[nemik]

From http://www.aboveavalon.com/notes/2015/6/13/apples-cash-dilem... it seems like Apple may not actually have the cash to do this, not in the USA at least and it would need to pay taxes on the cash it is holding outside the US to pay the majority US labels/producers/artists.

Not that this excuses what they're trying to pull here or anything. By trying to weasel out of paying any US taxes, they can't spend their own money. So in this case they really might be too poor to make this deal work otherwise.

Good for Taylor Swift to stand up to this kind of crap.

[spinchange]

They "only" have about 22 BILLION in American cash! They can raise capital in the bond market in perpetuity secured against all their global cash. There's demand for debt like Apple's. SO, they absolutely, unequivocally, unquestionably can pay the artists. This is a business decision based on greed - just like leading a wage suppression cartel. They are not too poor!

[nemik]

Hmmm I was under the impression that cash was part of their operating expenses. They have retail stores, their campus, most of their employees and all their most expensive employees are all in the US too. But you're right, it's probably still enough to eat 3 months worth of royalty payments.

Also likely, this isn't going to be the only or last fuck-you Apple is going to be giving artists or content producers. The ones who agree to be screwed for the 3-month opening trial will be push-overs who can be leaned on again when the time comes.

[nrp]

Per the RIAA, the entire recorded music industry in the US recorded under $7 Billion in revenue in 2014. Apple has north of $20 Billion in cash in the US. There are likely many reasons for Apple to make the move they did, but it is unlikely cash on hand was one of them.

[rsync]

"Per the RIAA, the entire recorded music industry in the US recorded under $7 Billion in revenue in 2014."

Amazing. We think of the RIAA, or "big music" as some kind of juggernaut force in society and politics - especially Internet politics.

But their entire industry top line is smaller than what fedex makes in a month.[1]

[1] http://www.nasdaq.com/symbol/fdx/revenue-eps

[charlesdenault]

That's astonishing. I'd be interested in seeing some more statistics on the amount of lobbying vs market size compared to other industries (e.g. Transportation, Hospitality, Pharma).

[jdjb]

Something tells me we'd see a direct correlation between the amount of lobbying and the amount of legal backing your "product" needs in order to have value (copyright protection, patents, brand trademarks, etc).

[RodericDay]

This happens all the time in "Uber vs. big taxi medallion cartel" debates.

[maxerickson]

The months there are dates marking fiscal quarters, so each number is for 3 months. Fedex monthly revenue is a bit less than $4 billion.

[ixtli]

Sadly that's still more than enough money to bully individuals :(

[reagency]

You can't compare top-line revenue across industries. Fedex is capital intensive.

[simonh]

> By trying to weasel out of paying any US taxes, they can't spend their own money.

It's not about avoiding paying any US taxes, it's about avoiding paying US taxes on earnings abroad. This is why so many Americans living abroad are giving up their US citizenship. I'm a Brit living in London and I know several American born friends that have become British citizens to avoid paying both UK and US taxes on their earnings. In fact the current mayor of London, Boris Johnson, is Anglo_America and even though he has never lived or worked in the USA, because he had US citizenship the IRS hit him with a massive tax bill on his lifetime earnings in the UK. On what possible basis could anyone consider that appropriate? He promptly gave up his US citizenship.

The US Government's attitude to earnings abroad is IMHO utterly reprehensible. I'm not aware of any other country that does this. I'm not a US citizen but I do work for a US owned company.

[michaelt]

  The US Government's attitude to earnings abroad
  is IMHO utterly reprehensible.

I'm also a Brit and I disagree - at least in the case of multinational companies like Apple. If you have a lower tax rate for profits from abroad, the American operation can "license intellectual property" from shell companies in tax havens, then the American operation makes no profits (and hence pays no tax) while the tax haven shell company makes big profits (but pays no tax).

America has a system of foreign tax credits - so if the American tax rate is 35% and the company was taxed 20% in the country where they made the profits, when they repatriate the money to America they only have to pay 15%.

