Friday, September 2, 2016

Governments Begin Worldwide Fight for Taxes

It all started with an apple falling from the tree that gave Sir Isaac Newton the idea of gravity.  At first he was vilified by other researchers and officials.  Only to be recognized for his thoughts and achievements later on.

Time Cook the CEO of Apple has found himself precariously in the same position as Sir Isaac Newton.  He finds himself vilified for not wanting to pay taxes that he believes the company does not owe. This week the European Union deemed that Apple owed them nearly $14 billion due to unfair tax agreements with Ireland.  Ireland has found itself in the awkward position of not wanting to accept the tax payment out of fear it will deter business from locating there in the future, depriving its citizens of future jobs.  Then on the opposite side the US chimed in saying that Apple owed it the money instead!  Crazy that 3 separate places all are possibly owed the money. Who is right will be the lawyers job, and I'm sure they'll get a nice chunk of that money for their work.

The situation highlights the plight faced by many multi-national companies. Legal shakedowns by government. Or at least legal until a court decides it was not legal.  Cook has been quoted saying "It's total political crap" in reference to the EU. Oddly enough they are considering taking their money back to US shores to pay the tax here instead. By doing that it means they will either save on tax payments, or they feel their money is safer in US Banks. Judging by the situation in Europe I'd err on the side of safety.

This situation also highlights some hypocrisy on part of
the US. Treasury Secretary Jack Lew had the audacity to say this.

U.S. Treasury Secretary Jack Lew criticised the ruling. “I have been concerned that it reflected an attempt to reach into the U.S. tax base to tax income that ought to be taxed in the United States,” he said on Wednesday.

So there it is in black and white.  He basically threw it out there that no other country better dare try to get tax money the Treasury believes is theirs. Except the US via FATCA has reached it's hands into the income earned worldwide on individuals and corporations. It's part of the reason why companies go through such great lengths to reduce their tax bills.  Even the Supreme Court has stated it's in an individuals best interest to do their best to legally minimize taxes. 

I think the EU made the mistake of taking aim at the 800lb gorilla in the room.  They figured since Apple has the cash they can go ahead and change the rules whenever they feel like and corporations will just pay.  Unfortunately for them Apple is willing to fight this, and I think they mis-judged.  This saga puts every other company in the world on high alert as to how their European operations are viewed. It's now blatantly obvious that the hunt is on and your money is no longer safe there. 

As for Tim Cook only history will tell if he will go down as a villain, or a hero. 

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