a good 'distraction'? AAPL's tax dodge might force taxcode overhaul

[lektrode]

just noted, over a yah-hoooo:

Here’s Who Pays the Bill for Apple’s Tax Avoidance

Related Quotes: AAPL 439.81 -3.12 -0.70%


The flap over Apple’s (AAPL) corporate tax strategy might sound like a snoozer, until you consider who makes up the difference for Apple’s shrunken tax payments. That would be you, dear taxpayer.

Apple is suddenly in the crosshairs as Congressional investigators claim the company used audacious accounting methods to avoid paying tax on at least $74 billion of income during the past three years. Apple did nothing illegal but it shifted money among various overseas entities in a way that essentially left billions in income under no nation’s jurisdiction. Senate Democrats initiated the investigation as legislators are beginning the spade work for what may ultimately be an ambitious effort to overhaul the entire U.S. tax code.


Apple is the latest poster child for a tax system many experts say is routinely abused by those with the means to hire tax lawyers and accountants able to fully exploit hundreds of loopholes. General Electric (GE), Microsoft (MSFT), Google (GOOG) and many other companies have faced similar charges. The real problem isn’t any one company’s tax strategists, however, but lawmakers who have shredded the tax code into a leaky mess.


The victims
The victims, meanwhile, are ordinary taxpayers who fund most of the federal government. During the 1950s, individual income taxes typically accounted for about 60% of the government’s tax revenue, with corporate taxes covering the other 40 percent. By 1970 individuals paid 73% of all taxes. By 1990 it was 83 percent, with the peak coming in 2009, when corporations claimed steep losses and individuals paid 87% of all taxes. By 2012, that had drifted down to 82%, with corporations paying 18%.


Despite that shrinking share of the nation’s tax payments, the business lobby routinely claims taxes on U.S. corporations are too high because the official federal tax rate of 35 percent exceeds the rate in every other developed nation. But after credits and deductions, most U.S. companies pay an effective tax rate that’s considerably lower, ranging from 23 to 35 percent.


[Related: Sorry, Tim Cook, U.S. Tax Law Isn't a Big Economic Drag]


Some large U.S. multinationals are able to lower their taxes further by moving money among divisions based in different countries, to take advantage of the lowest tax rates. A 2011 New York Times story explained how GE earned a $14.2 billion profit in 2010 yet paid no federal income tax in the United States. Companies such as Apple that sell software or other types of intellectual property can take advantage of other loopholes that allow wide latitude for where they claim profits, and therefore pay taxes.


The corporate tax burden began to decline as a share of the nation’s total at a time when most taxes were falling. Tax reform in 1986 helped streamline the tax code, and a strong economy during the 1990s brought in more tax revenue with lower rates, leaving Washington flush. But that’s obviously not the case anymore. Since 2001, the national debt has exploded from $5.8 trillion to $17 trillion, with gaping annual deficits as far as the eye can see.


The real battle
The real battle over tax reform is going to be focused on who will pay the future taxes necessary to hack the national debt down to a manageable size. Many companies, including Apple (which still paid $6 billion in federal taxes in 2012 and claims to be the single largest U.S. taxpayer), say they’d welcome tax reform that closes loopholes, as long as it also lowers rates and more or less leaves nobody paying more in actual tax. The idea is that even a zero-sum outcome would be worthwhile if it simplified the whole process, lowered compliance costs and generated more confidence in the fairness of the system.


[Related: Apple’s Tax Dodging: Bigger Scandal Is Congress Knew About It, Says David Cay Johnston]


A lower corporate tax rate might also encourage big companies to move cash from overseas accounts back to the United States, perhaps boosting investment here. That’s why President Obama and some Democrats favor the idea, along with most Republicans.


But virtually no company favors tax reform that would raise the overall tax burden on corporations. And corporations tend to have the upper hand these days, since jobs are scarce and multinationals can threaten to move more work — and positions — overseas. That has already produced a kind of economic warfare among states, as low-tax places such as Texas aggressively woo companies from the northeast and other high-tax locales.


So if corporate America — ably represented by the best lobbyists in Washington — gets its way, somebody else will have to pay the future taxes needed to bail the government out of its massive debt load. We got a preview of how that’s likely to go earlier this year, when legislators resolved the “fiscal cliff” by raising taxes on the wealthy and ending a temporary cut in the payroll tax, effectively giving a tax increase to everybody who gets a paycheck. And this barely dented the national debt. America needs innovative companies such as Apple but the innovation should stop at the tax department.


Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success.

[vt]

Re: a good 'distraction'? AAPL's tax dodge might force taxcode overhaul

"Apple Inc. pays more taxes than any US corporation, $16 million a day. GE ought to be up there explaining how they don't pay any tax on their multiple billions in earnings." -Rush

[lektrode]

Re: a good 'distraction'? AAPL's tax dodge might force taxcode overhaul

wondren how much in fees the 'advisors' are rakin' in....

[don]

Re: a good 'distraction'? AAPL's tax dodge might force taxcode overhaul

committee fawns over Apple in hearings . . .

loves his iPhone

[don]

In Related 'Reform' Newz

Matt Taibbi

In a scene reminiscent of the Storming of the Bastille, angry Americanos demand bankster reform . . .