This is much fairer than the British approach to tax-dodging which appears to be "ignore it and maybe the crooks will donate to our political party".

[mike_hearn]

It's normal that companies can choose where to book revenue by performing various forms of cost shifting. The entire EU system of corporate taxation is based on that principle (tax is paid where your HQ is registered). Global tax treaties, ditto. It's the USA that is weird and exceptional in this case.

So the British approach is not to "ignore tax dodging". It's to theoretically apply the same system it's always used, along with everywhere else, whilst simultaneously trying to appease populist anger over spending cuts by branding various foreign companies as socially irresponsible, although (a) there is no chance of this making any different to austerity and (b) those companies were only following rules that were considered uncontroversial not so long ago.

It's kind of a dumb strategy.

[jbooth]

"It's not about avoiding paying any US taxes, it's about avoiding paying US taxes on earnings abroad."

It's also about structuring earnings so that they happen to be earned abroad.

https://en.wikipedia.org/wiki/Double_Irish_arrangement

[minot]

Here are my simple thoughts.

If an entity pays for an Apple product or service in the US, Apple has earned an income. This income is without doubt subject to taxes in the US. As far as I know Apple does pay US taxes on these monies. Do we agree this far?

I don't see why we can fault Apple for not repatriating income it earned abroad. They can do as they please with it as long as they don't bring it back in the US. I'm not saying they shouldn't pay a tax if/when they bring it back. I am just saying we should not demonize them for not bringing it back.

[jbooth]

Here are my thoughts:

America invented the transistor and Internet with tax money, plus educated most of the engineers who built those products up to grade 12. But everyone acts like it'd be some moral tragedy for Apple to pay taxes back into that system. It's disgusting. Our society has been overrun by MBAs. Nobody thought like this 30 years ago.

Also you completely ignored my actual point about the flexibility of where money was 'earned' if you have good accountants.

[S4M]

> On what possible basis could anyone consider that appropriate?

Not a US citizen here, but I think the reason is that a US citizen has more privileges than someone else: it's easier to travel and get a work permit abroad, if something goes badly they are still under protection of the US government, etc.

This is due to the fact that USA are the most powerful country on Earth, and one of the reasons for that is its military power, which is very expensive.

So the US citizen residing somewhere else would still have to pay their share to be protected by their country.

Not saying that I completely agree but I think it's a valid reason.

[mike_hearn]

> I think the reason is that a US citizen has more privileges than someone else

Not the case. I have read that the most powerful passport in the world (as in, getting into countries visa free) is the British passport.

Additionally Americans, unlike citizens of other countries, get no protection from their host government. If they get evacuated from a disaster zone they get charged for the costs. And as everything the US Gov does is horrendously price inflated, there are cases of people getting "rescued" and then wishing they'd been left behind after being served with massive bills.

The way the USA taxes citizens abroad is indefensible. There's literally not one single defence for it.

(btw: there are two different Mike Hearn's posting in this thread! I am the other one)

[djrogers]

> If they get evacuated from a disaster zone they get charged for the costs. And as everything the US Gov does is horrendously price inflated, there are cases of people getting "rescued" and then wishing they'd been left behind after being served with massive bills.

Citation please? The only thing I've ever heard of even remotely close to this ate the occasional local search and rescue operations that are caused by poor judgement. That has nothing at all to do with the U.S. government.

The next time there's a disaster in almost any country - look around. That's a U.S. Navy carrier providing electricity for emergency relief. Those are U.S. Marines distributing rice, ponchos, and water. Those are U.S. Navy Corpsmen delivering first aid to the wounded.

As bad as people like to make this country out to be, we are the first ones there with the biggest shovel any time another country needs to be dug out.

[mike_hearn]

http://travel.state.gov/content/passports/english/emergencie...

Click the "Will the U.S. government pay for my travel? How much will it cost?" section.

