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clinker
Trad climber
Santa Cruz, California
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Topic Author's Original Post - Aug 30, 2016 - 06:51am PT
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One of my climbing partners talks a lot about the low rate of tax on we have on corporations in the US. He owns and runs a small company.
The EU is calling out individual countries tax bargaining practices.
A small bite out of Apple.
EU hits Apple with $14.6 billion tax bill
by Ivana Kottasova @ivanakottasova
August 30, 2016: 9:04 AM ET
Tech giants hold $500 billion in cash
Ireland must recover up to 13 billion euros ($14.6 billion) in unpaid taxes from Apple, Europe's top regulator ruled on Tuesday.
The tax ruling is by far the biggest the European Union has ever made regarding a single company, and it could spark a huge transatlantic row over how Europe treats big U.S. companies.
Apple shares fell almost 3% in premarket trading. The company will appeal the decision. It said the ruling upended the international tax system and would damage jobs and investment in Europe.
The European Commission, the EU's de-facto government, said the Irish government had granted illegal state aid to Apple (AAPL, Tech30) by helping the tech giant to artificially lower its tax bill for more than 20 years.
apple ireland tax reaction
Apple reacts to the EU commission hitting it with a 14.5 billion tax bill
"Member States cannot give tax benefits to selected companies -- this is illegal under EU state aid rules," said Commissioner Margrethe Vestager, Europe's top antitrust official.
Apple paid tax at 1%, or less, on profits attributed to its subsidiaries in Ireland, well below the 35% top rate in the United States and even well below Ireland's 12.5% rate.
That prompted complaints by both European and U.S. lawmakers, who argued the deal gave Apple an unfair advantage in exchange for creating jobs in Ireland. CEO Tim Cook was even called to testify on Apple's tax deal before a Senate committee in 2013.
The bill for tax benefits, plus interest, covers 2003 to 2014. Apple has more than $231 billion in cash on its balance sheet to cushion the blow.
Cook said on Tuesday the ruling has "no basis in fact or in law," calling it "obvious targeting of Apple."
eu apple
He also said Apple has helped create and sustain more than 1.5 million jobs across Europe and stressed the company follows the law and pays all the taxes it owes.
"The European Commission has launched an effort to rewrite Apple's history in Europe, ignore Ireland's tax laws and upend the international tax system in the process," he wrote.
Ireland said it will appeal the decision, saying Apple paid what it owed. The country has one of the lowest corporate tax rates in Europe, which makes it an attractive place to invest for global companies.
The Irish government is afraid companies would be less likely to invest in Ireland if its tax regime changes, which could cost the country thousands of jobs.
Related: U.S. warns EU: Don't hit Apple with a massive tax bill
Apple is not the only American company that has recently found itself under scrutiny over its European tax affairs.
The European Commission ordered Starbucks and Fiat Chrysler to repay millions in taxes last October.
Starbucks (SBUX) has to pay back up to 30 million euros it saved thanks to a sweetheart tax deal with the Netherlands. Fiat Chrysler (FCAM) was ordered to repay a similar amount after a similar deal with Luxembourg.
Both companies have appealed the decisions.
Related: France going 'all the way' to collect tax from Google, McDonald's
The EU is also probing the tax arrangements of Amazon (AMZN, Tech30) and McDonald's (MCD). Google (GOOGL, Tech30) is under investigation over its taxes in France and a couple of other European countries.
The ruling against Apple's tax deal comes despite a stern warning from the U.S. last week. The Treasury Department urged the European Commission to stop its tax crackdown on American companies, saying it would consider "potential responses" if Brussels doesn't change course.
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Reilly
Mountain climber
The Other Monrovia- CA
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Aug 30, 2016 - 07:30am PT
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Tell yer climbing partner to quit reading The Daily Worker. European corporations, firmly
ensconced in their socialist paradise, pay much lower taxes than US corporations.
France 15-33%
Germany 29.65%
Italy 27.5%
Netherlands 25%
Switzerland 18%
Sweden 22%
Liechtenstein 12.5%
UK 20%
USA 35% + 0-12% state/local
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Lorenzo
Trad climber
Portland Oregon
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Aug 30, 2016 - 08:06am PT
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2011 effective tax rate after loophole deductions. 12%. In 2011
https://en.m.wikipedia.org/wiki/Corporate_tax_in_the_United_States
Making the USA as much a corporate tax haven as Lichtenstein.
