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(The Atlantic Wire)   I'm not sure what a "Double Irish with a Dutch Sandwich" is, but Apple management has perfected it   (theatlanticwire.com) divider line 41
    More: Asinine, offshore bank  
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3284 clicks; posted to Business » on 05 Nov 2012 at 1:17 AM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2012-11-05 12:04:01 AM
It sounds like a story from "Behind The Music" and a Thin Lizzy/Golden Earring tour.
 
2012-11-05 12:18:52 AM
drinkingmadeeasy.comthehappyhomeshop.files.wordpress.com
 
2012-11-05 12:20:30 AM
those poor poor job creators
 
2012-11-05 01:07:27 AM
It sounds like the answer to the shocker's sad "one in the pink, two in the stink" equation.

i.ebayimg.com
 
2012-11-05 01:28:12 AM
The libs favorite company isn't paying it's fair share.
 
2012-11-05 01:30:37 AM
Just not as many as it would without all of the tax tricks.

This statement makes no sense. If I was a shareholder in any business who didn't do everything in its power to minimize its tax liability - I would push to have the entire executive management fired.

/if this article really wants to blame someone - blame our elected officials for being bought and paid for my corporations and not doing their jobs
 
2012-11-05 01:34:21 AM

Tellingthem: [drinkingmadeeasy.com image 200x267][thehappyhomeshop.files.wordpress.com image 233x175]


I've lived in the Netherlands. That sandwich can't possibly be Dutch. It looks like it might have flavor and texture.
 
2012-11-05 02:27:39 AM
"legally" cheating on their taxes. they are hardly the main company we should be worried about.
 
2012-11-05 03:08:10 AM
This sort of thing didn't happen when Jobs was at the helm.

Oh, wait, it did
 
2012-11-05 04:16:52 AM

gingerjet: I would push to have the entire executive management fired.


and then you are part of the problem.
 
2012-11-05 05:54:20 AM
Wonder if Apple's taxes cover the cost of helping them enforce their patients.
 
2012-11-05 06:18:25 AM
Before I get outraged - is this money made from foreign sales that will end up being taxed if the company ever distributes it to shareholders?
 
2012-11-05 06:54:10 AM

Dear Jerk: Before I get outraged - is this money made from foreign sales that will end up being taxed if the company ever distributes it to shareholders?


Dear Jerk

A portion yes. Apple to my knowledge has no US manufacturing. Apple US is the brains of the operation and also a seller into US markets. All product production, portion of R&D, product procurement, shared services, contract manufacturing and some other integral services are off shored. This translates into more expense in US and higher income in the foreign jurisdictions to pay for the services. More US expense means less US tax. While Apple may make a healthy margin, I bet its out in EMEA not the US.

Apple is not a low margin computer business like HP or Dell. Its structure is designed not to expand overseas but rather support US operations at home and keep its cash away from US taxation. In this regard it should be taxed more in US. I dislike Apple
 
2012-11-05 06:55:26 AM

gingerjet: This statement makes no sense. If I was a shareholder in any business who didn't do everything in its power to minimize its tax liability - I would push to have the entire executive management fired.

/if this article really wants to blame someone - blame our elected officials for being bought and paid for my corporations and not doing their jobs


THIS

The best way to deal with tax is to switch from people to land. Own a piece of land? You pay a tax on it. Don't pay the tax? We take the land. It's almost impossible to avoid and is simple. And it also has the effect of taxing what cannot be destroyed, so it doesn't act as a disincentive to wealth creation.
 
2012-11-05 07:18:40 AM

Dear Jerk: Before I get outraged - is this money made from foreign sales that will end up being taxed if the company ever distributes it to shareholders?


Technically, yes, but in practice that would never happen. There is absolutely no need for Apple to repatriate any money to make shareholders happy. They have two other alternatives:
- Pay dividends out of spare cash sitting in the US and/or
- Use foreign money to buy back shares (thus raising the price). You don't need to transfer the money to the US to buy Apple shares ... they're listed on Frankfurt stock exchange.
 