As bad as people like to make this country out to be, we are the first ones there with the biggest shovel any time another country needs to be dug out.

It's not so. Go look at Yemen. The Chinese, Indians and Pakistanis evac'd their citizens when the war started. The USA left theirs to rot.

http://www.theguardian.com/world/2015/apr/01/american-civili...

[wmeredith]

"it would need to pay taxes on the cash it is holding outside the US"

Oh, the horror.

[chvid]

They would not - paying their artists is a deductible business expense.

[malnourish]

I believe what the grandparent meant is that bringing the money in to the US will require taxing it.

[cowsandmilk]

That article discusses buybacks and dividends.

Buybacks and dividends are post-tax expenses.

Paying royalties is an expense that comes before taxes. If they bring $500MM over and pay it as royalties, they would pay no taxes on it.

[zymhan]

Would they have to pay taxes all of the overseas earnings if they use just some of it? I figured they only paid tax on what they actually bring back here.

[URSpider94]

No, just what they repatriate. But they already have $22 BILLION in cash in the U.S., and they can borrow more for far less than their income tax rate, so why incur even a little tax?

[adventured]

The only reason for them to be concerned, is they've accumulated a vast amount of debt in a very short amount of time, all to put off dealing with the cash / tax problem.

That debt starts to add up, even when you're paying record low interest rates on it. Right now they're losing a billion a year just in interest on their debt, that's up from nothing three years ago. At the rate they're taking on debt, they'll be losing two billion dollars per year to interest within another two years. That starts to become a lot of money to be pissing away just on interest, all to avoid taxes. Over time it'll become a net larger sum than they would have paid in taxes on the cash.

[matwood]

It's not just about avoiding taxes. Bond rates are extremely low. If one believes rates will soon start to go up, taking on fixed rate debt can be a smart thing. As rates rise, the cash lying around can be used to generate returns above the rate on the debt. The tax angle makes it a double win.

[chernevik]

They can almost certainly borrow against their foreign holdings.

[simonh]

No, they'd become liable. If it was that easy to avoid paying taxes on repatriated earnings it wold simply stop being a problem.

[rndstr]

> it seems like Apple may not actually have the cash to do this

Maybe they could do a Kickstarter campaign?

[briandear]

Not defending apple for not paying artists, but I will defend their 'weaseling' out of US taxes. U.S. Corporate taxes are among the highest in the world and until Washington starts lowering their confiscatory tax rates, I would encourage all businesses to avoid repatriating earnings. A 10% tax rate is high enough.

[fordh]

I was curious and looked up this claim. Turns out PolitiFact looked into it: http://www.politifact.com/punditfact/statements/2014/sep/09/...

The conclusion:

  Bolling said the United States has "the highest corporate tax rate in the free
  world." He was referring to the statutory rate, meaning the rate before
  deductions. On that score, he’s right: The United States does have the highest
  statutory rate among developed countries. However, the United States’ corporate
  tax rate doesn’t appear to be the highest once deductions and other exclusions
  are taken into account.

I found it an interesting article so I decided to share.

[adventured]

The US effective corporate tax rate tends to be 25% to 27% in normal times, which is still one of the highest effective tax rates in the world. The median S&P 500 effective tax rate is 30%, also one of the highest rates in the world.

You often see 12% or 13% bandied about as the effective rate, but that's intentional intellectual fraud: they refer to 2010 numbers, when the US was coming out of the great recession and corporations had lost a ton of money.

[nicolas_t]

There's also some countries that have relatively "low tax rate" but very high social security costs which are not always counted as tax rates by studies.

[seanmcdirmid]

And not all those costs can be credited against US taxes on repatriation, so double taxation scenarios exist.

[yequalsx]

Nice usage of the word 'confiscatory'. My experience with people who use this word in relation to taxation is that they use it in derogatory sense and is used primarily by conservatives and libertarians. I don't know if that is the case for you. What do you consider the optimal corporate tax rate? You said 10% is high enough. Do you think it should be 0%?

