If MS owe's billion's? How much Does Apple Owe?
The US taxman thinks Microsoft owes billions. Prove it, says Microsoft
The ongoing squabble between Microsoft and the US Internal Revenue Service is heading to court, beginning with a hearing to take place in a Seattle federal court on Tuesday. The case is gearing up to become one of the largest-ever legal battles between tax authorities and a US corporation over the practice of shifting assets …
COMMENTS
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Tuesday 21st July 2015 02:00 GMT Anonymous Coward
These dodges aren't available to Apple
He wasn't talking about how many years in existence, he was talking about how many years rolling in cash. Which is pretty much only the past decade or so for Apple.
Apple would not be able to take advantage of the same dodges Microsoft is accused of here because Apple is selling hardware, while Microsoft is selling licenses. Supposedly Microsoft is licensing the rights to their US IP to offshore companies, meaning that Microsoft US has to make big payments to the offshore companies for the right to use it. This reduces Microsoft's US taxable income and makes more of their income offshore.
Apple can't do that, because they are selling actual hardware devices that have a known cost of production and known sales price. While theoretically they could ship them from China to Bermuda or wherever, and have Bermuda sell them to the US at a much higher price so Apple US makes almost nothing selling them, that's already been tried a century ago by importers and all the loopholes closed (otherwise Exxon would have been using it, among others)
Apple is reporting pretty much what you'd expect in US income based on reported US sales of iPhone & Mac versus worldwide sales, and paying taxes on that amount (Apple paid over $13 billion in US taxes in 2013) If they want to investigate anyone, they should look at GE, which paid an effective tax rate of barely 4% in 2013, versus Apple's 26%. Apple probably paid more taxes in 2013 than GE has paid in the past 20 years...
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Tuesday 21st July 2015 08:56 GMT LucreLout
Re: These dodges aren't available to Apple
@Doug
Sorry, but you're wrong. Both software and hardware have extensive IP and R&D associated with them, which can be licenced or costed from anywhere.
You can port the manufacturing cost about the globe too, along with gaming internal/external reselling at the whoelsale tier.
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Tuesday 21st July 2015 08:59 GMT Tim Worstal
Re: These dodges aren't available to Apple
Pretty much but not quite exactly. Tim Cook actually referred to this in one of the congressional hearings, that Apple doesn't do what some other tech firms do.
MS does have some of the US rights to its tech held offshore. Apple has the offshore rights to its tech held offshore and the US rights held in the US. Thus Apple pays full US whack on sales and profits in the US. MS not so much.
This particular and specific case will be being looked at by Apple. But with glee more than anything else.
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Tuesday 21st July 2015 10:30 GMT LucreLout
Re: These dodges aren't available to Apple
@Tim
MS does have some of the US rights to its tech held offshore. Apple has the offshore rights to its tech held offshore and the US rights held in the US. Thus Apple pays full US whack on sales and profits in the US. MS not so much.
In the US and in Delaware is not the same thing as people think when you say "in the US".
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Tuesday 21st July 2015 11:15 GMT DaveDaveDave
Re: These dodges aren't available to Apple
"This reduces Microsoft's US taxable income and makes more of their income offshore."
Nope. It doesn't, that's impossible. At best it postpones payment of US tax. They can't pay the money out as dividends (or whatever) without repatriating it and paying tax.
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Tuesday 21st July 2015 11:46 GMT LucreLout
Re: These dodges aren't available to Apple
Nope. It doesn't, that's impossible. At best it postpones payment of US tax. They can't pay the money out as dividends (or whatever) without repatriating it and paying tax.
They can, however, secure virtually interest free loans on it and use those for dividends. Eventually, as has happened before, a "tax holiday" comes along with very favourable rates, at which point they repatriate the cash and pay very little tax on it (usually around 7% rather than 20%+).
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Tuesday 21st July 2015 12:01 GMT DaveDaveDave
Re: These dodges aren't available to Apple
"Eventually, as has happened before, a "tax holiday" comes along with very favourable rates, at which point they repatriate the cash"
Yes, quite. So no tax is avoided or evaded. If the US government merely set corporation tax rates on overseas profits at a sensible rate, there'd be no issue.
There're a lot of people complaining that if rich people are able to structure their affairs in such a way as not to be held hostage by any one government, they should be able to as well - and they're right. But it's their governments they should complain to.
It's notable that the EU was deliberately set up in a way which encourages tax competition.
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Monday 3rd August 2015 20:26 GMT JeffyPoooh
Re: These dodges aren't available to Apple
"...Apple is selling hardware, while Microsoft is selling licenses."
MS sells a copy of MS-Word, that's one software PN.
Apple sells a tablet or laptop, it contains dozens and dozens, possibly hundreds, of software PNs.
Hardware now contains more software than software.
Let it sink in, think through some examples (not hammers). You'll soon see I'm right.
