Tuesday, August 30, 2016

Apple Computer: EU / Ireland Taxation and Jobs in 2016

European Commission orders Apple to Pay €13 billion ($14.5 billion) in back taxes

This is certainly one of the bigger financial news stories today.  And, Apple's official response to this EU judgement is rather predictable.  As Business Insider (BI) reports:
"Apple's official statement on the EU ruling against its Irish tax arrangements tells you all you need to know about what is at stake: You can have taxes, or you can have jobs, but Apple is in no mood to deliver both."
Really?,.. can Ireland, or any other jurisdiction, truly choose between jobs and taxes?
If so, let's do the math and make the right choice: take the TAXES!

Jobs or Taxes: Taxes Win!

According to that same BI article:
"In the 15 years since [the 1991 tax deal with Ireland], Apple has created thousands of jobs in Ireland. By 2015 it had 5,000 employees in the country [Ireland]."
OK, now the math, people:
What is $14.5 Billion divided by the number of current employees [i.e., apparently circa 5,000 employees] (never mind the fact that Apple didn't carry this many employees for the entirety of the 15 years in question) divided by that 15 years?  Well, it is a staggering $193,330 Dollars [173,333 Euros] per employee per year for 15 years, and again, this assumes that same headcount for all that time, which was not truly the case.

So, forget the jobs and take the taxes! According to 2014 statistics, the average Irish worker only earned 34,465.85 Euros per year.  The Irish government could apply the €13 billion in taxes levied upon Apple toward, essentially, full career-length payouts to each and every one of those 5,000 current Apple workers, as this is enough money to pay each current worker nearly 87,000 Euros per year for the next 30 years!

The numbers are simply staggering!  Sure, you can argue that the periphery businesses built up around the Apple offices and such wouldn't get the same amount of business, but then again, with those 5,000 people having an income that is well over double the average annual Irish wage, they would have a lot of money to spend on all sorts of things. Periphery businesses, around larger business, make quite a bit of their revenue from what employees spend, and these employees would still have a lot of income to spend, though perhaps not in the exact same neighborhoods.  As for any effect of building offices / facilities, well, those same people are probably likely to build homes and/or start businesses of their own (at least, the ones that don't simply want to do nothing for 30 years), and Ireland has a housing shortage currently too.

Update: I just decided that it may be easier for people to understand the magnitude of this Irish Apple computer company tax if I were to show how much tax €13 billion is if it were spread equally among every man, woman, and child in Ireland: it is still huge!  Ireland's population is approximately 6.4 million persons.  So, the math is quite easy, and it works out to just over €2,000 for each and every Irish Citizen... so a family of 4 would get €8000 in direct benefit from this proposed Apple tax settlement if it were simply distributed to the citizens equally.  That is extraordinary, and really demonstrates the size of the settlement, and how much tax has been saved, by Apple, at the apparent cost of the average citizen over the past decade or more.

US Tax Policy to Blame

The bottom line is: this type of tax situation exists for the simple reason that the United States government, for the simple fact that it is owned by and beholden to corporations and wealthy elites that can abuse existing tax law through shell companies and the like, refuses to simply implement a corporate tax on foreign-earned income that is instantly accrued and owed just like domestically-earned taxes are.  I.e., the USA needs to get rid of this ridiculous offshore zero-tax perpetual "holding-ground" for US Corporation profits.

As a United States individual, you cannot simply park your earnings overseas and not pay taxes!  In fact, it is the extreme opposite.  Thanks to legislation like FATCA, you are instead burdened by extraordinary reporting requirements on any foreign income, and failure by an individual to declare their income and/or pay taxes upon any income recognized from offshore holdings/investments during a calendar year will lead to truly massive penalties and fines in addition to the tax owed.  So, why have corporations, and individuals that are able to use corporations and partnerships and the like to hold massive portions of their wealth overseas, been able to get such preferential treatment whereby their income is not taxable until they physically move it back into the Unites States?

Therein lies the obvious problem and the obvious reason that was already illuminated earlier: the US government tax-policy has been hijacked by powerful multinationals and ultra-wealthy individuals.

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