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Reich writes: "For years, Washington lawmakers on both sides of the aisle have attacked big corporations for avoiding taxes by parking their profits overseas. Last week the European Union did something about it."

Robert Reich. (photo: Steve Russell/Toronto Star)
Robert Reich. (photo: Steve Russell/Toronto Star)


Standing Up to Apple

By Robert Reich, Robert Reich's Website

02 September 16

 

or years, Washington lawmakers on both sides of the aisle have attacked big corporations for avoiding taxes by parking their profits overseas. Last week the European Union did something about it.

The European Union’s executive commission ordered Ireland to collect $14.5 billion in back taxes from Apple.

But rather than congratulate Europe for standing up to Apple, official Washington is outraged.

Republican House Speaker Paul Ryan calls it an “awful” decision. Democratic Senator Charles Schumer, who’s likely to become Senate Majority Leader next year, says it’s “a cheap money grab by the European Commission.” Republican Orrin Hatch, chairman of the Senate Finance Committee, accuses Europe of “targeting” American businesses. Democratic Senator Ron Wyden says it “undermines our tax treaties and paints a target on American firms in the eyes of foreign governments.”

P-l-e-a-s-e.

These are taxes America should have required Apple to pay to the U.S. Treasury. But we didn’t – because of Ryan, Schumer, Hatch, Wyden, and other inhabitants of Capitol Hill haven’t been able to agree on how to close the loophole that has allowed Apple, and many other global American corporations, to avoid paying the corporate income taxes they owe.

Let’s be clear. The products Apple sells abroad are designed and developed in the United States. So the foreign royalties Apple collects on them logically should be treated as corporate income to Apple here in America.

But Apple and other Big Tech corporations like Google and Amazon – along with much of Big Pharma, and even Starbucks – have avoided paying hundreds of billions of dollars in taxes on their worldwide earnings because they don’t really sell things like cars or refrigerators or television sets that they make here and ship abroad.

Their major assets are designs, software, and patented ideas.

Although most of this intellectual capital originates here, it can be transferred instantly around the world – finding its way into a vast array of products and services abroad.

Intellectual capital is hard to see, measure, value, and track. So it’s a perfect vehicle for tax avoidance.

Apple transfers its intellectual capital to an Apple subsidiary in Ireland, which then “sells” Apple products all over Europe. And it keeps most of the money there. Ireland has been more than happy to oblige by imposing on Apple a tax rate that’s laughably low – 0.005 percent in 2014, for example.

Apple is America’s most profitable high-tech company and also one of America’s biggest tax cheats. It maintains a worldwide network of tax havens to park its global profits, some of which don’t even have any employees.

Sitting atop this network is “Apple Operations International,” incorporated in Ireland. Never mind that Apple Operations International keeps its bank accounts and records in the United States and holds board meetings in California. It’s still considered Irish. And its main job is allocating Apple’s earnings among its international subsidiaries in order to keep taxes as low as possible.

As a result, over last decade alone Apple has amassed a stunning $231.5 billion cash pile abroad, subjected to little or no taxes.

This hasn’t stopped Apple from richly rewarding its American shareholders with fat dividends and stock buybacks that raise share prices. But rather than use its overseas cash to fund these, Apple has taken on billions of dollars of additional debt.

It’s a scam, at the expense of American taxpayers.

Add in the worldwide sales of America’s Big Tech, Big Pharma, and Big Franchise operations, and the scam is sizeable. Over 2 trillion dollars of U.S. corporate profits are now parked abroad – all of it escaping the U.S. corporate income tax.

To make up the difference, you and I and millions of other Americans have to pay more in income taxes and payroll taxes to finance the U.S. government.

Why can’t this loophole be closed? In fact, what’s stopping the Internal Revenue Service from doing what the European Commission just did – telling Apple it owes tens of billions of dollars, but to America rather than to Ireland?

The dirty little secret is the loophole could be closed, and the IRS could probably do what Europe just did even under existing law. But neither will happen because Big Tech, Big Pharma, and Big Franchise have enough political clout to stop them from happening.

Ironically, the European Commission’s ruling is having the opposite effect in the United States. It’s adding fuel to the demand Apple and other giant U.S. global corporations have been making, that the United States slash taxes on corporations that move their overseas earnings back to the United States.

In other words, they want another tax amnesty.

Congress’s last tax amnesty occurred in 2004, when global U.S. corporations brought back about $300 billion from overseas, and paid just a tax rate of 5.25 percent rather than the regular 35 percent U.S. corporate rate.

Corporate executives argued then – as they argue now – that the amnesty would allow them to reinvest those earnings in America.