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Thursday 20th August 2015 13:24 GMT Anonymous Coward
Re: These dodges aren't available to Apple
Not sure where you're getting your incorrect info? These tricks are completely available to Apple and Apple has been using much the same tax avoidance schemes for a very long time:
http://www.nytimes.com/2013/05/21/business/apple-avoided-billions-in-taxes-congressional-panel-says.html?pagewanted=all&_r=0
If fact Apple is one of the companies that pioneered these "Double-Irish" "Dutch Sandwich" tax haven schemes way back in the '80s. See: http://www.nytimes.com/2012/04/29/business/apples-tax-strategy-aims-at-low-tax-states-and-nations.html
Not to single out Apple here's a who's who list of other companies using these sleazy subsidiary accounting tricks:
Google
Adobe
Facebook
GE
IBM
Oracle
Yahoo
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Tuesday 21st July 2015 08:53 GMT LucreLout
@Gordon10
In reality probably less, as they have had less time rolling in money to develop a byzantine structure like M$
It takes no time at all to achieve this.
I have previous professional experience (in IT) in this area, and am absolutely confident that Apple, Amazon, and Google will be watching this one with interest and will be fully backing MS. A win here for the IRS would be a game changer - potentially forcing corporate relocations outside of the USA.
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Monday 20th July 2015 20:34 GMT Anonymous Coward
Lets hope they ARE being gutted
The IRS and various state departments of revenue are little more than bullies that like to beat up on anyone the administration does not care for or that they can get money from.
They are no better than modern day pirates, stealing from ordinary citizens and businesses under their "charter" with the government.
We need to abolish the entire department and all it's law & regulations and substitute a few simple words instead of the millions of lines of regulations they have propagated over the years.
All that is needed is the following: All citizens and businesses shall pay taxes as a percentage of gross income. No less than 15% of gross income or receipts shall be paid. All state and local taxes (if applicable) shall be paid as no more 15% on Net Income (after Federal Taxes and ALL employee benefits are paid). The sole remaining deduction will be for Mortgage Interest.
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Monday 20th July 2015 20:43 GMT Anonymous Coward
Re: Lets hope they ARE being gutted
And so it starts, you want your pet deduction, mortgage interest, but what about all my out of pocket medical expenses? I won't even comment about your initial diatribe. Most of us willingly pay our taxes when due and without issue. When I had a problem a few years back the IRS were actually pretty helpful with getting me back on track.
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Tuesday 21st July 2015 12:46 GMT Dan Paul
Re: Lets hope they ARE being gutted
@Turtle,
Yes, I have a mortgage you simpering douchebag. I worked for a very LONG time before I saved enough to afford one. Unlike you Mr. Grasshopper who apparently wasted every dollar you ever made.
You must be a millennial who mooched off your parents as long as you could before they threw your sorry ass out. Hopefully, the REAL world will beat some more sense into your head.
The mortgage deduction is the most popular deduction there is across the country and without it, there will be no support for ANY changes in tax law.
Since you all got to suck the public teat with your paid socialist healthcare, YOU don't need any medical deductions since you would be "double dipping" getting a deduction on top of subsidies.
Did you notice the 15% of gross revenues for businesses? No, you were too busy being stupid. Business does not pay enough in taxes even today because of a maze of deductions, rules and regulations that allow them to pay literally NOTHING. There would be even more tax money available than now because they would just have to pay the 15% of revenue. Remind me again of what the gross revenues were for Apple or Microsoft?
Seems that you are unable to even grasp the language so it's pointless going further.
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Tuesday 21st July 2015 13:01 GMT TonyJ
Re: Lets hope they ARE being gutted
"@Turtle,
Yes, I have a mortgage you simpering douchebag. I worked for a very LONG time before I saved enough to afford one. Unlike you Mr. Grasshopper who apparently wasted every dollar you ever made."
I think, perhaps, you may have misconstrued the meaning...I took the comment to be jokey/sarcasm but fair in relation to how hard it is for people to get a mortgage these days. Indeed I fear for my kids and how they're going to manage to get onto the property ladder. Guess it'll be with my and their mum's help.
Here in the UK it seems there are more and more blocks to being able to make that first step and with house prices constantly moving upwards for the most part, and faster than wage rises...well...
Of course I could have misunderstood.
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Tuesday 21st July 2015 18:26 GMT John Brown (no body)
Re: Lets hope they ARE being gutted
"Did you notice the 15% of gross revenues for businesses?"
Yes, we all noticed it
"No, you were too busy being stupid.
I think you need to go away and have a think about what 15% of gross revenue means to a business and how they wiil all go bust when the first tax bill comes in.
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Tuesday 21st July 2015 00:54 GMT OnlyTono
Re: Lets hope they ARE being gutted
".. Do you realize that your proposal raises taxes in every state? It basically means that quite a lot of people would be paying a significantly higher percentage of their income in taxes than they are now."
I would be considered somewhere in the middle of "middle class", and it would mean a tax decrease for me. Making sure everyone has a little skin in the game might actual cause those that pay very little, or almost nothing to pay a bit more attention to the people running this country and writing the tax laws.
I would be happy with the flat tax as proposed a few comments up, but I would start it a bit lower - say 8-10% and do away with ALL deductions. Make it even across the board for all income levels, classes, and entities private or business. and no special cutouts. Seems fair to me.
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Tuesday 21st July 2015 10:42 GMT LucreLout
Re: Lets hope they ARE being gutted
But then how do you nail the ultra-rich who can pull off Tax Planning 101
This will be as popular as a fart in an elevator, but the truest answer you will ever get is this: You can't.