Corporate share of federal tax revenue has dropped by two-thirds in 60 years — from 32% in 1952 to 10% in 2013.
General Electric, Boeing, Verizon and 23 other profitable Fortune 500 firms paid no federal income taxes from 2008 to 2012.
288 big and profitable Fortune 500 corporations paid an average effective federal tax rate of just 19.4% from 2008 to 2012.
And the largest corporation on the planet, Apple, paid 8.2% in effective tax rate in 2013.
The socialist worker's rag I got that last number from was the Bloomberg report.
And today's news from where Apple hides it profits, Ireland, is that the EU Force them to pay 14.5 billion in back taxes for all the years Apple has been in Ireland and sent profits to Bermuda.
http://www.nytimes.com/2016/08/31/technology/apple-tax-eu-ireland.html
http://www.eurotrib.com/story/2013/10/15/14211/890
In the story
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Chaz
Trad climber
greater Boss Angeles area
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Aug 30, 2016 - 08:33am PT
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Lorenzo writes:
"2011 effective tax rate after loophole deductions. 12%. In 2011"
How about a compromise?
Cut the tax rate to 12%, and shitcan all the deductions.
Tax deductions exist only as a government tool to pressure people into doing things that they otherwise wouldn't.
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Lorenzo
Trad climber
Portland Oregon
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Aug 30, 2016 - 08:36am PT
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Well, OK, if you can talk Apple in adding half again what it pays with deductions.
And GE, Boeing, and Verison paid nothing, so I doubt you'll convince them.
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JEleazarian
Trad climber
Fresno CA
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Aug 30, 2016 - 11:02am PT
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Corporate income taxes have an inherent unfairness because we do not know what individuals pay them. Econometricians demonstrated this long ago, starting with Arnold Zellner, in "The Corporate Income Tax In The Long Run: A Comment" Journal of Political Economy 66, No. 5 (October 1958), pp. 444-446. Zellner demonstrated, and many have later confirmed, that we have too many dependent variables and too few independent variables to use econometrics to measure who pays corporate income tax.
I realize I use this example often, but tell me who pays Chevron's corporate income tax, as an example? Is it its shareholders, its executives, its workers, its vendors, its customers or someone else? If you know, how do you know? Sorry, but I don't believe visionaries unless they can successfully predict the winning Lotto numbers.
If we don't know who pays a tax, we cannot know its fairness or unfairness. This, of course, is why those who favor big government love corporate income taxes and similar levies. Someone pays, but few of them know how much, if any, they pay. That way there's less resistance to higher taxes than levies with direct, measurable impact such as sales or income taxes. Those who spend their lives to spend our money have more money to spend when they can hide the identity of the payers.
Another trouble I have with "average actual corporate tax rates" is the method of calcuation. The professional corporation of which I was a member paid almost no income tax, because we paid almost all of our income as salaries. This kept us well below the higher marginal rates.
Moreover, as mentioned by Chaz, above, just who, exactly, created those "loopholes?" Isn't that the government with its thumb on the scales? Any alleged "loophole" that is not, in fact, necessary to calculate income (as opposed to gross receipt) constitutes a governmetn intervention creating "crony capitalists," Conservatives want those interventions eliminated, but liberals want to direct private activity toward the activities they want, rather than those buyers want.
No matter how you slice it, U.S. marginal corporate income tax rates far exceed those of most of the rest of the industrialized world, totally aside from their unknown incidence.
John
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Lorenzo
Trad climber
Portland Oregon
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Aug 30, 2016 - 11:06am PT
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If we don't know who pays a tax, we cannot know its fairness or unfairness.
No matter how you slice it, U.S. marginal corporate income tax rates far exceed those of most of the rest of the industrialized world, totally aside from their unknown incidence.
You make no sense.
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NutAgain!