Lobbyists are trying once more to weaken the already-thin financial regulations put in place by Congress.

It's becoming an annual tradition: Spring rolls around, and while nobody is looking, Wall Street quietly lays siege to Washington and reaches a hand out to yank the last remaining teeth out of the government's financial regulatory head.

In the last two weeks, we've seen two major developments here. There was a wave of deregulatory bills that snuck through the House with surprisingly bipartisan support, and a series of regulatory decisions by the Commodity Futures Trading Commission that will seriously weaken the already-weak Dodd-Frank reform legislation, particularly with regard to derivatives trades.

If a story about a wave of bills designed to prevent the meager derivatives reforms passed in Dodd-Frank from being enacted sounds familiar, that's because it is. I wrote almost exactly the same story a year ago, in the middle of May, 2012, when a herd of Wall Street-friendly congresshumans teamed up in the House Financial Services Committee to push through a wave of nine ambitious bills targeting derivatives reform. This is from last spring:

The nine bills being contemplated by Congress take a variety of approaches to gutting Dodd-Frank. Two bills, H.R. 1840 and H.R. 2308, are essentially stalling tactics, requiring regulators to undertake more of those sweeping cost-benefit analy*ses that result in lengthy delays. Another bill, H.R. 3283, is more substantive: Sponsored by Connecticut Democrat and hedge-fund industry BFF Jim Himes, it exempts foreign affiliates of U.S. swaps dealers from all Dodd-Frank oversight.

The rule, if implemented, would make the next AIG possible, given that AIG was undone by half a trillion dollars in derivative bets produced by such a foreign affiliate – its London-based financial products outfit, AIGFP. If passed, says Rep. Brad Miller, a Democrat from North Carolina, H.R. 3283 would leave a "massive, gaping hole" in Dodd-Frank. "It would be very easy to move those trades to whatever the most indulgent country would be," Miller explains.

After those bills escaped the House, most of them stalled on the way to the Senate, where of course the Democrats still hold a majority and are reluctant to openly scrap Dodd-Frank just yet.

But this is the key to understanding how financial lobbyists succeed in getting what it wants on the regulatory front: They never stop. It's not a war of ideas, it's a war of resources. You march up the Hill with some crazy idea about overturning a bill prohibiting bailouts of companies that engage in risky derivative trades, you get knocked down, and you march up again, then you march up again, and again . . .

With each successive attempt, you peel off a few more Committee members in the House, slowly but surely weakening resolve.

And while you're attacking on the legislative front, you also file a series of lawsuits that tie up the process by targeting reforms in court, and then you also send armies of lobbyists to sit in the laps of regulators during the rule-making process, so that key new laws (like the Volcker rule, designed to separate risky trading from federally-insured depository banking) are either written in reams of industry-friendly language, or delayed altogether.

No matter how bad your ideas are, and how unpopular they are (or, rather, would be, if anyone in the general public understood them and/or cared enough about them to complain to their congressional reps), you can still score huge wins just by continually attacking and chipping away.

Which brings us to this month: A little while back, I got a call from someone in the House. "You wouldn't believe the shit they just pushed through the Financial Services Committee,” he groaned. This person read off a list of bills, suggested I look them up, then specifically told me to look at how many Democrats voted "yea" on them.

"A lot of bad D votes on this one," was the editorial comment here.

Almost all of these bills turned out to be aimed directly at Title VII of the Dodd-Frank Act, i.e. the derivatives portion. They included:

H.R. 992 would "repeal most of Dodd-Frank Section 716" of the Dodd-Frank Act. This section, also known as the "Lincoln Rule," was one of the hottest of hot potatoes during the negotiations for the Dodd-Frank bill (see here for more details).
That portion of Dodd-Frank began with a simple, bold statement:

"Notwithstanding any other provision of law," it read, "no Federal assistance may be provided to any swaps entity with respect to any swap, security-based swap, or other activity of the swaps entity."

In other words, no matter what other laws are written, the federal government doesn't bail out any "swaps entities" or "activities of the swaps entities."

This sounds great, except Congress then decided on an exception or two to that law – among other things, federally-insured banks would be permitted to engage in swaps trading, so long as it was for "bona-fide hedging" and "risk-mitigation efforts."
Put another way, so long as the bank is merely guarding against loss, such behaviors are okay and bail-out-able.

But we've already seen that banks call pretty much anything hedging. In the case of the infamous London Whale trades – which were the very definition of stupid, reckless, doubling-and-tripling-down on insane billion-dollar bets high-stakes gambling – Chase and Jamie Dimon tried to call that activity hedging. Later, of course, in the Senate, Dimon was forced to admit that the trades, er, maybe were not hedging at all.

The lesson of this is that no law that allows "hedging" as an exemption will have much teeth, because most banks can find a way to call almost anything they do hedging.

But apparently this wasn't enough. This new bill in the House baldly expands the universe of trading activities that we may later have to bail out. It's actually written that way – check out this summary of H.R. 992, the "Swaps Regulatory Improvement Act" (God, I love the names):

Declares the prohibition against federal government bailouts of swaps entities inapplicable to: (1) a foreign banking organization supervised by the Federal Reserve; and (2) an insured depository institution or a U.S. uninsured branch or agency of a foreign bank that limits its swap and security-based swap activities to hedging and similar risk mitigating activities (as under current law), non-structured finance swap activities, and certain structured finance swap activities.

