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How Apple avoids paying taxes in CA

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Re: How Apple avoids paying taxes in CA

#101

Post by neilc »

jrockway wrote: post #4
dot wrote: post #3

Earlier quoted context omitted.

well, the state is bankrupt. partly because companies that embody its dreams are not chipping in with the bills.

The state just needs to pass a better law. Apple is obligated by its contract to its shareholders to avoid taxes as much as possible; they are just avoiding a lawsuit. (I don't like this, but I understand it. The law just needs to catch up with the market, then everyone will be paying their fair share again.)

Apple is obligated by its contract to its shareholders to avoid taxes as much as possible; they are just avoiding a lawsuit.

To which contract/obligation are you referring?

Per http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1013744 :

"Among non-experts, conventional wisdom holds that corporate law requires boards of directors to maximize shareholder wealth. This common but mistaken belief is almost invariably supported by reference to the Michigan Supreme Court's 1919 opinion in Dodge v. Ford Motor Co ... U.S. corporate law does not and never has imposed a legal obligation on directors to maximize shareholder wealth."

Re: How Apple avoids paying taxes in CA

#102

Post by neilc »

_delirium wrote: post #59
hop wrote: post #32

Article title is misleading, they only minimize some capital gains tax on their cash and investments with the nevada entity. And they certainly have a duty to shareholders to do so. They pay hundreds of millions in income tax on their profit in California, plus everything else - property tax, payroll tax, sales tax on purchases in CA...

I don't think there is actually a "duty to shareholders" to reduce taxation by jurisdiction-shopping. At least, having done some research, I'm unable to come up with a single case where a shareholder lawsuit against a company that declined to do so succeeded.

A board of directors has significant discretion in deciding what course of action truly maximizes the long-term value of a company; see the business judgement rule, for instance ( http://en.wikipedia.org/wiki/Business_judgment_rule ).

The flippant view that a board is obligated to maximize profit (especially short-term profit) is pretty simple-minded. See also http://crookedtimber.org/2008/07/24/fiduciary-obligation-vs-... and http://crookedtimber.org/2008/07/25/what-obligation-maximise...

Re: How Apple avoids paying taxes in CA

#103

Post by hop »

_delirium wrote: post #99
hop wrote: post #96

Earlier quoted context omitted.

The board of directors and officers have a fiduciary duty to do what is in the best interest of the company and shareholders. If the choice is to invest our extra cash thru a CA based corp, pay more tax, have a lower return and ultimately less $ to reinvest in the company, or, to set up in the neighboring state so don't lose money, and its perfectly legal, the choice is easy. I think a better question is why have CA…

You assert the opposite of my claim, but do you have any evidence? "Fiduciary duty" is an actual legal term; there are some actions or non-actions which violate a corporate officer's fiduciary duty, and some which don't. Failure to set up a tax shelter, even when it would be possible to do so and it would save the company money, is not a breach of fiduciary duty. I'd welcome any evidence otherwise, but I suspect you'…

Yes, you're very right. I more accurately should have said acting in the shareholders interest, which it certainly is in this type of non-shady way to lessen tax liability. If a director, maybe al gore, was against the idea for the pious sake of giving more money to support the govt, that would violate fudiciary duty.

Re: How Apple avoids paying taxes in CA

#105

Post by yardie »

DaniFong wrote: post #71
hop wrote: post #32

Article title is misleading, they only minimize some capital gains tax on their cash and investments with the nevada entity. And they certainly have a duty to shareholders to do so. They pay hundreds of millions in income tax on their profit in California, plus everything else - property tax, payroll tax, sales tax on purchases in CA...

Why does selling shares to the public produce a duty to do anything possible to make a profit? A share in something could be a share in any social contract. A share in a nation, for example, accords one vote and a host of other rights and duties. A share in Whole Foods implies a share in some of the profits going towards nonprofit activities. A share in Google implies only a 1/10th control over their direction -- the…

It actually came from a quote taken out of context by Sumner Redstone 30 years ago. Wall Street took it to heart over the next few decades leading up to the financial clusterfuck we have now. When asked about that quote, he said, "it is the stupidest thing I've ever said."