2012-11-05 07:21:36 AM

farkeruk: The best way to deal with tax is to switch from people to land.


This has been tried in the past. Unfortunately, it's not "impossible to avoid," it's actually easier. It does nothing to prevent wealth hording, favors foreign investment over local investment, and requires careful management not to upset rural areas that provide everyone with food via large amounts of cultivated land. Avoiding that last point is tricky, even now many folks, wealthy or not, will choose to build their home just on the other side of a tax boundary. Granted, I'm not that well informed on all of the problems this had presented, but there should be plenty of information out there especially as it's the system we started with.
 
2012-11-05 07:53:34 AM
This thread will be fun to watch
 
2012-11-05 07:58:40 AM
This link wasn't about what I hoped it would be about.
 
2012-11-05 08:00:44 AM
Stop giving Apple money, idiots.
 
2012-11-05 08:08:01 AM

Arthen: Stop giving Apple money, idiots.


Do you really think this is an Apple problem rather than a largely nationwide enforcement and loophole problem?
 
2012-11-05 08:15:54 AM
If it's legal, every corporation should be held responsible in finding every tax loophole available.

//We should be more active in removing all of the open loopholes. The government isn't even trying anymore.
 
2012-11-05 08:22:42 AM
Apple certainly isn't the only one doing this. Many big tech companies (Google, etc) do the same thing.
 
2012-11-05 08:28:01 AM
Offer corporations two choices.

1) Effective corporate tax rate on all income with NO exceptions
or
2) Tariff on all goods made by them equivalent to the effective tax rate
 
2012-11-05 08:39:08 AM

pkellmey: If it's legal, every corporation should be held responsible in finding every tax loophole available.

//We should be more active in removing all of the open loopholes. The government isn't even trying anymore.


and yet the left screams that Romney has done the same thing and I wonder what percent of Apple employees are voting for Obama and are also screaming about Mitt only paying 14% in taxes.

I've been an Apple user and fan for a long time and the tax issue is one I don't care about with them but dang they are closer to the evil in their 1984 ad than Microsoft was in their heyday.
 
zez
2012-11-05 08:53:43 AM
My wife works for a large pharmaceutical company and she always wondered why the had offices in Dublin and the Netherlands since they really didn't make much product there. This explains it.
 
2012-11-05 09:12:43 AM
It is almost like corporations will use whatever legal means they have to avoid taxes. We could either try to shame each company into voluntarily paying more taxes, or we could change the tax laws.
 
2012-11-05 10:15:11 AM
in Jersey City they charge $50 for a Philadelphia Deep Dish Finger Pie and sweetie, it is worth every penny.
 
2012-11-05 10:31:26 AM
It's the Tuesday special at Starbucks.
 
2012-11-05 10:35:15 AM
"when America's most profitable companies pay less, the general public has to pay more"

Not true, unless the amount of government spending must stay the same. The government could spend less.
 
2012-11-05 10:48:29 AM

Prevailing Wind: Offer corporations two choices.

1) Effective corporate tax rate on all income with NO exceptions
or
2) Tariff on all goods made by them equivalent to the effective tax rate


The problem is in the definition of "income". Gross sales is not the same as income. You have to subtract your expenses in creating said sales to determine your income. If you make your product overseas, then you have legit expense for the cost of making that product, which should be subtracted from the amount you sold your product for in order to determine your income. And, if you can find a way to have high "expenses", then your income is low.

***Quote from relevant article below***

The following is an example of how a transfer pricing scheme might work:

[A] company . . . that makes widgets [creates] a subsidiary, S1, to perform the actual manufacturing in high-tax country A. The widgets cost $60 to produce. S1 sells the widgets for $62 to a related company, S2, which is a resident in tax haven Country B. S2 sells the widgets for $80 to S3, yet another related company residing in the United States. S3 distributes the widgets throughout the U.S. market, selling them to unrelated U.S. customers at an average of $90, after incurring expenses of about $5 per widget. Of the $25 of combined profits per widget, S1 reports and pays taxes on $2 in A. S3 pays taxes on its profit of $ 5 per widget in the United States. S2 reports $18 of the profit and is taxable only in B, which levies very little tax.