The argument was baloney then and it’s baloney now. A study by the National Bureau of Economic Research found that 92 percent of the repatriated cash was used to pay for dividends, share buybacks or executive bonuses.

“Repatriations did not lead to an increase in domestic investment, employment or R.&D., even for the firms that lobbied for the tax holiday stating these intentions,” the study concluded.

The political establishment in Washington is preparing for another tax amnesty nonetheless. In a white paper published last week, the Treasury Department warned that an American corporation like Apple, ordered by the European Commission to make tax repayments, might eventually use such payments to offset its U.S. tax bill “when its offshore earnings are repatriated or treated as repatriated as part of possible U.S. tax reform.”

Rather than another tax amnesty, we need a crackdown on corporate tax avoidance.

Instead of criticizing the European Commission for forcing Apple to pay up, American politicians ought to be thanking Europe for standing up to Apple.

e-max.it: your social media marketing partner
 

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+58 # guomashi 2016-09-02 09:29
"Republican House Speaker Paul Ryan ...
Democratic Senator Charles Schumer...
Republican Orrin Hatch,...
Democratic Senator Ron Wyden ..."

Time to find a place among the unemployed for these guys.
 
 
+32 # Liebermania 2016-09-02 10:16
Quoting guomashi:
"Republican House Speaker Paul Ryan ...
Democratic Senator Charles Schumer...
Republican Orrin Hatch,...
Democratic Senator Ron Wyden ..."

Time to find a place among the unemployed for these guys.


They will never be unemployed, they all have HIGH PAYING JOBS waiting for them.
 
 
+1 # revhen 2016-09-02 11:02
Orrin Hatch, my high school classmate and old friend, is 82. Why would he need a high paying job? Then again, he's a clean-living Mormon and could live forever and thus need more long term income.
 
 
+12 # dickbd 2016-09-02 15:26
I don't know why you are getting red marks, as I think your comment is kind of funny--in many ways!
 
 
+3 # rayb-baby 2016-09-03 00:31
Too many RSN readers are too hardboiled to have any sense of humor.
 
 
+26 # wrknight 2016-09-02 11:01
"Republican Orrin Hatch, chairman of the Senate Finance Committee, accuses Europe of “targeting” American businesses."

Apple is about as American as Mao Zedong.
 
 
+27 # tswhiskers 2016-09-02 09:56
All I know is that Hillary will have a lot to do if/when she gets to the WH. Only Reps. are idiotic enough to raise Hell over the GALL of the European Union to collect Apple's back taxes. If we are too stupid to want them, then Ireland might as well have them. I dearly hope that this election will put the Dems. in the majority. I'm so disgusted with the willful stupidity of the Reps. that I can hardly think at the moment. It's not as if WE have no debt and no deficit. Hell no! WE just LOVE to give money away to those who don't need it! And for those who do need it--TOUGH SH--!
 
 
+6 # mmc 2016-09-02 11:29
Double "Amen" to this post!
 
 
+14 # tgemberl 2016-09-02 12:54
Schumer is a Democrat.
 
 
+18 # MidwestDick 2016-09-02 13:58
Tax justice is a very heavy lift and before Congress or the White House will be able to do it, there must be campaign financing reform.
Any politician who dares to demand tax justice can expect that a piece of that $2 Trillion stashed overseas will be used to mendaciously assault his character in the media and to get paid operatives going door to door to make sure his opponent wins.
 
 
+5 # wrknight 2016-09-03 10:53
Quoting MidwestDick:
Tax justice is a very heavy lift and before Congress or the White House will be able to do it, there must be campaign financing reform.
Any politician who dares to demand tax justice can expect that a piece of that $2 Trillion stashed overseas will be used to mendaciously assault his character in the media and to get paid operatives going door to door to make sure his opponent wins.

Yeah, but to get campaign financing reform you first have to get politicians that want to reform the system. So now we're in a catch 22 because no incumbent politician is about to reform a system that benefits them so well?
 
 
+1 # RLF 2016-09-04 07:13
The politicians all want to reform taxes to give business a tax amnesty. Business has been pushing it for a long time. That's the only reform we're likely to see except to put more taxes on small mom and pop shops!
 
 
+4 # RLF 2016-09-04 07:11
Schumer is a Democrat in name only. He sucks up money from corporate and wall st. interests.
 
 
0 # rogerhgreen 2016-09-05 20:11
Quoting RLF:
Schumer is a Democrat in name only. He sucks up money from corporate and wall st. interests.