Trad climber
South Pasadena, CA
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Aug 30, 2016 - 11:32am PT
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John, I'm open to your ideas on lots of stuff, especially economics where you have a background. But I can only rationalize your response if you are paid by corporations to come up with an excuse to defend their practices. I see zero meat in your argument.
What is the relevance of who owns the corporations in terms of taxation? Whoever they are, they make a profit (or loss) and should be subject to taxation on the income, just as if they were working with physical labor to earn the money (I'm perilously close to the issue of taxation on passive vs active investment income, but let's not fall into that side discussion that doesn't change the merits of this discussion). I'm sure owners of corporations (shareholders) are quick to declare losses and take deductions it the corporation loses money. No reason I can see to obfuscate it with murkiness of what individuals benefit or suffer from it. Anyone who can invest in a corporation, which exists with the primary motive of making a profit, can afford to pay the taxes associated with the income.
When you reduce corporate taxation, you reduce the tax liability of rich people who can afford to own stock. Further, you create a system that rewards passive income and discourages people from performing real work and creating something of value- the government takes more from people creating things than from the investment leaches of society. It's a way for the rich people to stay rich while the people with ideas and hard work claw away creating value trying to get into that rich class that keeps getting richer even without doing anything except parking the wealth that their ancestors created.
Reducing corporate taxes creates a giant loophole that only benefits the people who least need government assistance.
The ONLY counter-argument that I see against extreme tax rates for corporations, is the issue of global competitiveness. If we have too much taxes, then companies will shift their operations to other countries. So our challenge should be to discourage countries with low corporate taxes, use our military might and negotiations power against that! Not pandering in a downward spiral of giving away our national resources and collective wealth of our citizens to corporations that ultimately have no allegiance to anything except profits.
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zBrown
Ice climber
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Aug 30, 2016 - 11:48am PT
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Moreover, as mentioned by Chaz, above, just who, exactly, created those "loopholes?"
The corporate attorneys who dictated to the Congress what to pass (actually they wrote it for them).
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Escopeta
Trad climber
Idaho
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Aug 30, 2016 - 11:48am PT
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Starting any argument from the premise that its the government's role to collect taxes and we are just here to argue about the rates immediately marks you.
Statists gonna state.....
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StahlBro
Trad climber
San Diego, CA
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Aug 30, 2016 - 12:28pm PT
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Might be the dumbest troll-bot ever created
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JEleazarian
Trad climber
Fresno CA
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Aug 30, 2016 - 02:11pm PT
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Corporations are people, remember? Have you been drinking?
DMT
Corporations are people acting in concert. Conservatives understand this. Leftists pretend corporations are simply separate metaphysical entities, and therefore have no rights. They also view that metaphysical entity as a taxpayer. That's like saying an apartment building pays property tax. Its owners pay the tax, but they doubtless collect at least some of that tax in rental income. Conservatives understand what corporations really are. Corporations apparently still baffle the left.
The corporate income tax is ultimately an excise tax on the corporate organization. To the extent corporate organization is the most feasible way to organize a business association with huge capital requirements (e.g. oil companies), all such associations will pay that excise tax. Investors look to return on investment. Since the corporate income tax reduces that return before an investor gets his or her money, that tax is no different from any other cost, a portion of which gets passed on to those who sell to (i.e. workers, who sell labor or vendors who sell other goods and services) or buy from the corporation.
We can figure out the incidence of an excise tax on, e.g. utility service, rubber goods, etc. pretty easily. But what's the incidence of an excise tax on corporate organization if so much of what we use in our daily lives comes from corporations?
If you think you pay no corporate income tax, but buy products produced by corporations, work for a corporation, sell to a corporation, or own stock in a corporation (either directly or indirectly, through participation in a retirement plan, e.g.), you're kidding yourself. If you think you know how much you pay, you're also kidding yourself. The only honest answer to the question "How much corporate income tax do I pay?" is "I don't know." And you don't, either. So how can you talk about a corporation's "fair share" when you don't even know who's paying how much?
What is the relevance of who owns the corporations in terms of taxation? Whoever they are, they make a profit (or loss) and should be subject to taxation on the income, just as if they were working with physical labor to earn the money
That's a good idea, but we don't do that now. If a corporation pays a dividend, it's taxed both at the corporate level, and again at the individual level. When one combines the corporate rates with individual rates, dividend income would seem taxed at a much higher rate than labor income.
