461–470 of 817 posts
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Yes but the moral burden is not on Apple, it's on those graduates. If you got your education for free and now you make a fat salary from Apple, it's your job to give back. Not Apple's.
They do, in income tax.
Basically the implication is that we should tax people more when they act as part of a productive collective (corporation), which to me seems counterintuitive.
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Maybe the problem is in trying at all to tax something you can't pin down, like this IP transfer between (say) Apple Germany and Apple US. I mean what should its value be? Clearly Apple Germany is nothing at all like an independent company importing phones from China to sell. Much of what they sell is the software, the image, the brand... these things don't have open-market prices. So who gets to decide what their pr…
This would mean that immaterial things won't have a worth in the book keeping way and can't be billed. In simple terms what happens is that Apple Europe, Inc. has to pay a lot for the license to use the Apple logo and trademark to Apple Paradise, Inc. Thus Apple Europe, Inc. doesn't have profits, while Apple Paradise, Inc. has all the profits. Now the value of the logo and trademark are artificial ... What's needed a…
This would likely have the positive side-effect of protecting smaller national brands from foreign competition, but might make the country less appealing to foreign investors, so it can't be done willy-nilly - but it's the only way. This is not unlike what China does - money goes in but it's not allowed to go out.
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They don't break a letter of the law (probably), but they break spirit of the law. Laws do not exist like a puzzle challenge to be beaten by clever lawyers with a reward being factual exemption from the law. They are usually intended for everyone.
Most of the criticism (of Nike and Apple, for instance) isn't for breaking even the spirit of the law. Most often the companies are acting precisely as the law is intended to work, and criticism is based on a misunderstanding of what is turnover and what is profit, and how taxes should be calculated. Very commonly the complaint is that Nike (for instance) pays no corporate income tax to a country even though it sells…
In my view, the real problem when you do not respect the spirit of the law is that you do not respect the people themselves, even if you're not doing anything illegal. And I fear that some of those people, when they learn of another case like this one in 6 months, one year or two years, could consider using violence. In the past, several terrorist groups had targeted economic or corporate symbols (the Baader group for example), so we shouldn't forget histoire. These affairs will feed those enclined to follow that path again, but against what are now documented possibilities. That is why the states across the world need to act: it is not only about getting countries' money back, it is also to avoid future violence.
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I'll quote the first sentence from your post, "I think tax avoidance is morally justified." But more broadly, laws are not always moral. If you equate laws with being moral (or equitable which is hopefully a subjunct matter), then personally I think your view of the world is far more black and white than reality. In my view morality (and part of which is equality) should lead to legality not the other way around.
I don't think laws are moral. I think that, in a functioning democracy, laws are dictated by whatever views are currently held to be moral by the largest portion of participants in the democracy . Laws are what the largest proportion of people in a pure democracy have agreed is moral. If you think laws are consistently being put into place that don't reflect the morality of the populace, then you have an issue with y…
Then why is murder wrong?
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The fix can certainly involve appealing to morals and human responsibility. A company is, after all, just a group of people. This should be a very strong tactic considering how liberal Silicon Valley is. The major players preach constantly about progressive ideals, yet fail to do more than the minimum when push comes to shove. My business partner and I purposefully pay normal taxes, avoiding accountants' crazy tax re…
IANAL but it is my understanding that if those tax reduction schemes are legal many companies are legally bound by their stock holders to exploit them, or else be found negligent in their duties.
That's not the case. There is no way a company's management could be sued for "gross negligence in tax planning".
If shareholders are unhappy about this issue, their recourse is the same one that's always available to them: elect a new Board of Directors and hire new management that will follow the board's guidance on tax evasion schemes.
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While I appreciate the sentiment it is time to start taking a more global look at these antics of companies. I run my own company in the UK and I know for a fact that apple makes a massive amount of money selling in this country. Now as a small business owner I am taxed at 20% on corporate profit. (19% going forward now due to a tax cut in corporate rates introduced during the last financial year). You then also get…
That's an interesting case to bring up. In the UK, it is very common (I'd go as far as to say it's the norm) for software contractors to start a single-person limited company and pay themselves through a mixture of salary and dividend in order to optimise their taxes. I wonder how many of these people consider that they are committing "tax avoidance" and "exploiting legal loopholes" too.
