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Apple iTax: made in Ireland, designed in the US

Apple, famous for its innovative products, is equally creative in its tax structure. From 2009 to 2012, it successfully sheltered US$44 billion from being taxed anywhere in the world, including sales generated…

Who me? Legislators in the US have made it possible for “national heroes” to implement tax avoidance schemes. EPA/Jim Lo Scalzo

Apple, famous for its innovative products, is equally creative in its tax structure.

From 2009 to 2012, it successfully sheltered US$44 billion from being taxed anywhere in the world, including sales generated in Australia.

While there are probably some sound reasons for Apple’s CEO, Tim Cook, to claim in a US congressional hearing in May 2013 that his company “complies fully with both the laws and spirit of the laws”, many people may think it is immoral for such a successful company to avoid taxation.

But the company shouldn’t be alone in the being blamed for the low tax it pays around the world.

Concerted government action, including specific provisions inserted into US tax laws in 1997, have made it possible for multinationals with complex structures to funnel profits between the gaps of tax authorities.

And it is unlikely to be a coincidence that Irish tax law has been crafted to allow companies incorporated in Ireland to take full advantage of these gaps in the US.

Mapping the reach of Apple’s iTax scheme and the rules it uses to hide profits is difficult, if not impossible, to discern from its financial statements.

My research on this topic would have been impossible but for information revealed in the US Senate hearing in May last year.

Indulging Apple

The tax structure of Apple is designed to ensure that little income is left to be taxed in non-US markets like Australia.

For example, when a customer buys an iPad in Australia for A$600, the sale is recorded as a revenue of Apple’s distribution subsidiary incorporated in Australia.

But this company “purchases” the iPad from another Apple subsidiary incorporated in Ireland for A$550.

The Irish subsidiary is basically a shell company with no employees and no factory. The iPad was manufactured through third party contract manufacturers in China, who shipped it directly to Australia.

Hearings on both sides of the Atlantic have revealed that by effectively disabling one of its major anti-avoidance weapons in its tax law – namely the controlled foreign corporation regime – the US government has been knowingly facilitating the avoidance of foreign income tax by its multinationals.

Originally, under the US anti-avoidance regime called “subpart F”, the kinds of payments made to the Irish shell company by the Australian company would have been considered the income of the US parent.

But changes made in 1997 meant Apple was able to elect to deem the Irish company to have “disappeared” for US tax purposes, thus escaping from the US tax net.

Tim Cook appeared before a Senate committee last year. They were examining the structures and methods used to shift profits offshore. EPA/Shawn Thew

Apple’s tax structure not only takes advantage of gaps and loopholes in tax laws around the world, but also highlights the key role that politics can play in shaping these tax policies.

The US government’s indulgent attitude towards the tax avoidance of its multinational firms' is all done in the name of “promoting competitiveness” of national champions, including hugely successful companies like Apple.

Ireland also plays a key role in the avoidance structure. It provides the perfect complementary tax provisions to the US, allowing firms to create tax-free income. This has successfully attracted Apple, among others, to incorporate subsidiaries in the country.

A reading of US tax history suggests that the US government is unlikely to strengthen its tax laws any time soon. The corporate lobby in the US is too powerful for Congress to ignore.

Sympathy for the authorities

So what can other countries like Australia do to protect their tax bases?

This is a difficult and complex issue requiring international consensus to reform the current cross-border tax rules. The OECD has already embarked on an ambitious project targeting “base erosion profit shifting” by these firms.

But given the divergent political agenda of the G20 countries involved in the project, it’s difficult to predict an outcome.

Regardless of what progress is made by the G20, countries like Australia should consider implementing a properly designed country-by-country reporting regime.

Under the regime, a multinational would have to disclose essential tax information – like turnover and profits, tax payments and the number of employees – separately for each country where it operates.

At present, tax authorities around the world often suffer from information asymmetry.

While multinationals operate as one single enterprise, it is a challenge for tax authorities to obtain relevant information about these firms' tax affairs in order to identify targets for further investigations and audits.

It is easy to sympathise with tax authorities who find it challenging to obtain even the most basic information, like the group structures of these multinationals.

If a country-by-country reporting requirement had been in place, tax authorities would have been alerted to the extremely low effective tax rate paid by Apple in Ireland much earlier and could have taken appropriate actions promptly.

Besides this “identify-the-target” function, the country-by-country reporting system has another more important function: the deterrent effect.

If a multinational knows there is a disclosure requirement for detailed country-by-country information, it may have less incentive to pursue aggressive tax avoidance schemes.

The potential tax benefit may be outweighed by the increased risk, not only of tax investigations and audits, but also of possibly damaging its reputation.

Apple might have thought twice before implementing its iTax structure if it had known that country-by-country reporting could disclose its dark side to the public.

This article is drawn from research, authored by Dr Ting, to be published in a forthcoming issue of the British Tax Review.