If I could start a tax system from scratch, I would only tax individual incomes for redistributive and unallocable expenses, and have user fees where we can identify the beneficiary of government expenses. Unfortunately, it's too late to do that. There's a saying in tax policy that "old taxes are good taxes," meaning that the distortions caused by the tax have worked their way through the economic system. Changing the game will lead to new distortions that need to be factored in.
John
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John M
climber
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Aug 30, 2016 - 02:18pm PT
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hey also view that metaphysical entity as a taxpayer.
You can sue the corporation, but you can not sue the people who are the corporation. With that, people can hide behind corporations. Taking money out of the corporation and then saying the individual stock owners are not responsible for the problems/debts of the corporation.
If corporations are separate, and have the rights of a person, then they should be taxed like a person.
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JEleazarian
Trad climber
Fresno CA
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Aug 30, 2016 - 02:23pm PT
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Corporations aren't unique in limiting liability. Limited partnerships, LLC's and for certain professions, LLP's do the same. Partnership taxation allocates all income and losses to individual partners. Corporations do not, in part because the enormous size of the shareholder class in large public corporations would be a bookkeeping and taxation nightmare.
Individaul stockholders pay individual income when they receive money for their status as stockholders, either through dividends (which have an extremely high effective tax rate) or when they sell their stock (which have a lower tax rate, which is a different discussion). Again, who, exactly, is paying that corporate income tax, and how do you know? If you don't know, how is a higher or lower rate fair or unfair?
John
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John M
climber
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Aug 30, 2016 - 02:28pm PT
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no offense taken Dingus..
And John, I do sort of see where you are coming from. Use fees instead of taxes on corporations. That would in one sense level the field and not penalize successful corporations. You pay to play. I believe that is in essence what you are saying.
My problem with that then is the capital gains tax.
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Mungeclimber
Trad climber
Nothing creative to say
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Aug 30, 2016 - 05:13pm PT
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Corporations apparently still baffle the left.
Not sure they baffle the left as much as they are baffled by the different rates of taxation of capital gains vs. ordinary income.
But Nuts point about foreign competitiveness is well taken as a downward pressure on the taxation rate we're politically willing to accept.
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Jon Beck
Trad climber
Oceanside
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Aug 30, 2016 - 05:29pm PT
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If the EU prevails against Ireland the world will be faced with a situation where mega-corporations will not have any tax havens and will be forced to pay their fair share. Oh the horror.
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thebravecowboy
climber
The Good Places
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Aug 30, 2016 - 05:30pm PT
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i feel bad for the corporashunsiz
they should contribute less because dey employz so menny.
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mtnyoung
Trad climber
Twain Harte, California
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Aug 30, 2016 - 05:58pm PT
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John E said:
"Corporations are people acting in concert. Conservatives understand this. Leftists pretend corporations are simply separate metaphysical entities, and therefore have no rights. They also view that metaphysical entity as a taxpayer."
In fairness, I think my political views are a little left of yours John. But I often read your stuff (which is usually both respectful and well thought out).
But, oh man, I think you're way, way off on this one.
Corporations are certainly more than people acting in concert - that's totally simplistic. They're a blend of people acting in concert and entities with an exisitence of their own.
John M pointed out a part of this truth when he said:
"You can sue the corporation, but you can not sue the people who are the corporation. With that, people can hide behind corporations. Taking money out of the corporation and then saying the individual stock owners are not responsible for the problems/debts of the corporation."
John M's points aren't just valid, they illustrate one of the most basic reasons for corporations to exist (I know you know your economic history).
As another example, what about Citizens United? Corporations (apparently) are considered entities (not just people acting in concert) to the point where that they've got their own separate First Amendment rights (although that's horseshit and they shouldn't).
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zBrown
Ice climber
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Aug 30, 2016 - 06:04pm PT
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Corporations do not, in part because the enormous size of the shareholder class in large public corporations would be a bookkeeping and taxation nightmare.
Do the math.
May be time to upgrade some of those corporate computers.
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