It's not 'cheating' if it's perfectly legal.  The home mortgage interest deduction is a 'loophole' - must someone decline to take the deduction in order to be 'honest' now?

They can't very well be 'hiding' anything if you (and apparently everyone else) know exactly where it is, now can they?

They also didn't steal anything.  They didn't put a gun to anyone's head and force them to buy their products.  If they've violated Oz law, Oz should put 'em in the dock.  Your venom would be better directed at your own government, which is who should be determining what 'fair' is - not you or me.  We can dislike Apple all we want but 'your fair' and 'my fair' may be wildly different.  Hence the evolution of 'government of laws' as opposed to 'government of men*'.

*Not that we're practicing what our Constitution preaches much these days, but I still kinda like the document.

Okay, be argumentative; however, the only people who know exactly where the money is are Apple and the bankers holding it, thus it IS hidden from the various tax authorities.

No, because it has tried to bring Apple to task, but Apple keeps avoiding the issue by throwing lawyers at it to create smoke screens, hence my venom, as you call it, is very much pointed in the right direction.

Okay, so it's okay for Apple to cheat on its taxes so you, who is in a lesser position to do so, have to pay more.  And it's not that I don't acknowledge having to pay dues where applicable, I know that and do so when required.  However, what I do protest is that people like me, just ordinary folk, have to pay more because companies like Apple do not pay their dues as required.

Anyway, it's pointless arguing with you - it's fine for Apple to cheat, lie and steal - so I'm outta here.

I want to chime in here because from reading this discussion it seems apparent that most people aren't aware of how deliberately the tax system is setup to be gamed like this.

The Double Irish

The tactic used by Apple (and Google and countless others) is called the Double Irish.  Our own accountants recommended we do this for Stardock and Impulse a few years back but I rejected it on principle.

The way it works is as follows:

1. You have an American company (Apple, Google, etc.)
2. You create an Irish (or one in Denmark) that has no taxes on royalty based income
3. You create a Bermuda based entity that has no income taxes

You then assign the IP to the Bermuda company and have the licensing company be in Ireland or Denmark.  The sales of *licenses* generates royalty income which aren't taxed in Ireland or Denmark and the proceeds then go to Bermuda which aren't taxed.

The money is "outside" the United States but that's not relevant anyway because there's another part that the media doesn't talk about because, well, most people get lost at the complexities of this but here it is:

The last part is the key: The government has been buying up treasury bonds through a process called Quantitative Easing (QE).  This has the effect of lowering interest rates massively. For example, Stardock's credit lines have a 1.51% interest rate -- lower than the rate of inflation.  So what Apple, Google, etc. do is take out loans using the assets in Bermuda as collateral. This is the real "Buffet" rule btw as he's the one who has made this technique popular.  

The Bermuda assets are put into an investment portfolio that returns much better than 1.5% (the S&P 500 was up 25.5% last year -- thanks to QE) and increases in your portfolio are not taxed at all because they are unrealized gains (they only become capital gains when you sell something).

It's not the main issue

The entire debate gets sidetracked because Republicans lamely argue that the way around this is to lower corporate taxes which would do zilch to solve this and Democrats whine about evil corporations even though they are the ones pushing QE which is the real source of this issue.

Now, as a "rich" person, I love QE.  No one has done more to increase the wealth gap in recent years than our beloved President who continues to support QE.  QE causes interest rates to decrease and because of the devaluated dollars causes the stock market to go up.  

This means that a company is better off investing in the market using their portfolio as collateral to obtain super low interest loans than they are hiring people. And yet, we have politicians complain that companies aren't hiring even though they're sitting on a pile of money.  Well not shit. That's because it's more profitable to invest their profits into the stock market than it is to hire.

Quantitative Easing is the real issue

It's a simple IF/THEN question:  IF S&P 500 rate - Interest Rate > Natural profitability of the company THEN invest in stock market instead of employees.

When you can borrow at 1.5% using your investment portfolio that is generating >10% per year (25.5% last year) as collateral then the only way you hire employees is if your company's normal profit margin is pretty decent.

Last year was a good year for Stardock.  We had Start8, Legendary Heroes, ModernMix, etc.  And yet, from a profitability stand point, our unrealized gains (untaxed) from our investment portfolio was our most profitable "product" last year. 

If Stardock were a publicly traded company, I would have been fired for aggressively hiring and creating the SSIF (Stardock investment fund for new game studios) because I can borrow at 1.5% (and do, every day, we have an 8 digit credit line) and use our 8 digit portfolio as collateral and plow our profits into increasing that portfolio instead of hiring.

What is the solution?

There is no easy solution. That's why nothing has been done about it.  QE is supposed to go away. But everyone's addicted to it. EVERYONE. While rich people can get loans at 1.5%, even middle class people can borrow at 4% which is amazing.  It would be tough to return to the 7% norm.  Similarly, the rich and connected would very much dislike seeing their portfolios return to the 8% historical average.