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83 Comments sorted by

  1. Mike Jubow

    Forestry nurseryman at Nunyara Wholesale , Forestry consultants, seedling suppliers.

    I expect Apple would still be paying GST, so, for companies that dodge income tax like Apple does, why not pass legislation for a Super GST of,say, 50%? That would have the effect of driving hords of customers away from their product and they would cease to exist in Australia unless they came clean and paid the propper taxes like everyone else. It could be made even tougher by charging the Super GST on the goods on landing in Australia before they are released from customs. If the government is not getting any tax from a company, why not employ more aggressive tactics to combat aggressive tax evaders?

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    1. Richard Ure

      logged in via Facebook

      In reply to Bruce Noake

      Does the consumer actually draw the cheque and post it to the ATO? Of course not. The consumer pays the GST in the same way it pays Company Tax. It’s just the formula for calculation which is different.

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    2. Mike Jubow

      Forestry nurseryman at Nunyara Wholesale , Forestry consultants, seedling suppliers.

      In reply to Bruce Noake

      Yes Bruce, the consumer pays the GST at the point of sale, and that is the point of the suggestion. Price them out of the market unless they pay proper company taxes like all the other honest traders. It is an unfair form of competition in the market place if they are not paying the company taxes on profits for products sold within this country.

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    3. Garry Baker

      researcher

      In reply to Mike Jubow

      Yes, but the real GST component at the point of sale is about $5 - given the $550 buying price attracts a GST input credit for the company - After all it's supposed to be a valued added tax. In this case, a nominal $50 value add

      Whereas the real buying price ex China is probably $20, plus a GST of $2. Consequently the GST should be $60 contained within the sales price - Less that $2 input credit. Say $58 per phone, payable to the ATO. (ie: about 10 times the present component)

      Put simply…

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    4. Jonathan Maddox
      Jonathan Maddox is a Friend of The Conversation.

      Software Engineer

      In reply to Garry Baker

      What nonsense is this? The GST component of the sale is 1/11 of the sale price, rounded down. On a $600 item that's $54.54, collected from the consumer by the retailer and ultimately paid by the retailer to the government. There's no GST credit on imports, as the foreign exporting entity didn't charge Australian GST. Duh.

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    5. Mike Jubow

      Forestry nurseryman at Nunyara Wholesale , Forestry consultants, seedling suppliers.

      In reply to Garry Baker

      Mate, you are so right, but where does the will for action come from?

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    6. Robert Molyneux

      Citizen at Drehmex Sales and Services

      In reply to Jonathan Maddox

      It it is simple arithmetic. If you add 10% (100 + 10) to get X, then to find out how much tax was imposed, divide X by 11.
      Our braniacs thought that 10% was a nice round number, easy to add, to get the GST inclusive price. Remember that it is illegal to advertise a price except as GST inclusive, so why bother showing anything else?
      BUT You need to take the GST inclusive price divided by 11 to get the GST component and multiply by 10/11 to get the GST exclusive price for accounting - except dividing by 11 rarely gives a simple result and rounding is needed. And "mixed supply" transactions that involve a mix of taxable and non-taxable goods (fresh food and cooked food, for example) can be a bit tricky.
      Fortunately our world-class education system allows us to grapple with the arithmetic and do the calculations in our heads - NOT.

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  2. Andrew Franklin

    IT

    Antony, targeting Apple in your article is a bit unfair considering other companies like Google have been paying far lower effective tax rates. As Bloomberg reports: "Google has employed the "Double Irish" technique with such aplomb as to lower the tax rate it pays on income generated outside the U.S. to 2.4 percent, lower than any of its rich technology industry peers."

    In 2012, Apple paid $6 billion in federal corporate income taxes: 1/40th of all corporate income taxes collected by the US and last year paid another $7 billion.

    Also, Apple has historically had almost zero lobbying presence in Washington and only recently started to beef up their presence as they started being targeted by the Feds in recent actions like the eBooks investigation which has had the perverse result of handing Amazon back it's loss-leadig monopoly position.

    Just because Apple is so successful, do you have to engage in such tall poppy tactics when there are far worse offenders out there?

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    1. Andrew Franklin

      IT

      In reply to Andrew Franklin

      Heck, how about taking to task a company like G.E. who reported worldwide profits of $14.2 billion in 2010 with $5.1 billion of the total coming from its operations in the United States.

      Its US tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion. In fact G.E. paid no tax in 2008, 2009 or 2010 and reportedly paid an average corporate tax rate of just 2.3 percent over the decade up till 2012.

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    2. Robert Shield

      Production Manager

      In reply to Andrew Franklin

      How about reporting on them all. Yes, that would be good. Now if we could just get the message out into MSM, so potential customers can make an informed choice to boycott their products until they come clean, we may have less of a worry about budget deficits. There is no moral excuse for not paying tax. It is something we all should do, to recognise the fact that the profits are made in an infrastructure bought and paid for by the people and which costs to keep running.