Re: How Apple avoids paying taxes in CA

#106

Post by patrickk »

btmorex wrote: post #17
riferguson wrote: post #10

Judge Learned Hand: "Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for…

That may be true, but the simple fact is that it's a lot easier for a large corporation to minimize its taxes than it is for a small business or individual. For example, a company like apple can afford to pay 10 people full time to move around money and assets in order to minimize taxes. Those people will save Apple far more than it costs to employ them. A 5 person company not only can't match that effort, but if the…

Big companies can employ tax specialists, attorneys and accountants, certainly, to do all these things - it's definitely an expense that a small company can't afford.

But small companies have advantages too - being nimble and able to innovate much quicker than big companies, to name just two. It's important to recognise these advantages and exploit them as well as possible.

Also it's worth bearing in mind that Apple was once a small company in a garage too. They had to grow big and become profitable before they could hire people to minimise their tax bill.

Re: How Apple avoids paying taxes in CA

#107

Post by kelnos »

dot wrote: post #3
towndrunk wrote: post #2

Seems like a smart business move to me. Are we suppose to be upset about this?

well, the state is bankrupt. partly because companies that embody its dreams are not chipping in with the bills.

The state is bankrupt because it mismanages money and spends more than it takes in. It's certainly not Apple's problem to solve.

Re: How Apple avoids paying taxes in CA

#108

Post by jbooth »

eru wrote: post #90
jbooth wrote: post #67

Earlier quoted context omitted.

Yeah, but that's a crappy thing to do. Lots of unethical practices are legal but we don't encourage companies to do them. Why this?

We don't encourage them to do this. The shareholders elected the board that is currently minimizing the taxes. If you don't like that, you can become an activist shareholder (or just an activist) and campaign for changing this company policy. This is no question of company ethics. It might be a question of the ethics of shareholding.

This thread is full of people who presumably aren't even significant apple shareholders clamoring for tax avoidance on principle, like it's some sort of honorable thing to do, sticking it to the man or something, and you hear the same in the real world as well. We do encourage them.

Re: How Apple avoids paying taxes in CA

#109

Post by jbooth »

eru wrote: post #95
kd0amg wrote: post #91

Earlier quoted context omitted.

Having been elected to a position does not absolve you of moral responsibility for the actions you take while holding that position.

Indeed. But the shareholders will find somebody to do their bidding. Also you could argue that doing what you were elected to do, within the legal limits, is fine. I'd say tax minimization is a patriotic duty.

Patriotic duty, heh.

Making sure you never give to charity either is a mitzvah?

Re: How Apple avoids paying taxes in CA

#110

Post by jbooth »

ju2tin wrote: post #86
_delirium wrote: post #60

Earlier quoted context omitted.

I don't know about other people, but I don't go out of my way to avoid taxes. I certainly don't create new companies or change how I do business in order to avoid taxes. If there's an actual deduction box on a form that I'm eligible for, sure, I'll check it. But I don't really spend days thinking up ways to hide my income. Any time I would've spent on that could be much more productively spent by just making more inc…

"Any time I would've spent on that could be much more productively spent by just making more income." Which is actually a good reason to make taxes lower and less burdensome, so the most productive members of our society (as measured by income) will spend their time producing, instead of defending the fruits of their labor from the tax man.

Well, it's certainly a reason to make them simpler.

But those same big companies with the same high priced lawyers, accountants and lobbyists never tend to actually advocate for making them simpler. Oh, they might say that in public and at your Ayn Rand book club, but it's not what they say when they're speaking to the congressmen.

EDIT: Hey guys, I wasn't dissing Ayn Rand, don't get so defensive. Just, you know.. who's got a really big interest in making sure people believe all this stuff? Might be worth thinking about.

Big corporations don't actually have an interest in a simple tax code -- more complicated means their accountants give them a competitive advantage.

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