If Apple’s Irish tax loophole is a fraud, the whole tech industry is guilty
Apple’s profits in Ireland are “a fraud,” said Nobel Prize-winning economist Joseph Stiglitz in an interview with Bloomberg Television’s Tom Keene. True it is, but almost every tech company uses the same loophole for which Stiglitz blamed the U.S. tax system.Stiglitz said: “Our current tax system encourages companies to keep their money abroad, opens up a vast loophole through what is called the transfer-pricing system that allows them not only to keep their money abroad but, effectively, to escape taxation.”How it works In international markets, companies manipulate higher costs, reducing taxes by using easily understood transfer-pricing. In this simplified example below, a product sells for $1,000 and costs $500 to produce. The taxes in the U.S. would be $175. But if the cost to produce it can be inflated to $600 and recognition of the sale and the cost transferred to a lower-tax country such as Ireland, $175 in taxes are saved.To read this article in full or to leave a comment, please click here
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