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    3. Antony Ting

      Senior Lecturer of Taxation Law at University of Sydney

      In reply to Andrew Franklin

      Thanks for your comments, Andrew. I would love to investigate other multinationals' tax structures, but cannot do so because they will never disclose such information voluntarily. The reason that I can do the in-depth research on Apple is because the company was subject to a US congressional hearing last year. The good thing about the hearing is that it had the power to force Apple to disclose hard-to-find information about its tax structure, and the information is available on the hearing website.

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    4. Robert Smith

      retired

      In reply to Robert Shield

      No need to dump on Anthony for only concentrating on one tax avoider. Apple are guilty of tax avoidance and deserve to be outed whatever the guilt of others might be.
      I think most Conversation readers would be aware, at some level, of the tax avoidance actions of Google, Amazon, GE, Apple etcetera, this article provides an example of just what these companies are up to and how they get away with it. (With a lot of help from the US government.)
      It is unlikely that governments will actualy do anything to change the situation, especialy as the US government will almost certainly veto any efforts to close the lopholes.
      Judging by the queues of Lemmings clamoring to buy every new Apple product when it hits the shelves, boycotting such companies to put pressure on them would be a forlorn hope.

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    5. Michael Shand

      Software Tester

      In reply to Robert Smith

      Totally agree, our government can do something but neither of the major parties has even attempted to do anything in decades, because they don't want to

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    6. Andrew Franklin

      IT

      In reply to Antony Ting

      The Senate subcommittee acknowledged Apple's practices were entirely legal.

      However, more importantly, the subcommittee also investigated Microsoft and Hewlett Packard - what about critiquing them? Or was Apple the only one transparent enough to post their full testimony on the web for public viewing?

      Apple would be crucified if they didn't follow the entirely legal options for minimising tax as followed by all other companies, but because Apple is the one openly explaining how it works, they are the ones who are blasted in the media. Shades of the one-eyed media criticisms of Apple's audits of their sub-contractors in China which Apple openly publishes showing progress, while every other company keeps mum and has a FAR worse record.

      It would also be nice if you mentioned that Apple proposed how the U.S. could simplify its corporate tax system, including the creation of a "reasonable tax on foreign earnings" when companies want to bring that money back to the U.S to make.

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    7. Patrick Maher

      Retired Doctor of Psychology and Academic

      In reply to Andrew Franklin

      The Tax Office scours my meagre Pension if I earn a tiny extra bit by working or earn income from someone who dies and leaves me a pittance. They just let all of these crooks alone, seemingly because Australia is forever at the teat of America. What do I think of Apple? Ha! So if I buy something that has a Super GST - I end up paying their tax as well. Yeah, Right!

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    8. Richard Ure

      logged in via Facebook

      In reply to Michael Shand

      Absolutely. Taxes are supposed to be certain of calculation but that does not stop Land Tax being levied on valuation figures picked from thin air with no effective right of appeal. Countries could do the same if they wanted to.

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    9. Jeff Payne

      PhD in Political Science and Masters in Public Policy

      In reply to Robert Shield

      I understand that in Japan, companies promote the amount of tax they have paid. They are proud of how much tax they pay. Contrast this mentality to Google, Apple and others. If you want to deal with companies that pay their taxes support Japanese businesses over U.S businesses. I know this consideration is at play when I buy electronics.

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    10. Blair Donaldson
      Blair Donaldson is a Friend of The Conversation.

      Researcher & Skeptic

      In reply to Robert Smith

      Not much value in criticising people who choose to buy a product that works. You would be better off criticising weak kneed governments and crazy free-trade deals that are often disadvantageous to local manufacturers.

      Certainly, multinationals with any sense of morality (that is probably an oxymoron) would pay the taxes they are due but if countries choose to fiddle the system for their own benefit, it's not really surprising that companies bend the tax rules to breaking point.

      I'm not aware of any individuals in this country who willingly pay more tax than they are due. What is good for the goose…

      I am not condoning what Apple and other multinationals do, just pointing out that blaming the people who buy the products is intellectually dishonest and fails to address the problem.

      And yes, I have bought and use a number of Apple products.

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    11. Bill Davis

      Swinburne University, eCommerce/ICT Tutor at Swinburne University

      In reply to Andrew Franklin

      I am not quite sure why you seem so defensive of Apple, while I agree that others should also be pursued. Malcolm Turnbull showed disgust with Google over their 1.2 Billion in Revenue here in Australia, while paying $76,000 in tax here in Australia. But look Andrew, while we need to close these loopholes, the rush to a consumer society and a globalised consumer society at that has had the companies way ahead of the legal system. Apple claims to be such a good company, but much of what they did, they did by design. We should go after all of them, but hey, quit picking on the guy for writing about Apple, after 12 young people committed suicide whilst working making iPads & iPhones, Apple deserves all the negative publicity they can get. Yes, many of the high tech firms use cheap Chinese manufacturing for the same reason, name and shame them all til they change.

