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Apple Inc. is reportedly circumventing huge tax bills by setting up offices in tax havens all around the world, to help avoid Californias present corporate tax rate of 8.84%, amongst others. In Reno, Nevada, the corporate tax rate is 0%, and Apple set up an office there, as well as business hubs in other light tax locales in Ireland, the Netherlands, Luxembourg and the British Virgin Islands. The small business offices help to legally offset the global tax bill by collecting and investing in Apples huge profits $39.2 billion was raked in in Q4 2011.

According a former Apple exec who had a hand in creating the legal tax evasion tactics, the company had devised corporate strategies that take advantage of gaps in the tax code. Apples office in Reno is called Braeburn Capital, (perhaps the British Virgin Islands location is called something like Albermarle Pippin Investments), and invests some of the profits from Cupertino under Nevadas tax codes, to save some funds. Robert Hatta, former iTunes retail marketing chief for Europe, states, We set up in Luxembourg because of the favorable taxes Downloads are different from tractors or steel because theres nothing you can touch, so it doesnt matter if your computer is in France or England. If youre buying from Luxembourg, its a relationship with Luxembourg.

But, so what? Apple already pays a ridiculous amount of taxes worldwide, and their efforts on getting around some of them arent exactly uncommon or unorthodox Amazon has also gone through Luxembourg in the past. Still, with the world economy being all over the place, there will always be those who object to Apple looking for ways to avoid hefty tax bills.

Apple told the New York Times that the company has conducted all of its business with the highest of ethical standards, complying with applicable laws and accounting rules We are incredibly proud of all of Apples contributions, and noted that the corporation pays an enormous amount of taxes, which help our local, state and federal governments.

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Apple Sets Up Shop in Tax Havens Worldwide

GWEN MOORE | Democratic member of Congress from Milwaukee madison.com | | Posted: Monday, April 23, 2012 5:00 am

Ugland House is a modest five-story office building in the Cayman Islands, yet it is the registered address for 18,857 companies. The Cayman Islands, like many other offshore tax havens, levies no income taxes on companies incorporated there. Simply by registering themselves in the Cayman Islands, companies can legally shift much of their U.S.-earned profit to the Caymans and pay no tax on it.

The vast majority of these companies have no physical presence in the Caymans other than a post office box at Ugland House. About half of these companies have their billing address in the U.S. This transparently false corporate presence is one of the hallmarks of a tax haven.

Abuse of tax havens by multinational companies and wealthy individuals is one of the most outrageous loopholes in the American tax system. These complex tax avoidance schemes allow many of Americas largest corporations to drastically shrink their tax bill. For example:

Google uses techniques nicknamed the double Irish and the Dutch sandwich, involving two Irish subsidiaries and one in Bermuda a tax haven that helped shrink its tax bill by $3.1 billion between 2008 and 2010.

Wells Fargo paid no federal income taxes for 2008, 2009 and 2010 despite being profitable all three years in part due to its use of 58 offshore tax haven subsidiaries.

G.E. received $3.3 billion in tax refunds in 2010 despite reporting over $5 billion in U.S. profits to shareholders. The company has $94 billion parked offshore and uses 14 tax haven subsidiaries.

These same corporations take advantage of and benefit from the many services and public structures provided by our tax dollars an education system that prepares their workforce, government-funded research which helps them remain competitive globally, a publicly funded infrastructure system to transport their products, and the protection that our military and court system provide. They are in effect parasites.

While this practice is not illegal, it could easily be stopped by Congress, except that these tax dodgers take their tax rebates and spend heavily on lobbying expenditures and campaign contributions. A recent report by WISPIRG and Citizens for Tax Justice found that 30 unusually aggressive tax dodging corporations have made campaign contributions to 524 (98 percent) sitting members of Congress, and disproportionately to the leadership of both parties and to key committee members, including the tax-writing Ways and Means Committee. Among Wisconsins delegation, House Budget Committee Chairman Paul Ryan, a Republican from Janesville who also sits on the Ways and Means Committee, received $144,750 and Ways and Means Committee member Ron Kind, a Democrat from La Crosse, received $109,500 from these 30 companies.

The pervasiveness of campaign money across party lines speaks volumes about why major proposals to close corporate tax loopholes have not even come up for a vote.

Excerpt from:
U.S. Rep. Gwen Moore: Ditch Cayman Islands tax loophole

Misconception regarding the new general anti-avoidance rules (GAAR) spread panic in the market last week. Rumours are afloat that the tax authorities will use these rules to bring all participatory note (PN) holders and FIIs investing through tax havens in to the tax net.

Given the length to which the FM went to placate stock market players in the Union Budget speech, it is highly unlikely that he will impose a blanket tax on all PNs that make up 16 per cent of the total FII assets currently. Surely he knows that our market is not deep enough to withstand the sell-off that such an event can trigger?

Again the fact that there are many who use PNs due to reasons other than tax planning and that these instruments do not have any interest in the assets of the company are also arguments against taxing them.

But it is also true that a section of funds that enters our stock market is just black money camouflaged as FII money or PNs.

The Government should have the right to take closer look at the source of such money. The tax authorities might investigate a couple of cases and that could prove to be a deterrent to other wrongdoers. It would be wrong to panic at the thought that the tax men will form an army and run down all such cases.

Over time, genuine FII funds will make up for reduction in these funds. Value of PNs is down 60 per cent from the peak of Rs 4,50,000 crore in October 2007 (to end of February 2012). Total FII assets are up 20 per cent in the same period.

