<story><title>How Apple Sidesteps Billions in Taxes</title><url>http://www.nytimes.com/2012/04/29/business/apples-tax-strategy-aims-at-low-tax-states-and-nations.html?hp</url></story><parent_chain><item><author>grellas</author><text>The implied but never fully-articulated point of this article is that high-tax domiciles resent it when rational actors having a choice in the matter will routinely structure their business affairs to incur tax to the maximum extent possible in low-tax as opposed to high-tax domiciles.&lt;p&gt;The issue becomes almost formulaic. Given (1) rational actors, (2) freedom to choose and to structure business affairs using a multiplicity of entities for different purposes, (3) resources with which to hire and pay for the talent needed to sort out the tax issues and their complexities, (4) a business goal of maximizing after-tax profits, (5) a multiplicity of domiciles from which to choose, and (6) a ready means by which to direct resources from one domicile to another (as with digital assets), it inevitably follows that every sophisticated company meeting these criteria will avail itself of the tax avoidance/minimization strategies. As the article notes, it is perfectly legal and every big company does it (see, e.g., this similar write-up from a couple of years ago on Google&apos;s comparable tax strategies: &lt;a href=&quot;http://news.ycombinator.com/item?id=1815195&quot; rel=&quot;nofollow&quot;&gt;http://news.ycombinator.com/item?id=1815195&lt;/a&gt;).&lt;p&gt;Nothing, of course, stops a given company from voluntarily subjecting itself to higher tax rates by declining to follow this formula but why would it? Big companies will routinely want to avoid high taxes if they can. So too do small businesses. People may have social views that higher taxes are desirable but, as individual economic actors, they will seek to avoid them. This may be right or wrong but it is reality.&lt;p&gt;This means that high-tax domiciles will have no choice but to continue to remain frustrated that they cannot have unchecked means of taxing their citizens. As long as people have freedom, governments have to strike a balance that people can live with. And that is not a bad thing.</text></item></parent_chain><comment><author>_delirium</author><text>What&apos;s annoying to me is not that companies choose jurisdictions based on taxes, but that they get away with playing shell games to &lt;i&gt;fake&lt;/i&gt; moving between jurisdictions entirely on paper, which also gives them an advantage over smaller companies and individuals that can&apos;t do that.&lt;p&gt;I lived in California for some years. If it were possible for me to open a P.O. box (or even rent a small office) in Reno, book all my non-California-sourced income (e.g. AdSense) to the Reno P.O. box, and avoid California taxes, maybe I would&apos;ve. But that&apos;s not legal; my attempt to produce a fake domicile in Nevada for tax purposes when I clearly lived ~11 months of the year in California would be correctly judged a sham. If I wanted to claim I&apos;d moved to Reno for tax purposes, I&apos;d have to &lt;i&gt;actually&lt;/i&gt; move to Reno in real life, too. Yet Apple can do effectively do that, opening a sham office where no work is done, solely to dodge taxes, because the rules for individuals when it comes to those kinds of fake domiciles are much stricter than the rules for corporations are.&lt;p&gt;If Apple actually moved its main operations and employees from Cupertino to Reno for tax reasons, that would be another matter entirely, and a more honest example of jurisdictional competition.</text></comment>
<story><title>How Apple Sidesteps Billions in Taxes</title><url>http://www.nytimes.com/2012/04/29/business/apples-tax-strategy-aims-at-low-tax-states-and-nations.html?hp</url></story><parent_chain><item><author>grellas</author><text>The implied but never fully-articulated point of this article is that high-tax domiciles resent it when rational actors having a choice in the matter will routinely structure their business affairs to incur tax to the maximum extent possible in low-tax as opposed to high-tax domiciles.&lt;p&gt;The issue becomes almost formulaic. Given (1) rational actors, (2) freedom to choose and to structure business affairs using a multiplicity of entities for different purposes, (3) resources with which to hire and pay for the talent needed to sort out the tax issues and their complexities, (4) a business goal of maximizing after-tax profits, (5) a multiplicity of domiciles from which to choose, and (6) a ready means by which to direct resources from one domicile to another (as with digital assets), it inevitably follows that every sophisticated company meeting these criteria will avail itself of the tax avoidance/minimization strategies. As the article notes, it is perfectly legal and every big company does it (see, e.g., this similar write-up from a couple of years ago on Google&apos;s comparable tax strategies: &lt;a href=&quot;http://news.ycombinator.com/item?id=1815195&quot; rel=&quot;nofollow&quot;&gt;http://news.ycombinator.com/item?id=1815195&lt;/a&gt;).&lt;p&gt;Nothing, of course, stops a given company from voluntarily subjecting itself to higher tax rates by declining to follow this formula but why would it? Big companies will routinely want to avoid high taxes if they can. So too do small businesses. People may have social views that higher taxes are desirable but, as individual economic actors, they will seek to avoid them. This may be right or wrong but it is reality.&lt;p&gt;This means that high-tax domiciles will have no choice but to continue to remain frustrated that they cannot have unchecked means of taxing their citizens. As long as people have freedom, governments have to strike a balance that people can live with. And that is not a bad thing.</text></item></parent_chain><comment><author>timr</author><text>&lt;i&gt;&quot;The implied but never fully-articulated point of this article is that high-tax domiciles resent it when rational actors having a choice in the matter will routinely structure their business affairs to incur tax to the maximum extent possible in low-tax as opposed to high-tax domiciles.&quot;&lt;/i&gt;&lt;p&gt;No, that&apos;s the conclusion you might draw if you choose to read the article through an extremely narrow filter where you start from the premise that the laws, as they stand, are sufficient and reasonable.&lt;p&gt;If, instead, you look at the situation and wonder at the &lt;i&gt;utter inefficiency&lt;/i&gt; of a tax system that allows some (but not all) corporations to move profits around on paper to avoid taxation -- but only if they spend money on creating fake offices and legal castles in the sky that don&apos;t contribute to productivity -- then you start to wonder if perhaps the situation can be changed.  And that&apos;s an interesting discussion.</text></comment>