News - iPhone 6 Plus costs $16 more to produce, demands $100 premium

[TheAnimus]

You really didn't need to let me know so much about you! :/

Why not, it illustrates precisely why your views are so wrong. I am 'richer' than I was, yet my actual cash flows are so low, I'll not be paying much tax if any. This is because I co-founded a new company.

I don't think its a matter of the fair price at the point of sale of something. In a free and appropriately regulated market (theme for another thread perhaps) the parties to the transaction will agree that. What I'm talking about is the manipulation of the framework of international rules so that multinational corporations, like Apple and Amazon, can avoid paying tax on the profits they make where they make them.

But in my example you can just do it on that transaction. How would you stop that?

At present such corporations save paying tax by shuffling money between jurisdictions to create artificial paper trails that shift profits into low zero-tax havens and their costs to high tax countries. That, alongside the use of secrecy in tax havens to hide profit altogether (like in Liechtenstein where you can set up an anonymous company called an 'Anstalt' with a single secret shareholder, which may be another company). So, given the extent of reporting you simply can't know whether Amazon makes little ROI.

This is a kind of fun prisoners dilemma type thing, however it's even more interesting to a game theorist because many of the places are democratic and will have quite open indications as to how they will behave. Hence why I very much doubt that no one will betray.

No, that would be silly - that's what accountants and auditors do, under the rules and regulations that I'm saying need to be changed.

Changed how? Prove my software license isn't worth £10M....

No it wouldn't be simpler - for a start the concepts are completely different. Income is generated cash revenue in the short term whereas capital gains are increases in asset value over the long term. Corporate and non-corporate business tax uses systems of deduction for costs incurred generating income before tax is paid. Capital taxes sometimes allow for asset development costs or inflation. They are separate concepts of accounting and taxation and so its not a matter of political will, just one of common sense.

But I am talking on an individual level, not businesses accounting for different kinds of costs. If you have a trust fund you'll just be paying CGT, but if you have a job, you'll be paying a higher rate of tax, hardly fair.

Also I'd really like to just get back to the original point. Amazon make sod all profit. Sod all. I wouldn't be surprised at all if their silly phone results in a massive mark down. The amount of corporation tax that they are not paying in the UK is really tiny.

[RobbieRoy]

But I am talking on an individual level, not businesses accounting for different kinds of costs.

I think that's where we're coming unstuck - as a past stockbroker and tax inspector and now a company director of two businesses (funnily enough one of which runs a coffee shop!), I suspect we have different perspectives, perhaps even different paradigms.

In reality, to skin this cat you need to look at all the legal entities that undertake trade, from individuals to offshore trusts. It makes no sense to me for you to simply base your argument on the individual's position.

Also I'd really like to just get back to the original point. Amazon make sod all profit. Sod all. I wouldn't be surprised at all if their silly phone results in a massive mark down. The amount of corporation tax that they are not paying in the UK is really tiny.

Yes, the point of our debate. My argument, again, is that the accounts show that Amazon makes profit. In fact, note 11 to the financial statements shows it made a total of $506 million pre tax profit in 2013, net of a $198 million loss on international trade.

The accounts also simply don't provide enough information available to be able to say where that loss was made or how, other than it was "outside Europe" - it could be start up costs in new markets in the far east, for example.

Also, I'd point you to that Amazon's 10A submission also details Amazon's two non-US 100% owned subsidiaries - both of which are registered in that well known tax haven, Lichtenstein.

There's loads more you can pull out of the accounts to support my argument that Amazon is a profitable business, but I'm sure that would bore the pants off everyone else here!

Cheers matey!

[TheAnimus]

I think that's where we're coming unstuck - as a past stockbroker and tax inspector and now a company director of two businesses (funnily enough one of which runs a coffee shop!), I suspect we have different perspectives, perhaps even different paradigms.

In reality, to skin this cat you need to look at all the legal entities that undertake trade, from individuals to offshore trusts. It makes no sense to me for you to simply base your argument on the individual's position.

It's more I don't like the suggestion that the CEO is rich, he has a lot of paper assets, but these assets are not been sold, and realistically couldn't be at the market value.
[QUOTE=RobbieRoy;3384781]Yes, the point of our debate. My argument, again, is that the accounts show that Amazon makes profit. In fact, note 11 to the financial statements shows it made a total of $506 million pre tax profit in 2013, net of a $198 million loss on international trade. [/QUTOE]I dislike the amazon bashing because people look at gross revenue, neglect to include VAT, and then say they should be paying hundreds of millions in corp tax. The fact is, and for some reason investors are happy with, amazon making sod all profit.

For instance, the Guardian hypocritical bunch of little twonks they are, moan about this: http://www.theguardian.com/business/...azon-uk-tax-3m Apparently £4bn of gross, but we know that amazon like to do about 0.5-1% margin. So let's say 40M and cgt on that of £3M doesn't look at all out of place to me. At most it's a couple of million quid they are screwing us by. Hardly worth getting worked up over considering how much other taxes they've raised.

Also, I'd point you to that Amazon's 10A submission also details Amazon's two non-US 100% owned subsidiaries - both of which are registered in that well known tax haven, Lichtenstein.

Which to be honest with, I don't see the issue, they have a duty to their mostly international share holders after all to maximise their profits, everything they do is legal, and as I said before, a prisoners dilemma for the global nations to stpo.

There's loads more you can pull out of the accounts to support my argument that Amazon is a profitable business, but I'm sure that would bore the pants off everyone else here!