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    12. Jonathan Maddox
      Jonathan Maddox is a Friend of The Conversation.

      Software Engineer

      In reply to Bill Davis

      " ... not quite sure why you seem so defensive of Apple ... "

      We are neither picking on Apple nor specifically defending Apple here. For-profit corporations are basically *obliged* to avoid tax wherever legal to do so. Essentially all businesses do it. It is the responsibility of governments to tax sanely, which includes making efforts to prevent money being siphoned off into tax havens. As the author of the article explained in the comments, Apple is singled out here and elsewhere because…

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    13. Mike Jubow

      Forestry nurseryman at Nunyara Wholesale , Forestry consultants, seedling suppliers.

      In reply to Patrick Maher

      I would venture to suggest that you would not be paying the Super GST that I proposed. You would simply buy a product that had the same capabilities for a much lower price from a legitimate competitor of Apple. It really is easy to grasp. Just because Apple has the bling and is the fashion trend, does not make it the only product on the market which should compel you to buy it.

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    14. Robert Shield

      Production Manager

      In reply to Mike Jubow

      Would be nice to have an alternative, but it's clunky old Windows. Can't easily run MAC OS on a generic PC, has to be a Apple hardware and they already charge a premium for the privilege. It's called "The Apple Tax". Haha, they tax us but we can't tax them.

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    15. Garry Baker

      researcher

      In reply to Antony Ting

      Antony, there is something wrong with the logic here - either that, or Apple simply don't give a toss about our GST

      It sells iPads for $600 - and given that GST is normally inclusive in retail prices - then it implies the sales price was $545 + GST.

      But the company “purchases” the iPad from another Apple subsidiary incorporated in Ireland for A$550. However, this suggests an invoice value only ex Ireland, since that company is not GST obligated here.

      Thus the landed sum is $550 +(freight + customs duties + clearing charges - Say another $10) So the landed price is $560 + GST -- or $56 GST

      All resulting in an input credit of $56 -- on an item that had $54.50 GST included in the sales price.

      In effect, Canberra owe Apple a refund

      Whatever - perhaps you might lend some clarity to the $550 buying price

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    16. Robert Molyneux

      Citizen at Drehmex Sales and Services

      In reply to Garry Baker

      You are working the wrong way.
      1. Ireland gets some gear from China for some price - their business. Could be very cheap, but then Ireland swallows a large lump of money as follows..
      2. It exports the gear to Australia for X dollars
      3. It pays Australian charges of Y dollars resulting in X + Y - sometimes called Free on Board (FOB)
      4. Apple OZ receives the goods at a charge of X + Y.
      5 Apple OZ adds some other value - warehousing and distribution, OZ sales and marketing, sweet young people in…

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    17. Antony Ting

      Senior Lecturer of Taxation Law at University of Sydney

      In reply to Garry Baker

      Thanks, Garry, for the comment. All the numbers in the example exclude GST, because for income tax purposes, GST is not included as income or expenses in a company's tax computation.

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    18. Garry Baker

      researcher

      In reply to Robert Molyneux

      I get your drift Robert. However X+Y must = $550 according to what Antony Ting wrote

      This is what I'm questioning

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    19. Garry Baker

      researcher

      In reply to Antony Ting

      So the invoiced valued, ex Ireland is just that $550 (perhaps including the freight bill) and may not include customs duties, etc, Given the recipient pays local charges

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    20. Yoron Hamber

      Thinking

      In reply to Jonathan Maddox

      I don't know. It's a unhealthy attitude to the country's who provide them with a profit. That fiduciary duty you mention comes out as greed to me. With multinational companies and individuals 'owning' more and more, the normal citizen less and less, it all comes from the same place as what we see in corrupted states, where the money never get to where it should make the most use.

      And it's not the companies that pay, it's us.

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    21. Jonathan Maddox
      Jonathan Maddox is a Friend of The Conversation.

      Software Engineer

      In reply to Yoron Hamber

      Fiduciary duty doesn't have to mean greed. What it means is that a company's management is obliged to act in the interests of the company's shareholders, just as a lawyer has to act in the interests of his client or a doctor in the interests of her patient. In the case of a for-profit corporation is almost invariably taken to mean their financial interests first and foremost. The shareholders are, however, free to direct otherwise.

      As for taxation, it's entirely a matter for governments. If…

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  3. Edwina Laginestra
    Edwina Laginestra is a Friend of The Conversation.

    Jack of all trades

    Brilliant article thank you Antony. A real eye opener regarding not only use of shell companies but also tax laws in US. The protesters who appear at a lot of G20s and other corporate and financial meets know these huge corporations are avoiding paying tax but it has been interesting to see how they have done it.
    It is annoying that we talk about democracy but in the current corporatisation of the globe the people have very limited say - except for boycotting product and when the company is providing something people want (and the competition has been bought) then that is pretty ineffective - as mentioned above.