So let me outline how this works these days as I run up against this argument a lot.
1) Any income that comes into the UK Ltd company is taxed at the corporate tax rate which as of this year is 19%. 1.1) This tax is paid on profit so if you pay yourself a normal salary out of this you will deduct this from the profits. Take note that dividends are NOT deductible from company profits before tax and as such is not a way for you to reduce your tax liability as a UK company. Dividends are only payable from after taxed money in your UK Ltd company. 1.2) Any expenses your company has in providing its services are deducted from profits. There is a misconception that you can write off A LOT of expenses but in actual fact that is not true. There are strict guide lines. Most of these expenses are also only valid if you are truly outside of IR35. Once you fall inside of it your allowed expenses decrease even more.
The above leaves you with your taxable company profit on which you pay your 19% corporation tax. (This is the tax that are being circumvented in the article by big companies.)
So now you as a UK Freelancer you now get the opportunity to pay yourself money from your UK Ltd company. You are then subjected to the following personal income tax: 1) Your tax free allowance as an individual is applied so you pay no tax on the first £11500 of income. 2) The first £5000 of dividends are also tax free. (remember this money has already been taxed at 19% in your corporation tax so is hardly free) 3) All other dividends that you then pay out to yourself are taxed as per the different tax brackets set out for personal income tax on dividends. (Again remember that 19% tax has already been paid on the this money before you can distribute it to yourself.)
So lets look at an example: - Lets say that as a contractor you work for 10 months (42 weeks) out of the year at £500 per day. We also assume you have no problem in getting your clients to pay (a real risk in certain industries). That leaves you with 210 days that you bill at £500 per day. 210 * 500 = £105000 which is your income coming into the company before deducting allowed expenses. - Lets now say you are not inside IR35 and you can claim travel and subsistence against this amount. That normally works out at around £500 per month of expenses you can deduct. (We assume you have already bought your equipment that you use on site etc.) - You also need to pay your accountant, which does not work for free, the going rate in London is around £130 per month - You now pay yourself a small salary up to the allowed personal allowance for the year of £11500
Your total corporate taxable income is now as follows: 105,000 -1,560 (Accountancy fees £130 x 12 months) -5,000 (£500 expenses for the 10 months of billable work) -11,500 (salary of around £958 per month for the 12 months of the financial year) =86,940 (This is the amount you pay corporation tax on) -16,518.60 (The amount of corporation tax you pay at 19% on the above £86940) =70,421.40 (This is the amount you can now distribute to yourself in dividends)
So now your personal income tax looks as follows: 11,500 (Salary received up to tax free allowance and tax of 0%) 5,000 (Dividends with 0% tax allowance) 65,421.40 (Remaining dividends that you are taxed) -14,136 (Tax levied on the 65,421.40 dividends that are taxable, combination of the different tax bracket rates on HMRC website.) =67,785.40 (Income you receive after tax)
So on £105,000.00 of earned income as a freelancer you end up paying £30,654.60 of income taxation (Corporation and Personal tax).
If you were a normal salaried employee you would pay £31,696.40 on £105,000 salary. (www.listentotaxman.com)
So I would argue it is hardly tax avoidance and if I take into account the risk I take as a freelancer then I am hardly working through a UK Ltd company to avoid tax. Most people still believe that the same rules of the 90's apply to UK ltd companies and freelancing but it is simply not the case.
Please do check the above with your accountant to confirm as this is not financial advise and I am not an accountant. However there are really not many options for avoiding paying tax as a UK freelancer. Keep in mind that the £5k dividend tax free allowance is also being reduced to only £2k from 2018 onward.