In English, this just means that in addition to hedging, which we banks think is pretty much everything we do, we'd like to be eligible for bailouts when we engage in "non-structured finance swap activities and certain structured finance swap activities."
If you read the fine print, what they mean by "certain structured finance swap activities" are swaps of a type and quality "to which the prudential regulators have jointly adopted rules," i.e. to be determined later during the rule-making process.

So to sum up, we banks would like to remain eligible for bailouts when we engage in hedging, which we think is everything we do, and also additionally when we engage in "certain structured finance swap activities," which will mean whatever we tell the rule-makers it means after the bill is passed.

This bill passed by a vote of 53-6 in the Financial Services Committee. Only six House members voted against expanding the types of financial behaviors that we may later have to bail out. Go figure.
Also passing in committee:

H.R. 1062, the "SEC Regulatory Accountability Act," is the same bill as H.R. 2308 from last year, requiring the SEC to undertake a cost-benefit analysis of any new rule before it is adopted. These "cost-benefit analysis" bills are pure stalling tactics. They have absolutely no purpose other than to force the government to spend valuable time, effort and money engaging in pointless reviews of rules that already in some cases take years to craft, incidentally with the constant input of bank lobbyists.

Politically, these bills serve another function. They allow members that may have voted for a certain reform originally to recoup some status with the banks by left-handedly undermining the rule later on with these pointless cost-benefit delays. This one passed 31-28 in committee.

Then there was H.R. 1256, the "Swap Jurisdiction Certainty Act," which:

. . . exempt[s] a non-U.S. person in compliance with the swaps regulatory requirements of a G20 member nation from U.S. swaps requirements unless the SEC and CFTC jointly determine that the regulatory requirements are not "broadly equivalent” to U.S. swaps requirements.

This is yet another leprechaun trick. What it basically means is that if you're Goldman or Chase and you have an office in some place like Mexico or Turkey or Russia or Saudi Arabia, you can do all the swaps business you want from there, undet whatever film of derivatives regulation exists in that country, without having to comply with U.S. swaps rules.

That is, unless the SEC and the CFTC make a joint determination that that country's laws are not "broadly equivalent" to our own.

This really just gives banks permission to go around the world regulator shopping. "It just makes it harder for the SEC to prevent regulatory arbitrage," is how one analyst put it to me. "That's all it does."

That one passed 48-11.

There are six more such bills, and who knows, the Senate might hold the line on all of them. But even if it does, nobody can stop regulators from backtracking on reform by writing crappy rules, which is also happening.

This past week, the CFTC released a series of new rules governing the swaps business. The rules are highly technical and basically unintelligible to people who don't work in these markets. But there are some basic concepts that can be understood.

To backtrack a little, the aim of reformers going into the Dodd-Frank debates was to do what FDR did with stocks after the crash of 1929: put them on open exchanges. That reform worked and has made the stock market a safe, thriving financial arena ever since. Today, when you go to buy a share of IBM stock, anyone can see what the price is, and there's constant data on bids and offers being that is made available to anyone who wants to participate.

But in the existing "over the counter" market for derivatives, the whole thing is a black box. There's no exchange where you can see with the price of this or that interest rate swap or credit default swap is.

"It's basically just a bunch of people on the telephone," is how Dennis Kelleher of Better Markets puts it. And when the five biggest banks control most of the derivatives market, the potential is there for all sorts of abuses.

The anemic Dodd-Frank bill halted well shy of forcing derivatives onto exchanges (coupled with the failure to break up the TBTF banks, it was the largest failure in the bill). Instead, it set up a structure of what are called "Swap Execution Facilities," or SEFs, which are a step somewhere between a completely opaque black box and an open exchange.

In the SEF model, participants can see some pricing data, but it's far from a system like the stock market, in which data from all trades is immediately and transparently posted. In fact, Wall Street has been fighting tooth and nail ever since Dodd-Frank passed to keep the activity in the SEFs as close to the old black-box model as possible.

There are two main avenues for preventing transparent swap trades. One is through something called an RFQ, or "request for quote," which allows participants in the market to pursue trading on an essentially private, person-to-person basis, without broadcasting the transaction to everyone. The other is through "block trades," which are trades so big that they can be done outside of the exchanges.

Without getting too far into the weeds, the new CFTC rules will significantly expand the use of both loopholes. "Wall Street and its allies fought to get as few RFQs as possible and to allow as many block trades as possible in the final rules," says Kelleher, adding that this was done to "prevent a level playing field, competition and transparency."

Essentially, the rules as written will keep the derivatives market functioning in pretty much identical fashion to the old "bunch of guys on the telephone" model. "It's pretty much the same system," sighs Kelleher.

Members of Congress, when they talk about having to vote on issues like derivative reform, express frustration about the political dynamics of this debate. When they go back to their districts, nobody is standing up at town halls and shaking fists about relaxing rules at Swap Execution Facilities.

