Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Friday, November 11, 2016

Apple's Profit Reporting A ‘Fraud,' Nobel Laureate Joseph Stiglitz Says

Nobel Prize-winning economist Joseph Stiglitz has called Apple’s profits a “fraud,” blaming weak U.S. laws for allowing the company to shift its tax burden to low-tax Ireland.

“Here we have the largest corporation in capitalization not only in America, but in the world, bigger than GM was at its peak, and claiming that most of its profits originate from about a few hundred people working in Ireland — that’s a fraud,” Stiglitz, a former head of the World Bank and an advisor to the Hillary Clinton presidential campaign, told Bloomberg TV this week.

“A tax law that encourages American firms to keep jobs abroad is wrong, and I think we can get a consensus in America to get that changed.”

Apple has been engaged in a practice known as “transfer pricing,” which works like this:

A company sets up a division in a low-tax jurisdiction like Ireland. Then that division charges all the other divisions of the company for some service or good it provides (in Apple’s case, intellectual property rights), and the cost of those charges just happen to eat up the profit margin of all the other divisions.

Thus profits are transferred to the Irish division, to be taxed at a low rate, while the divisions in the rest of the world pay no tax on their profits.

“The transfer-pricing system ... allows them not only to keep their money abroad but, effectively, to escape taxation,” Stiglitz said.

By employment, Apple’s Irish office is its second-largest in Europe, with 5,500 employees. It employs 6,500 people in the U.K., 2,400 in France and 2,200 in Germany.

Apple is by no means the only company shifting profits to Ireland. Facebook disclosed this week it could be on the hook for a US$3 billion to US$5 billion tax penalty over its shifting of profits to its Irish subsidiary. Among tech companies, Hewlett-Packard and Microsoft have also been criticized for their tax avoidance strategies.

Ireland has a 12.5-per-cent corporate tax rate — much lower than the U.S. 35-per-cent tax rate — and one of the lowest rates in the world. Some observers have accused Ireland of trying to set itself up as a tax haven.

If that’s the case, it’s working: Ireland’s economy grew by an improbable 26.3 per cent over the past year, most of that generated by companies shifting money to the country.

Besides transfer pricing, companies are also engaging in “tax inversions” — buying an Irish firm, then making it the new headquarters, effectively shifting its tax burden there.

The Obama administration launched a crackdown on tax inversions earlier this year, and it seems to be having an effect: Drug giant Pfizer shelved plans to move to Ireland, a maneuver that would have saved it US$35 billion in taxes.

Apple has been unapologetic about its tax practices in the past, with CEO Tim Cook arguing before Congress that “we pay all the taxes that we owe.”

Still, Cook has said his company would back U.S. corporate tax reform, even though it could mean a higher tax bill.

Original Article
Author: Daniel Tencer

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