Julie Roin, Can The Income Tax Be Saved? The Promise and Pitfalls of Adopting World-Wide Formulary Apportionment, 61 TAX L. REV. 169, 181 (2008). *** end quote***

Insert Ireland and the Netherlands in the right slots, and you have a simple version of the Dutch sandwich. It's not illegal. It lowers the U.S. subsidiary's profits and make the Irish subsidiary's profits higher. The income is not "lost" or "undeclared", it is just effectively shifted to another country (which happens to have a lower corporate tax rate).
 
2012-11-05 11:17:33 AM

je mehr umso besser: S1 sells the widgets for $62 to a related company, S2, which is a resident in tax haven Country


This is the trick. In the case of Apple (and Google, and Microsoft, and every other large tech company), the "widgets" are actually licenses to various pieces of IP. Unlike with widgets with a definable cost per widget ($60 in your example), the IP's value is extrinsic, so they can sell licenses to their S2 company for very low cost.

One potential way to close this, without trying to implement tariffs or strange taxation systems, is to require that those license fees be disclosed as representative, should the company ever try to assert their IP in litigation. Company B is infringing your patents? For damages, we'll consider the cost of the licenses you sold to your foreign subsidiary.
 
2012-11-05 11:57:15 AM

Theaetetus: je mehr umso besser: S1 sells the widgets for $62 to a related company, S2, which is a resident in tax haven Country

This is the trick. In the case of Apple (and Google, and Microsoft, and every other large tech company), the "widgets" are actually licenses to various pieces of IP. Unlike with widgets with a definable cost per widget ($60 in your example), the IP's value is extrinsic, so they can sell licenses to their S2 company for very low cost.

One potential way to close this, without trying to implement tariffs or strange taxation systems, is to require that those license fees be disclosed as representative, should the company ever try to assert their IP in litigation. Company B is infringing your patents? For damages, we'll consider the cost of the licenses you sold to your foreign subsidiary.


That doesn't seem to hard to obfuscate though. Sell the IP cheap to the foreign subsidiary. Have the foreign subsidiary then provide the "marketing" (and whatever other intangibles you can tack on), thereby adding value, and then the subsidiary sells it into the US at a higher cost. Then you could rebut the low-damages argument by saying that most of the value came from excellent marketing, etc., and prior to said marketing creating demand for the product, the value for which the IP was transferred was understandably low, but the infringement now is damaging you greatly because you have created a valuable market for the product.
 
2012-11-05 12:47:43 PM
One of these days I'm going to getting around to calculating the standard deviation of time between when a "cool" company becomes the/one of the largest companies in the world and when it becomes perceived as evil.
 
2012-11-05 01:47:05 PM
It's forty bucks, same as downtown.
 
2012-11-05 02:34:34 PM
Sounds like a couple of things I saw in the movie "Bruno".
 
2012-11-05 05:02:33 PM

Dear Jerk: Before I get outraged - is this money made from foreign sales that will end up being taxed if the company ever distributes it to shareholders?


Yes and no.

Yes, in that's why this is legal; they didn't have income in the US and therefore don't owe US taxes. And in fact Apple has accounted a portion of this money as future taxes in anticipation of that sort of transfer. Over time they will almost certainly move some of this money back to the US and they'll pay taxes on that portion when they do.

No, in that it's not impossible to transfer some of this value back into the US without transferring the cash -- for example, if you can drive up the stock price or reduce the number of outstanding shares you don't need to distribute the money directly to effectively transfer value to investors. Plus if you're not in a hurry you can game changes in law both within and among countries as they (and your income) vary over time. It's not straightforward or lossless but if you're talking about billions of dollars shaving a few percentage points off your tax bill is big business.
 
2012-11-05 05:11:22 PM
Apple's corporate tax rate is 24.2%.
 
