sure, there's a lot wrong and immoral with multinational corporations and globalization. 

i am just not sure if the world would be a better place without it. it might well be, but it would require us to follow the Bhutanese concept of Gross National Happiness instead of Gross National Product.

now the people in Bhutan really seem to be happier than us westerners, but the standard of living is also a lot lower.

It's not 'cheating' if it's perfectly legal.  The home mortgage interest deduction is a 'loophole' - must someone decline to take the deduction in order to be 'honest' now?

The whole point being missed here is that Apple hides its profits in tax havens where it can't be touched by tax officials trying to recover unpaid taxes.  These are the key words 'hides' and 'tax havens'.  Now if Apple had done everything legally and by the book, why does it see the need to deposit billions upon billions in these 'untouchable' tax havens?  Why can it not leave those funds in their respective countries to be assessed for tax payments at the going rate?

I suppose it's okay for Apple to do this in Australia, New Zealand, the UK and Europe because... well because the US isn't being cheated, and that some how those funds will pour back into the US economy.  WRONG... on both counts:

Firstly: this practice of hiding profit is NOT confined to Australia and etc.  Apple also does the same thing from its US based operations.  I mean, why would it not follow the same practices as in it overseas based businesses?  This means, then, the US public/taxpayer is being cheated just like we are... because there's a huge vacuum in the economy - as in the taxes received books just don't add up - and somebody has to fill it to pay to top up the government's coffers so it can fund the huge war machine.

Secondly; Apple hides its ill-gotten gains in Ireland... meaning the money it stole from us and others does NOT benefit the US economy.  No, it goes to benefit Apple and its shareholders.  So, if anybody thinks that is okay, do they also think Apple and the shareholders who have become wealthy are going to pump any of  that money into the economy to benefit the average bloke?  No on both counts... because those shareholders will have learned from Apple just how to keep it all to themselves.

What I find truly preposterous is when ordinary people - many of whom do not have alot - will say that it is perfectly alright for corporations to cheat on their taxes... to find loopholes so as not to pay the proper amount due.  Firstly, that tells corporations that what they're doing is okay and that the public supports it.  Secondly; governments do not fund themselves, so whatever the corporations refuse to pay on their huge profits eventually comes from the ordinary bloke trying who is often struggling to feed, clothe and house himself and family.

So, having said that, I defy anyone to say that it is absolutely 100% fine with them to pay much higher taxes because the corporations are not paying their dues

They can't very well be 'hiding' anything if you (and apparently everyone else) know exactly where it is, now can they?

They also didn't steal anything.  They didn't put a gun to anyone's head and force them to buy their products.  If they've violated Oz law, Oz should put 'em in the dock.  Your venom would be better directed at your own government, which is who should be determining what 'fair' is - not you or me.  We can dislike Apple all we want but 'your fair' and 'my fair' may be wildly different.  Hence the evolution of 'government of laws' as opposed to 'government of men*'.

*Not that we're practicing what our Constitution preaches much these days, but I still kinda like the document.

You pay the 'dues' either way, you're just not willing to acknowledge that.  Easy to concentrate your anger at a single wad of cash like $6B, while 300 million people paying an extra $2 each to cover the tax flies totally under the radar.  Who gives a shit about $2, right?

Okay, be argumentative; however, the only people who know exactly where the money is are Apple and the bankers holding it, thus it IS hidden from the various tax authorities.

No, because it has tried to bring Apple to task, but Apple keeps avoiding the issue by throwing lawyers at it to create smoke screens, hence my venom, as you call it, is very much pointed in the right direction.

Okay, so it's okay for Apple to cheat on its taxes so you, who is in a lesser position to do so, have to pay more.  And it's not that I don't acknowledge having to pay dues where applicable, I know that and do so when required.  However, what I do protest is that people like me, just ordinary folk, have to pay more because companies like Apple do not pay their dues as required.

Anyway, it's pointless arguing with you - it's fine for Apple to cheat, lie and steal - so I'm outta here.

No need to be so touchy, starkers.  We have a difference of opinion about who actually 'pays' when it comes to corporate taxes, but I still love ya.  Nothing personal here.

For one thing, I'm not so sure us little folks are truly in a 'lesser position to do so'.  Actually, it's just that you know about Apple's behavior but you know nothing about how much I 'cheat' on my taxes.  I've actually long been rather more lackadaisical about reducing my taxes than I should have, but damn near everyone I know 'writes off' every restaurant meal they eat & takes all sorts of other dubious deductions to reduce their tax bill.  I've only this year gotten round to setting up an S-Corp as a legal vehicle to reduce my tax burden.  Does that now make me a dishonest tax cheat?  As I said, it's just a matter of scale, not a matter of principle.