If you are in the libertarian and/or conservative branch of U.S. politics why do you look to other countries' tax rates for guidance on what our tax rates ought to be? I have been under the impression that looking to other countries for guidance on our social policy is bad and contrary to the notion of exceptionalism.

The U.S. uniquely, I believe, considers corporations persons. Hence the Citizens United decision. Given this shouldn't the tax rate on these citizens be the same as on other citizens with like earnings?

[comex]

There is no sense setting up a strawman about a topic, exceptionalism, which the parent did not even raise or mention.

Blaming Citizens United (certainly a harmful decision) on corporate personhood is, while popular, unduly reductive; the actual ruling was more about freedom of association. Even in the context of the debate about corporate personhood, your rhetorical question about tax rate is pure demagogy.

[yequalsx]

Have you ever heard of someone refer to taxes as confiscatory and it be the case that that person is not a conservative or a libertarian who holds the beliefs mention in my post? I haven't but I did acknowledge that perhaps those beliefs were not shared by the person I responded to. Thus the questions I asked. It was not demagoguery. The argument was quite rational.

People who refer to taxes as confiscatory rather than as being too high are attempting to frame the topic of taxation as it being, necessarily, wrong. It's a ridiculous starting point. These same people almost always scoff at arguments that the U.S. ought to adopt some social policies because all other industrialized nations have them. It is, with this fact in mind, quite rational to ask why looking at the corporate tax rate of other countries is a good argument.

Why is it demagoguery to ask why a person in the form of a corporation should pay less in taxes than a person in the form of a human?

[comex]

I appreciate you responding to my criticism. The first part - there is definitely an association between believing A and believing B, but I don't think it's fair to assume B when they only talked about A.

As for what I called demagoguery: I mean, corporations are considered legal persons in most countries - that's where the word corporation comes from - which is what allows them to own property, enter into contracts, etc., as well as to violate the law. So then the US has been more uniquely inclined to allow corporations to claim rights originally intended for natural persons (such as free speech, contract rights, property rights, rights of the accused); and there is valid criticism of that idea for various reasons, the most obvious one being that they're very different from actual people, so Congress should have to explicitly decide what privileges corporations should have rather than the judicial system tacking on existing ones. But on the other hand, it's not completely ridiculous to say that since corporations and people have similar sets of abilities in the eyes of the law, the same principles should apply, especially with respect to commerce.

Even in the case of corporate free speech, there are certainly situations where governmental restrictions on a corporation's speech would feel fundamentally wrong - e.g. suppose Congress decided political activism groups, from the EFF to the NRA, were only allowed to use corporate funds to spread their message at all if Congress liked them. Citizens United, as I said, approached this in terms of freedom of association more than corporate personhood, but neither does it seem immediately absurd to try to solve it the latter way. (Incidentally, the need to find, and the partial arbitrariness of, a dividing line between that example on one hand which should have constitutional protection, and super PACs on the other which should not, is why "corporations aren't people" is a bit simplistic as an approach to solving the Citizens United problem. You really don't want to remove protection from the former.)

Anyway, it seems self-evident that corporations and individuals need at least somewhat separate treatment by tax law (e.g. because of the double taxation issue when corporations pay out earnings to shareholders). Given that corporate personhood in general is not fundamentally and irrevocably an evil or unfair idea, merely specific implementations of it, it's not fair to be reductive and say that the person analogy must be taken to absurd extremes.

[RexRollman]

I agree with corporations who attempt to legally pay as little taxes as possible. That's what I do. If someone doesn't like it, then get the laws changed.

[hobs]

Yeah, why dont the poor and downtrodden just pay their lobbyists to change the law of the land... what?

The corporations have the money and the drive to get the laws changed, who else does?

[WorldWideWayne]

I was hoping someone would start a popular kickstarter style site for this.

It seems pretty simple to me. If you want your laws changed, pool your money and go lobby the gov't just like every other corporation.

