Wednesday, 31 August 2016

That Apple tax bill raises all sorts of interesting topics...

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 patents 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 shenanigans) 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 a firm 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


Bayard said...

The whole affair is like watching Shakespeare: you know who'd going to come on stage before they appear and you know what they are going to say before they say it.

Mark Wadsworth said...

B, a bit like Thatcher, you mean? Where what people say says more about the person saying it than Thatcher?

In my defence, I did a whole post without mentioning LVT and I tried to be even handed. Or is that the tone you expected me to take before I came on stage?

Graeme said...

Corp tax on multi-nationals nis just a geme as to who can get the most. Why not simpilify it to a tax on the prooperties they reside in? Stop all this flimmyfladdle

Francis said...

Why would LVT raise a lot from Apple?

As Mark says above, Apple has their own source of non-land rents (albeit not in perpetuity) from intellectual property. We need some sort of tax on super-profits to capture that. It's not clear what the right level to be taxing those super-profits at is, as the monopoly exists ostensibly to promote innovation, but I think Apple would make the same products etc with it at, say, 50%.


Mark Wadsworth said...

G, yes of course, but we are where we are. If we have Corp tax then al companies should pay it. She slso what F says.

F, I don't care about how much LVT Apple and all its employees would pay. It would be the right amount, be it high or low. I agree on taxes on patent income of course.

Ben Jamin' said...

Patents and intellectual property stifle innovation. Justification for these monopoly privileges is akin to the old "landowners create land values" KLN.

Ideas do not create wealth, what we do with them does.

Evolution happens by small efficient steps,that as a result have a greater likely hood to hitting the correct pathway. The allure of owning the intellectual space around an idea leads to a gamble to take big steps. Which are not only less likely to hit the right path, but even if they do, once owned will lead to the expenditure of resources to find alternative paths.

In other words patents are like toll booths. Pay up or find another way around.

This seems likely to me to lead to a wasteful use of resources. Not to mention all the litigation etc, etc.

Copyright of brand names protects consumers. Scrap everything else.

Intellectual pathways should be common property. No toll booths ta.

Bayard said...

"B, a bit like Thatcher, you mean?"

Not really, it's that the man from Apple said exactly what I'd expect a man from Apple to say, ditto the man from the EU, ditto the man from the Irish Government, ditto the economist the Beeb wheeled in. A lot of the points you brought up in your post weren't mentioned and that was expected, too, because they weren't part of The Script.

It reminds me of Tom Lehrer's introduction to one of his songs (Smut) where he says (and I paraphrase) "The people defending these books are doing it on the grounds of free speech, because that's how they've got to do it, but it's nothing to do with free speech. What it boils down to is that dirty books are fun, but they can't just get up and say that in a court of law."

"Patents and intellectual property stifle innovation. Justification for these monopoly privileges is akin to the old "landowners create land values" KLN."

Actually, the justification for patents and the reason why they were introduced, was to prevent people inventing things, keeping the essentials of their invention secret to prevent copying and then the secret dying with them, like the method for making Coade stone. Of course, as soon as patents were introduced, some clown went and got one on the crank, so people must have realised the drawbacks pretty quickly.

Shiney said...

Always in a quandary about patents.

I can sort of see the logic that if I'd invented something really cool, that lots of people wanted or solved a big problem, why shouldn't I get at least some benefit rather than it (the benefit) being effectively handed over to the Chinese communist party the minute they reverse engineer my product (which provide the protection racket that allows China to be a low cost producer). Or to the Gummint here in taxes that they can piss up the wall, for that matter.

OTOH I can see BJs argument that they are effectively tolls on the road to greater wealth for all and as such are 'bad'.

So as I said, a bit torn.

Oh, and re Apple.... I'm not sure, and please prove me wrong, but I thought most of their "super profits" come from the Apple brand, rather than patents on HW and SW as such (because you can't patent a UI and they use Intel and Samsung processors).

Mark Wadsworth said...

BJ, B , Sh, I too find myself swayed by those who argue that IP rights stifle the economy but this all part of an elaborate international network of treaties and cannot simply be unpicked. The only thing we could do under the circumstances is tax such income at higher rates than unprotected/earned income.

Sh, yes Apple customer loyalty is quite surprising, and as long as it is voluntary on the part of consumers, well fair play. However that supposed loyalty is rigged by Apple. For example I bought a Mac Mini (with no CD drive) that was compatible with a £25 external CD drive at a time when Apple didn't make external hard drives.

As soon as they started making them, hey presto, my Mac no longer recognised the £25 one and I had to go and buy an £80 one from Apple.

And patents/protections must be quite important to Apple, which is why they keep suing people for infringement.