Ireland and Denmark have a vested interest in keeping this system going because they are getting some income from this arrangement.  Bermuda also loves this arrangement.  The US is not really in a position to eliminate the corporate income tax and lowering it to say 20% or something more reasonably would do very little to change any of this.  It's hard to compete with "free".

It took us years to get into this situation and it'll take years to get out of it.  But perhaps if people learn the realities of our system and realize that our President is just as much part of this scheme as the biggest Wall Street insiders people will pay more attention to the politicians rather than blaming corporations.  

Next time someone bitches about the gap between the richest and poorest ask them if they voted for the guys who advocated endless QE. Because nothing in our lifetimes has exacerbated that gap than QE.

Corrections:

S&P 500 was up 29.6% for 2013, not 25.5%, Down Jones was up 26.5% (our portfolio was only up 25.5% because it has a lot of bonds in it and is generally more "conservative").

Thanks for taking the time to put that together.  Enlightening.

Thank you for the explanation, Brad, it was rather enlightening indeed.  However, it has little to do with what Apple is doing here in Australia, in that QE is not applicable here, so it avoids taxes by hiding revenue, income, profit, whatever you want to call it, in an offshore account outside the government's jurisdiction.  Once there it is nigh impossible for the ATO [Australian Tax Office] to claw it back because Apple continues to put up smoke screens and throwing lawyers at it to perpetually complicate the issue, thus buying Apple time.

Frankly, I'd like to see the Australian government kick Apple's arse out of the country - and the problem goes away - but that isn't going to happen because it places an unfair restriction on consumers/Apple customers.  The alternative would be for government to tighten the applicable tax laws to prevent the practice, but the problem there is that they're often too busy bickering to actually achieve such a thing, particularly when some MP's have vested corporate interests that would also be affected.

Let's see, the US federal government under both parties has been infested with ex-financial industry people (Goldman-Sachs in particular is very well represented).  Should we be surprised that US policy not only facilitates but encourages large corporations avoiding taxes?

Here's a fun story: I'm a Canadian citizen who currently lives in the US and pays US taxes, as is my oldest brother.  Over Christmas my parents had severe health issues.  Despite the fact that my brother had power of attourney for my father, my father's Canadian financial adviser could not even speak with either of us, as we were US taxpayers.  The US government has bullied foreign financial institutions into not even speaking with US taxpayers.

So yeah, US government policy is still allowing/encouraging corporations to shuffle their money around to avoid taxes, but average schmucks like us are treated as though we're trying to do something illegal.  Sounds fair.

Sure it's related.

Again: Apple (and Google and countless other American based companies) do this because they can keep their profits in off-shore accounts which they can then use as *collateral* to run their operations via credit lines that only have a 1.5% (well probably less than that, 1.5% is what *I* can get, they can probably get libor rates).

Being able to keep profits from being taxed is only half the equation. It's just well publicized because it makes companies look "greedy".  That tactic wouldn't be of any value if they couldn't somehow make use of the capital those profits represent and that's where EQ comes in.

A gazllion dollars in a Bermuda account plus $1.00 will buy you a cheap cup of coffee in Cupertino. As soon as Apple/Google/whoever wants to actually make use of that money they have to bring it into the territory they want to use it.  And that means either bringing in your profits directly (which is taxed) OR borrowing it somewhere at super low interest rates and then bringing THAT money into the territory where it isn't taxed.

And this is so because too many average schmucks give their blessing and contribute to the mentality by saying it's okay for corporations to cheat... cos if corporations cheat it means that it's okay for them too. 

When the average schmuck stops contributing and starts complaining bitterly about this loathsome practice enmasse to their reps, only then will something be done to change things.  With millions of signatures on petitions against the practice, the government would find it hard to ignore, especially if everybody signing the petition made it clear that they would boycott the next election... meaning that EVERYBODY refused to vote at all. 

Now that would create a chaos both parties would prefer to avoid at all costs... but of course there would be the wowsers and those quite happy with the system as is, meaning it will never happen and the gap between the wealthy and the poor will continue to ever widen.

The globalization of economies...multi-nationals et al is what 'should' be forcing Govts to create a level playing field where there IS NO facility for tax dodging.... just as the same SHOULD apply for extraditions.  It should NOT be possible for some arse to bugger off to Majorca [or where ever] and avoid corruption/murder/rape/pedaphile/whatever charges.

We're all so happy-feet about the big melting pot that we need to also strike a balance with Law and legislation too...

surely that's an insult too miss piggy, and pigs are cute and nice too eat

The problem is, by the nature of their power/influence it seems law might just be 'corporate-will' these days.  The demands of the 'average joe' on that corporate-will have by comparison much less power/influence.  Without which not much 'change' can be effected.