On the other hand, when they return to Washington, they're inundated with bank lobbyists who offer extensive financial backing if they play ball on these votes, while simultaneously threatening to run primary candidates if they don't. Thus there are plenty of people in both parties who are extremely tempted to look the other way and accede to bank interests when it comes to the question of building the infrastructure for, say, the derivatives markets.

Moreover, the Democrats have become the victims of their own pusillanimity on these issues. The main Wall Street argument against these new rules is that they're excessive and onerously complicated. But they're only complicated because the Democrats didn't have the stones in the original Dodd-Frank debate to insist on simple concepts like putting all trades on open exchanges.

Instead, they built a system based upon a series of fiendishly complicated compromises. They keep adding more and more fine print to the infrastructural rules for things like Swap Execution Facilities and deriviatives clearing, and the more fine print there is, the more cracks and crevices Wall Street's lawyers can find to slither through.

Anyway, this is just a reminder that when it comes to getting transparency in the financial markets, this is what it takes. You have to fight the same fight over and over and over again. And again . . .


http://www.rollingstone.com/politics...#ixzz2U1aoMY36

[lektrode]

Re: In Related 'Reform' Newz

......
On the other hand, when they return to Washington, they're inundated with bank lobbyists who offer extensive financial backing if they play ball on these votes, while simultaneously threatening to run primary candidates if they don't. Thus there are plenty of people in both parties who are extremely tempted to look the other way and accede to bank interests when it comes to the question of building the infrastructure for, say, the derivatives markets.

Moreover, the Democrats have become the victims of their own pusillanimity on these issues. The main Wall Street argument against these new rules is that they're excessive and onerously complicated. But they're only complicated because the Democrats didn't have the stones in the original Dodd-Frank debate to insist on simple concepts like putting all trades on open exchanges.

or the rolling stone/matt to goad/shame them into it

or maybe just simply re-instating the glass-steagall act?? - even tho krugman&co have said it wouldnt've prevented the meltdown? - like the one that happened just 6or7 years after it was s__tcanned - right? after relative calm for the prev 60years...

no siree - they dont like _anything_ thats 'simple' = much mo bettah to be complicated/indecipherable legalese - that way The Party of The Lawyers (bankers/med insurance/drugmob) gets more juice come election season.... just like in 2008 (or 1913...)

Instead, they built a system based upon a series of fiendishly complicated compromises. They keep adding more and more fine print to the infrastructural rules for things like Swap Execution Facilities and deriviatives clearing, and the more fine print there is, the more cracks and crevices Wall Street's lawyers can find to slither through.

Anyway, this is just a reminder that when it comes to getting transparency in the financial markets, this is what it takes. You have to fight the same fight over and over and over again. And again . . .

and again and again and again - but funny tho how it always comes back to this:

• May 21, 2013, 7:23 p.m. ET

The Apple Tax Diversion

Senators beat up a U.S. success for following the tax laws they wrote.

You almost have to admire Carl Levin's timing. Amid a furor over politicized IRS tax enforcement, the Michigan Democrat on Tuesday tried to change the subject to a hardy Washington perennial—corporate tax loopholes. Too bad his designated business pinata, Apple, AAPL +0.39% demonstrates instead the insanity of the tax code that Mr. Levin has done so much to write.


Mr. Levin unveiled the results of his months-long investigation into Apple's corporate taxes and accused the American business success of employing "alchemy" and "gimmickry" to lower its tax bill. What Mr. Levin did not do was present any evidence of anything illegal or even inappropriate. He did prove that Apple has smart accountants and tax lawyers.


Mr. Levin is outraged that Apple subsidiaries in Ireland pay little or no corporate income tax on profits generated from Apple's international sales. Ireland has a laudably low corporate tax rate of 12.5% to attract jobs and capital, but it turns out that for certain corporations controlled by entities outside Ireland, the deal gets better.


The Apple units are based in Ireland, so U.S. law does not consider them to be U.S. corporations subject to U.S. corporate tax. But since they are managed and controlled by Apple in the U.S., Irish law doesn't consider them Irish companies and thus they are also not subject to the 12.5% Irish corporate tax. This isn't alchemy; it's accountancy.


Mr. Levin claims that as a result one Apple subsidiary reported net income of $30 billion from 2009-2012 but didn't pay any corporate income tax. Apple says that since 2003 its Irish subsidiaries have paid a corporate rate of "2% or less," though it has also created some 4,000 Irish jobs.

and likely cost a heluva lot less per job than bailing out detroit

None of this required a Senate "investigation" to discover because Apple is constantly inspected by the IRS and other tax authorities. These tax collectors are well aware of Apple's corporate structure, which has remained essentially the same since 1980. An Apple executive said Tuesday that the company's annual U.S. tax return adds up to a stack of paperwork more than two feet high.

We wonder what the Irish think of the spectacle of an American Senator expressing outrage that an American company doesn't pay enough Irish taxes. As Wisconsin Republican Ron Johnson pointed out on Tuesday, Americans are better off when U.S. companies pay less in taxes to foreign governments.

That includes Americans who are invested in Apple through their mutual and pension funds. And it includes Apple's U.S. workers who benefit when the company is able to sell more iPhones and iPads overseas. Roughly 50,000 of Apple's 75,000 employees are in the U.S.

