Massachusetts Sen. Elizabeth Warren thinks Apple should pay more taxes in the United States, especially in light of the record-breaking European Union decision to force Apple to pay around $14 billion in taxes to Ireland. As a matter of economics, the EC is right.
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She said it was “a decision based on the facts of the case, looking into Apple Sales International, how they are arranged within Ireland, and the profits recorded there”.
Politicians like Obama, Clinton and the other progressives rail against this kind of thing in their political speeches because resentment of success plays well with the voters they hope will keep them in power.
The ongoing Apple tax scandal in Europe is the ideal opportunity to reform the US tax code, Sen. Under US tax codes, tax is only payable (at 35%) when profits are brought back to the US – which is why many companies leave them overseas, hoping for a lower rate to appear. If Apple has to pay the back taxes to Ireland, it could deduct those payments from what it owes in US taxes, meaning Americans would pay the price, the Obama administration said last week. He put its corporation tax bill at 26.1%.
USA companies have been taking advantage of various foreign incentives and holidays for years now to avoid the US corporate rate of 35 percent, the highest in the industrialized world. In Luxembourg, the ratio had leapt from 18.2% to 127%.
There are several drivers for this increase. Under those circumstances, an IRS analysis would be appropriate to determine whether AOI functions as an instrumentality of its parent and whether its income should be attributed to that US parent, Apple Inc.
Yet, given the significance of multi-nationals within the economy, the government says it can’t afford to risk any lingering doubts over its tax regime, and is launching an appeal against the European Union ruling.
The Commission plans to demand companies are required to pay a portion of the corporation tax (1/3 in the 2011 proposal) they need to pay in the final country where their goods are sold, (ie Spain or France).
Apple’s response was characteristically unapologetic. More jobs create a more stable economy.
Previously, Apple chief executive Tim Cook said he was “very confident” the ruling would be overturned on appeal. “The government’s position throughout this process has been that the full amount of tax was paid in this case and no state aid was provided”, he said during the debate. We would know what Apple paid and where.
Opinion polls reflected the divisive nature of the ruling with many people arguing in favour of Apple paying the back taxes.
Mr. Lew is also motivated by money.
Kenny has refused to distribute the 150-page European Commission report to lawmakers, citing “commercial sensitivities”. But the USA also claims the money. The decision came after three days of talks between ministers. There was a period when every sector exporting didn’t pay tax on their profits, there was then a period when manufacturing companies had a 10 percent rate and every other sector didn’t. Without that, its cash tax rate is 19%. Not the USA because the tax rate is so high. About half of S&P 500 companies had a higher reported effective tax rate in their most recent fiscal year, Bloomberg data show.
The OECD initiative is aimed at closing down some of the loopholes that facilitate tax avoidance but it’s an open question how much of a dent it can make. “And anybody looking at that says that is a ruse, that is an attempt at tax avoidance, tax evasion, whatever you want to call it”, the 73-year-old US economist said.
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Even using those SEC disclosures that Apple highlights, on income tax provision per dollar the company is merely average.
