[socket0]

That statement itself means very little. I would argue the value is created where thousands of workers turn designs into millions of individual devices; Tim Cook might argue value is created where slapping an Apple logo on the device transforms it from a regular gadget into a luxury status symbol. Either way the issue here isn't where Apple should pay tax, but that they should be taxed fairly. There are many international tax treaties to prevent double taxation, Apple simply need to pay tax like (most) everyone else.

[mcphage]

You see, if there's no clear answer to where the value is created, then there's no clear answer to where the profits are taxed! So it kinda clips through the cracks. Whoops!

[maxmax]

The value is "created" where the sale is made. Until money changes hands, there is no concrete value.

[JamesBarney]

I think this is the best way to tax corporations. Corporations can move around where they produce goods, but it's much harder to move where they sell them.

[webXL]

Seems simple enough, but money is changing hands throughout the production process. Apple and its suppliers' wages are taxed. What's left over is taxed when spent or invested for a return.

Given the leviathan tax systems out there, it's no wonder tax havens exist in the first place. Before judging this activity as unethical and shifting the tax avoidance to some other place though, governments really need to perform a cost-benefit analysis of their tax laws and make it clear to companies what's expected from them in return for access to their market.

[mcphage]

Money can change hands where you want it to change hands, and profit can occur where you want it to occur. In this case, Apple Ireland buys an iPhone from the manufacturing division for (say) $300, sells an iPhone to Apple Italy for $800, and Apple Italy sells it to a consumer for $800. Apple Ireland made $500 profit, Apple Italy makes $0 profit, and so pays taxes in Ireland and not Italy.