The ultra rich have wealth in many locales, across all asset classes, and can afford better lawyers and accountants than any one government can afford. They are truly globally mobile, and can base themselves as readily out of America as they can Britain, or Bermuda, or Monaco.
Your definition of fairness, or mine, just don't come into it.
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Tuesday 21st July 2015 11:50 GMT LucreLout
Re: Lets hope they ARE being gutted
You're saying a private citizen can outspend a STATE (who basically has carte blanche due to being sovereign)?
If a state spent 100% of its take on chasing more pie, how long do you think the revoloution would take?
Apple et al can pay billions for tax advice and not blink. The IRS can't. It has to function and collect what it gets now, as well as funding the fight for more pie. Those with the pie are, predictably, defensive about it, and what they spend on operating costs (lawyers) is not profit and so not taxable. In effect, the IRS fund both sets of lawyers, due to the way corporate taxation works.
Please don't shoot the messenger - I didn't make this sh*t up, I just understand how it works.
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Wednesday 22nd July 2015 03:13 GMT Anonymous Coward
Re: Lets hope they ARE being gutted
"If a state spent 100% of its take on chasing more pie, how long do you think the revoloution would take?"
Not very long. Then again, there's no guarantee either side will win, either, given the extreme power amplification factor in play today.
Remember, although the IRS does possess a budget, they can petition Congress for more given a justification (such as a billion-dollar scofflaw). And the House has both the power of the purse and the power to print more money if need be.
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Tuesday 21st July 2015 05:38 GMT Richard 12
That would single-handedly destroy every small business
The average profit margin of many businesses - shops, bars and restaurants - is under 5%.
Almost every small business that makes and sells physical widgets makes a loss for the first few years.
Basing taxation on income would destroy all of these businesses.
Setting it at 15% would make it completely impossible to start any small businesses at all, and would bankrupt all of them within a year.
Good plan. We need more countries with no jobs whatsoever.
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Tuesday 21st July 2015 10:34 GMT LucreLout
Re: Lets hope they ARE being gutted
@AC
All that is needed is the following: All citizens and businesses shall pay taxes as a percentage of gross income. No less than 15% of gross income or receipts shall be paid. All state and local taxes (if applicable) shall be paid as no more 15% on Net Income (after Federal Taxes and ALL employee benefits are paid). The sole remaining deduction will be for Mortgage Interest.
Sorry AC, but I can already think of too many ways around what you have written that it could ever be effective. And I'm a code jockey as opposed to a lawyer or tax accountant.
As an aside, you'll also blow up a truly mahoosive housing bubble once you make interest deductible. Most people consider most of their taxes dead money, and so would happily take living in a bigger house and offsetting the interest against the taxes, allowing them to bank the larger gains on their home instead. As a nation, you'd be bust in five minutes I'm afraid.
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Tuesday 21st July 2015 12:54 GMT Anonymous Coward
Re: Lets hope they ARE being gutted
Mortgage Interest already IS deductible here in the US and we haven't suffered for it.
The average tax rate (Summed state and federal) here in the USA for the middle class approaches 50%. Last I looked, 15% of nothing was still nothing so you welfare queens still have nothing to fear.
Let's be honest, the only reason why you freetards fear a tax reduction is that the impact of the Federal Government would potentially be lessened and your entitlements could be curtailed.
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Monday 20th July 2015 20:38 GMT Gray
Not to worry
Whatever is good for Microsoft is good for America; corporate support of members of Congress assures America a stable and profitable business climate; and America will never suffer a budget crisis, certain of a continuing, bottomless line of credit with China.
Regarding the IRS: They have an obligation to appear competent and to maintain certain pressures to assure a continuing flow of political contributions.
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Monday 20th July 2015 20:49 GMT Anonymous Coward
Governments pass laws to allow corporations to avoid tax.
Corporations lobby/pay governments.
Corporations look after politicians when they leave office so as not to make it obvious what they are doing. e.g. public speaker earning 1m just to talk bollocks. Tony Blair springs to mind.
Politicians have a way of passing laws that benefit corporations in monetary value.
Why is this not obvious? Well that could be the media who are also corporations and also have politicians as very close friends.
Microsoft will never pay a penny or make some grandiose gesture of tax that don't need to pay but will pay it anyway.
Am I the only one that see's this or are we just that stupid?
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Tuesday 21st July 2015 07:25 GMT TonyJ
"..Governments pass laws to allow corporations to avoid tax.
Corporations lobby/pay governments..."
This.
It amazes me that people get so blindly hot-headed about legal loopholes that corporations then "exploit".
Here's the problem - if a government (any government) makes tax laws that are so incredibly complex but full of loopholes, then massive corporations who can afford to pay the large accountancy firms (who themselves contract to said governments to advise and assist in the making of these laws and loopholes) will exploit them. More than that, corporations are not individuals and have a legal duty to maximise profits for shareholders meaning that they have to exploit whatever loopholes they can.
And I use the term 'loophole' loosely here as more often than not, it'd probably be more accurate to call them something like 'purposefully constructed mechanisms'.
Governments are then left going after the small businesses and individuals - who more often than not don't have the financial ability to fight their governments in court and will so just pay up - to make up the missing revenue.
