Company A has $100
Company A spends $50 building a product they sell for $100
Company A sells product for $100, now worth $133
Company B has $100
Company B spends $50 building a product they sell for $100
Company B sells product for $1 to company C in Belize, now worth $50.83
Company C sells product for $100, then moves cash back to Company B, now worth $150.83
Company B is worth more now in this case as Company B wouldn't be paying tax on bringing the cash on-shore. Company B will strike deals with other trade partners to lessen tax for everyone involved, especially when there is millions worth of savings to be had.
If the argument is that much of the value is created in the states, then that is already captured mostly in USA income taxes (after all, labor is a dominate cost for R&D).
The point is they're still avoiding paying tax they should be paying. I don't think the stance that one company should pay tax on their widgets while another company doesn't. Tax avoidance is robbing everyone.
I'm not saying this is specific to America. If you look at corporations setup by these companies in other countries, ie New Zealand they paid $5.5m NZD in 2013.
Given the high tax bracket in New Zealand. For arguments sake:
1x iPhone 5S 16GB was $1000NZD + GST (which is paid by consumer).
iPhone profit margins: 30%
Profit per phone: $300NZD
Now, top tax rate in NZ: 35%
Tax paid on each phone in theory: $105
At $5.5 million, let's assume they only sold iPhone in New Zealand and we'll exclude all other products.
In reality there are more than 52,000 iPhones sold in New Zealand each year. Based on mobile market share, iPhones hold 30%. There are 2.5 million mobile users in New Zealand putting total number of iPhones at 750,000.
Hang on a second, at $105 tax on each phone, shouldn't they have paid tax of a total $78.8bn in New Zealand?
But to-date, the amount of tax Apple Corporation has paid in New Zealand is.. $27m
Don't you think there's something wrong with those numbers?
Oh wait no, because ACTUALLY Apple is just a company setup in Bermuda who pays other companies to make the phones and sells them internationally at 30% profit with no tax. In reality this is more like 11.5% because the bulk of their corporate-to-corporate payments are done through Ireland, but with larger companies this is funnelled through local companies at a 0.5% profit (to keep the lights on).
Comments
You need both, as this creates more loopholes.
var tax = 0.2
Company A has $100 Company A spends $50 building a product they sell for $100 Company A sells product for $100, now worth $133
Company B has $100 Company B spends $50 building a product they sell for $100 Company B sells product for $1 to company C in Belize, now worth $50.83 Company C sells product for $100, then moves cash back to Company B, now worth $150.83
Company B is worth more now in this case as Company B wouldn't be paying tax on bringing the cash on-shore. Company B will strike deals with other trade partners to lessen tax for everyone involved, especially when there is millions worth of savings to be had.
If the argument is that much of the value is created in the states, then that is already captured mostly in USA income taxes (after all, labor is a dominate cost for R&D).
The point is they're still avoiding paying tax they should be paying. I don't think the stance that one company should pay tax on their widgets while another company doesn't. Tax avoidance is robbing everyone.
They aren't, you are just being American-centric in saying they should pay tax in the states rather than invest abroad.
I'm not saying this is specific to America. If you look at corporations setup by these companies in other countries, ie New Zealand they paid $5.5m NZD in 2013.
Given the high tax bracket in New Zealand. For arguments sake:
1x iPhone 5S 16GB was $1000NZD + GST (which is paid by consumer). iPhone profit margins: 30% Profit per phone: $300NZD
Now, top tax rate in NZ: 35%
Tax paid on each phone in theory: $105 At $5.5 million, let's assume they only sold iPhone in New Zealand and we'll exclude all other products.
In reality there are more than 52,000 iPhones sold in New Zealand each year. Based on mobile market share, iPhones hold 30%. There are 2.5 million mobile users in New Zealand putting total number of iPhones at 750,000.
Hang on a second, at $105 tax on each phone, shouldn't they have paid tax of a total $78.8bn in New Zealand?
But to-date, the amount of tax Apple Corporation has paid in New Zealand is.. $27m
Don't you think there's something wrong with those numbers?
Oh wait no, because ACTUALLY Apple is just a company setup in Bermuda who pays other companies to make the phones and sells them internationally at 30% profit with no tax. In reality this is more like 11.5% because the bulk of their corporate-to-corporate payments are done through Ireland, but with larger companies this is funnelled through local companies at a 0.5% profit (to keep the lights on).