-un-miliardo-1.141085), the case has been confirmed by Reuters (http://www.reuters.com/article/2013/11/13/us-apple-italy-tax-idUSBRE9AC0RW20131113)through two judicial sources: Apple’s Italian operation is said to have underreported its taxable income by €206 million in 2010 and €853 million in 2011.
The complaint alleges that the income was booked to Apple’s Irish holding company, but should have been reported to Italian tax authorities as income derived from activities in Italy.
The investigation includes two unnamed middle managers from the Cupertino, Calif.-based company. Apple has reportedly challenged the seizure order that followed a search of the company’s headquarters in Milan, and Italian appeals courts will take up the question of its validity. A timeline for that action was not specified. [http://appleinsider.com/articles/13/11/13/italian-government-levels-tax-fraud-accusation-at-apple-raids-local-hq]
This tax fraud in Italy dwarfs the amount of tax revenue that Apple has cheated the United States out of, however; the Senate Permanent Committee on Investigations revealed this May that Apple has structured its operations so that the vast majority of the company’s US profits are reported in Ireland through a strange loophole which allows shell companies to be incorporated in Ireland, and yet not be “tax resident” there (or anywhere else).
A complex system of inter-company transactions ensures that the majority of the “profits” remain with “Apple Operations International” while the national “subsidiaries” of Apple (including its American subsidiary) report lower profit margins and pay lower taxes. [http://www.reuters.com/article/2013/11/13/us-apple-italy-tax-idUSBRE9AC0RW20131113] Oh, and Apple also negotiated a special sweetheart deal with the Irish government over taxation, lowering its tax rate to a shocking 2 percent or less every year since 2003.
Using information provided by Apple, the subcommittee found that the company used subsidiaries in Ireland to funnel about $74 billion in worldwide income away from the U.S. The three units involved — Apple Sales International, Apple Operations Europe and Apple Operations International — were incorporated in Ireland but not tax resident anywhere.
The structure allowed Apple to pay an effective tax rate of 2 percent or less since 2003, well below Ireland’s corporate tax rate of 12.5 percent. Perhaps the most d**ning part for Ireland came in the explanation of the low rate in the subcommittee’s report: “Apple told the Subcommittee that, for many years, Ireland has provided Apple affiliates with a special tax rate through negotiations with the Irish government.” [http://www.bloomberg.com/news/2013-05-26/apple-s-tax-dodge-should-prompt-rethink-in-ireland.html]
You can watch Apple’s testimony before the Senate subcommittee (http://www.hsgac.senate.gov/subcommittees/investigations/hearings/offshore-profit-shifting-and-the-us-tax-code_-part-2) (if you are interested in watching over 5 and a half hours of testimony, that is). Here is what Senator John McCain (R-AZ), the Subcommittee Chairman and Ranking Member, had to say about the case to the media:
“Apple claims to be the largest U.S. corporate taxpayer, but by sheer size and scale, it is also among America’s largest tax avoiders,” said Sen. McCain. “A company that found remarkable success by harnessing American ingenuity and the opportunities afforded by the U.S. economy should not be shifting its profits overseas to avoid the payment of U.S. tax, purposefully depriving the American people of revenue. It is important to understand Apple’s byzantine tax structure so that we can effectively close the loopholes utilized by many U.S. multinational companies, particularly in this era of sequestration.”
Sen. McCain added: “I have long advocated for modernizing our broken and uncompetitive tax code, but that cannot and must not be an excuse for turning a blind eye to the highly questionable tax strategies that corporations like Apple use to avoid paying taxes in America. The proper place for the bulk of Apple’s creative energy ought to go into its innovative products and services, not in its tax department.” [http://www.hsgac.senate.gov/subcommittees/investigations/media/subcommittee-to-examine-offshore-profit-shifting-and-tax-avoidance-by-apple-inc]
Let’s put a bit more concrete of a spin on this. Just as Sen. McCain points out, Apple is an American company who has profited and benefited from US policies on trade, economics, and more; Steve Jobs didn’t grow up in international waters floating in some “non-resident” space, and neither do any of the people who make up Apple’s corporate entity now.
Since the financial collapse in 2008, Apple’s has purposefully withheld $74 billion in legitimate tax revenue from the struggling US economy, an amount which would have made up almost 87% of the money necessary to completely stop the budget sequestration in 2013 [http://en.wikipedia.org/wiki/Budget_sequestration_in_2013]. The loopholes John McCain aren’t just important to find in a “time of sequestration,” they have effectively CAUSED sequestration by starving the American government of tax revenue and the American economy of the subsequent public spending.
When SNAP benefits got $5 billion cut from the program… Apple’s taxes could have continued funding the program this year, and paid for all of the reductions that House Republicans have been legislating and agitating for. Twice over. Corporate tax evasion is a huge reason why Americans can’t have nice things like social security.http://www.classwarfareexists.com/house-republicans-pass-bill-to-cut-food-stamps-by-39-billion/
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