I'd like to believe that tax laws could be simplified but honestly I don't know how feasible this is.
Mostly though the accountancy firms, politicians and corporations all have their snouts in the same troughs, feeding greedily from the same gravy train. (Apologies for the mixed metaphors).
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Tuesday 21st July 2015 11:39 GMT Anonymous Coward
Corporations look after politicians when they leave office so as not to make it obvious what they are doing. e.g. public speaker earning 1m just to talk bollocks. Tony Blair springs to mind.
Hmm. For that to work you'd have to be able to lift the lid on much of what happened when New Labour were running the show, from inheriting a budget surplus when they started to leaving the largest budget hole in UK history when they left, with a note "haha, we took it all" to show that that wasn't an accident.
Not going to happen.
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Monday 20th July 2015 22:52 GMT Pascal Monett
I hope this will be useful
I think it is shameful that corporations can evade tax. Everyone has it in against tax but without taxes there would be no hospitals, no roads, and no welfare.
Hospitals, people. Is it worth not paying 25% Income Tax to not see your mother die of sickness ?
But hey, corporations don't have mothers, do they ?
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Monday 20th July 2015 23:13 GMT veti
Re: I hope this will be useful
I hate to break it to you, but no amount of income tax is going to keep your mother from dying. Maybe not this year, maybe not next, but sometime, and statistically speaking it's likely that you'll be alive to see her do it.
As for corporations: I'm perfectly happy with corporations not paying income tax. What matters to me is the money paid out to people, such as the corporation's owners. That's what we should be taxing.
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Tuesday 21st July 2015 10:38 GMT Mike Pellatt
Re: I hope this will be useful
What matters to me is the money paid out to people, such as the corporation's owners. That's what we should be taxing.
I was going to say that. But I misread "owners" as "senior employees". Given the majority owners of publicly-traded companies in the UK are us - at least any of us who has some form of private pension - I don't wan't to see huge increases in tax on corporations.
Gordon Brown did that in order to keep the incoming Labour Government's commitment to "no increase in income tax". The reduction in Advance Corporation Tax relief was one of the nails in the coffin of final-salary pension schemes - he was advised that the actuarial cost to pension schemes would be £67 billion.
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Monday 20th July 2015 23:28 GMT TheTick
Re: I hope this will be useful
"but without taxes there would be no hospitals, no roads, and no welfare."
Don't be ridiculous, we would have all three without taxes.
Roads - probably a touch difficult to arrange compared to state provision but there is a demand for them so they would be there.
Hospitals - huge demand so they will be provided.
Welfare - Both Brits and Yanks give billions to charity every year even with a massive welfare state, so in the absence of a welfare state private charity would step in to help people (and probably only help those who really need it, rather than scroungers, so a distinct improvement).
You can make the argument that the state would do a better job of things, but you can't argue they would cease to exist.
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Tuesday 21st July 2015 05:48 GMT Anonymous Coward
Re: I hope this will be useful
Roads - So a toll booth at every corner, then? Chokepoint owners holding people and vital goods for ransom?
Hospitals - Huge demand, yes, but normally no way to afford it. You get mangled through no fault of your own and you're out of work so no money. Is it now, "Too bad! Game Over! Better Luck Next Life!"?
Welfare - Dovetails with hospitals. Used to be if you were ill/injured and poor, you were at the mercy of charity hospitals. Last I checked, most then and now have trouble staying afloat: mostly on account of being overloaded. So your life was a crapshoot at that point.
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Tuesday 21st July 2015 08:14 GMT TheTick
Re: I hope this will be useful
@Anonymous Coward
Roads - so you agree with me that roads will still be provided. Good. (Note I did not advocate private provision, merely noted that it would be provided - it would).
Hospitals - Normally no way to afford it? Normally? No, the only real concern is for those who have no means to pay, whether by their own fault or bad luck. The answer to this is, once again, private charity. Perhaps a fund set up to fund A&E access for anyone who needs it, I know I would pay into that. It's not hard to imagine a circumstance where I end up in A&E unconscious and without my insurance documents so I would want A&E available to everyone (real A&E, not stubbing your toe).
Welfare - Being at the mercy of charity is better than starving in the street, after all charities are staffed and funded by...merciful people! What little faith you have in humanity if you think the only way the truly needy will be helped is by putting a gun to the head of peaceful people and taking their wealth.
I have to laugh at all the downvotes, do you all truly think none of these things would be provided if the state didn't threaten us with violence to take our wealth? Or do you just not like that fact that what I said was true?
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Tuesday 21st July 2015 11:53 GMT Anonymous Coward
Re: I hope this will be useful
"I have to laugh at all the downvotes, do you all truly think none of these things would be provided if the state didn't threaten us with violence to take our wealth?"
No. Try going to the third world and you'll see how much good charity and a lack of cohesive government structure does. Put simply, people die...A LOT.
PS. RE: "so you agree with me that roads will still be provided" they might as well not be there as they'll be so expensive as to be impractical. That's one reason the government runs the Post Office (both sides of the water): because they felt that communication was too important to be held hostage to private interests. That's why the government runs the police and fire services; used to be in the 19th century these were privately run...and quickly turned into protection rackets ("Shame if something happened to your house, hm hmm....").