And I don't understand how the Oz government has so little power or authority to address the issue.  If it can't simply enforce existing tax laws, seems there would be lots of things it could do to raise the cost of Apple doing business in the country & effectively claw back what you consider to be its 'fair share'.

Furthermore, we're talking about squeezing a balloon - it's gonna expand somewhere else.  Corporate taxes come out of consumers' pockets in the form of higher prices for all consumer goods across the board.  The consumer is paying the tax in all cases as corporations can't simply print money (unlike governments), it has to come from their customers.  If government needs a certain amount of cash, it's going to come from taxing lots of people a little, or fewer entities a lot, or a mixture of the two.  We could debate forever what the 'fair' balance of those should be.

I want to chime in here because from reading this discussion it seems apparent that most people aren't aware of how deliberately the tax system is setup to be gamed like this.

The Double Irish

The tactic used by Apple (and Google and countless others) is called the Double Irish.  Our own accountants recommended we do this for Stardock and Impulse a few years back but I rejected it on principle.

The way it works is as follows:

1. You have an American company (Apple, Google, etc.)
2. You create an Irish (or one in Denmark) that has no taxes on royalty based income
3. You create a Bermuda based entity that has no income taxes

You then assign the IP to the Bermuda company and have the licensing company be in Ireland or Denmark.  The sales of *licenses* generates royalty income which aren't taxed in Ireland or Denmark and the proceeds then go to Bermuda which aren't taxed.

The money is "outside" the United States but that's not relevant anyway because there's another part that the media doesn't talk about because, well, most people get lost at the complexities of this but here it is:

The last part is the key: The government has been buying up treasury bonds through a process called Quantitative Easing (QE).  This has the effect of lowering interest rates massively. For example, Stardock's credit lines have a 1.51% interest rate -- lower than the rate of inflation.  So what Apple, Google, etc. do is take out loans using the assets in Bermuda as collateral. This is the real "Buffet" rule btw as he's the one who has made this technique popular.  

The Bermuda assets are put into an investment portfolio that returns much better than 1.5% (the S&P 500 was up 25.5% last year -- thanks to QE) and increases in your portfolio are not taxed at all because they are unrealized gains (they only become capital gains when you sell something).

It's not the main issue

The entire debate gets sidetracked because Republicans lamely argue that the way around this is to lower corporate taxes which would do zilch to solve this and Democrats whine about evil corporations even though they are the ones pushing QE which is the real source of this issue.

Now, as a "rich" person, I love QE.  No one has done more to increase the wealth gap in recent years than our beloved President who continues to support QE.  QE causes interest rates to decrease and because of the devaluated dollars causes the stock market to go up.  

This means that a company is better off investing in the market using their portfolio as collateral to obtain super low interest loans than they are hiring people. And yet, we have politicians complain that companies aren't hiring even though they're sitting on a pile of money.  Well not shit. That's because it's more profitable to invest their profits into the stock market than it is to hire.

Quantitative Easing is the real issue

It's a simple IF/THEN question:  IF S&P 500 rate - Interest Rate > Natural profitability of the company THEN invest in stock market instead of employees.

When you can borrow at 1.5% using your investment portfolio that is generating >10% per year (25.5% last year) as collateral then the only way you hire employees is if your company's normal profit margin is pretty decent.

Last year was a good year for Stardock.  We had Start8, Legendary Heroes, ModernMix, etc.  And yet, from a profitability stand point, our unrealized gains (untaxed) from our investment portfolio was our most profitable "product" last year. 

If Stardock were a publicly traded company, I would have been fired for aggressively hiring and creating the SSIF (Stardock investment fund for new game studios) because I can borrow at 1.5% (and do, every day, we have an 8 digit credit line) and use our 8 digit portfolio as collateral and plow our profits into increasing that portfolio instead of hiring.

What is the solution?

There is no easy solution. That's why nothing has been done about it.  QE is supposed to go away. But everyone's addicted to it. EVERYONE. While rich people can get loans at 1.5%, even middle class people can borrow at 4% which is amazing.  It would be tough to return to the 7% norm.  Similarly, the rich and connected would very much dislike seeing their portfolios return to the 8% historical average.

Ireland and Denmark have a vested interest in keeping this system going because they are getting some income from this arrangement.  Bermuda also loves this arrangement.  The US is not really in a position to eliminate the corporate income tax and lowering it to say 20% or something more reasonably would do very little to change any of this.  It's hard to compete with "free".