Derivative expiry also contributed to the volatility. But there was no bear squeeze and the stocks just slipped slightly lower in to the expiry.

We have a three-day week coming up and most market players might prefer to take off to the hills and beaches after the torrid time in the market last month. Action is, therefore, likely to be tepid next week.

Friday's recovery has helped salvage the daily oscillators and they are reversing higher. Both the Sensex and the Nifty reversed upward from the 200-day moving average last week. Weekly oscillators are dipping but they continue in the positive zone.

The implication is that the medium-term trend continues to be up for both the indices.

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Index Outlook - Resilient show by stocks

California's Gov. Jerry Brown has just signed on to a labor-backed ballot initiative to raise tax income tax rates to as high as 13.3%, and so far the voters seem to approve. A new Los Angeles Times poll puts public support for the plan at 64%. If the measure wins in November, California will hold the prize for the highest income tax rates in the nation.

That is, if some other state doesn't jump past it before then.

In recent years, the country has seen something of a tax-the-rich derby among states enacting so-called "millionaires' taxes" on top earners. Hawaii, New Jersey, New York, Oregon and Maryland all raised rates on high earners during in the 2000s. California's rates were high already.

In some cases the taxes were temporary, in others, not. And you didn't always have to be earning a million dollars to feel the bite. As of January 2012, according to data from the Tax Foundation, Hawaii was the top taxer with a rate of 11% on incomes over $200,000 (for single filers). California was close behind with 10.3% on incomes over $1 million. New Jersey has let a 10.75% tax lapse, but its top rate was still a relatively high 8.97%. Oregon's temporary 11% tax was history, but the top rate was still 9.9%. In New York, Gov. Andrew Cuomo resisted pressure to keep a top rate of 8.97% in effect, but the state ended up with a tax only slightly lower 8.82% on incomes over $1 million.

If Brown's initiative succeeds in California, taxes will rise to 12.3% for single filers at $500,000 and for joint filers at $680,000. Another 1% a tax approved voters in 2004 for mental health programs kicks in at $1 million. The total top rate of 13.3% would put California ahead of New York City, where state and city income taxes top out at just below 12.5%. California also would raise already-high sales tax rates.

What would happen then? In the short term, the state would get some new revenue. In the longer term, the impact gets murkier because a new question arises: What will this tax do to the state's economy

This is where the real arguments start. States that hike taxes sharply on the rich are, in effect, conducting an experiment in taxpayer behavior. They are testing just how much people are willing to pay to stay in one state before the tax burden makes them relocate to states with a low income tax or none at all.

Wealth is mobile enough to have at least some people worried. As Calif. GOP State Sen. Bob Huff has put it, "There's nothing more portable than a millionaire and his money.

Even among the more tax-friendly Democrats, there are murmurs of concern. California State Treasurer Bill Lockyer in 2011 told the Sacramento Press Club he was worried about tax flight: "The risk is (the rich) may decide to live and work out of one of their other houses (in another state)," he said. "And then very quickly we lose a substantial source of income.

In California, one of those "other houses" might be in Nevada, which has no income tax at all. In a high-tax Eastern state such as New Jersey, it might be in neighboring Pennsylvania, where the top rate is just 3.07%. Or it might be in more distant Florida, with no income tax at all.

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Calif. Eyes Tax Hike To Top In Nation; Will Wealthy Flee?

New Delhi, March 30: The government will not go after P-note holders but can tax foreign institutional investors (FIIs) issuing promissory notes in case they are not genuine residents of tax-free havens.

However banks and FIIs with actual operations in tax-free havens will be allowed to operate in the stock markets without attracting taxes.

Indian tax authorities would examine the tax liability of the said financial institutional investors. However, the tax authorities would not go beyond the FIIs to check any further detail about the participatory notes holders, finance minister Pranab Mukherjee clarified here today.

Accordingly, the question of liability for tax in India of participatory note (P-note) holders would not arise.

The statement came after a week of market turbulence with stock market punters reacting negatively to new tax provisions which sought to impose taxes on investors who routed money through shell firms in tax havens.

Finance ministry officials said they wanted to allay fears of P-note holders who have as much as $20 billion of Indian stock assets in their portfolios. Many investors who want to invest in the Indian stock market or who wish to play without the bother of registering themselves with Sebi use these participatory notes which are certificates with underlying Indian shares. Its estimated that FIIs have invested about 10 per cent of their approximately Rs 10,00,000-crore portfolio in India through P-notes.

Mukherjees statement is being read to mean that the government will not try to check on the persons who hold the P-notes. We are not out to uncover the seven veils of P-note holders, provided the bank or FI certifies that know your customer norms have been followed, said a top revenue official.

The 30-share Sensex ended up 312 points at 17370 and the 50-share Nifty ended up 103 points at 5282 after this announcement. However, independent tax consultant Sudatto Sen said FIIs remained liable to taxation on earnings from P-notes, unless they could prove genuine residence in tax havens.

Top finance ministry officials agreed on this analysis but pointed out that most FIIs playing in India were actually operating out of tax free jurisdictions such as Singapore, Mauritius and Luxembourg.

Taxes will be due from persons or firms who are operating through shells in tax havens, say from a lawyers office or from an address where twenty firms are registered in one single small flat! any sane person will agree these are shady operations and need to be investigated and taxed, they said.

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Pranab puts P-note worry to rest