It's also amazing to behold Democrats who routinely claim that high tax rates don't matter to business behavior denouncing a business for engaging in behavior to avoid paying higher tax rates. Which brings us to the real scandal that Mr. Levin has exposed: the folly of America's corporate tax code.

The genuine outrage is that Apple's profits in the U.S. are subject to a combined state and federal statutory tax rate of 39.1% that is the developed world's highest. Corporate taxation is so heavy in the U.S. relative to other countries that even while enjoying its near-zero rate in Ireland, Apple ends up with roughly the same overall effective tax rate, 14%, as South Korea's Samsung, its main global competitor. Yet Samsung still enjoys a tax advantage, because it has more flexibility to allocate those profits to the most promising investments anywhere in the world.

Like other U.S. companies, Apple pays an extreme tax penalty for bringing its foreign profits home to invest in the U.S. This is due both to the punitive U.S. tax rate and the fact that the U.S. is virtually alone in refusing to embrace a territorial tax system that applies corporate income taxes only in the jurisdiction where the money is earned.

So it's no surprise that Apple keeps $102 billion of its roughly $150 billion cash pile overseas. The repatriation tax penalty is so absurd that Apple chose in April to borrow $17 billion to pay a prospective dividend to shareholders rather than pay out of its overseas cash horde.

All of which argues for a corporate tax reform that would at the very least cut the combined U.S. state-federal rate to the mid-20s to be comparable with many of our trading partners. We'd suggest something closer to the Irish model—ideally zero but 12.5% also works—to turbo-charge growth and coincidentally generate lots of new revenue for Mr. Levin's beloved IRS.

Speaking of which, Mr. Levin is one of those Senators who wrote the IRS demanding that it inspect the tax-exempt status of Americans for Tax Reform, the Club for Growth and other groups that are his ideological opponents. "Why does the IRS allow 501(c)(4) organizations to self-declare?" he roared in July 2012.

The IRS seems to have followed his orders, so no wonder he is trying to change the subject.

uh huh...
kinda like how every time it might make sense to "pivot to jobs" we get another 'crisis too good to waste' ???

uh huh....

[vt]

Re: In Related 'Reform' Newz

The Washington Post supports Apple

http://www.washingtonpost.com/opinions/matt-miller-not-a-rotten-apple/2013/05/22/885f1bb4-c2dd-11e2-8c3b-0b5e9247e8ca_story.html

[GRG55]

Re: a good 'distraction'? AAPL's tax dodge might force taxcode overhaul

I'm watching this circus from an overseas vantage point at this moment. Only got two comments:

1. Did Apple fail to comply with any USA tax laws or regulations? If so, why have they not been charged? If not, what's the fuss about?

2. Tax Reform? From these jokers on Capital Hill?? They can't even agree on a one year budget. What makes anybody think they are capable of anything more ambitious than voting themselves more benefits?

[Master Shake]

Re: a good 'distraction'? AAPL's tax dodge might force taxcode overhaul

I'm watching this circus from an overseas vantage point at this moment. Only got two comments:

1. Did Apple fail to comply with any USA tax laws or regulations? If so, why have they not been charged? If not, what's the fuss about?

2. Tax Reform? From these jokers on Capital Hill?? They can't even agree on a one year budget. What makes anybody think they are capable of anything more ambitious than voting themselves more benefits?

1. Nope. It would have been interesting for the Apple folks to ask their inquisitors why they passed the legislation that Apple was taking advantage of, if they didn't want companies to take advantage of it.

It's simply political Kabuki.

[lektrode]

Re: a good 'distraction'? AAPL's tax dodge might force taxcode overhaul

I'm watching this circus from an overseas vantage point at this moment. Only got two comments:

1. Did Apple fail to comply with any USA tax laws or regulations? If so, why have they not been charged? If not, what's the fuss about?

more grandstanding and distraction by those who have utterly FAILED to address the real problems (while giving away the treasury to buy votes = standard dem party politix and the other side of the aisle just plays along when it works for them, sandbagging/stonewalling when it dont) that THEY THEMSELVES have created - purposefully, IMHO - which allows them to be feted (and financed) by the lobby brigade which then creates conditions whereby the lawyer brigade cleans up - both the owellian-named 'affordable care act' and the 'Dodd–Frank Wall Street Reform and Consumer Protection Act' are the evidence of this = thousands of pages of incomprehensibly vague, loopholed gobbledeegook designed from the gitgo to create as many lawyer jobs as possible

2. Tax Reform? From these jokers on Capital Hill?? They can't even agree on a one year budget. What makes anybody think they are capable of anything more ambitious than voting themselves more benefits?