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Tuesday 21st July 2015 11:58 GMT DaveDaveDave
Re: I hope this will be useful
"Try going to the third world and you'll see how much good charity and a lack of cohesive government structure does."
Yes, comparing the poorest countries on the planet with the richest countries really tells us a lot, doesn't it. Numpty.
Essentially your argument is that since government is better than private charity at providing such services, no-one should send any charity to help poor dark-skinned people in Africa. Your true motivation is showing through there.
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Tuesday 21st July 2015 15:08 GMT TheTick
Re: I hope this will be useful
"No. Try going to the third world and you'll see how much good charity and a lack of cohesive government structure does. Put simply, people die...A LOT"
I have been, I've seen families in rags living in shacks by the side of the highway in the Philipines where my better half comes from. What these countries are is POOR. The *proven* solution to poverty is free market capitalism and a society that protects peoples property and businesses not one that removes it from them.
And the reason charity does poorly in places like Africa is not because of a lack of state power, but because of it. Bastards with guns and corrupt politicians siphoning off the charity of good people. Less state-backed violence is necessary not more.
Protection rackets? Are you the same Anonymous Coward above with horror stories about there being no roads/hospitals/welfare if the state couldn't tax us?
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Tuesday 21st July 2015 11:56 GMT LucreLout
Re: I hope this will be useful
Read some Dickens to see how a purely charity and private-sector driven society works in reality...
In terms of Dickens, "the rich" seem to have had poorer health care, fewer opportunities, and worse diet than even the poorest in Britain enjoy today.
Read some history to see how a purely state driven economy works in reality.... that is to say that it doesn't ever work in reality. Taxes and social provision then, have to be a balance, which is precisely the point I was making when I said there has to be some level of taxation.
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Monday 20th July 2015 23:52 GMT Paul Hovnanian
Re: I hope this will be useful
"I think it is shameful that corporations can evade tax."
It's a question of avoidance vs evasion. Avoidance (structuring your financial dealings to mimimize tax) is legal. Evasion (misrepresenting financial dealings) is not.
So lets see if Microsoft properly reported its dealings between US, Puerto Rico and Bermuda business units.
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Tuesday 21st July 2015 07:34 GMT Steve Davies 3
Re: I hope this will be useful
It is worth pointing out that MS pays just about no Income Tax at all in Washington where its HQ is. All sales in the US are channeled through a company in Nevada (setup by Gate & Balmer) where the corporate taxes are close to zero.
That is the foreign shell company licensing scam being played out at home (for you USAians).
If the feds could crack down on that then the state of Washington won't be far behind. They have had several attempts at getting MS to pay its dues thwarted in recent years.
Google is much the same (well that's the impression I get from reading their financial reports)
AFAIK, Apple on the otherhand seems to be paying its dues which is a real surprise.
Apple's latest quarterly figures are due out later today. Lets see how much Tax they pay and compare it to MS. Should be interesting reading.
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Tuesday 21st July 2015 08:05 GMT Smudger 1
Re: I hope this will be useful
"It's a question of avoidance vs evasion. Avoidance (structuring your financial dealings to mimimize tax) is legal. Evasion (misrepresenting financial dealings) is not."
Actually, that used to be the case but the game has changed.
Tax evasion is fraud and is a criminal offence.
What you refer to as tax avoidance is now called tax planning and is acceptable.
Tax avoidance is about structuring your business transactions in an entirely artificial way to avoid paying tax without actually breaking the letter of the law.
The government considers tax avoidance schemes to be against the spirit of the law and will move to close loopholes in legislation/regulations. Companies employ tax advisers to create new tax avoidance schemes to employ as soon as the game is up on the current scheme. A bit like zero-day exploits, really.
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Tuesday 21st July 2015 16:22 GMT Paul Hovnanian
Re: I hope this will be useful
"Companies employ tax advisers to create new tax avoidance schemes to employ as soon as the game is up on the current scheme."
We could just rename the Tax Code as the Tax Advisor Full Employment Program.
We could get some smart people tgether and create a simple tax code with minimal loopholes. But the people tasked with this lawmaking would be the equivalent of having death row prisoners build their own gallows. Few people are willing to work themselves out of a job.
The biggest problem I (and I suspect many other Americans) have with the current tax code aren't the loopholes (deductions, tax incentives, whatever) in the system. It's that corporations can easily exploit them whereas private citizens cannot. I can't tell my boss that, for the purposes of my weekly paycheck, my address (and tax jurisdiction) is Bermuda. I can't buy, sell or lease additional children to take advantage of their income tax deduction.
I want either less corruption or more opportunity to participate in it.
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Tuesday 21st July 2015 08:30 GMT codejunky
Re: I hope this will be useful
@ Pascal Monett
"I think it is shameful that corporations can evade tax"
Is it shameful that the bully picks on people or that someone stands up to the bully? MS is far from any form of saint but if nobody fought against having lunch money stolen then we would all be handing over a lot more of it.
"without taxes there would be no hospitals, no roads, and no welfare."
