“Apple’s got some $100 billion in such profits parked offshore and the shareholders, who do after all really own this money, would like some of it. The problem is that the US corporate income tax is 35%, those offshore profits have only paid perhaps 3 or 4% in tax so far, so 30 odd % will be demanded by the taxman if they’re taken back into the US to be sent out as a dividend,” Tim Worstall writes for The Adam Smith Institute. “So, instead, Apple borrows money in the US and pays that out as a dividend.”
“Hurrah!” Worstall shouts.
“Which brings us to the usual complaint but, well, companies should pay tax on their profits. So why am I cheering someone avoiding doing that? The answer there being tax incidence. It never is a company that bears the economic burden of a tax: it’s some combination of shareholders, customers and or the workers,” Worstall writes. “So given that we’re not actually taxing the companies why is it that we send the tax bill to the company? Simply because it is convenient to do so. There is no economic reason at all to tax company profits.”
“Which is why I applaud Apple’s plan,” Worstall writes. “Given that the only reason we do tax companies is convenience, if it’s no longer convenient then perhaps we should stop doing it? Simply abolish corporation tax altogether. Make income taxes on dividends and other returns from investment the same as they are from any other source of income. There, job done. And hundreds of thousands of accountants and lawyers will have to go do something productive for a living. Shame, eh?”
Read more in the full article here.
Related articles:
Apple, corporate taxes, and The New York Slimes – May 2, 2013
Apple avoids potential $9 billion U.S. tax bill – May 2, 2013
Debt-free Apple to take on debt to avoid huge U.S. repatriation tax hit – April 26, 2013
Apple’s massive $100 billion capital return program is a perfect tax arbitrage – April 26, 2013
Apple to tap a hungry debt market; strong demand likely from investors eager to get cash off sidelines – April 25, 2013
Debt-free Apple plans to borrow to finance massive capital-return program – April 23, 2013
Apple beats Street on EPS and revenue; ups quarterly dividend by 15%; ups buybacks to $60 billion – April 23, 2013
Apple paid $6 billion in U.S. federal income taxes, 1/40th of all corporate income taxes collected by U.S. government in 2012 – January 5, 2013
Google, Apple, eBay shouldn’t pay taxes – people should pay taxes – November 25, 2012
So how much did Apple really pay in taxes? – November 1, 2012
Apple’s showdown with the U.S. government over taxes on offshore cash – July 13, 2012
Apple‘s $74 billion tops list of U.S. tech companies’ overseas cash – July 9, 2012
Apple’s dividend move puts spotlight on foreign cash holdings, repatriation tax reform – March 20, 2012
Apple: Good start; and what about the overseas cash? – March 19, 2012
Apple’s foreign cash hoard piles up: $54 billion and rapidly growing – January 11, 2012
Senator John McCain eyes Apple’s $54 billion overseas cash pile – November 3, 2011
Google joins Apple in push for U.S. repatriation tax holiday – October 3, 2011
Apple lobbies Obama for tax holiday, wants to bring overseas bounty home – August 24, 2011
U.S Senate Democrat Schumer allies with Apple, other multinationals on repatriation tax talks – June 21, 2011
U.S. companies push for tax break on foreign cash – June 20, 2011
Apple, Oracle, Duke Energy, others organize lobbying blitz for tax holiday – February 17, 2011