+1

the political class is completely out of control, answers to nobody, while the electorate is blinded by BS spewed forth by the liberal-dominated lamestream media, who IGNORES anything that isnt accomodative to their agenda

other than that, i dont really have much of an opinion

a small-r type
formerly from The Live Free or Die state, that still manages just fine after nearly 400 years with a citizen-volunteer legislature that gets paid 100bux/year for their service and STILL gets the Public's Business done WITH NO SALES TAX AND NO INCOME TAX

[Thailandnotes]

Re: a good 'distraction'? AAPL's tax dodge might force taxcode overhaul

Tax avoidance by multinational corporations is hardly a new development. In 1999, The Economist detailed how Rupert Murdoch’s News Corporation had managed to pay just six per cent in taxes on the billions of dollars in profits it generated around the world. Back then, News Corp.’s use of tax-avoidance tricks, such as directing revenues through offshore subsidiaries located in tax havens and ruthlessly exploiting global differences in tax laws, made it something of an outlier.

As the latest revelations about Apple’s tax-dodging tactics make clear, that’s no longer the case. Over the years, aggressive tax avoidance has become the standard practice at many American-based multinationals, particularly at technology companies such as Apple, Google, and Microsoft, which like to portray themselves as being on the side of the angels. Indeed, the only surprise about Tim Cook’s appearance on Capitol Hill today is that it took so long to come about.

According to an ongoing congressional investigation, Apple, by setting up a shell company in Ireland, where it had negotiated a tax rate of two per cent or less, was able to pay minimal taxes on much of its overseas earnings. And by transferring ownership of some of its intellectual-property rights to offshore affiliates, including some in Ireland, which then charged other parts of the company for using them, it was able to avoid paying billions of dollars of U.S. taxes on income that was actually generated in this country, which is where Apple does the bulk of its research and development.

But the company that prides itself on thinking differently didn’t stop there. Exploiting a quirk in Irish tax law, which has long been appealed to by tax dodgers of all kinds, it claimed that some of its Irish subsidiaries weren’t resident anywhere for tax purposes. In the words of Senator Carl Levin, they were “ghost companies” that, for several years, didn’t file tax returns to anybody. One of them, Apple Operations International, generated thirty billion dollars of profits between 2009 and 2012 but paid no corporate income at all, not a penny.

“A.O.I.’s board minutes show that its board of directors consists of two Apple Inc. employees who live in California and one Irish employee of Apple Distribution International, an Irish company that A.O.I. itself owns,” Levin said on Tuesday. “Over the last six years, from May, 2006, through the end of 2012, A.O.I. held thirty-three board meetings, thirty-two of which took place in Cupertino, California. A.O.I.’s lone Irish-resident director participated in just seven of those meetings, six by telephone, and in none of the eighteen board meetings between September, 2006, and August, 2012.”

In other parts of the world, particularly Europe, corporate tax avoidance has already turned into a major political issue. In Britain, for example, some consumers started boycotting Starbucks, which in the three years from 2009 to 2011 paid just $3.7 million in tax despite generating sales of $11.5 billion. Last week, Margaret Hodge, a Labour Party M.P. who chairs the public-accounts committee in the House of Commons, called Google, which pays virtually no taxes on its British operations, “evil,” and Ed Miliband, Labour’s current leader, called it “irresponsible.” Even David Cameron, the Conservative Prime Minister, has weighed in, urging his colleagues in the G8 to tackle tax avoidance and calling upon multinationals to “wake up and smell the coffee.”

During last year’s campaign, President Obama called for a reform of the tax code to insure that the “biggest corporations pay their fair share.” But, since being reëlected, he’s hardly made it one of his top priorities, and, even if he did, the Republicans in Congress wouldn’t go along with it. They are more interested in cutting the corporate tax rate, which is officially thirty-five per cent, although many large companies end up paying a much lower rate. The job of turning corporate tax evasion into a political issue has been left to Levin, the head of the Senate’s Permanent Subcommittee on Investigations (and a national treasure), and to John McCain, the ranking minority member on Levin’s committee and one of the few Republicans willing to criticize corporate misbehavior.

It’s hard to disagree with Levin when he described Apple’s behavior—which, according to the committee’s report, saved it about twelve billion dollars in taxes last year—as “completely outrageous.” The bigger scandal is that many of the tactics Apple employed, such as the use of “transfer pricing” to shift revenues offshore, and taking advantage of “check-the-box” rules in the U.S. code, are now standard practice at tech giants and other multinationals. For example, a report that the Permanent Subcommittee published last September showed Microsoft involved in very similar shenanigans, using offshore subsidiaries in Puerto Rico, Singapore, and, you guessed it, Ireland.

“Income shifting to tax-favored jurisdictions is the Macondo well of the international tax system, except it is not a sudden catastrophe and the blowout is not under control,” said Stephen Shay, a professor at Harvard Law School, who was one of the expert witnesses at Tuesday’s hearing. “Indeed, the gusher is not visible to the public or to most policymakers. But the damage is real.”

That’s for sure. Partly as a result of their evasive tactics, big businesses now shoulder a lot less of the tax burden than they used to do. In the years after the Second World War, the corporate income tax accounted for about a third of over-all tax revenues. Today, its share is less than nine per cent. Who has made up the difference? Who do you think? Sixty years ago, individual and payroll taxes accounted for about half of over-all tax revenues; today, they account for more than eighty per cent.

“America’s tax system is broken and uncompetitive, and I have long supported efforts to modernize it,” Senator McCain said at today’s hearing. “However, I will not allow that position to be used as an excuse to turn a blind eye to the highly questionable tax strategies used by Apple. The general American public should not have to make up the balance as corporations avoid paying billions in U.S. taxes.”

