Of course taxes make a big difference, what Ireland was doing was not quite kosher so to speak, Apple has a big tax bill owed to Ireland as the EU forces Ireland to collect more taxes from Apple says to me things were not quite right.
The Netherlands also has/had a few quirks on taxes with music royalties and international revenue that have many musicians registering their music there, perhaps even why Booking dot com is registered there.
My understanding about how taxes worked with Apple are over simplified but were something like this.
1 Apple makes a phone in China for $100
2. Sells it to their Irish company for $150 (pays taxes to China on $50)
3. Sells the phone to their US arm for $800, pays virtually zero tax to Ireland
4. US sells phone to dealer for $900 and pays tax on $100 profit
Ireland's government has been told it needs to collect €14bn (£11.8bn) in back taxes from Apple. The EU's highest court ruled that the US technology firm had benefited from an illegal sweetheart tax deal in the country.20 hours ago
I am a tax lawyer. The details are a bit different, but I am not sure the difference matters.
US company (Apple) has all sorts of intellectual property. Some promising intellectual property get moved to "Irish sub" (more on that later). US tax laws (Sub F) provide locals must work on developing and marketing intellectual property or income from such property is attributed to US parent. Apple in addition to moving intellectual property hires a bunch of people in Ireland to further develop and market property (as you can hire a bunch of smart english speaking people in Ireland). Added benefit, Ireland being part of EU gets access to EU market for products.
Apple set up Bermuda company with zero tax rate. It would own an Irish company which would employ the people and own the intellectual property.
Foxcom would make the I Phone in China. For use of the intellectual property owned by the Irish company it would pay a large % of the profits to be made to Apple Ireland. Apple Ireland would be allowed to pay the money to the Bermuda parent without paying tax. So It cost Foxcom $50 to make phone. It paid $600 to Apple Ireland. It then sold the phone to Apple US for $650, who sold it to phone company for $700. So $50 gets taxed in US.
Ireland was fine with zero taxes being paid by Apple Ireland as they employed tons of people in Ireland and paid very high wages (as did Google, Facebook, Microsoft, and most of the other tech companies) .
The US rules have changed so this gig doesn't work anymore.
Assuming as mentioned the rules have changed, the jobs in Ireland are disappearing or gone, so it looks like the EU thinks they can change the rules and get a bunch of money from Apple..
BTW Mike, your previous comments on CIBC and options were intriguing to me, I dont do much with options but surprised how low option premiums are. I looked into your comments on BMO and took a position on some BMO options as I like the cdn backs especially with interest rate reduction, Ive also been increasing my REIT positions... BMO has had a nice move in the last week since your post...
Ive looked at writing some options on the options but right now the premiums dont make it worth my while...
Of course taxes make a big difference, what Ireland was doing was not quite kosher so to speak, Apple has a big tax bill owed to Ireland as the EU forces Ireland to collect more taxes from Apple says to me things were not quite right.
The Netherlands also has/had a few quirks on taxes with music royalties and international revenue that have many musicians registering their music there, perhaps even why Booking dot com is registered there.
My understanding about how taxes worked with Apple are over simplified but were something like this.
1 Apple makes a phone in China for $100
2. Sells it to their Irish company for $150 (pays taxes to China on $50)
3. Sells the phone to their US arm for $800, pays virtually zero tax to Ireland
4. US sells phone to dealer for $900 and pays tax on $100 profit
Ireland's government has been told it needs to collect €14bn (£11.8bn) in back taxes from Apple. The EU's highest court ruled that the US technology firm had benefited from an illegal sweetheart tax deal in the country.20 hours ago
This was posted by a tax lawyer I Interac with…
I am a tax lawyer. The details are a bit different, but I am not sure the difference matters.
US company (Apple) has all sorts of intellectual property. Some promising intellectual property get moved to "Irish sub" (more on that later). US tax laws (Sub F) provide locals must work on developing and marketing intellectual property or income from such property is attributed to US parent. Apple in addition to moving intellectual property hires a bunch of people in Ireland to further develop and market property (as you can hire a bunch of smart english speaking people in Ireland). Added benefit, Ireland being part of EU gets access to EU market for products.
Apple set up Bermuda company with zero tax rate. It would own an Irish company which would employ the people and own the intellectual property.
Foxcom would make the I Phone in China. For use of the intellectual property owned by the Irish company it would pay a large % of the profits to be made to Apple Ireland. Apple Ireland would be allowed to pay the money to the Bermuda parent without paying tax. So It cost Foxcom $50 to make phone. It paid $600 to Apple Ireland. It then sold the phone to Apple US for $650, who sold it to phone company for $700. So $50 gets taxed in US.
Ireland was fine with zero taxes being paid by Apple Ireland as they employed tons of people in Ireland and paid very high wages (as did Google, Facebook, Microsoft, and most of the other tech companies) .
The US rules have changed so this gig doesn't work anymore.
Assuming as mentioned the rules have changed, the jobs in Ireland are disappearing or gone, so it looks like the EU thinks they can change the rules and get a bunch of money from Apple..
BTW Mike, your previous comments on CIBC and options were intriguing to me, I dont do much with options but surprised how low option premiums are. I looked into your comments on BMO and took a position on some BMO options as I like the cdn backs especially with interest rate reduction, Ive also been increasing my REIT positions... BMO has had a nice move in the last week since your post...
Ive looked at writing some options on the options but right now the premiums dont make it worth my while...