[evunveot]

That exists: Mayday PAC. Lawrence Lessig organized it last year. They raised $11 million and tried to influence some key Congressional races, but it didn't really work. Now they're trying some different things:

https://medium.com/@lessig/we-tried-we-learned-we-re-trying-...

[avn2109]

Interesting link, but $11 million bucks is probably not enough to buy even a single Senator, even if his district is an extremely cheap media market.

A recent Senate campaign in one of the nation's cheapest media markets (Jon Tester's) was run for ~15 million bucks[0] in coordinated campaign funds, plus probably-larger undisclosed amounts of "independent" campaign funding through PAC's etc.

In the same cheap media market, Senator Max Baucus raised >$5 million[1] for the coordinated campaign in his final Senate race, in which he ran effectively unopposed. Again this $5 million does not account for his pre-existing war chest from thirty five years of Senate campaigns or the (vastly larger) fundraising of his GlacierPAC or other related "independent" political organizations.

So the minimum single-senator campaign cost is probably somewhere between those two bounds. Therefore I don't regard the core idea of Mayday PAC as a failure; instead it seems like they need to scale it before we can decide if it's workable.

[0] http://www.opensecrets.org/politicians/summary.php?cid=n0002...

[1] http://www.opensecrets.org/politicians/summary.php?cid=n0000...

[nona]

Yeah! None of this one-man-one-vote crap, back to some good old fashioned plutocracy. After all if the top 10-20% own 90% of the wealth, it's only right and proper that they also own an equivalent share of the political power. ;-)

[icebraining]

Nobody said it was right, just that it's less bad than having just the rich lobbying.

[specialist]

Do you play board games?

Any rule set can be gamed / broken.

To keep the game going, sometimes players just need to do the right thing, thereby honoring other player's investment in the game.

And law is so much more complicated than a board game.

https://en.wikipedia.org/wiki/Gödel%27s_incompleteness_theor...

[jjoonathan]

Changing the laws requires a sizable investment in lobbyists and bribe money before any ROI can be achieved. Most individuals simply don't have enough taxable income to make the investment worthwhile. Megacorps do. The situation is not morally symmetrical and not practically symmetrical.

[GFK_of_xmaspast]

How come 10% is high enough for corporations but I pay a lot more than that in income taxes. Shouldn't it be the other way around?

[jannotti]

I think it could be either way, but many object to the fact that it is both. In other words, corporate tax is seen as double taxation, since the earnings (after taxes) are then passed on to shareholders, who pay tax on it again.

I could see a coherent tax code that taxes corporations, but not individuals, or one that taxed individuals, but not corporations (Of course with either of these there would no doubt be all sorts of new loopholes to deal with). But taxing both seems odd to me.

[samuellevy]

I'm not sure how the tax system works in the US, but I was just talking to my accountant about this issue the other day.

In Australia, my company gets taxed at a flat 30% on all profits in a year. If I want to take cash out of the company after that tax has been taken, I pay "top-up" tax that brings the total tax paid to the level of my income tax rate.

For example, if the company earned $10000, after all expenses, then it would pay $3000 in tax, leaving $7000 left that I can take out. If I earned no money in the year, my income tax rate is 0%, so the top-up tax is -$3000 (I.e. I get a tax refund for $3000). If I earned $50000 in the year, then my income tax rate is 32.5%, so I would have to pay top-up tax of $250 (I.e. 2.5% of the original $10000, which has already been taxed 30%).

Double taxation shouldn't happen, and while my company was set up for tax minimisation purposes, international corporations are able to do an insane level of fuckery to avoid almost all taxation.

[tomp]

Isn't double taxation really a choice that the owners make? I.e. an unlimited liability company wouldn't be taxed twice. In essence, corporate tax is a fee for the legal protection given by a corporation/limited liability entity.

[GFK_of_xmaspast]

By the double tax hypothesis, how come then I have to pay sales tax on things I buy using money I earned from income that's already been taxed.