2012-11-05 07:35:35 PM

cman: This thread will be fun to watch


Some men would watch two dung beetles fight over a turd.
And bet on it.
 
2012-11-05 08:23:15 PM
So Apple's CFO is probably going to get a big bonus. I wonder what his personal, effective tax rate is if he's that good at hiding Apple's income?
 
2012-11-06 12:21:46 AM
This is what happens when the rich can buy whatever tax laws they like.

The top corporate income tax level in the United States is 35 percent. In the United Kingdom, it's 28 percent. But in Ireland, it's only 12.5 percent, and in Bermuda there's no corporate income tax at all. That means multinational companies that shift their earnings through Ireland or Bermuda can save billions of dollars in taxes each year.

On today's Fresh Air, Bloomberg News reporter Jesse Drucker, who has written extensively about corporate tax-dodging, explains how companies like Google, Pfizer, Lilly, Oracle, Facebook and Microsoft have managed to reduce their tax rates by hundreds of millions - and in some cases, billions - of dollars by taking advantage of offshore tax havens.

In October, Drucker reported that Google had saved $3.1 billion in taxes in the past three years by shifting the majority of its foreign profits into accounts in Ireland, the Netherlands and Bermuda using financial techniques called "the Dutch Sandwich" and "the Double Irish" arrangement. Basically, he says, Google credited its Irish office with the majority of its non-U.S. sales revenue - and then shuttled that money through various subsidiaries located in Ireland and other countries to save billions in taxes.

Other companies have also been able to cut hundreds off their tax bills by shifting or licensing their earnings overseas. Forest Laboratories Inc., the manufacturer of the antidepressant Lexapro, cut its total income tax bill by more than a third last year by allocating income through various subsidiaries.

"They're a company that does almost 100 percent of its sales here in the U.S., they have almost 100 percent of their employees in the U.S., they're headquartered in New York City and yet the majority of their profits show up overseas, most of them attributed to a mailbox in Bermuda," Drucker says. "An economist at Reed College estimated that the U.S. is losing $60 billion a year in federal tax revenue [from all U.S. companies], but she's actually in the process now of revising that estimate and has arrived at a figure closer to $90 billion."
 
2012-11-06 02:14:12 AM

BullBearMS: This is what happens when the rich can buy whatever tax laws they like.

The top corporate income tax level in the United States is 35 percent. In the United Kingdom, it's 28 percent. But in Ireland, it's only 12.5 percent, and in Bermuda there's no corporate income tax at all. That means multinational companies that shift their earnings through Ireland or Bermuda can save billions of dollars in taxes each year.

On today's Fresh Air, Bloomberg News reporter Jesse Drucker, who has written extensively about corporate tax-dodging, explains how companies like Google, Pfizer, Lilly, Oracle, Facebook and Microsoft have managed to reduce their tax rates by hundreds of millions - and in some cases, billions - of dollars by taking advantage of offshore tax havens.

In October, Drucker reported that Google had saved $3.1 billion in taxes in the past three years by shifting the majority of its foreign profits into accounts in Ireland, the Netherlands and Bermuda using financial techniques called "the Dutch Sandwich" and "the Double Irish" arrangement. Basically, he says, Google credited its Irish office with the majority of its non-U.S. sales revenue - and then shuttled that money through various subsidiaries located in Ireland and other countries to save billions in taxes.

Other companies have also been able to cut hundreds off their tax bills by shifting or licensing their earnings overseas. Forest Laboratories Inc., the manufacturer of the antidepressant Lexapro, cut its total income tax bill by more than a third last year by allocating income through various subsidiaries.

"They're a company that does almost 100 percent of its sales here in the U.S., they have almost 100 percent of their employees in the U.S., they're headquartered in New York City and yet the majority of their profits show up overseas, most of them attributed to a mailbox in Bermuda," Drucker says. "An economist at Reed College estimated that the U.S. is losing $60 billion a year in federal tax revenue ...


So if Ireland has all of this free money flowing through its shores, how come it's one of the PIIGS countries on the brink of economic collapse?
 
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