More that I don't think they are misleading their investors in terms of hiding profits from the parent entity. I genuinely believe what Jeof says about your margin, his opportunity, the fact they are growing and investing money heavily in new areas and infrastructure. It makes sense to me they pay sod all CT, not just because it's a silly tax, but because they make sod all money. For a 150bn business 0.5bn is sod all in my book.

[RobbieRoy]

[QUOTE=TheAnimus;3384801]It's more I don't like the suggestion that the CEO is rich, he has a lot of paper assets, but these assets are not been sold, and realistically couldn't be at the market value.

I dislike the amazon bashing because people look at gross revenue, neglect to include VAT, and then say they should be paying hundreds of millions in corp tax. The fact is, and for some reason investors are happy with, amazon making sod all profit.

I also feel that criticism of Amazon based on a fundamental misunderstanding of accounting and tax is wrong. Tax is paid on profit, not turnover (which excludes VAT as it is a sales transaction tax).

Investors like Amazon because they like the business model, like the return on investment and see it as a good growth story. As in all stock investment, buy quality and hold for the long term - which I presume you have done. They don't want 'profit' as they want all that generated money to be reinvested in growth.

As for the VAT point and use of overseas companies - some of the criticism is that the arrangements (which are quite legal) allow Amazon to reclaim input VAT but not charge output VAT. So, if they buy something for £100 but pay VAT of £20 the total cost is £120. But they then reclaim the VAT and so the net cost is £100 so if if they then sell at £120 and charge no VAT they have made a £20 profit for no other reason but the VAT refund.

You may think the Guardian twonks are hypocrits but is there anything factually wrong with that article? The issue, as I have been arguing in terms of cross border financial manipulation, is that companies like Amazon can move profits to places where taxes are low or non existent and costs to places where they can be set against profits. The old retail model, for instance, was that the sale price of an item was 1/3 stock cost, 1/3 overheads and 1/3 profit. Amazon's apparent profitability is therefore questionable.

BTW, companies don't pay CGT they pay CT.

More that I don't think they are misleading their investors in terms of hiding profits from the parent entity. I genuinely believe what Jeof says about your margin, his opportunity, the fact they are growing and investing money heavily in new areas and infrastructure. It makes sense to me they pay sod all CT, not just because it's a silly tax, but because they make sod all money. For a 150bn business 0.5bn is sod all in my book.

Well, our opinions remain some way apart then and I suspect our views on the role of international companies in our society are quite different too!

[TheAnimus]

I also feel that criticism of Amazon based on a fundamental misunderstanding of accounting and tax is wrong. Tax is paid on profit, not turnover (which excludes VAT as it is a sales transaction tax).

Investors like Amazon because they like the business model, like the return on investment and see it as a good growth story. As in all stock investment, buy quality and hold for the long term - which I presume you have done. They don't want 'profit' as they want all that generated money to be reinvested in growth.

Yeah that is my criticism, in the linked article, they used revenue.

Also I'm not opposed to growth stocks per say, I find them fine when they are say Tesla, but not so cool when they are say Apple back in 2011...

As for the VAT point and use of overseas companies - some of the criticism is that the arrangements (which are quite legal) allow Amazon to reclaim input VAT but not charge output VAT. So, if they buy something for £100 but pay VAT of £20 the total cost is £120. But they then reclaim the VAT and so the net cost is £100 so if if they then sell at £120 and charge no VAT they have made a £20 profit for no other reason but the VAT refund.

But any net VAT left over on UK Vattable trading, they have to pay. They could not even be registered in the UK but after a certain threshold they have to still comply.

You may think the Guardian twonks are hypocrits but is there anything factually wrong with that article? The issue, as I have been arguing in terms of cross border financial manipulation, is that companies like Amazon can move profits to places where taxes are low or non existent and costs to places where they can be set against profits. The old retail model, for instance, was that the sale price of an item was 1/3 stock cost, 1/3 overheads and 1/3 profit. Amazon's apparent profitability is therefore questionable.

But this is the point, Amazon have razor thin margins, this is what they tell their investors, if this is not the case I think the SEC would be more concerned...

BTW, companies don't pay CGT they pay CT.

I know, the argument often for CGT been lower than normal income taxation is because of CT, hence the relationship.

Well, our opinions remain some way apart then and I suspect our views on the role of international companies in our society are quite different too!

I have more of a view that it's futile to try and think you can turn the tide, hence my use of the prisoners dillema as an example of this situation from game theory. We know morally what is obviously the best solution, but realistically we know it won't happen because people are flawed. I think it's churlish to pretend otherwise, as the damage that can cause is significant.

[RobbieRoy]

Yeah that is my criticism, in the linked article, they used revenue.

I have more of a view that it's futile to try and think you can turn the tide, hence my use of the prisoners dillema as an example of this situation from game theory. We know morally what is obviously the best solution, but realistically we know it won't happen because people are flawed. I think it's churlish to pretend otherwise, as the damage that can cause is significant.

I don't accept that its futile to try. Yes we're all flawed, subjective individuals carrying enormous in-built biases (evolved traits that helped our species become so dominant) but all our current practices were started somewhere by someone, and evolve as people's experience and attitudes change. Thus, we all have an opportunity (I suggest an obligation) to effect change in order to move to a better world. The prisoners dilemma remains just part of game theory.

[RobbieRoy]

Oh, and one last thing friend Animus - if you don't believe that people can't set up ethical, moral and socially fair businesses and effect change just look at food wholesaler, Suma: http://www.suma.coop/

[Rens11]

Gotta love apple tax