If a seventy-six-year-old Arizona conservative can get worked up about this stuff, why can’t other Americans?

http://www.newyorker.com/online/blog...c-outrage.html

[lektrode]

Re: a good 'distraction'? AAPL's tax dodge might force taxcode overhaul

T.....As the latest revelations about Apple’s tax-dodging tactics make clear, that’s no longer the case. Over the years, aggressive tax avoidance has become the standard practice at many American-based multinationals, particularly at technology companies such as Apple, Google, and Microsoft, which like to portray themselves as being on the side of the angels. Indeed, the only surprise about Tim Cook’s appearance on Capitol Hill today is that it took so long to come about....
....
Who has made up the difference? Who do you think? Sixty years ago, individual and payroll taxes accounted for about half of over-all tax revenues; today, they account for more than eighty per cent.
....
“America’s tax system is broken and uncompetitive, and I have long supported efforts to modernize it,” Senator McCain said at today’s hearing. “However, I will not allow that position to be used as an excuse to turn a blind eye to the highly questionable tax strategies used by Apple. The general American public should not have to make up the balance as corporations avoid paying billions in U.S. taxes.”

If a seventy-six-year-old Arizona conservative can get worked up about this stuff, why can’t other Americans?

well.... its MUCH EASIER TO BLAME 'somebody else'

esp when the spotlight happens to land on them:




and its MUCH BETTER for 'bipartisanship' when it comes to really good distractions

The Daily Show with Jon Stewart
Get More: Daily Show Full Episodes,Indecision Political Humor,The Daily Show on Facebook

....As was previously reported, President Obama and Congress gutted the insider trading regulations on Congress. Like a thief in the night Congress and the White House did nothing to call attention to themselves as they stealthily removed key provisions of the STOCK Act covering executive and congressional staffers disclosing their finances.
Other than FDL, a few other independent media outlets, and watchdog groups no one seemed to think the story was a big deal or even a story at all.
But now the corporate media is irrelevant as the number one source of news has weighed in, Jon Stewart.

All hail Jon Stewart and those clever Daily Show writers for very adeptly (and hilariously — though not in a very safe for work way) reporting last night how quickly and quietly Congress and President Obama combined forces to gut major transparency provisions of the STOCK Act passed last year. In an election year, they rushed to pass this reform legislation (and garner public kudos for doing so), but now with less of a spotlight on their actions, they rushed to undo the bill.

The Daily Show with Jon Stewart
Get More: Daily Show Full Episodes,Indecision Political Humor,The Daily Show on Facebook

Will the establishment media now, finally, cover this issue?

PLEASE?
pretty please?
somebody?
A N Y B O D Y ???

[c1ue]

Re: a good 'distraction'? AAPL's tax dodge might force taxcode overhaul

More detail on Apple's "Business As Usual" tax strategy - looks bad, smells bad.

At least Apple doesn't have a motto of "Do No Evil"...

http://www.theregister.co.uk/2013/05...ee_in_ireland/

Apple has been operating practically tax-free in Ireland since 1980, a former exec has claimed.
The ex-Cupertino veep spoke out as the fruity firm was accused of being a "tax resident nowhere in the world" by Senator John McCain (R-AZ) during a hearing of the US Senate's Permanent Subcommittee on Investigations. The iPhone maker was also accused of routing sales through overseas subsidiaries purely to minimise its tax bills back at home.


Chief exec Tim Cook, who was summoned to the Senate proceedings, denied those charges, saying that Apple's Irish business was a company "set up to provide an efficient way to manage Apple's cash from income that's already been taxed" elsewhere.

Subcommittee chairman Senator Carl Levin (D-MI) said during the hearing that, between 2009 and 2012, Apple declared profits of $38bn in the US, while its Irish subsidiaries trousered $74bn. In 2011 alone, he said, 64 per cent of Apple's global pretax income was recorded in Ireland, despite just four per cent of Apple employees and one per cent of Apple customers being located there.
Apple said it paid $6bn in US taxes in 2012. The company's chief financial officer Peter Oppenheimer added that if two-thirds of the firm's profits happened to be in Irish companies, that was "because of the way we set ourselves up 30 years ago".
Meanwhile, Ireland's finance minister Michael Noonan has said that his country is not to blame for Apple's tax avoidance because Apple isn't resident there.
“I do not want to be the whipping boy for some misunderstanding in a hearing in the US Congress,” he said during a parliamentary committee meeting on Wednesday.
Responding to a question on Apple's apparently magical tax rate in Ireland, Noonan said: "Maybe there was a magician, but the magician wasn’t living down in Cork [where Apple is based in Ireland]. Because [Apple] is not tax resident in Ireland, [it is] not liable to Irish tax."
But Del Yocam, veep of manufacturing at Apple in the early 1980s, told Reuters that the firm did get a favourable tax rate back then, one that was offered to many companies, which is openly admitted by the Irish government.
From 1956 to 1980, the country attracted foreign companies by offering them a zero rate of tax and from 1980, any multinational that was exporting its products got a tax holiday until 1990. As part of the deal to join the European Economic Community, before it became the European Union, the country had to stop offering tax holidays to exporters, but it could still give a low ten per cent rate to firms, providing they qualified as manufacturers.
Phillip Bullock, Apple's head of tax operations, claimed that since the 1990s, Ireland and Apple have continued this arrangement, despite the fact that much of the Mac maker's manufacturing has been outsourced to Asia.
"Since the early 1990s, the government of Ireland has calculated Apple's taxable income in such a way as to produce an effective rate in the low single digits," he told the Senate subcommittee.
However, Ireland continues to insist that Apple gets the same 12.5 per cent corporation tax rate as everyone else - already a much lower rate than the UK's 23 per cent main rate or the up to 35 per cent paid in the US - it's just that Apple isn't paying in the country.
Cupertino apparently manages this feat by having its main Cork-based business Apple Sales International, earning the profits but two other Cork-based firms Apple Operations Europe and Apple Operations International own the firm's intellectual property rights and all three firms are registered in the US. This structure seems to result in the curious state of affairs of the profits not really being tax resident anywhere. ®

