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Apple sold $4.2 billion of product in New Zealand, paid $0 local taxes

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S

Seth Enosh

Member
ReplacementPelican said:
What do you think is the problem? Do you think Australia and New Zealand are the same country?
Click to expand...

Heh, seems like 15 people responded with the same post as yours. ThisisNeoGAF.gif?

NZ and Australia made a treaty where companies pay money to the country they are based in. If Apple was based on NZ and shipped products to Australia, they'd be paying all their taxes to NZ. Since it's the other way around, they pay all their taxes to Australia (at a slightly higher rate, even). I don't see an issue here and the idea it's some sort of "moral" failure of Apple as peddled by the article is laughable.

It's the same law that applies to other companies too and you can bet no one is paying double taxes, it's a very unusual situation in any tax law where you'd be double taxed on your income. For instance if an individual lives in one state in the USA and works in another and both states have income tax, they can exempt their taxes in one state from being paid to the other state rather than paying both states' income tax. Seems like a very normal and unremarkable arrangement.
 
S

Syriel

Member
mdubs said:
Feel free to express that to the lawmakers in New Zealand so they can stop Apple from getting away with it. I think we all agree we want Apple to pay taxes.

But, we don't just sit here saying "gee Apple, you should deposit a big bag of money to New Zealand because reasons". New Zealand's government has the impetus of setting up a statutory framework to capture Apple's income to get it taxed.
Click to expand...

What would you propose that NZ do?

Ban all Apple products from the country unless Apple opens up a retail presence?
 
M

mdubs

Banned
Syriel said:
What would you propose that NZ do?

Ban all Apple products from the country unless Apple opens up a retail presence?
Click to expand...

Higher surcharge on importation of Apple products into the country, changing their treaty with Australia, etc. Those are some possibilities. Obviously that would antagonize Apple, but that's a cost-benefit analysis they have to weigh in creating their tax system and the associated loopholes they allow.
 
D

djkimothy

Member
mdubs said:
Higher surcharge on importation of Apple products into the country, changing their treaty with Australia, etc. Those are some possibilities. Obviously that would antagonize Apple, but that's a cost-benefit analysis they have to weigh in creating their tax system and the associated loopholes they allow.
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That'll go well with the locals...

this has nothing to do with apple as a company but the tax structure of New Zealand and their arraignment with Australia.
 
M

Mario

Sidhe / PikPok
As a New Zealander and a business owner, this article (and the original Herald article) are stupid.

Apple is paying the local sales tax. But why should they pay any income tax if their operation is based overseas? The tax agreement with Australia doesn't even really come into it.

As a New Zealand company, we sell our products to over 200 countries around the world. We pay sales tax where relevant. But the only place we pay income tax is in New Zealand.
 
N

numble

Member
mdubs said:
Higher surcharge on importation of Apple products into the country, changing their treaty with Australia, etc. Those are some possibilities. Obviously that would antagonize Apple, but that's a cost-benefit analysis they have to weigh in creating their tax system and the associated loopholes they allow.
Click to expand...
Any duties or GST on import are the tax liability of the importer. That's not even counted in this article, which is about income tax.

Even if the tax treaty was changed, there likely would be no basis to impose income tax on Apple. You would need a fundamental overhaul of the international tax system if you want to impose income tax for simply selling into a country. For all those New Zealand farmers that export milk and beef to China, you would also require them to start filing Chinese income taxes.
 
HoodWinked

HoodWinked

Member
honestly seems more like a failure on NZ part for creating a tax structure or arrangement that could be circumvented. even then looks like they're still paying taxes on it which the headline omits to sensationalize it.
 
N

numble

Member
Trojita said:
If it's not a problem why is a clampdown being mentioned in NZ for companies that profit within the country but pay a low amount of tax?

https://www.tvnz.co.nz/one-news/new-zealand/nz-tax-clampdown-coming-giants-like-facebook-google
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This article is for Internet companies that make money from ads, which is unrelated to the income made from Apple's sale of goods. Even Apple's iTunes and iCloud sales are already subject to GST in New Zealand.

The analogy is NeoGAF LLC not paying income taxes in New York or the EU even though a lot of Neogaf users are there and generate ad revenue for NeoGAF LLC.
 
Audioboxer

Audioboxer

Member
That is pretty disgusting and insanely immoral, but no doubt legal. Issue does sit in the country and government. As always the government's pander to the big money corporations.

Of course, it's the hard working lower and middle class, often minimum wage workers who have to pay their taxes to try and prop up and run the country.
 
H

Hephaestus

Member
What loop holes is apple exploiting? Did they lie or hide assets?

How much tax did they avoid? How much Tax are other business that dont have a presence in New Zealand paying?
 
T

TheSecondSpitter

Member
Hephaestus said:
What loop holes is apple exploiting? Did they lie or hide assets?

How much tax did they avoid? How much Tax are other business that dont have a presence in New Zealand paying?
Click to expand...