Thank you, RLF. I was going to say that but I figured that someone else here must be bright & knowledgeable enough to make the observation. I have disliked Schumer for a long time. He is the classic Blue Dog Democrat and neocon "liberal hawk". What I fear about Hillary as President is that she will turn out to be just like Schumer if he were to be President. They say "If it walks like a duck and quacks like a duck then it probably is a duck." In Schumer's case he probably would vote with the Dems for a Dem Senate majority leader, but apart from that he is a Republican.
 
 
+10 # pietheyn07 2016-09-02 14:29
Hillary won't touch this one, both for political and ideological reasons, and Wall Street will continue congressional majority in its pocket.
 
 
-3 # Robbee 2016-09-02 18:13
Quoting tswhiskers:
Only Reps. are idiotic enough to raise Hell over the GALL of the European Union to collect Apple's back taxes. I'm so disgusted with the willful stupidity of the Reps. that I can hardly think at the moment.

- well put!

when obama took office 8 years ago he offered to reform the tax code including huge tax reduction from corporate taxpayers - but made it clear that reform would include the whole code - whereby billionaires pay much lower tax rates than heir secretaries - repugs refused to raise ANY taxes - so - tax reform went nowhere for the past 8 years!

if rump takes office ryan has made it known that there will be huge tax cuts for millionaires - and rump has made it known that he will sign off

if hill takes office we can reasonably expect that she will renew obama's tax reform offer - maybe our house repugs will take her up on it - maybe not - if not dems stand a good chance of taking the u.s. house from repugs in 2020

this is just another little thing for our resident steinbots to think about - NEXT YEAR WILL MILLIONAIRES PAY MORE OR LESS TAXES? - what's the difference between a dem and a repug? - ask prez rump!

it's hard for steinbots to think about america when your only benchmark is anything and everything but who pays taxes and how much - steinbots have bigger fish to fry - and so - as they remind us every day! - could care less
 
 
0 # rayb-baby 2016-09-03 00:45
Oh, Steinbots do care, but they are absolutely, unequivocally, 100% certain beyond ANY shadow of a doubt that anyone that thinks that Hillary would do anything other than totally favor corporations over people must be stupid.
 
 
-9 # fletch1165 2016-09-02 10:35
"For years, Washington lawmakers on both sides of the aisle have attacked big corporations for avoiding taxes by parking their profits overseas."

I would never start an article like this trying to indict the status quo.

Its hard to comprehend the full idiocy of this statement. The first sentence shows complicity with the corporate government and open denial of the true dynamic. Which years and whom? The Leibermen Bill allowed corporations to go tax free for entire years. When their business practices led to failure, or worse were deamed unethical and corrupt by it own employees and stockholders, shares were understandably sold. Why should the corporations be able to write off these sales of their stock holders? It is they themselves who failed and were acting unethically in most of the cases.

GE, who made over 4.5 Billion in profits in 2010, did not pay ONE DIME IN TAXES THAT YEAR.

I don't want to listen to Reich when he is off this much. You really can't open with that sentence, period. A former Clinton Aide, so I guess it should not surprise us that he is backing the system, even while he seems to attack it.
 
 
+21 # revhen 2016-09-02 11:06
Reality check: They paid lip service to us ordinary folk -- then screwed us royally in their laws. Don't look at what the SAY, look at what they DO!
 
 
+9 # Skyelav 2016-09-02 10:51
I am sick to death of Congressional mishandling of everything because someone is wearing pink knickers or some such We need to force them to stop writing riders on bills. Things would go a lot more smoothly and there could be less misunderstandin gs and criminality. Write and phone and tell them to FIX IT
 
 
-5 # LarryK 2016-09-02 10:56
Reich is usually someone I can understand but he misses the mark on this one. To paraphrase Learned Hand, it is not illegal for a taxpayer to arrange his affairs to pay the least tax allowed. Generally, a liberal will think that it is the duty of all to pay the most in taxers they can! The other points about what happened when money was repatriated in the past are easily dealt with by making conditions to repatriation; something that congress and the IRS (regulations) can do if a law gets passed.
 
 
+15 # maindrains 2016-09-02 11:14
It seems that it is not illegal right now but the whole point is that it should be.. but until the legistlators on both sides of the house show some guts its not going to happen and US debt will continue to rise.While "free trade" focusses on tarriff bariers, the main barrier is preferable tax rates that cause companies to move from one jurisdiction to another.
 
 
+19 # kalpal 2016-09-02 10:57
The Guardians Of Privilege do not attack the most privileged of America. They mostly comfort the comfortable and frequently afflict the afflicted.
 
