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Reports: Apple facing EU tax probe, building huge ad team

  • Irish broadcaster RTE reports the EU will launch a formal investigation of Apple's (AAPL +0.6%) Irish tax arrangements.
  • Apple's use of favorable Irish tax laws allowed it to pay just a 3.7% tax rate on non-U.S. income during its last fiscal year. That, in turn, is a big reason $132.2B of Apple's $150.6B  cash balance at the end of FQ2 was offshore.
  • Tim Cook was grilled by Congress last year over Apple's offshore tax payments; Cook responded in part by calling for an overhaul of the oft-criticized U.S. corporate tax code.
  • Meanwhile, AdAge reports Apple is "madly building an internal [ad] agency that it's telling recruits will eventually number 1,000 [employees]," and by doing so is set to move projects away from historical agency partner TBWA/MAL.
  • Apple has also reportedly invited other agencies to collaborate on big projects, as it tries to overhaul its marketing after recent campaigns failed to meet expectations.
  • In e-mails unearthed during the latest Samsung trial, marketing chief Phil Schiller voiced concerns about Samsung's ad campaigns, and also asked Cook if Apple should replace TBWA/MAL.
  • Earlier: Morgan Stanley forecasts strong FQ3 iPhone sales
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Comments (36)
  • Bogie 1
    , contributor
    Comments (125) | Send Message
     
    It looks like governments all over the world are into the corporate money grab. Apple plays by their rules and of course they must be doing something shady. They have been scrutinized ad nauseum and have been proven not to have any improprieties. This is a typical attempt at a money grab by the politicos.
    10 Jun 2014, 07:48 PM Reply Like
  • King Rat
    , contributor
    Comments (1007) | Send Message
     
    Tax laws are written by politicians with private winks and nods, but public cloak tearing and teeth gnashing, of wealthy friends.

     

    They're just angry when outsiders join their private club of loophole jumpers. If they want to avoid this they COULD just make tax laws more equitable (even, level, flat) with fewer loopholes.
    10 Jun 2014, 08:09 PM Reply Like
  • kmi
    , contributor
    Comments (4527) | Send Message
     
    Crazy.

     

    The EU originally looked at Ireland's corporate tax rate while preparing, planning and executing the Irish bailout. And backed away.

     

    Makes me wonder what's changed and I think I know: they didn't want to go after corporate entities set up in Ireland across the board, they wanted to pick and choose their sacrificial cows.

     

    I'm not a fan of tax rate mitigation strategies that utilize off-shoring on principle, but I understand them. And if the US doesn't fix it's increasingly regulation-heavy, convoluted and overwhelming tax and legal codes it is destined to fall into non-competitiveness in the international arena, and those companies set up as multinational entities with offshore headquarters will simply.... move. And it'll be trivial to do so. And the money will most certainly stay 'offshore'.
    10 Jun 2014, 08:10 PM Reply Like
  • Market DJ
    , contributor
    Comments (738) | Send Message
     
    Good comment kmi,

     

    I really couldn't have said it better myself. I, not too long ago, remember the US TV commercials calling corporations to Ireland.
    10 Jun 2014, 09:05 PM Reply Like
  • Yokyok
    , contributor
    Comments (330) | Send Message
     
    or maybe we ought to use sanctions on Ireland like we do on Russia to keep the scumbags from using Ireland to screw American taxpayers.
    10 Jun 2014, 09:33 PM Reply Like
  • VictorHAustin
    , contributor
    Comments (826) | Send Message
     
    When the Irish rate is low, American taxpayers come out ahead when the money is eventually repatriated, because more of the full US tax rate is collected.

     

    Yap yap has been reading too much Huff hate.
    11 Jun 2014, 01:02 AM Reply Like
  • rrose39
    , contributor
    Comments (944) | Send Message
     
    I guess I just don't see how taxpayers are being "screwed".