[c1ue]

Re: a good 'distraction'? AAPL's tax dodge might force taxcode overhaul

More detail on Apple's "Business As Usual" tax strategy - looks bad, smells bad.

At least Apple doesn't have a motto of "Do No Evil"...

http://www.theregister.co.uk/2013/05...ee_in_ireland/

Apple has been operating practically tax-free in Ireland since 1980, a former exec has claimed.

The ex-Cupertino veep spoke out as the fruity firm was accused of being a "tax resident nowhere in the world" by Senator John McCain (R-AZ) during a hearing of the US Senate's Permanent Subcommittee on Investigations. The iPhone maker was also accused of routing sales through overseas subsidiaries purely to minimise its tax bills back at home.

Chief exec Tim Cook, who was summoned to the Senate proceedings, denied those charges, saying that Apple's Irish business was a company "set up to provide an efficient way to manage Apple's cash from income that's already been taxed" elsewhere.

Subcommittee chairman Senator Carl Levin (D-MI) said during the hearing that, between 2009 and 2012, Apple declared profits of $38bn in the US, while its Irish subsidiaries trousered $74bn. In 2011 alone, he said, 64 per cent of Apple's global pretax income was recorded in Ireland, despite just four per cent of Apple employees and one per cent of Apple customers being located there.

Apple said it paid $6bn in US taxes in 2012. The company's chief financial officer Peter Oppenheimer added that if two-thirds of the firm's profits happened to be in Irish companies, that was "because of the way we set ourselves up 30 years ago".
Meanwhile, Ireland's finance minister Michael Noonan has said that his country is not to blame for Apple's tax avoidance because Apple isn't resident there.

“I do not want to be the whipping boy for some misunderstanding in a hearing in the US Congress,” he said during a parliamentary committee meeting on Wednesday.
Responding to a question on Apple's apparently magical tax rate in Ireland, Noonan said: "Maybe there was a magician, but the magician wasn’t living down in Cork [where Apple is based in Ireland]. Because [Apple] is not tax resident in Ireland, [it is] not liable to Irish tax."

But Del Yocam, veep of manufacturing at Apple in the early 1980s, told Reuters that the firm did get a favourable tax rate back then, one that was offered to many companies, which is openly admitted by the Irish government.

From 1956 to 1980, the country attracted foreign companies by offering them a zero rate of tax and from 1980, any multinational that was exporting its products got a tax holiday until 1990. As part of the deal to join the European Economic Community, before it became the European Union, the country had to stop offering tax holidays to exporters, but it could still give a low ten per cent rate to firms, providing they qualified as manufacturers.

Phillip Bullock, Apple's head of tax operations, claimed that since the 1990s, Ireland and Apple have continued this arrangement, despite the fact that much of the Mac maker's manufacturing has been outsourced to Asia.

"Since the early 1990s, the government of Ireland has calculated Apple's taxable income in such a way as to produce an effective rate in the low single digits," he told the Senate subcommittee.

However, Ireland continues to insist that Apple gets the same 12.5 per cent corporation tax rate as everyone else - already a much lower rate than the UK's 23 per cent main rate or the up to 35 per cent paid in the US - it's just that Apple isn't paying in the country.

Cupertino apparently manages this feat by having its main Cork-based business Apple Sales International, earning the profits but two other Cork-based firms Apple Operations Europe and Apple Operations International own the firm's intellectual property rights and all three firms are registered in the US. This structure seems to result in the curious state of affairs of the profits not really being tax resident anywhere. ®

[LorenS]

Re: a good 'distraction'? AAPL's tax dodge might force taxcode overhaul

So, the folks who wrote a tax code designed for exploitation are surprised when the code is exploited?

The founding fathers weren't stupid. Tax the states, let them figure it out. Tax imports/exports at the border (who cares where they were "resident").

On the other hand, if you get enough money who cares where it comes from? Does it really kill me to have Apple paying no taxes? If I pay for the government/services that I want and Apple provides the products/services that I want am I really suffering???

Maybe we should ditch corporate income tax and make dividends and capital gains taxable as regular income.

Or we can just keep chasing our tails with these sideshows.