The FT has reported this morning that Apple raised $6.5 billion in new loan capital yesterday.
Apple did not, of course, need the money. It has well over $100 billion of cash held offshore. But that's the point: the money is offshore and so can't be used in the USA without tax being paid there. And so the world ends up with the absurd position that Apple said of its new loan, again according to the FT, that the funds would be used for:
general corporate purposes, including repurchases of our common stock and payment of dividends under our programme to return capital to shareholders, funding for working capital, capital expenditures and acquisitions and repayment of debt.
It's not the first time Apple has borrowed money for this purpose. It apparently bought back nearly $45bn in stock in the 12 months to December 2014, following $26bn of such purchases in the previous year and about $2bn in 2012. A significant part of his programme has been paid for by US borrowing precisely becuase it can't use its own money to pay shareholders as that would mean it was taxed.
Instead the absurd reality is that Apple can borrow in the US, and get US tax relief on interest paid, when the sole reason for the borrowing in that country is that it does not want to pay tax there on money it already has. In other words, the US taxpayer is now subsidising Apple's tax avoidance through tax relief given, and is in the process subsidising the accumulation of wealth by those who own Apple.
President Obama has proposed a new tax charge to tackle this issue. I commented on this yesterday. The FT has feed back on the same issue today. Their report can be summarised in one sentence:
Lobbyists argued the measures would damage the competitiveness of big companies.
No it wouldn't. It would damage the ability of large companies to play tax systems off against each other whilst claiming tax subsidies from states for which there is no justification barring reinforcement of their ability to ensure smaller business cannot compete with them.
It's time to get real here. And to remind those big business lobbyists that they are not supporting competition, fair or otherwise. They are supporting monopoly. It's tax justice that supports fair and open competition by opposing such abuses. The media should take note.
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As I’ve proposed previously Corporation tax needs to be scrapped as it’s “optional” for large international corporations/companies. Tax at the point of Activity/Sale is the only answer. In a competitive situation this is not a sales tax on the consumer as the provider/seller has to be competitive!
Apple is near to being a monopoly
Basing policy suggestions on facts helps
“Lobbyists argued the measures would damage the competitiveness of big companies”.
Irrespective of taxes and the public purse, the measures should help smaller companies who can’t obtain cheap loans, or afford tax avoidance schemes, to compete. So there is even a strong neo-liberal case for the change.
@Stephen Latham – and precisely therein lies the difference between neo-liberalism (an enacted philosophy, but mainly a methodology) and neo-feudalism (a whole world view, binding together conviction and praxis)
For a neo-liberal economist would almost certainly take your point, arguing from first principles.
A neo-feudalist, by contrast only uses ideas and theories as a means to an end, which end is hegemony – domination and the creation of monopoly conditions.
Time and again these big companies talk the talk of “competition” and “discipline of the market”, only for us to find these apply to their small competitors, but not to them, the “new Baronage”, who don’t have to submit to the same disciplines and requirements as “little people”, which term encompasses small businesses.
Apple is behaving like the prey revolutionary French aristocracy, asking special favours paid for by the sacrifice of others.
Indeed
Richard
Forgive my ignorance but if Apple has $100 billion plus stashed off shore but cannot use it because doing so would mean it would be taxed where can it spend/use it and for what?
It invests it in US Treasury bonds, amongst other things, because it has no use for it
“But that’s the point: the money is offshore and so can’t be used in the USA without tax being paid there.”
And that’s the problem: if there was free movement of capital then it could be put to productive uses.
EU countries can’t charge tax on incoming capital, and the reason it can’t is because the EU believes such a charge would be a deterrence to trade and investment. And they’re right.
There is free movement of capital
It does require that tax be paid
“Lobbyists argued the measures would damage the competitiveness of big companies”
I take this to mean that when they’re bidding for foreign business they can build into the business model an assumption that no US tax will ever be paid on the profits.
This aligns their model with, for example, a UK based group (or any country with a participation exemption regime) who also don’t have to build in tax on repatriation of profits into their model. So the US multinational can compete on the same playing field as the UK (et al). Whether that is the right level playing field is of course another matter.
So the only competitive advantage I can see is for justifying making profits outside the US – Which of course exacerbates the issue at hand.
Richard I am very upset to learn that my MP Chuka Umanna Shadow Business Secretary and high flyer for the Labour Party, is in bed with PWC. In fact his office is manned by staff from PWC! Any hope that if we get rid of the current government in favour of Labour then we might get further of tax justice reforms has just been crushed. How are we ever going to get any further on any real reforms?
If you have any inside info on him could you let me know please. I am now firmly campaigning for Jonathan Bartlett – Green Party who totally makes sense on his approach to the housing crisis and I think offers a real solution.
This PWC link worries me too…
I am sure you saw this back in November 2014 but there is so much corruption going on daily that it’s hard to keep up.
http://www.theguardian.com/politics/2014/nov/12/pricewaterhousecoopers-tax-structures-politics-influence
This has happened for a long time