     

    Devices that are manufactured, assembled and sold outside the US should be exempt from US taxes.
    12 Jun 2014, 10:23 PM Reply Like
  • kmi
    , contributor
    Comments (4527) | Send Message
     
    It's not quite as simple as that. There are multiple entities in multiple places in the world that collect portions of the income streams in varied and complex ways. The design of the income streams is very explicitly a tax mitigation strategy, but the end result is that the 'primary' ownership entity isn't quite the same as the entities receiving the income streams which are the ones paying the taxes.

     

    And that's the simple explanation.
    12 Jun 2014, 10:29 PM Reply Like
  • locutus49
    , contributor
    Comments (1053) | Send Message
     
    No wonder Apple plummeted from over $600 a share to $94 in a single day: scare tactics. Michael Blair must be declaring victory (*_*)
    10 Jun 2014, 08:11 PM Reply Like
  • Budavar
    , contributor
    Comments (1396) | Send Message
     
    Sorry, but I expected less silliness from our valued contributors.
    10 Jun 2014, 10:29 PM Reply Like
  • michiganjake
    , contributor
    Comments (293) | Send Message
     
    Hey Locutus are you doing a tongue in cheek or living in a cave? Apple split its stock 7 for 1, there was no plunge!
    11 Jun 2014, 06:44 AM Reply Like
  • locutus49
    , contributor
    Comments (1053) | Send Message
     
    Did you not see my smiley face? Jeez, you guys must be new to the internet. The protocol is that is you make a humorous comment, you must use an emoticon to indicate that. I did so.
    11 Jun 2014, 07:15 AM Reply Like
  • jjkiam
    , contributor
    Comments (390) | Send Message
     
    Will be interesting to see how this plays out!
    Perhaps they may realize that these kinds of tax avoidance methods, while legal, need to be revised going forward. One thing I feel very confident in is that Apple played by the rules. So let the EU look all it wants
    10 Jun 2014, 08:11 PM Reply Like
  • VictorHAustin
    , contributor
    Comments (826) | Send Message
     
    Another one. Tax is not avoided, it is deferred. And more of it ends up going to the US. Can these commenters even add or subtract?
    11 Jun 2014, 01:04 AM Reply Like
  • a alto
    , contributor
    Comments (221) | Send Message
     
    Damn shame U.S. Companies can't keep the money here because of a bunch of dumbass politicians .
    10 Jun 2014, 08:13 PM Reply Like
  • 1980XLS
    , contributor
    Comments (3333) | Send Message
     
    "I'm from the Government, and I'm here to help you"
    10 Jun 2014, 09:08 PM Reply Like
  • oneotherfool
    , contributor
    Comments (292) | Send Message
     
    Lol, 1980!
    10 Jun 2014, 10:39 PM Reply Like
  • hosstheboss
    , contributor
    Comments (17) | Send Message
     
    Why can't we just fix the tax laws in place of letting terrorist loose?
    10 Jun 2014, 09:29 PM Reply Like
  • Dr. Kris
    , contributor
    Comments (359) | Send Message
     
    So, Apple's building an ad team--the question is, what took them so long?
    10 Jun 2014, 10:14 PM Reply Like
  • Rich in NJ
    , contributor
    Comments (60) | Send Message
     
    I think it has understandably taken Tim Cook a while to fully internalize and then implement Steve Jobs' admonition to him:

     

    “Don’t try to guess what I would have done. Do what you think its best."

     

    We are seeing that with the dismissal fo Scott Forstall, the hiring of Angela Ahrendts, the Beats acquisition, opening up iOS 8 to third-party software, and now the ad team.
    10 Jun 2014, 11:02 PM Reply Like
  • i_am_seeker_2
    , contributor
    Comments (1292) | Send Message
     
    The reason many countries get by with a low corporate tax is that they have value added taxes that are much greater than sales taxes in the US (and are paid to the country, not municipalities). They also, for the most part, have much higher income taxes than in the US. As long as there are these asymmetries in tax codes, corporate entities will go to low tax areas. Not to mention those dodgy places that attract corporations or wealthy individuals by allowing them to establish "residency" with a POBox and a room somewhere in return for a small cut (e.g., Liechtenstein, Bahamas, Bermuda, Cayman Islands, etc.).