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    1. Michael Shand

      Software Tester

      In reply to Edwina Laginestra

      Our government has the power to enforce or tighten tax law - they choose not to, the only party I have heard mention this as a serious issue is the greens, neither major party has even attempted to touch tax loop holes or tax havens in decades....because they don't want to

      Just on the idea of boycotting, the majority of companies that exist do not have a public image or persona. That is they do not deal directly with the public, so a company like Toll can only be boycotted by other companies.

      And getting the public to boycott the companies that are customers to the company you actually have a problem with is very hard because you usually do not know which companies are servicing which other companies.

      Boycotting for the most part is not the most effecient way to affect change, and even when it does happen, usually you get the corporation engage in perception management, not actually making any substantial changes.

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    2. John Holmes

      Agronomist - semi retired consultant

      In reply to Michael Shand

      What about the mining tax which the Noalition is highlighting as a problem which they will remove if they win the WA Senate vote. Just how much was spent to politically embarrass Labor?

      Like wise has anyone looked carefully at income shifting in the big multinational mining companies. Nabalco years ago too all of its profit on bauxite out of Gove as freight in its ships. No tax paid anywhere. Iceland complained to the Aust. Govt re high royalties, yet we were not making much heather.

      Time to demand a copy of their accounts of any company operating here and making them available for the disenfranchised share holders, the Australian citizens. Could be useful for the ATO as well.

      'Commercial in confidence' - suggests that untruths are being hidden. Your competitors know, as can/does the NSA et al, what about the people?

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  4. Michael Shand

    Software Tester

    Brilliant, thanks for sharing, such an important and often overlooked topic.

    Thanks for breaking it down for us

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  5. George Naumovski

    Online Political Activist

    Basically the business elites make their own tax system and the government/politicians bow down to them! Then they cry poor about workers rights and wages demanding they are cut to the bare minimum “which they are” and yet many people worship this dreaming how maybe one day somehow they will be rich! It was the same here in Australia with the mining tax as the business elites told the government what to do and how much tax they will pay! But at least we got some sort of return through the MRRT.

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  6. Paul Regis

    Business Analyst

    Sometimes the only way to fight it is to join them. Imagine if everyone tried to follow this tax avoidance scheme, every company, every person. The system would break down and government would soon figure something out to deal with it. Of course I'm not advocating anarchy or disobedience. But sometimes governments don't pay attention until they perceive it as an issue and, for one reason or another, they don't seem to be taking this one seriously. And they need to take it seriously together.
    At least we know about Apple. Some mining companies are worse. They take away from countries, especially in Africa, paying nil tax or royalties (except to 'designated government officials') and the poor stay poor.

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  7. harry oblong

    tree surgeon

    cancel the tax treaty with ireland and jersey and all the other tax havens and introduce a tax surcharge on turnover here.....

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    1. Andrew Franklin

      IT

      In reply to harry oblong

      We already have a surcharge - it's called the GST and the government makes a cool 10% on every Apple device sold in Australia. Australia also gets the payroll taxes of the thousands of Apple employees in all of our Apple retail stores and the other associated taxes and charges.

      In contrast, Google and others get away scot free making billions on all the ads they charge for when people use the web. Now that is just one of the unmentioned issues here.

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    2. Robert Molyneux

      Citizen at Drehmex Sales and Services

      In reply to Andrew Franklin

      You do realise that the GST is passed on from company to company until it hits a "natural person". That is, companies do NOT "pay" the GST, they collect it. They pay Y for the goods and services they buy in, which includes 10% GST, then they charge X for their goods and services they sell of which 10% GST is charged. The difference between 1/11th of Y less 1/11 of X is the amount of GST remitted to the government by the company. At the end of the pass the parcel game, the one left standing is the…

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    3. Peter Heffernan

      Chartered Accountant and Employer

      In reply to Robert Molyneux

      What's your point Robert? What a lot of hysterical claptrap.
      The GST is probably the most effective and stable tax available to Government. Avoidance is harder as it's on the 'spending' point which can't be as readily hidden as an earning point. Furthermore, at 10% Australia's GST particular with its exemptions is by far the lowest consumption or sales tax of any OECD country.
      If you want better medical services (costs going up at 6% pa) in your old age, adequate pensions for an aging population…

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    4. Robert Molyneux

      Citizen at Drehmex Sales and Services

      In reply to Peter Heffernan

      Stop arguing with me, I am doing my tax returns.
      Anyway
      - no argument that the GST is stable;
      - no argument that taxes pay for government services;
      - no argument that taxing the wealthy makes more sense than taking the poor (I can see you having a minor pause on that one);
      - no argument that taxing foreign mining companies might cause them to take their bats and balls and pull up stumps. After all, there are lots of iron ore mines in London's City, and Lake Geneva is undoubtedly full of natural gas and oil fields.
      Someone once said that the art of taxation is to pluck the goose with minimal squawking, so yes, you have to be careful ratting the cages of the wealthy, even when wealth is being continually concentrated in their hands..
      I gather you are unimpressed with the argument that the GST unfairly targets the poor and those on fixed incomes (same thing in due course)?