 
+10 # Aliazer 2016-09-02 11:53
Under these despicable conditions under which both the U. S. government is placed, as well as the American people in having to paying more taxes than necessary, what business is of federal agencies enforcing so called "Intellectual Property" for these thieves? And why should precious funds should be spent for these efforts.

Of course, I know why!! The criminals who run this country, being in bed with these multinationals, do not give a damn about any of this!! Shame on all of them!!
 
 
+7 # fletch1165 2016-09-02 13:20
Congress is not working on these issues. I don't see how anyone would believe that. Who Alan Grayson and Bernie Sanders? That is not Congress. That is two people. And one endorsed Hillary. Go ahead and defend Reich who clearly states reform is necessary, but then expects it to somehow fix itself under our current Congressional format.

We need a parliamentary system, and not winnewr take all. Secondly we need publically funded electons. Dream on otherwise people. You can go on getting snowed by fake progressives like Reich for years to come.

I would trust other economists. Dean baker is not bad. I prefer social scientists like the exposer of the Bohemian Cub, G. William Domhoff, Who Rules America. Or HOward Zinn, A People's Republic. And harold S. Kerbo, Social Stratification and Inequality. Though Reich reaches some true conclusions, he is way off in the end since he thinks Congress has been working for the people when we all see its not true.
 
 
-4 # fletch1165 2016-09-02 13:21
Personally I would stop printing Reich. His remarks are only half true almost always. Anyone who served under Bill Clinton simply cannot be trusted. The Clinton adminisration raised military spending aboive Reagan's ridiculous Star Wars numbers. They imprisoned more youth than anyone. And the sweatheart deals to corporations and corporate influence also increased markedly. Including corporate interlocking(sa me CEO's on multiple boards of directors and multiple industries) and the number of former CEO's in the President's cabinet directly was also GREATER than even Ronald reagan.
 
 
-6 # Robbee 2016-09-02 18:18
Quoting fletch1165:
Personally I would stop printing Reich. His remarks are only half true almost always. Anyone who served under Bill Clinton simply cannot be trusted. The Clinton adminisration raised military spending aboive Reagan's ridiculous Star Wars numbers. They imprisoned more youth than anyone. And the sweatheart deals to corporations and corporate influence also increased markedly. Including corporate interlocking(same CEO's on multiple boards of directors and multiple industries) and the number of former CEO's in the President's cabinet directly was also GREATER than even Ronald reagan.

- this is just another little thing for our resident steinbots to think about - NEXT YEAR WILL MILLIONAIRES PAY MORE OR LESS TAXES? - what's the difference between a dem and a repug? - ask prez rump!
 
 
+9 # Activista 2016-09-02 14:42
"But Apple and other Big Tech corporations like Google and Amazon ..."
add Microsoft ....
www.huffingtonpost.com/.../tax-dodging-microsoft-sho_b_8961...
The Huffington Post
Jan 12, 2016 - Microsoft began building this tax avoidance maze more than 20 years ago when it shifted software royalty rights to a dummy corporation in ...
 
 
+4 # fcvnyc 2016-09-02 15:13
This global fiscal loophole is part of a global fiscal system that is kept in place by the powers within the G 7’s neo-liberal (dis)order. One way and a lasting and long-term way of countering this fiscal disorder is to transform the unjust, unsustainable and, therefore unstable international monetary system which binds together the global fiscal, financial, economic and commercial systems.

This transformation would happen if the monetary system were to be based upon a carbon standard of a specific tonnage of CO2e per person. Details of such carbon-based monetary system are presented at Verhagen 2012 and updated at www.timun.net.
 
 
+5 # bardphile 2016-09-02 18:02
I despise Trump; or rather, I despise the system that has raised him up, since absent his born-on-3rd-bas e origin, he's just an uncouth boor, not worthy of actual hatred, and his kids seem to like him. But if he were to put forth a credible, aggressive proposal to not only close domestic tax loopholes, but to reach out and do something about the whack-a-mole system of world-wide tax avoidance/evasi on by the wealthy, individuals and corporations, I might consider voting for him.

This is the conversation (one of them) we should be having, not Trump's bloody-shirt bigotry or Hillary's damn emails.
 
 
-1 # carytucker 2016-09-03 10:57
Quoting bardphile:
I despise Trump; or rather, I despise the system that has raised him up, since absent his born-on-3rd-base origin, he's just an uncouth boor, not worthy of actual hatred, and his kids seem to like him. But if he were to put forth a credible, aggressive proposal to not only close domestic tax loopholes, but to reach out and do something about the whack-a-mole system of world-wide tax avoidance/evasion by the wealthy, individuals and corporations, I might consider voting for him.