     

    Does everyone really want value added taxes and/ore higher income taxes? Tax consumption? Not saying that is necessarily wrong (as long food and medicine are exempted), and in fact, it may well be a more efficient way to collect taxes, although it would also mean that tax revenue would take a big hit during recessions if that is the primary means of revenue collection. There are always trade offs. It even happens between states within the US, as they compete to attract businesses with different tax breaks and business welfare, whoops, I mean "incentives."

     

    >>The Wall Street Journal in a study of 60 large U.S. companies found that they deposited $166 billion in offshore accounts in 2012, sheltering over 40% of their profits from U.S. taxes.[11] Similarly, Desai, Foley and Hines in the Journal of Public Economics found that: "in 1999, 59% of U.S. firms with significant foreign operations had affiliates in tax haven countries", although they did not define "significant" for this purpose.[23] In 2009, the Government Accountability Office (GAO) reported that 83 of the 100 largest U.S. publicly traded corporations and 63 of the 100 largest contractors for the U.S. federal government were maintaining subsidiaries in countries generally considered havens for avoiding taxes. The GAO did not review the companies' transactions to independently verify that the subsidiaries helped the companies reduce their tax burden, but said only that historically the purpose of such subsidiaries is to cut tax costs.[24]

     

    James Henry, former chief economist at consultants McKinsey & Company, in his report for the Tax Justice Network gives an indication of the amount of money that is sheltered by wealthy individuals in tax havens. The report estimated conservatively that a fortune of $21 trillion is stashed away in off-shore accounts with $9.8 trillion alone by the top tier—less than 100,000 people—who each own financial assets of $30 million or more. The report's author indicated that this hidden money results in a “huge” lost tax revenue—a "black hole" in the economy—and many countries would become creditors instead of being debtors if the money of their tax evaders would be taxed.[18][19][20]<...

     

    http://bit.ly/13nTQOz
    10 Jun 2014, 10:18 PM Reply Like
  • VictorHAustin
    , contributor
    Comments (826) | Send Message
     
    And why is the US entitled to taxes on products made in China and consumed in Europe, again? I think I missed that point. Is Europe entitled to taxes on products made in Mexico and sold in the US, then?
    11 Jun 2014, 01:07 AM Reply Like
  • Budavar
    , contributor
    Comments (1396) | Send Message
     
    US has one of the highest (if not the highest) corporate tax rates on the planet.
    A stupid, self-defeating policy.

     

    U.S. corporations are responsible to their U.S.(mostly) shareholders to do business efficiently. That means, among others, to minimize expenses, including taxes.

     

    The IRS presented AMZN with a $1.5 billion claim for "back-taxes" around 2012 =
    a claim vigorously opposed + as far as I know, still unresolved. It is also under severe pressure in the U.K. which claims AMZN is not paying its "fair share". As a result, AMZN's UK tax-bill was hiked by a reported 60% last year.

     

    U.K. activists are unconvinced + have called for a boycott of AMZN claiming that even that higher tax bill is a very low percentage of AMZN's profits derived from transactions with Brit citizens.

     

    My attention was drawn to Alibaba's recent tax-shelter move, undoubtedly in prep for its move into AMZN's backyard later this year. It acquired an interest in an entity leading into the a corporate friendly Singapore, if memory serves.

     

    The simple solution of reducing U.S. corporate tax rate to a much lower, competitive level, is up to politicians. Don't hold your breath but hopefully it will come to pass.
    10 Jun 2014, 10:25 PM Reply Like
  • locutus49
    , contributor
    Comments (1053) | Send Message
     
    That is factually incorrect.
    11 Jun 2014, 07:17 AM Reply Like
  • 2puttwo
    , contributor
    Comments (595) | Send Message
     
    1980XLS- you forgot- now bend over!
    10 Jun 2014, 10:38 PM Reply Like
  • rsbduff@gmail.com
    , contributor
    Comments (438) | Send Message
     
    Greed is Good?

     

    Those that cheat paying their U.S. taxes....by having a phoney "off shore" company...will find out that "If ten or fewer....U.S. citizens...own a foreign corporation," they will be taxed as a domestic corporation." (I lived in Grand Cayman...and never cheated on my taxes).