It took us years to get into this situation and it'll take years to get out of it.  But perhaps if people learn the realities of our system and realize that our President is just as much part of this scheme as the biggest Wall Street insiders people will pay more attention to the politicians rather than blaming corporations.  

Next time someone bitches about the gap between the richest and poorest ask them if they voted for the guys who advocated endless QE. Because nothing in our lifetimes has exacerbated that gap than QE.

Corrections:

S&P 500 was up 29.6% for 2013, not 25.5%, Down Jones was up 26.5% (our portfolio was only up 25.5% because it has a lot of bonds in it and is generally more "conservative").

Thanks for that, Brad.  Is there any real 'value' in those unrealized gains, then, since it's all coming from printed/devalued dollars?  Or is it just in the difference between the interest rate and inflation?

Absent QE, the relationship between corporate taxes and prices should still apply.  But then, we're not absent QE.

Thanks for taking the time to put that together.  Enlightening.

Sure because those unrealized gains are tied to stocks and the value of those stocks are not tied to the dollar per se.  The less the dollar is worth, the more the stocks are worth in dollars.

QE changes everything.  We are explicitly lowering the value of the dollars in order to keep interest rates low.  A liberal Democrat could make a principled argument on why this is a good policy for society overall (i.e. allows for massive deficit spending which can be used to provide more social welfare programs) but the evil side effect is that it is a gift to the 1%ers.

Thank you for the explanation, Brad, it was rather enlightening indeed.  However, it has little to do with what Apple is doing here in Australia, in that QE is not applicable here, so it avoids taxes by hiding revenue, income, profit, whatever you want to call it, in an offshore account outside the government's jurisdiction.  Once there it is nigh impossible for the ATO [Australian Tax Office] to claw it back because Apple continues to put up smoke screens and throwing lawyers at it to perpetually complicate the issue, thus buying Apple time.

Frankly, I'd like to see the Australian government kick Apple's arse out of the country - and the problem goes away - but that isn't going to happen because it places an unfair restriction on consumers/Apple customers.  The alternative would be for government to tighten the applicable tax laws to prevent the practice, but the problem there is that they're often too busy bickering to actually achieve such a thing, particularly when some MP's have vested corporate interests that would also be affected.

The solution [for Oz, re Apple] would be for us to have some piddly little local Computer/OS manufacturer petition our Govt. [like Harley Davidson did against imported bikes] and impose a protectionist levy specific to Apple on imports...that way taxing them BEFORE sales.

...and get them coming...as we don't seem to be able to get them going.....;)

Let's see, the US federal government under both parties has been infested with ex-financial industry people (Goldman-Sachs in particular is very well represented).  Should we be surprised that US policy not only facilitates but encourages large corporations avoiding taxes?

Here's a fun story: I'm a Canadian citizen who currently lives in the US and pays US taxes, as is my oldest brother.  Over Christmas my parents had severe health issues.  Despite the fact that my brother had power of attourney for my father, my father's Canadian financial adviser could not even speak with either of us, as we were US taxpayers.  The US government has bullied foreign financial institutions into not even speaking with US taxpayers.

So yeah, US government policy is still allowing/encouraging corporations to shuffle their money around to avoid taxes, but average schmucks like us are treated as though we're trying to do something illegal.  Sounds fair.

That would be great if we had politicians who had any balls to implement it... but sadly, we don't.  And it would likely never happen under an Abbott, Lib government, given how many of them have corporate ties/investments to protect.

In fact, we should be able to stop them going [pissing off with all the cash] but again, the pollies simply don't have the nuts to do what's right, not when they can make up the shortfall from ordinary bloke, with far less trouble and complication.

Sure it's related.

Again: Apple (and Google and countless other American based companies) do this because they can keep their profits in off-shore accounts which they can then use as *collateral* to run their operations via credit lines that only have a 1.5% (well probably less than that, 1.5% is what *I* can get, they can probably get libor rates).

Being able to keep profits from being taxed is only half the equation. It's just well publicized because it makes companies look "greedy".  That tactic wouldn't be of any value if they couldn't somehow make use of the capital those profits represent and that's where EQ comes in.

A gazllion dollars in a Bermuda account plus $1.00 will buy you a cheap cup of coffee in Cupertino. As soon as Apple/Google/whoever wants to actually make use of that money they have to bring it into the territory they want to use it.  And that means either bringing in your profits directly (which is taxed) OR borrowing it somewhere at super low interest rates and then bringing THAT money into the territory where it isn't taxed.

You wouldn't be able to do that. You'd lose in the WTO.  Plus, remember, it's not just Apple. Google basically invented this technique. Everyone else are Padawans.  Nearly every IP-intensive public company does this.  There is no "easy" solution. 