  • Probably benefiting from the Australia-Singapore Tax treaty since that's where most of Apple's Australian income goes.
  • It previously went to Apple Ireland because it was/is the economic owner of all of Apple's IP.
  • The Irish Apple entity previously had no tax residency anywhere in the world, because under Irish tax law it was an US resident company and under US tax law it was an Irish resident company.This has changed how.
  • Then from Apple Ireland it went to Apple Netherlands untaxed as result of the EU Parent-Subsidiary Directive.
  • The Dutch entity paid a dividend to Apple Treasury entity in the Cayman Islands or Bermuda also untaxed because the Netherlands doesn't levy withholding tax on dividends.
  • The Apple Treasury entity literally hoards most of its cash, a small percentage is repatriated to the US only because it is captured by CFC rules. However a small percentage of a lot of money is still a lot of money.

On the NZ issue.....Apple has literal zero exposure in NZ. This is their argument as pithy as it is. Kiwi's buying Apple products online are transacting with the Singapore or Apple Australia. The marketing functions for NZ are being performed in Australia. Warranty risk is borne by Apple Singapore.
 
M

medrew

Member
Mario said:
As a New Zealander and a business owner, this article (and the original Herald article) are stupid.

Apple is paying the local sales tax. But why should they pay any income tax if their operation is based overseas? The tax agreement with Australia doesn't even really come into it.

As a New Zealand company, we sell our products to over 200 countries around the world. We pay sales tax where relevant. But the only place we pay income tax is in New Zealand.
Click to expand...

I don't disagree. But what sales tax does apple pay? Perhaps on the apple store they oncharge the gst aspect which is an end user tax not a company tax (like Netflix is required to with the law changes) but in some sense that could trigger the requirement for income tax, I.e. apple has permanent establishment in NZ that then triggers declaring financial accounts to the ird being subject to income tax (which is where they probably get around it with the Australian entity).

The critical thing is around permanent establishment, which I am guessing you do not have in other markets.
 
M

mrklaw

MrArseFace
$4bn sounds like a lot of revenue for NZ - even if its NZ dollars. If that's correct then I think the bigger issue isn't where the tax is laid, it's how much is paid

Apple already has some of the highest margins on products out there. Yet they still feel the need to constantly avoid paying normal taxes against revenue/profits to increase that margin even further. If they were forced to pay normal tax would they put their prices up even more?


I find it hugely hypocritical when Apple talks loudly about environmentally sound production, protecting our privacy etc - yet they're doing this all over the world. I'm really surprised it hasn't created a massive backlash yet.
 
godhandiscen

godhandiscen

There are millions of whiny 5-year olds on Earth, and I AM THEIR KING.
N

numble

Member
medrew said:
I don't disagree. But what sales tax does apple pay? Perhaps on the apple store they oncharge the gst aspect which is an end user tax not a company tax (like Netflix is required to with the law changes) but in some sense that could trigger the requirement for income tax, I.e. apple has permanent establishment in NZ that then triggers declaring financial accounts to the ird being subject to income tax (which is where they probably get around it with the Australian entity).

The critical thing is around permanent establishment, which I am guessing you do not have in other markets.
Click to expand...

Collecting GST does not trigger a permanent establishment. Take a look at what a permanent establishment requires in the Australia-New Zealand Tax Treaty--in New Zealand, iTunes is provided by Apple Pty Limited, an Australian company.
 
Zok310

Zok310

Banned
Yeah, and no politician on the planet have the balls to fix it. In 100 years you will still have this problem.
 
T

TheSecondSpitter

Member
medrew said:
I don't disagree. But what sales tax does apple pay? Perhaps on the apple store they oncharge the gst aspect which is an end user tax not a company tax (like Netflix is required to with the law changes) but in some sense that could trigger the requirement for income tax, I.e. apple has permanent establishment in NZ that then triggers declaring financial accounts to the ird being subject to income tax (which is where they probably get around it with the Australian entity).

The critical thing is around permanent establishment, which I am guessing you do not have in other markets.
Click to expand...

It's a transfer pricing issue NOT a PE issue.
 
old

old

Member
Just because the law allows it doesn't make it right. The laws should be changed. Defending this exploitation of bought-and-paid-for loopholes is ridiculous.
 
K

KHarvey16

Member
old said:
Just because the law allows it doesn't make it right. The laws should be changed. Defending this exploitation of bought-and-paid-for loopholes is ridiculous.
Click to expand...

There is no loophole being exploited here. Apple has no retail presence in New Zealand.
 
T

TheSecondSpitter

Member
old said:
Just because the law allows it doesn't make it right. The laws should be changed. Defending this exploitation of bought-and-paid-for loopholes is ridiculous.
Click to expand...

The OECD BEPS project aims to address this. However, after Apple was exposed in Senate hearings in the UK, the US and Australia, they have decided to stop cooperating with tax authorities.
 
N

numble

Member
TheSecondSpitter said:
It's a transfer pricing issue NOT a PE issue.
Click to expand...