     

    "Played by the rules." is a phrase that all greedy wealthy people use to rationalize their cheating. There is nothing wrong with being wealthy...."Just shut-up and pay your taxes." The more time you spend cheating....the less time you spend making money.

     

    What a crock of bull....."higher taxes keep the economy down." Yah....there are many times that I tell my wife, "Honey....you know I would have done that deal, but because I only get to keep $650,000 out of a $million.....I'm not going to do it!" (Get a life.....Apple should "shut up and pay its taxes, while it avails itself of this great country).

     

    RSBDuff
    11 Jun 2014, 02:41 AM Reply Like
  • 1980XLS
    , contributor
    Comments (3333) | Send Message
     
    rsbduff,

     

    How could they have cheated while playing by the rules?

     

    If you don't like the rules change them.

     

    Period.

     

    You almost sound like one of those guys that made the rules.
    11 Jun 2014, 07:53 AM Reply Like
  • daugherty
    , contributor
    Comments (759) | Send Message
     
    AAPL is paying its taxes. Like all corporations, AAPL has a fiduciary duty to shareholders to maximize earnings, which in many cases means minimizing taxes within existing law. Congress draws the lines and AAPL colors within those lines. If the U.S. doesn't like the revenue results from existing tax policy, redraw the lines.
    11 Jun 2014, 08:53 AM Reply Like
  • dpw8248
    , contributor
    Comments (86) | Send Message
     
    Your argument ignores economic realities. Texas chooses to have a lower tax rate than California to attract residents and businesses into their state. No different than Ireland. Florida has a zero income tax because of its revenue from tourism. Eventually, the answer is going to migrate into taxes on consumption versus production.
    11 Jun 2014, 05:05 AM Reply Like
  • JMajoris
    , contributor
    Comments (1361) | Send Message
     
    Until someone breaks the law - leave them alone.

     

    This pretty much sums up their attitude:

     

    “We need to fight against aggressive tax planning,” Joaquin Almunia, the EU’s competition commissioner, said at a press conference in Brussels."
    11 Jun 2014, 08:03 AM Reply Like
  • lsk5689
    , contributor
    Comments (22) | Send Message
     
    Florida has a zero state income tax but it's property tax runs approx. 2.2% of assessed value, give or take, depending on the county. That's more than double the rate in Boston, MA.
    11 Jun 2014, 08:05 AM Reply Like
  • locutus49
    , contributor
    Comments (1053) | Send Message
     
    All states require revenue, although some get it one way, some another. Or some poor Southern states just remain poor.
    11 Jun 2014, 09:01 AM Reply Like
  • rsbduff@gmail.com
    , contributor
    Comments (438) | Send Message
     
    Another example?

     

    States that have no income tax are catering to the rich, who have the political power in al RED states. They typically ...tax food, ave high property taxes, and refuse to give healthcare to the poor. They cut funding to state universities, and push their students into large college loan debt. Many things to be proud of....so that the rich can avoid (legally) paying their fair share......

     

    RSBDuff
    11 Jun 2014, 09:05 AM Reply Like
  • locutus49
    , contributor
    Comments (1053) | Send Message
     
    Agree. Red states tend to be the poorest. And low-info voters tend to vote against their own economic and social interests. Many studies on this.
    11 Jun 2014, 10:23 AM Reply Like
  • rsbduff@gmail.com
    , contributor
    Comments (438) | Send Message
     
    Good point:
    States that have the lowest level of economic prosperity....are mostly RED. They promote low wage jobs for students who rank in the bottom of the country, and the rich that live their could care less about the average person.

     

    Look at the states that prosper.....Mass, CA. Washington....If everyone pays their fair share....and give a damn about the average person.....they prosper.

     

    RSBDuff
    11 Jun 2014, 12:38 PM Reply Like
  • Market DJ
    , contributor
    Comments (738) | Send Message
     
    States that have sales tax are also taxing the poor, and states that have no income tax cater to the rich.

     

    Unfortunately many states do both of these things, especially the poorer states.

     

    Probably just a coincidence though :)
    11 Jun 2014, 01:09 PM Reply Like
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