This is where the question stands. Do we pay tax for welfare or welfare for tax? The people pay tax for welfare, a safety net, a support system to look after those in times of need. The gov spend welfare to gain votes, win elections and get their hands on that lovely tax money.
"Hospitals, people. Is it worth not paying 25% Income Tax to not see your mother die of sickness ?"
No because you sell a lie for the emotional manipulation of putting your hand in my pocket and I will see no benefit. You cannot defeat death and you cannot stop sickness so factually you are trying to con me. And the price tag of 25% of my hard work (and you only talk of income tax!), money I could use to keep my family (including mother) fed and healthy to reduce their risk of sickness and death.
"But hey, corporations don't have mothers, do they ?"
That is a very true fact. Just as they dont have money either. It is private individuals who pay all tax and private individuals who suffer a bad tax policy, corrupt state or reap the benefits of a good system and fair state. A fair state is not the arbitrary 25% income tax + more and more 'mother saving' tax's.
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Tuesday 21st July 2015 17:26 GMT Pascal Monett
Re: You cannot defeat death and you cannot stop sickness
You cannot defeat death. True, but you're alive now and you want to stay that way, don't you ? If something can be done to improve your life expectancy, you're going to refuse it then ? I don't think so.
You cannot stop sickness ? Really ? Since when ? We're stopping sickness all the time. Polio has apparently been almost eradicated. Doctors and researchers around the world are working on all the various cancers round the clock and have found cures to some. Real cures, that stop it in its tracks and prevent it from reactivating. What they cannot outright cure now, they have improved the treatment of to lessen the pain and make what life is left more bearable. And they are regularly finding new avenues of research.
As for corporations not having money, please excuse me but it is Microsoft sitting on a 50-billion dollar bank account, not some people on its board - they just manage the money, it is not theirs. Proof of that is that they cannot take the money and spend it on their houses or cars. So it does not belong to them, it belongs to Microsoft.
Don't blame taxes for what you do not like. Taxes are necessary for the State to function, and their amount should depend on what the People want to have available to everyone. And some things should be available to everyone if we are to call ourselves civilized.
You can, however, blame the People for always wanting more and more from the government hand, and the politicians for abusing that in order to get elected.
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Wednesday 22nd July 2015 11:18 GMT LucreLout
Re: You cannot defeat death and you cannot stop sickness
As for corporations not having money, please excuse me but it is Microsoft sitting on a 50-billion dollar bank account, not some people on its board - they just manage the money, it is not theirs. Proof of that is that they cannot take the money and spend it on their houses or cars. So it does not belong to them, it belongs to Microsoft.
No, it belongs to Microsofts shareholders. It is their money, not the directors, not the states. It has already been taxed as corporation tax on profits.
Taxes are necessary for the State to function, and their amount should depend on what the People want to have available to everyone
Correct, but only up to the point that those you're taking the tax from deem it unreasonable or that you use the money incorrectly, after which time they will seek the means to reduce their exposure. Corporations can change domicile to almost any nation on earth in less time than it would take you to fly there if you head for the airport right now. For individual tax payers, relocation takes a little longer but the principle remains. That rather sets a limit on how much they will allow you to extract from them, no matter "what the people want".
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Tuesday 21st July 2015 10:54 GMT LucreLout
Re: I hope this will be useful
@Pascal Monet
Everyone has it in against tax but without taxes there would be no hospitals, no roads, and no welfare.
Two things....
Firstly, you are aware that provision of those things in whichever domicile you reside, will consume only around half your taxes, and that of the money spent on their provision, much of it is wasted on valueless internal paperwork?
Secondly, hospital provision pre-dates income taxation, such as The Royal Free Hospital not being so named because they decline to treat William or Harry. Most roads pre-date the war with France which gave birth to income taxation. Charity existed long before welfare and was arguably more difficult to defraud for any length of time.
Having said all that, you might be suprised to discover that I agree with your general sentiment that some level of taxation and state service provision is neccessary to have a civilised society.... Its just that that level is far below the level we currently endure in Britain. Taking into account all allowances etc, my tax rate currently nets out about 32%, so if you're really only paying 25% you're either in America, or a contractor.
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Tuesday 21st July 2015 06:23 GMT Anonymous Coward
Corporations are not people
Knee jerk reaction is "hey, if I have to pay 30% in income taxes, then why doesn't Microsoft???"
I admit, I probably thought this for years myself.
But a corporation is not a person, so I don't see why the idea of personal income tax applies. Whatever money a corporation makes ends up being paid to employees or shareholders, and THEY pay income tax on it.
So why should the corporation ALSO pay income tax on the same money?
So it no longer bothers me to hear that XYZ corporation made billions and paid almost nothing in taxes, because I'm sure plenty of taxes are being paid on those billions.
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Tuesday 21st July 2015 07:56 GMT Anonymous Coward
Re: Corporations are not people
Companies pay company taxes after deducting business expenses... guess what expenses are?
If you want to start from something simple (corporate rules are pretty complex):
http://www.irs.gov/publications/p535/index.html
Have you ever filed a business tax report in your life?
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Tuesday 21st July 2015 10:01 GMT Anonymous Coward
Re: Corporations are not people
>>Have you ever filed a business tax report in your life?
In fact I'm self employed so I file them fairly often.