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    5. Jeff Payne

      PhD in Political Science and Masters in Public Policy

      In reply to Peter Heffernan

      The general criticism of a GST, Peter, is that it is inequitable. It is actually a rather antiquated tax. A pensioner buys a box of cereal and a millionaire buys the same box and they pay the same rate of tax. The poor, as you would know, pay a higher proportion of their income on GST than the rich. Increase this tax, it is argued, and you are in effect making the poor subsidise the rich . . . again.

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    6. Robert Molyneux

      Citizen at Drehmex Sales and Services

      In reply to Jeff Payne

      You may find it hard to believe, but Gina and James can only eat a certain amount of cereal boxes, and they even have problems consuming enough Rolls Royces, even when their offspring lend a hand.

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    7. Jeff Payne

      PhD in Political Science and Masters in Public Policy

      In reply to Robert Molyneux

      Are you questioning Robert, the fact that poorer people pay a higher proportion of their income on GST than the wealthy?

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    8. Robert Molyneux

      Citizen at Drehmex Sales and Services

      In reply to Jeff Payne

      No. You might remember the French Queen's comment that if the poor cannot could not bread they should by cake. (This might have been made up to claim that the rich and powerful have no idea of how the poor handle their needs - by still tells a story).
      The argument typically advanced is that the rich pay all sorts of expensive stuff, which means that maybe more GST collected. So ordinary mortals buy tinned fish and the rich buy caviar, ordinary mortals buy small Korean cars and the rich buy expensive German sports cars and so. That is, everyone buys roughly the same sort of things, but the rich buy more expensive versions and pay more GST. This is considered "fair".
      Of course, various clever wheezes like trusts are used to avoid taxes, and to claim business expenses supporting their standard of living, such as worldwide travel.

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    9. Robert Molyneux

      Citizen at Drehmex Sales and Services

      In reply to Robert Molyneux

      "You might remember the French Queen's comment that if the poor cannot afford bread they should buy cake"

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    10. Richard Ure

      logged in via Facebook

      In reply to Robert Molyneux

      Companies price their goods so as to return an acceptable after (income) tax reward.

      Why is this any different to pricing their goods (including GST) the same way to return an acceptable after GST reward?

      In short, GST is an income tax on the entity which draws the cheque to pay it; it’s just calculated differently the tax on taxable income.

      GST the ideal tax=it’s paid by someone else. Oh? The greater your sales, the greater you must persuade your customers to hand you cash. The con of the 20th century.

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    11. John Holmes

      Agronomist - semi retired consultant

      In reply to Richard Ure

      The con is also having rort-ted the distribution system so that your returns are quite acceptable for you with out having any questioning re what you are doing. Transfer pricing.

      I object to paying for software and hardware at a rate of 50% more than my American cousins pay. I object to having potential problems in seeking redress if thing so not work ie fail to activate as I am not in the USA.

      Some presure like failure to enforce greyware resitrictions, ensuring that the cost of business in this country is higher than it should be, ie slow special individual customs inspections at a remote spot especially if there is no available info re just how the company works and the tax avoided.

      Problem is out Govt is too gutless, so 'Copyright' should be spelt 'Copy-It-Right' for offenders.

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    12. Bill Davis

      Swinburne University, eCommerce/ICT Tutor at Swinburne University

      In reply to Peter Heffernan

      Peter,

      Really, you stand then with Gina Rinehart, a person who inheritied her wealth when she calls for the "Thatcher" approach to Australia.

      Do you want Australia to become like the North of England, devastated with the effects of Thatcher?

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    13. Robert Molyneux

      Citizen at Drehmex Sales and Services

      In reply to Richard Ure

      GST is NOT an income tax. It is a tax on [G]oods and [S]ervices (hence "GST"). It is complete nonsense to treat the GST as a tax on the company providing Goods and Services. It is a tax on the people who buy them.
      It would be possible for a company to pay more GST than it collects - in which case it can get a refund, independent of whether it makes any profit.
      There a couple of taxes on wealth, such as Land Tax.
      There are number of levies used to raise money such as Fuel Excise.
      There are various taxes on miners levied by the States.
      There is a levy on medical benefits, and so on.
      As I said before, you could consider that ALL taxes ultimately percolate down to "natural persons". If you think that your parents and grandparents are keen to pay more tax, let Hockey know - he will be pleased!.
      Remember the slogan about Abbott before the election: "If he wins, you lose"

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    14. Bruce Noake

      Retired Technician

      In reply to Peter Heffernan

      Peter you have left a critical point in your defence of the wealthy, that is that if the workers had not toiled on their behalf they would not have a product to sell and make their profits.

      This also applies directors and CEOs that justify their often obscene remuneration's on company growth and profit, no workers no profit / growth.

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  8. Greg Angelo

    logged in via email @bigpond.net.au

    The following is the text of a letter published yesterday in the Australian Financial Review in response to a duplicitous letter from the Irish ambassador on Monday 10 March.

