Debate Magazine

That Apple Tax Bill Raises All Sorts of Interesting Topics...

Posted on the 31 August 2016 by Markwadsworth @Mark_Wadsworth

1. Apple's $200 billion "offshore" cash pile is largely money which they have magicked offshore tax-free and dare not touch because it will trigger a US tax bill if they repatriate it to the USA, for example in order to pay dividends.
2. For clarity, Apple's accounts show that the cash pile has not been lent back to other companies, it is invested in "marketable securities".
3. The Faux Lib fuckwits from the TPA/City AM axis have a bizarre notion that it would be better to get rid of corporation tax entirely and replace it with a tax on distributions. This would be full of loopholes; administratively unworkable; overlooks the basic point that corporation tax does not really touch reinvested profits (reinvested profits are called expenses, FFS, so they come off profits before they are taxed, duh); as well defeating the whole object. This is what Apple already have - the result being they do not make distributions out of this spare $200 billion at all (and the tax advisers, lawyers and corrupt politicians make a handsome turn), so from the shareholders' point of view, that money might as well not exist in practical terms.
3. The accounts also show that Apple's net profit margin is a startling 25% of net sales (after VAT and so on). This is five times higher than a normal manufacturing business, as Apple are protected by patents. Also, although computer hardware is a competitive, low margin business, software is a natural monopoly even if not protected by patens and Apple sells hardware and software as a bundle. This was IBM's big mistake of course, they should have taken on Bill Gates and his little friends as employees, or at least insisting on an exclusive licence, rather than just using Microsoft software and allowing Microsoft to sell it to all and sundry. That way, IBM would still be world number 1 in computers (like they were twenty or thirty years ago).
4. Such a high profit margin is evidence of quasi-rental income. As we know, rental income can be taxed at very high rates to no ill effect. Seeing as Apple can pay the EU's back tax demand out of this spare cash, it won't actually make any difference to them.
5. Apple are wailing that the tax bill "will have a profound and harmful effect on investment and job creation in Europe." This is complete nonsense. Payroll taxes have a harmful effect on jobs; taxes on investment have a harmful effect on investment (and the UK actually only has one tax on investment, and that is the element of Business Rates that relates to the building). A tax on super-profits i.e. rents has no particular effect at all.
6. What is strange is that the EU says that Apple should repay Ireland €13 billion avoided tax. That 'tax' was never Ireland's in the first place. If Ireland hadn't come up with their stupid rules, Apple would not have channelled so much money through there in the first place. Assuming it hadn't channelled it through some other tax haven instead, Apple would have either paid higher taxes in the various European countries (where products are sold), in the USA (where products are designed) or in China (where products are manufactured).
7. So while £13 billion seems reasonable, compared to the $9 bn "fine" which the USA imposed on BNP Paribas for some trumped up charge or compared to the likely corporation tax on the European notional share of the $200 billion untaxed money, that €13 billion ought to be divvied by between each European country, the USA and China (i.e. where the tax would have been paid absent the Irish shenanigins) in some rough and ready ratio.
8. Finally, while I am a Brexiteer and je ne Bregrette rien, I have often said fair play to the EU (or any national government) for taking this line with large multi-nationals who take the piss on tax, despite what Newsthump says.There's no point even trying to draft clever tax laws, they will always circumvent them. So we might as well just ask them for regular large payments and have done with it, call it a 'market access fee' in EU-speak

Back to Featured Articles on Logo Paperblog