So yes, whatever salaries are paid to the employees are deducted and thus not taxes as corporate income.
But the fact remains that a corporation is not a person. It will not take the profits of the company and blow them all on a Ferrari or strip clubs.
Whatever profits a corporation accumulates will eventually go SOMEWHERE, either back into the business, or as a stock distribution, or a buyback, or otherwise back to the employees and shareholders. I mean, the people who run these companies aren't going to let these billions just sit there for all eternity. Income taxes will be paid on them eventually, if not immediately.
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Tuesday 21st July 2015 10:33 GMT Anonymous Coward
Re: Corporations are not people
No, corporations ARE people and much of that money that you suggest goes somewhere, apparently, often goes to offshore banks and sits there growing while doing no good to nation from whence it came.
The whole thing is a joke. Corporations, like any other people ;) should pay the taxes where the income was earned to all levels of government to which taxes are due, just like everyone else. The problem with system is that they (Corporations) can afford their own politicians and hence write their own tax codes. How F&^%ed is that?
It's pretty easy when you take the complexity out and there is no need for the complexity that is in the system other than to obfuscate the ridiculousness of the system.
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Tuesday 21st July 2015 12:22 GMT Peter Gathercole
Re: Corporations are not people @AC
I'm interested in which side of the pond you are, and whether you are truly self employed.
In the UK, and you really are self employed, or a 'sole trader', then you won't have filed a company tax return, as you don't run a company. You will have filed a personal tax form which includes justifiable expenses. I don't know about the US or other countries.
If you run your own limited company, although lots of financial institutions like to treat you as if you are, you're not actually self-employed according to HMRC. You are actually employed by a company that you own. Not the same thing at all, especially when it comes to liability for tax.
For the UK, the rules are outlined here.
The taxes that companies pay are taxes on profits and certain types of transaction, and profits stay in the company, they're not paid out as salary, wages or justifiable expenses, at least not in the year that they're declared. A company may have revenue measured in millions, but may end up paying no corporation tax because all those millions are paid out in wages, materials, and other business costs.
Indeed, many small companies pay pretty much no corporation tax, as their purpose for trading is to provide the owners a living, so they're arranged that all profit that comes in over non-wage costs gets paid out with the appropriate level of tax. The purpose of running it as a limited company is to provide isolation between the business and the individual, as most people do not want to lose their house if some financial problem hits their company.
What financially savvy companies try to do is to make sure that the operating profit gets extracted from the company to the owners or shareholders with as little tax due as possible. The borderline between what's allowed and not is like a battlefield, with the front lines moving all the time. And the accountants and Revenue are the generals that get to control the battle!
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Tuesday 21st July 2015 19:20 GMT Anonymous Coward
Re: Corporations are not people @AC
>>I'm interested in which side of the pond you are, and whether you are truly self employed.
I am American. I am not self-employed by your strict definition, as I have a company and not a corporation. Here, when you describe yourself as "self-employed" to someone (e.g., at a party) it just means that you make a living without working for someone else.
Regardless--taxes are still only paid on the company's profits (which, for me, is the same as my income). Business expenses are deducted. So I do understand what you're saying, that corporations pay taxes on their profits.
I still don't see the necessity though, as again, those profits will eventually be paid to SOMEONE, SOMEWHERE.
I understand the practical issue of what I consider tax loopholes, i.e., the corporation shuffling money to different countries and said money eventually making it back to the owners somehow. This seems to circumvent the spirit of the law and maybe the letter of the law should be changed to address it. But I don't understand why taxing (most of) the money twice at the same rate is considered an acceptable solution to this problem.
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Tuesday 21st July 2015 07:39 GMT Henry Wertz 1
Can't have it both ways
Regarding corporations as people, there's two problems here...
First, in the US, corporations indeed are considered people. From Wikipedia:
"This rule of construction is specified in 1 U.S.C. §1 (United States Code),[15] which states:
In determining the meaning of any Act of Congress, unless the context indicates otherwise--
the words "person" and "whoever" include corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals;"
Second, the economic point (that it's being double taxed)... actually, this is a good point, for companies that are paying out a large amount of ther income as wages, salaries and other services that are already taxed, taxing it at a similar rate would amount to double taxation. The problem, though, is the likes of Microsoft and Apple avoiding paying tax on money that is pure profit, simply being banked away and not spent on any salaries, wages, or goods and services whatsoever.
As for the 15% flat tax (except your pet exemption of mortgages)... well, one of the games corporations play *now* is to shuffle around profits, losses, and where income goes. They would simply make sure their income comes in overseas, and you'd get 15% of jack.
As for Microsoft's situation, they used some kind of tax shelter or other that the IRS then decided was invalid. I would suppose both Microsoft is probably being difficult with the IRS, and the IRS are probably being jerks about it. The IRS do tend to be jerks if you are "difficult" with them.
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Tuesday 21st July 2015 11:54 GMT Aristotles slow and dimwitted horse
Corporations are not people...
...neither do corporations pay "income tax". Corporations (or Ltd / Public companies as we have them in the in the UK) pay, unsurprisingly - Corporation tax. This is a flat rate tax on annual profits, i.e. retained earnings AFTER all annual business expenses (i.e. the costs of doing that business in one calendar year) have been deducted.