This is the conversation (one of them) we should be having, not Trump's bloody-shirt bigotry or Hillary's damn emails.


Like his proposal to end the estate tax. How do you like that?
 
 
0 # Robbee 2016-09-04 17:45
Quoting carytucker:
Quoting bardphile:
I despise Trump; or rather, I despise the system that has raised him up, since absent his born-on-3rd-base origin, he's just an uncouth boor, not worthy of actual hatred, and his kids seem to like him. But if he were to put forth a credible, aggressive proposal to not only close domestic tax loopholes, but to reach out and do something about the whack-a-mole system of world-wide tax avoidance/evasion by the wealthy, individuals and corporations, I might consider voting for him.

This is the conversation (one of them) we should be having, not Trump's bloody-shirt bigotry or Hillary's damn emails.


Like his proposal to end the estate tax. How do you like that?

- ending estate tax only helps those with estates over $5.4 million - couples over $10.8 million

no worker who does not love to carry rich folks on our backs forever - sees benefit from ending estate taxes!

warren is right! - rump is only out for rump!
 
 
0 # Robbee 2016-09-04 17:47
Quoting Robbee:
Quoting carytucker:
Quoting bardphile:
I despise Trump; or rather, I despise the system that has raised him up, since absent his born-on-3rd-base origin, he's just an uncouth boor, not worthy of actual hatred, and his kids seem to like him. But if he were to put forth a credible, aggressive proposal to not only close domestic tax loopholes, but to reach out and do something about the whack-a-mole system of world-wide tax avoidance/evasion by the wealthy, individuals and corporations, I might consider voting for him.

This is the conversation (one of them) we should be having, not Trump's bloody-shirt bigotry or Hillary's damn emails.


Like his proposal to end the estate tax. How do you like that?

- ending estate tax only helps those with estates over $5.4 million - couples over $10.8 million

no worker who does not love to carry rich folks on our backs forever - sees benefit from ending estate taxes!

warren is right! - rump is only out for rump!

- apologies to all steinbots! who kiss rump!
 
 
+1 # Robbee 2016-09-04 17:49
Quoting Robbee:
Quoting Robbee:
Quoting carytucker:
Quoting bardphile:
I despise Trump; or rather, I despise the system that has raised him up, since absent his born-on-3rd-base origin, he's just an uncouth boor, not worthy of actual hatred, and his kids seem to like him. But if he were to put forth a credible, aggressive proposal to not only close domestic tax loopholes, but to reach out and do something about the whack-a-mole system of world-wide tax avoidance/evasion by the wealthy, individuals and corporations, I might consider voting for him.

This is the conversation (one of them) we should be having, not Trump's bloody-shirt bigotry or Hillary's damn emails.


Like his proposal to end the estate tax. How do you like that?

- ending estate tax only helps those with estates over $5.4 million - couples over $10.8 million

no worker who does not love to carry rich folks on our backs forever - sees benefit from ending estate taxes!

warren is right! - rump is only out for rump!

- apologies to all steinbots! who kiss rump!

- kissie! kissie! kissie!
 
 
-5 # Robbee 2016-09-02 18:20
when obama took office 8 years ago he offered to reform the tax code including huge tax reduction from corporate taxpayers - but made it clear that reform would include the whole code - whereby billionaires pay much lower tax rates than heir secretaries - repugs refused to raise ANY taxes - so - tax reform went nowhere for the past 8 years!

if rump takes office ryan has made it known that there will be huge tax cuts for millionaires - and rump has made it known that he will sign off

if hill takes office we can reasonably expect that she will renew obama's tax reform offer - maybe our house repugs will take her up on it - maybe not - if not dems stand a good chance of taking the u.s. house from repugs in 2020

this is just another little thing for our resident steinbots to think about - NEXT YEAR WILL MILLIONAIRES PAY MORE OR LESS TAXES? - what's the difference between a dem and a repug? - ask prez rump!

it's hard for steinbots to think about america when your only benchmark is anything and everything but who pays taxes and how much - steinbots have bigger fish to fry - and so - as they remind us every day! - could care less
 
 
+10 # bubbiesue 2016-09-02 22:18
The last time a company in which I owned a few shares moved to Ireland I got the privilege of paying Capital Gains because of the nature of the transaction. I was a bit fried. I don't much care what happens to Apple but they surely should be paying their taxes, wherever they are. They're a big corporation and if the dividend goes down a penny that's o.k. Taxes do a lot of good in the world--feed people, provide medical care and education, roads, parks, I could go on, but you get it. Apple, pay your taxes and keep quiet.
 

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