    Ireland complicit in tax avoidance
    Judging by the letter from the Irish Ambassador, disingenuity is not solely the province of politicians.
    According to the Irish Times, (Saturday 8 March) the effective tax rate of Apple Sales International (ASI) has been substantially less than 0.1%. Now due to US Senate revelations…

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  9. Peter Heffernan

    Chartered Accountant and Employer

    Good job Antony
    This issue has some momentum thanks to persistence such as yours, and we should be proud our own Treasurer is prosecuting this matter though Australia's Presidency of the G20. I have seen some appalling examples of international tax rorting, however no matter how diligently the ATO pursues these serial multinational tax avoiders through transfer pricing investigations and Part 4A actions etc, the veil of secrecy in international tax havens, the cynical behaviour of host Countries…

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  10. Steven R Clark

    PhD Candidate and Sessional Academic at University of South Australia

    Corporations are required by law to maximise returns for shareholders. To not do so can expose board members and senior executives shareholder approbation, ranginf from being removed from their positions to being sued to compensate for their failure to vigourously persue profit.

    This is not to say that shareholders can't and don't choose to accept (and in some cases expect) the board and senior management to pursue strategies that don't maximise profit. Shareholders may elect to pursue sustainability…

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    1. Jeff Payne

      PhD in Political Science and Masters in Public Policy

      In reply to Steven R Clark

      I think you have referred to what should be a major talking point when it comes to taxation and corporate governance. Should corporation be required to only maximise returns to shareholders with consideration of the social impact of their decisions. The requirement to maximise returns turns corporations into psychopaths. The idea that the primary function of corporations is to maximise returns is a revolutionary idea and one which can be rethought. To change this law would be to make decision makers in large corporation legally responsible for social harms to the environment or society.

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    2. Darren G

      logged in via email @yahoo.com

      In reply to Steven R Clark

      Your last sentence is an admirable objective but its not something that can legally be done by the private sector. There are many many tax haven and secrecy jurisdictions - ranging from Switzerland to Singapore, the Cook Islands to the Caymans, various African countries (which have been largely unsuccessful at this) and small countries in Europe incuding Luxembourg. The list is surprisingly long. But what these jurisdictions have in common is an otherwise unsustainable economic position.

      But the…

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    3. Bill Davis

      Swinburne University, eCommerce/ICT Tutor at Swinburne University

      In reply to Steven R Clark

      You are absolutely wrong, Corporations are not required to maximise shareholder profit. This has been wrongly taught by US based business schools, and that has spread around the world. It is a myth. Japan has long had corporate governance that treated not only employees, but customers and the environment as stakeholders on a scale where they come before profits can be declared. Corporate Governance does not have to treat other stakeholders badly, it is a choice. We can fix this. http://finance.wharton.upenn.edu/~allenf/download/Vita/Japan-Corporate-Governance.pdf

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    4. Jonathan Maddox
      Jonathan Maddox is a Friend of The Conversation.

      Software Engineer

      In reply to Bill Davis

      For-profit corporations are not required to maximise shareholder profit at the expense of all other considerations, but management *are* obliged to represent the shareholders' best interests at all times, as it is to the shareholders that management owes fiduciary duty. This principle exists in all common-law jurisdictions. The general idea is that if caught out trying to do something detrimental to the bottom line, management can be sued by shareholders for breach of fiduciary duty.

      Shareholders…

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  11. Jeff Payne

    PhD in Political Science and Masters in Public Policy

    Yes, great article Antony. I really think you've touched on something that appears to resonate with everyone. I've never seen the TC community is such agreement. The harmony is beautiful. It's creeping me out!

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  12. Christopher Seymour

    Business owner at Location

    Australia would do well to eliminate Corporation tax on companies registered in Ausatralia altogether. Corporate taxes are popular because it appears that companies pay them and not people (ie voters). However this is an illusion. In the end people pay all taxes.
    The burden of corporate taxes falls on workers (through lower wages) and shareholders. Some economists estimate the burden as 70% on workers and 30% on shareholders (http://www.cbo.gov/publication/18067).
    And remember that shareholders includes most of the working population through their super plans.
    It would be fairer and would encourage investment in Australia to eliminate Corporate tax and raise personal income tax, especially on the upper brackets.

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    1. Darren G

      logged in via email @yahoo.com

      In reply to Christopher Seymour

      If you abolished corporate taxes most foreign shareholders would automatically get a big tax cut because they would only be taxed withholding tax on their investments in Australia - that's a recipe for (a) a huge influx of investment money into Australia (b) tax dodging on a gigantic scale. I will leave you to consider the economic consequences of a huge flow of money coming into our economy when - at any one time - we have a finite set of investments available (and a finite amount of $A in circulation).

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    2. Christopher Seymour

      Business owner at Location

      In reply to Darren G

      Might have saved the car industry.
      As I see it appropriate witholding tax on dividends paid to overseas shareholders would solve this problem.