The more they can deduct as genuine "costs of doing business", the less corporation tax they are requried to pay. In the Uk we also have employers national insurance to pay also - but fuck knows what the Government does with that money, it's just another tax.
Just an aside to our US readers - I saw a documentary recently, the main proposition of which was that there is no actual written US law or statute that compels US citizens to pay "income tax" i.e. a tax levvied by a government on the exchange of their personal labour, for reward; and that the only tax that was legally required to be paid on "labour exchange" was corporation tax? No sure if this is true or not.
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Wednesday 28th October 2015 21:09 GMT Anonymous Coward
Re: Corporations are not people...
"Just an aside to our US readers - I saw a documentary recently, the main proposition of which was that there is no actual written US law or statute that compels US citizens to pay "income tax" i.e. a tax levvied by a government on the exchange of their personal labour, for reward; and that the only tax that was legally required to be paid on "labour exchange" was corporation tax? No sure if this is true or not."
When World War II came around and Uncle Sam REALLY needed the revenues to finance the war effort, they developed the compulsion: income tax withholding. Basically, all registered employers are required by law to withhold some slice of your paycheck (the slice is determined by your W-4 declaration) and pay it to Uncle Sam in advance. That's why Form 1040 is known as the Income Tax Return form: you're filing to balance what Uncle Sam has versus what you actually owe him since the standard tends to err high.
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Tuesday 21st July 2015 14:09 GMT Sean Timarco Baggaley
"Corporations are not people"?
From Latin corporatus, past participle of corporare (“to make into a body”). The concept dates back to Roman times.
The whole point of the concept of incorporation is creating a legal 'person' that acts on behalf of its owners. By defining a business as a fictional person, the same laws that govern contracts between two normal people can also apply to corporations, for example, which avoids the need to waste time and effort designing and implementing a parallel legal system just for businesses.
(In IT terms, you can consider a nation's laws as its operating system. These tend to be designed for interactions between people, so defining a corporation as a fictional person means you can use the same API for both. Of course, like many an old, crusty API, there are any number of edge cases, quirks, and outright design errors that cause problems and unintended behaviour, but that's us fallible humans for you.)
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Wednesday 22nd July 2015 11:40 GMT Sean Timarco Baggaley
Re: Can you buy your corporation a pint?
Yes. You can buy it an entire container ship full of fruit juice cartons if you like. That's the point: contracts work just fine, and offering to buy the corporation a pint is a perfectly valid contract.
What the corporation would do with said pint is another matter, but I'm sure the CEO will think of something.
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Tuesday 21st July 2015 17:37 GMT Anonymous Coward
Just like other U.S. criminal corproations
Intel has been convicted at least twice for income tax fraud. Unscrupulous companies routinely cook-the-books to avoid paying their fair share of income taxes. The problem is that the company CEOs never go to prison for these crimes so it will continue.
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Tuesday 21st July 2015 20:02 GMT Henry Wertz 1
Common law
"I saw a documentary recently, the main proposition of which was that there is no actual written US law or statute that compels US citizens to pay "income tax" i.e. a tax levvied by a government on the exchange of their personal labour, for reward; and that the only tax that was legally required to be paid on "labour exchange" was corporation tax?"
The 16th ammendment allows the feds to collect income tax. I have no idea if there's any specific law authorizing the IRS etc to actually do so. If not, what can I say? The US doesn't usually use common law, but this is a case where the IRS will come down hard if you don't pay taxes you owe, and judges go along with it, so it's safe to say it's common law anyway if there's no specific statue to point to.
The practical matter is, employers withold money and give it to the tax man, so in many cases if someone doesn't file, the IRS will be perfectly happy with that, because you'd either owe 0 or the IRS would actually owe you a refund anyway.
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Wednesday 29th July 2015 11:41 GMT Ptol
Flat rate tax system...
Unless you have a flat rate tax system, when there is enough money at stake, there is an incentive to transform a process to generate the tax liability at the lowest taxed rate. For people working as an employee you tend to get most of your reward as taxable income that you have very little flexibility over, and very little in the way of allowances to offset your tax bill.
However, earn enough, and are able to control how you receive your money and its a very different game. Dividend income from shares avoids the nasty national insurance tax. Capital gains is even better - if you qualify for entrepreneur relief! What about the negative tax rates out there?
Can you live without earning very much this year? Well, pay your self very little, and then claim tax credits to top you up!
Then there are the probably illegal methods, that keep coming around. Lend yourself the money at a commercial interest rate that keeps adding to your debt. Remember you will need to repay this at some point but that can be handled by the probate office...
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Wednesday 29th July 2015 14:28 GMT Charles 9
Re: Flat rate tax system...
Well then it's a lost cause since you'd have to apply this flat tax rate worldwide. But since many countries are in competition with others, tax havens emerge and since they're sovereign, there's little you can do directly to stop them being tax havens. So you gotta make it up somewhere.
As for the flat tax, one reason for a progressive tax code is to discourage the very rich hoarding their money away. Money that doesn't move doesn't get taxed since it's no longer income to someone. That's why some savvy wits borrow against assets instead of sell them: to dodge capital gains taxes.
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