What annoys me the most is that, as a small company, I can't evade from my country tax system. I pay the taxes. All of them, at full rate. But there are these big companies which can afford to create offshore companies/holding just to evade some tax system, and lower their tax rate. So, what? The tax rate of a country is now "artificial", because it will never be applied to all revenues from all companies, because th…
That's true if you think the solution has to come from more legislation and/or more taxation. Those approaches will simply encourage companies to move more of their operations to other more favorable jurisdictions.
If there's a way to save money, and companies have a responsibility to shareholders to be as profitable as (legally) possible, they'll do what they need to in order to save the money. We need to stop expecting some kind of moral accountability above what the law demands. There are plenty of natural incentives for companies to be morally responsible above what the law requires, but anything less isn't illegal unless it's illegal.
You can continue to play cat and mouse with laws and loopholes, or take a different approach...
Instead, if you consider the option of lowering taxes (on all companies) to compete with those other countries, you'll actually provide an incentive for more large companies to keep their businesses - and their taxable profits - in the US. It may be a lower tax as a percentage, but it would actually increase tax revenue in the long run, in addition to boosting the economy.
The music industry can provide a fairly good analogy: when (the original) Napster became popular along with other file sharing networks, the music industry wanted to solve the growing piracy problem by throwing people in jail and pushing for stricter laws. In the end, that did nothing to help the problem. What did help? When iTunes actually provided a decent, legal alternative to piracy, it took off and hoards of people who had been pirating music actually spent money obtaining music legally because it was reasonable and competitive (in terms of convenience) with networks like Napster. The lesson: you don't fight widespread behavior with legislation; you steer it with aligned incentives.
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Eliminating corporate income taxes would be the best way to start, given it would benefit society immensely.
How would it benefit society? Reduced state income that could be used to invest in infrastructure and people? Will the companies invest that money with society's interest at best better than the govt would? I don't think so. What do Apple do with their money? They horde it, waiting for a windfall to bring it back to the States and pay low/no corporate tax on the repatriated profits.
First, they have to pay corporate income taxes in all their foreign countries. Then, they owe 9% to state of California on what’s left. Then they owe 35% to the US treasury on what’s left. Then they pay the remainder as dividends, and shareholders owe up to 10% to their stars, and then 15-20% to the federal government.
We could likely generate as much or more in tax revenues by eliminating the corporate income tax and treating individual dividend payments as regular income (taxed at 28-38% normally).
This way reinvested profits aren’t taxed, leading to more investment, which leads to more profits and more dividends. And the return on investing for individuals increases, leading to more investment. More investment means more jobs, higher productivity and higher pay.
And hundreds of thousands of corporate tax accountants can now actually be switched to work that benefits society.
What annoys me the most is that, as a small company, I can't evade from my country tax system. I pay the taxes. All of them, at full rate. But there are these big companies which can afford to create offshore companies/holding just to evade some tax system, and lower their tax rate. So, what? The tax rate of a country is now "artificial", because it will never be applied to all revenues from all companies, because th…
This. I run a small company as well, and taxes are a damn maze. I just checked the tax authorities website in this country, and there are no less than 121 different tax-exempt health activities – things my company can pay for me, without having to also pay taxes. For most other things, there's sales tax (possibly other kinds of tax too, but let's limit it ourselves for brevity) that comes in at no less than three dif…
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I find it a bit disturbing that you value entertainment on TV as "great" and "state hospitals" and "schools" as crappy. In fact, overall, it seems like you value as "great" everything around you that don't implies interacting directly with other humans, and as "crappy" about everything that does. So if the free market purpose is to value antisocial products while making every social bonds look crappy, well, I'm not s…
Look at the innovation pace of products delivered by free market vs those by government. If government made computers, they would still be big as room and only the rich could afford them. Meanwhile free market delivered computers into your pocket with power and capabilities that just 10 years ago no one would believe. Our education system preparing our kids for future is still basically the same as our grand-grand-pa…
We have for profit hospitals and they are a terrible thing overall! We also have for profit prisons which are also a terrible thing.