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    3. Darren G

      logged in via email @yahoo.com

      In reply to Christopher Seymour

      To make them 'appropriate" - to use your phrase - you would have to match the tax laws of the investor's home country. If you didn't then either youre still giving a tax break to the foreign investor or effectively adding to their tax. The latter probably has the worse economic consequences. Right now we err on the side of giving them a tax break since that is the lesser evil for our economy and in any case they mostly pay lower tax in their home jurisdictions anyway. But its simply not practical…

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    4. Robert Molyneux

      Citizen at Drehmex Sales and Services

      In reply to Darren G

      When I worked on setting up GST systems for a telecom company, the government was trying to work out how to charge GST for overseas telephone calls.
      At that time they wanted to hide the GST by building it into the price, so no-one ever knew how much they were paying for anything. Dopey, I know.
      Anyway they came up with a scheme whereby if you made a business call from OS to OZ using a foreign telco, you had to pay GST which the foreign telco was supposed to collect and forward on to the ATO. Similarly if you made a business call from OZ, you had to pay the GST which the local telco would collect and pass on.
      If you made a call to someone which was partly business and partly private, you were supposed to divvy the costs appropriately. Ditto if you used a private phone partly for business and vice versa.
      All this was made difficult when supposedly you were not allowed to show the GST component.

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    5. Robert Molyneux

      Citizen at Drehmex Sales and Services

      In reply to Robert Molyneux

      Sorry, the O/S business phone call from OZ is GST exempt, like exports generally.
      The OZ business call from O/S is taxable if it relates to business within OZ.

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  13. Robert Tony Brklje
    Robert Tony Brklje is a Friend of The Conversation.

    retired

    Make no mistake what a viscous thieving country like Ireland are doing in reality is not assisting tax cheats what they are actively doing is stealing other countries social services.
    We are allowing the vermin politicians of Ireland to reduce the benefits received by poor, ill and elderly Australians.
    The greed, and criminal deceit behind stealing other countries social services is horrendous and serious penalties should be applied against the Ireland including trade sanctions, expelling of diplomats and challenges to their behaviour within the United Nations.

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  14. Jim Turnour

    Adjunct Research Fellow at James Cook University

    This is what the Conversation is all about. Thanks for making me aware and I encourage promotion of this article through mainstream sites like Facebook as Apple survive on reputation and they will hate this being discussed.

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  15. Christopher Seymour

    Business owner at Location

    The Gillard government passed legislation ( Tax Laws Amendment (Cross-Border Transfer Pricing) Bill (No.1) 2012 and: Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Bill 2013 ) to control this problem. Why isn't it working? Was this legislation as incompetently put together as all their other actions?

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  16. Bruce Noake

    Retired Technician

    It has been my observation that it is not only big business that avoid / minimise tax. I have noted over many years that there is a common practice in Small Business Enterprises where the assets are held in one company and leased to the company actually doing the work and shifting charges and income etc in great circles, often numerous companies. Along the way profits are skimmed off to accounts in tax havens. ( not being a bean counter I don"t know the exact process but have known one business owner in particular who openly boasted that he had not paid tax for many years). One of these companies often liquidated in the process. One also wonders how much is lot to tax revenue in these cases

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  17. Tim Cleary

    Solicitor

    The problem with these kind of articles and the arguments they make is that they miss the point. It is all well and good to say that companies "should" pay more tax. But the problem is the way the international tax system works.

    Suggestions that Apple, or Google, or Starbucks, or any other company should pay more tax voluntarily are just as silly as saying individuals should voluntarily may more tax just to be nice. People are entitled to pay the minimum amount of tax which they are required to…

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    1. Robert Molyneux

      Citizen at Drehmex Sales and Services

      In reply to Tim Cleary

      International trade and international tax will always be subject to clever wheezes to transfer costs and profits to maximise the controlling agent's wealth - which can also be located to minimise disclosure and minimise tax. It does not really whether you chase down the transactions - chase down the final wealth arising from them.
      Given that there has been a steady accretion of wealth in the hands of the few, and hollowing out the middle class, we should be looking to increase tax on the wealthy…

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  18. Tom Danby

    Sales Manager

    Have another look at the Tobin Tax concept - if all countries collected tax, automated via their banking systems, on deposits and withdrawals, it would capture a lot of missed local revenue - Apple-like profit transfers, GST on imports, currency speculation, black market dealings, criminal transfers - and add next to nothing in collection costs, or reporting of legitimate tax claims for businesses. It also addresses the moral issue of taxing the use (abuse) of natural resources as this is directly linked to the use of money.

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  19. Doug Rankin

    Plasterer

    As my occupation is listed I feel disinclined to comment.

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  20. greg hoey

    logged in via Twitter

    And the americans have the tenacity to accuse other countries of being corrupt. They could easily changed this law yet just don't think it a big issue [blatently corrupt political system].

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