So Ritchie doesn’t understand how tax works then

If Apple wants to prove itself a leader in every way, and not just in technology, it should now lead the pack of tech companies into constructive negotiations with the OECD in Paris to develop a tax system that truly, and fairly, ensures it pays the taxes it owes in the countries were it earns them.

Hmm. So here’s HMRC:

Non-resident trading companies which do not have a branch in the UK, but have UK customers, will therefore pay tax on the profits arising from those customers in the country where the company is resident, according to the tax law in that country. The profits will not be taxed in the UK. This is not tax avoidance: it is simply the way that corporation tax works.

He hasn’t even grasped the basics of how the system works, has he?

25 thoughts on “So Ritchie doesn’t understand how tax works then”

  1. And the very moment the system of direct tax changes to one based on the location of the customer (VAT is already based upon this) the added value of the supply chain will be disregarded and the neoliberal West will take all the tax. Ritchie is a part of the neoliberal plan. One wonders, is he being paid?

  2. Doesn’t Apple have branches in the UK? Or do they not count because they are Apple (UK) Ltd as opposed to Apple Inc.?

  3. Doesn’t Apple have branches in the UK? Or do they not count because they are Apple (UK) Ltd as opposed to Apple Inc.

    Sort of. The shops don’t make that much margin. The UK entity buys in the product from Apple IE at the same costs (transfer pricing rules) as other resellers. And given the size and spaciousness of the stores I’ve been in, and their premier locations, I assume their costs are quite high relative to a PC World or similar.

    So the profit is realised in low-tax Ireland.

  4. Apple, like many other US MNC’s use to their full advantage the CTB election and crappy US CFC rules to achieve the massive stockpiles of cash outside the US. The fact that they make fantastic, innovative products that masses of people want to buy is also a factor.

  5. > hasn’t even grasped the basics of how the system works
    More like “knows how he wants it to work” — which is to say, if you have money, it belongs to the Courageous State.

  6. Considering they will invest the money made outside the US into making more money outside the US then the rest of the world benefits. Take it back into America and the US benefits but not so much elsewhere.

  7. Ritchie wants all UK companies to pay UK tax on all their profits no matter where in the world they are earned, even if through subsidiary companies. He also wants all profits earned in the UK by foreign companies tax in the UK as well, even if the foreign company has no UK presence beyond having customers here.

    He has not yet demanded that foreign companies making profits in foreign countries should also pay tax in the UK but it can’t be far off.

  8. @Ironman,

    Even better, in ranty comment about Apple rent seeking due to it’s profits, a poster asks Ritchie to edit some typos in his post.

    Without irony, Ritchie replies: “On iPad so will have to do both – sorry”

  9. @ Andrew C
    “He has not yet demanded that foreign companies making profits in foreign countries should also pay tax in the UK but it can’t be far off.”
    He *has* demanded that Mannesman pay £billions of UK tax on profits earned in Germany, the German tax on which was reduced because it paid interest to a company located in Luxembourg.

  10. Noel

    But this isn’t hypocrisy at all. To understand you’ll need to buy ‘The Courageous State’, only available through Amazon.

  11. Surreptitious Evil,

    Yep, I understand about the shops. But what about offices? I don’t think Apple has any designers in the UK, but Google and Facebook both employ thousands of engineers in London. They are hardly “non-resident trading companies” – they actively create new products (services) in the UK. This is a very profitable activity: shouldn’t they be paying corporation tax on those profits?

  12. His grasp on reality was always tenuous – even more so now. His ignorance is only matched by his narcissism and lack of self-consciousness.

  13. Bloke in Costa Rica

    From a purely utilitarian standpoint, the more Apple’s profits are allowed to fructify in the pockets of its shareholders or to be reinvested in making cool things and the less they are mulcted by unnütze Esser like Murphy and his ilk to be pissed up against the wall, the happier the world will be.

  14. @Andrew M – Facebook employs around 7,000 people worldwide, the vast majority in the US. Why do you think they employ ‘thousands’ in the UK?

  15. they actively create new products (services) in the UK. This is a very profitable activity

    No it isn’t. It actually costs a lot of money.

    However, subsequently selling those products (noting that, actually, Facebook give and Google mostly give the clever stuff away and sell advertising to be shown to people using the clever free stuff) is a very profitable activity and that is carefully not done through a UK entity.

  16. @Andrew C – According to media reports, Facebook employs at least 500 people in its London office; Google’s new London offices have capacity for 4,500 people (not clear how many are actually employed there).

    S.E. – It sounds like dodgy transfer pricing to me. AmaGoogFace UK Ltd is selling its products (engineering services) at cost to AmaGoogFace Ireland / Luxembourg / Netherlands / Caymans / Bermuda. We might infer that the price is unrealistically low because the company then turns around and resells advertising with those services at a whopping margin.

    This all hinges on what exactly is being sold. For example Foxconn (China) sells bare phones to Apple, who slap on their software & branding and resell them for a 300% markup. That’s perfectly legitimate: nobody demands that Foxconn take a greater share of the profits. Starbucks UK pays for brand licensing from Starbucks NL, and we allow that.

    But with tech companies, how do we know that the services being sold from the UK Ltd to the foreign company are sold at a fair arms-length price? It seems self-evident that Google Bermuda isn’t where value is being added. But if not there, where?

  17. Bloke in North Dorset

    Apple has always seen its stores more as a marketing expense than a revenue generator. IIRC they got an executive in a few years ago, a brit, and he tried to change it. he didn’t last long.

  18. “Apple has always seen its stores more as a marketing expense than a revenue generator.”

    Indeed. They registered a community trademark on the store layout, since it’s distinctive to them and knockoff fake apple stores copied it, causing confusion to the consumer. It generated some interesting caselaw at EU level, basically saying that yes, they could do that.

    Ritchie, of course, didn’t understand it and presumed that the purpose of the mark in question was for tax avoidance… Which makes no bloody sense in any universe – why go to all that (extreme) effort when you can register any old crap and license it to your subsidiaries? The idea that perhaps they did indeed want to stop others copying their store layout and that maybe people could be confused by knockoff stores (and that a reseller has a fair use right to use the Apple logo to advertise the fact that he is…errr… selling Applie products) fell on the deaf ears of Mr. Never A Moment of Self-Doubt…

    But to a man with a hammer………….

  19. Bloke in Costa Rica

    Judging by his output on matters financial and tax-related, if you gave Murphy a hammer he’d break his thumb, the useless twat.

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