[ryandrake]

It's only considered "double taxation" when the tax hits wealthy people[1]

1: http://assets.amuniversal.com/921b06d016420130ff2c001dd8b71c...

[evunveot]

Sales taxes are deductible in the US, sort of. You can deduct either state and local sales taxes or state and local income taxes. No idea what the rationale for that is, but if you live in a State with no or very low income tax and deduct your sales taxes, it's kind of like you're not getting taxed twice.

http://www.irs.gov/Individuals/Sales-Tax-Deduction-Calculato...

[jjoonathan]

If there are loopholes allowing corporations to not actually pay their taxes and the capital gains tax rate is a fraction of the income tax rate, is it really fair to call it double taxation?

[philwelch]

Corporations are just a straw man. Any profit that a corporation makes is either held as cash, reinvested by the corporation, or returned to the owners of the corporation (i.e. shareholders) as dividends. The profit that's held and reinvested is intended to generate even more profits in the future, which means that eventually, all of a company's profit makes its way back to individual shareholders. Those shareholders, in turn, pay income tax on those dividends. So a corporation's profit is already taxed at the point where it performs the intended purpose of corporate profits--to provide income to the shareholders.

Taxing corporate profits directly at all only accomplishes the following things:

* The profits that are redistributed to shareholders end up being double-taxed; the corporation pays tax on them, and then distributes them to shareholders who pay income tax on them.

* The profits that are reinvested end up being taxed, which reduces the amount that the corporation can reinvest. This directly reduces economic activity, since reinvestment often manifests itself in things like hiring and construction; in other words, increased economic activity. In practice, it might be possible to avoid taxes on these reinvestment activities by accounting for them as expenses and saying, "I guess we didn't make any profit this quarter".

* The profits that are held as cash are taxed, and this isn't actually as big of a deal unless the company is building up a massive stockpile to reinvest later, but in this case it would be fairer to just tax a corporation's cash holdings directly. This would also incentivize corporations to either reinvest their profits or distribute them as dividends, either of which is better for the economy as a whole.

[toddmorey]

I think in some ways, you have a fiduciary responsibility to your shareholders to use reasonable means to maximize the value of your company. It seems to me that includes both operational efficiency and prudent use of available tax breaks.

I'm uncomfortable with the line of reasoning that we "can't do anything until we change the system," but I do wonder how Wall Street would react to a company that decided for moral reasons to avoid the schemes and pay more taxes.

[cdash]

Except you actually don't and this has been a myth that has continued to plague any type of discussions like this.

[TYPE_FASTER]

https://commons.wikimedia.org/wiki/File:US_Effective_Corpora...

[sanswork]

Where is the western world has lower tax rates than the US?

Edit: answered above.

[logicchains]

US taxes contribute more to violent deaths and unnecessary punishments/imprisonments per dollar than taxes paid in most other countries. The US spends a greater proportion of GDP on "defense" than almost all other Western countries, so a tax dollar paid in the US is more likely to contribute to "defense" and less likely to contribute to education, healthcare or whatnot than a tax dollar paid in e.g. Sweden or Holland. Similarly, the US has 25% of the world's prison population yet only 5% of its total population, so necessarily spends a relatively higher percentage of tax dollars on incarceration.

There are actually people who do everything they can to minimise their tax liability in order to reduce the money spent on things they consider unjust: https://en.wikipedia.org/wiki/Tax_resistance.

Every dollar not paid in US tax is a dollar that won't contribute to blowing up people in the Middle East who have the misfortune of being in proximity to suspected terrorists (tens of thousands of people over the past decade) [1]. Similarly, every dollar not paid in US tax is a dollar that won't be spent putting poor people in prison for smoking a weed that causes less violence in a decade than alcohol causes in a day.

https://en.wikipedia.org/wiki/Civilian_casualties_in_the_war...

[programmernews3]

I hope the people who are avoiding tax are donating their avoided taxes to their local schools and hospitals.