tax avoidance

  • 27 Jun 2014 at 4:57 PM

Who Needs Switzerland?

Certainly not commodities giant Glencore, which maybe just made high-interest-rate loans to itself to cut its Aussie tax bills. Read more »

David Cameron realizes it will be difficult for him to stake his claim to be the world’s foremost fighter against tax avoidance while his country’s own territories—the Caymans, the British Virgin Islands, Bermuda—top the world’s list of financial havens. So he’s asked them to cut it out.

Well, one current British Overseas Territory and one former have made it very clear that they’ve no intention of doing so. Read more »

  • 22 May 2013 at 1:59 PM

The Ultimate Tax Haven Is Offshore Of New Jersey

Sarah Palin was right: New York is, at least in the eyes of the taxman, not the real America. Read more »

  • 21 May 2013 at 11:06 AM

Senate Discovers There’s A Tax Code

Here’s a math problem: what does this sentence, from John McCain, tell you?

“Apple claims to be the largest U.S. corporate taxpayer, but by sheer size and scale, it is also among America’s largest tax avoiders,” he said in Monday’s pre-hearing comments.

The answer, of course, is that Apple is among the most profitable companies in America.1 If you have a lot of profits, you can not pay taxes on a lot of them, and still pay lots of taxes on a different lot of them. There is much focus on the exceptions, but for the most part I’d guess that “biggest taxpayers” and “biggest tax avoiders” are both highly correlated to “biggest profits.” Warren Buffett pays more taxes than his secretary, but at a lower rate.

The Senate, not being known for its quickness with math, is holding hearings today on the avoiding part; here you can read (pdf) the committee’s report. Apple does two main things to avoid taxes that the committee doesn’t like:

  • It incorporated two of its main foreign subsidiaries, Apple Operations International (AOI) and Apple Sales International (ASI), in Ireland. Those subsidiaries are, however, managed and controlled in the U.S. by their California-based directors. The U.S. taxes corporate income based on place of incorporation; Ireland taxes corporate income based on place of management and control. So if you’re incorporated in Ireland and managed and controlled in the U.S. you pay taxes nowhere, as AOI does and ASI more or less does. This is … honestly isn’t the surprise that everyone doesn’t do this?2 I’m incorporating myself in Ireland as we speak.
  • It entered a cost sharing agreement that gave ASI the economic rights to Apple intellectual property outside of America, in exchange for ASI funding a share of Apple’s California-based R&D proportional to its share of Apple’s total sales. Apple is in the business of manufacturing cheap electronic components in China, slapping expensive cool on them in California, and selling the package for $500. ASI effectively got the California cool at cost, rather than paying retail, which means that the international share (some 60%) of the profits of that cool are, for tax purposes, “earned” abroad (in a zero-tax subsidiary!) rather than in California.

That’s the main stuff; there’s some stupid stuff too.3 Apple’s response is a lot of blather that boils down to: Read more »