Let me be clear how common this technique is: Our accountants, which are a big 9 accounting firm, strongly urged us to do this.  When this technique is so entrenched that even piddly companies like Stardock are encouraged to do it, it's not some niche thing. It's "the way" IP companies are run.  I would bet that nearly every publicly (or nearly every one) game and software company does this.

It only requires 3 things to work:

1. A country that has widespread trade treaties (like Ireland) that has a seperate and low tax on *royalties*

2. A country that has widespread trade treaties (like Bermuda) that has no income tax.

3. A country that has widespread trade treaties (like the USA) that has very low interest rates.

If any of those 3 items goes away, this racket goes away.  

But before you yell at Apple, look into how EA, Activision, Microsoft, Google, Oracle, or GE do their accounting.  There are so many countries, companies and rich/connected people who profit off this that it's really hard to make go away.  The rich get richer.  The poor get welfare programs and the middle class get shitty roads and a kick in the ass.

And this is so because too many average schmucks give their blessing and contribute to the mentality by saying it's okay for corporations to cheat... cos if corporations cheat it means that it's okay for them too. 

When the average schmuck stops contributing and starts complaining bitterly about this loathsome practice enmasse to their reps, only then will something be done to change things.  With millions of signatures on petitions against the practice, the government would find it hard to ignore, especially if everybody signing the petition made it clear that they would boycott the next election... meaning that EVERYBODY refused to vote at all. 

Now that would create a chaos both parties would prefer to avoid at all costs... but of course there would be the wowsers and those quite happy with the system as is, meaning it will never happen and the gap between the wealthy and the poor will continue to ever widen.

I'M curious why you blame corporations while letting the governments off the hook.

The globalization of economies...multi-nationals et al is what 'should' be forcing Govts to create a level playing field where there IS NO facility for tax dodging.... just as the same SHOULD apply for extraditions.  It should NOT be possible for some arse to bugger off to Majorca [or where ever] and avoid corruption/murder/rape/pedaphile/whatever charges.

We're all so happy-feet about the big melting pot that we need to also strike a balance with Law and legislation too...;)

Ah, but I'm not. In reply #65 I let the Australian government have it because it is piss weak and gutless with regard to such matters... among others.  I have no doubt other governments are just as weak, pathetic, corrupt - all of the aforementioned - but I am not directly affected by them so do not feel qualified to criticise them in the same way.  However, the blame does not end with government and the corporations.

I also blame the people who think and say it's okay to cheat on taxes, because the attitude is soon espoused by the wider community, thus giving corporations and government a defacto mandate to continue being dishonest and deceitful.

surely that's an insult too miss piggy, and pigs are cute and nice too eat

How are they "cheating" on their taxes? They're following the laws as written.  Are you cheating on your taxes if you claim exemptions? 

If you don't like the law, demand they change it. Don't blame corporations for using what is in the law though. 

The problem is, by the nature of their power/influence it seems law might just be 'corporate-will' these days.  The demands of the 'average joe' on that corporate-will have by comparison much less power/influence.  Without which not much 'change' can be effected.

What I have seen is big companies and the government being too chummy. There's a difference between having a business friendly environment and what goes on in China where people are committing suicide. No, Apple or GE aren't breaking the law but let's face it, the environment in The United States has gotten anti middle class. You have people like Rick Santorum saying the term Middle Class is a leftist talking point. The middle class people who I grew up with were certainly not leftists.

You see what I'm talking about is an attitude that is prevalent now. Where I work almost all the production jobs have been outsourced to the Philippines and I make less now than I did 10 years ago. If you complain about it you are told you should be glad you have any kind of job at all.

The true definition of a fascist state is a marriage of the state and business where neither can be questioned. It is a class system that is against liberal ideas and gives companies the freedom to do pretty much whatever they want. Pollution, outsourcing the jobs, spending millions on lobbying to get your way in the capital all these things are now possible and are being done. Elections are now bought. The laws are in favor of business. The laws are supposed to be to defend the people. To look after the interests of the people. Then you have politicians saying corporations are people my friend. This is how it's become where the people elect law makers to represent them but the law makers end up representing and making laws that screw the people and benefit rich companies.

What good is it for someone to get in a huge deal of debt to get a college degree then end up working delivering pizzas or making burgers? They are caught in a spiral of debt for their whole lives and when some want to raise the minimum wage they are told it's bad for business.

There's a huge difference in making some money for your shareholders and pure GREED.

I say the United States is a Fascist state now and it makes no difference if the government is run by Republicans or Democrats. As long as the government is married to big business and forsakes the people this is how it will be.