TheSecondSpitter said:
OECD BEPS projects aims to address this. However, after Apple was exposed in Senate hearings in the UK, the US and Australia, they have decided to stop cooperating with tax authorities.
Click to expand...
It is not a transfer pricing issue. Transfer pricing issue would mean that Apple Australia is selling to Apple New Zealand at a price that does not enable Apple New Zealand to earn a profit. That is not the case here. The OECD BEPS Project also has nothing that would address this issue.
 
T

TheSecondSpitter

Member
KHarvey16 said:
How does that mean Apple has stores in New Zealand?
Click to expand...

Their brand is an asset. The global value of their asset increases from marketing activities in NZ. If Apple had no retail presence in NZ, then it would not conduct marketing activities in NZ. Ditto goodwill and going concern, ditto NZ customer lists, etc. All these things are intangible assets located in NZ.


numble said:
It is not a transfer pricing issue. Transfer pricing issue would mean that Apple Australia is selling to Apple New Zealand at a price that does not enable Apple New Zealand to earn a profit. That is not the case here. The OECD BEPS Project also has nothing that would address this issue.
Click to expand...
Yes, it is. These are the list of intangible assets Apple owns in NZ:
* The Apple Brand in NZ
* Goodwill in NZ
* NZ customer lists,
 
K

KHarvey16

Member
TheSecondSpitter said:
Their brand is an asset. The global value of their asset increases from marketing activities in NZ. If Apple had no retail presence in NZ, then it would not conduct marketing activities in NZ. Ditto goodwill and going concern, ditto NZ customer lists, etc. All these things are intangible assets located in NZ.
Click to expand...

Huh? Apple has no stores in New Zealand. They sell products to third party retailers. Why would they pay local income tax on those sales?
 
N

numble

Member
TheSecondSpitter said:
Their brand is an asset. The global value of their asset increases from marketing activities in NZ. If Apple had no retail presence in NZ, then it would not conduct marketing activities in NZ. Ditto goodwill and going concern, ditto NZ customer lists, etc. All these things are intangible assets located in NZ.
Click to expand...
A customer located in New Zealand does not mean a customer list located in New Zealand. Ditto goodwill and going concern. Anyway, there are no issues in this article being raised regarding lack of proper transfer pricing for these intangibles. The New Zealand business belongs to an Australian tax resident entity, and it is taxed accordingly on its profits from the New Zealand business in Australia.
 
S

Syriel

Member
TheSecondSpitter said:
Their brand is an asset. The global value of their asset increases from marketing activities in NZ. If Apple had no retail presence in NZ, then it would not conduct marketing activities in NZ. Ditto goodwill and going concern, ditto NZ customer lists, etc. All these things are intangible assets located in NZ.
Click to expand...


By this logic, EviLore is an evil tax evader because GAF doesn't pay income taxes in NZ.
 
?

____

Member
tedtropy said:
8AnQoqr.gif
Click to expand...

Came to post this.

Thanks for handling that.
 
T

TheSecondSpitter

Member
KHarvey16 said:
Huh? Apple has no stores in New Zealand. They sell products to third party retailers. Why would they pay local income tax on those sales?
Click to expand...
Huh?

Just because they have no stores doesn't mean that they do not have a presence in NZ. I would provide you with a citation, but I know you will not read it.

NZer's are increasing the global value of the Apple brand. THIS IS PROBABLY THE MOST VALUABLE INDIVIDUAL THING IN APPLE, INC. These NZers earn their income in NZ.
 
K

KHarvey16

Member
TheSecondSpitter said:
Huh?

Just because they have no stores doesn't mean that they do not have a presence in NZ. I would provide you with a citation, but I know you will not read it.

NZer's are increasing the global value of the Apple brand. THIS IS PROBABLY THE MOST VALUABLE INDIVIDUAL THING IN APPLE, INC. These NZers earn their income in NZ.
Click to expand...

You aren't making sense. How is what you're describing taxed? What forms do they fill out?
 
T

TheSecondSpitter

Member
numble said:
A customer located in New Zealand does not mean a customer list located in New Zealand. Ditto goodwill and going concern. Anyway, there are no issues in this article being raised regarding lack of proper transfer pricing for these intangibles. The New Zealand business belongs to an Australian tax resident entity, and it is taxed accordingly on its profits from the New Zealand business in Australia.
Click to expand...

You are incorrect.
http://www.keepeek.com/Digital-Asse...l-reports_9789264241244-en#.WNNlMG-GOHs#page1
 
dragonfart28

dragonfart28

Banned
Stuff like this is always on the government to fix.

It's the Chinese government's fault that Foxconn operates the way that it does, not Apple's
 
T

TheSecondSpitter

Member
KHarvey16 said:
You aren't making sense. How is what you're describing taxed? What forms do they fill out?
Click to expand...

The economic ownership of the brand is in either Apple Singapore or Apple Ireland. (Legal ownership is with Apple US but this is irrelevant for present purposes.) Follow the trail I outlined several posts up.
 
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