Daily Deduction

from the Tax Policy Center

Apple, Phantoms, Roads, and Debt

By :: June 11th, 2014

Is the EU about to grab the Holy Grail? The European Union plans to launch a formal investigation into Apple’s tax arrangements in Ireland—described by Senator Carl Levin (D-MI) as “the Holy Grail of tax avoidance,” Reuters reports. The US Senate determined that Apple had cut billions from its US tax bill by giving affiliates registered in Cork, Ireland, the right to license Apple’s intellectual properties to other related companies. Those Cork firms were declared to be not tax resident in any other country. Apple says it complied with law, achieving an effective non-US corporate income tax rate of 3.7 percent.

In Ukraine, one word… Plastics. In Ukraine, seated at a transparent plastic table and six chairs—bug-proof seating reminiscent of Cold War counterintelligence tactics—top tax officials of the former government cooked up a massive and elaborate tax fraud.  As described by the Associated Press, corrupt officials set up 100 to 120 phantom firms to funnel tax dollars to the scammers’ pockets and dramatically reduce the tax bills of participating companies. Over three years they bilked the nation out of $11 billion, more than half a year’s tax revenue. Ukraine's budget is currently supported by a $17 billion International Monetary Fund loan package.

Michigan wants a transportation deal by Friday. Republican and Democratic lawmakers in the state are moving closer, and Republican Governor Rick Snyder wants something on his desk before the legislative session ends this week. If lawmakers close a deal, Michigan voters may get to choose between a sales tax hike or a gasoline tax increase on the November ballot. Michigan wants to raise $1 billion in order to start fixing the state’s roads and bridges this summer.

Over in Ohio… The state just passed a huge tax cut, thanks to a surprise budget surplus. TPC’s Norton Francis reviews the numbers: It might have been better to bank the money.

Student debt continues to weigh heavily. Its size is likely slowing economic growth—and it seems a likely election issue for Democrats this year. The Obama Administration has expanded an income-based repayment program. It has also asked the Treasury and Education departments and two private tax preparation firms to help borrowers understand how to avoid default during tax filing season.

The IRS highlights a Taxpayer Bill of Rights. The Taxpayer Bill of Rights takes the multiple existing rights embedded in the tax code and groups them into 10 broad categories. The goal is to make them more visible and easier for taxpayers to find on the IRS website. The rights are, briefly: to be informed; to quality service; to pay no more than the correct amount of tax; to challenge the IRS’s position and be heard; to appeal an IRS decision in an independent forum; to finality, privacy, and confidentiality; to representation; and to a fair and just tax system.

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6Comments

  1. 2014 HOW MANY DAYS UNTIL TAX DAY – 2014  ::  1:18 pm on June 11th, 2014:

    […] Apple, Phantoms, Roads, and Debt – TaxVox – Tax Policy Center […]

  2. Michael Bindner  ::  1:49 am on June 12th, 2014:

    At some point revenue hungry states will ignore claims of technical compliance. Of course, the Holy Grail for Europe is not gettng Apple, but turning Ireland from a member Nation to a member Region or Province. If they do that, Apple and others are screwed. Of course, the US Treasury and the Fed would not like it either, because a unified European Debt and tax system might just attract confidence hungry investors and currency traders who are tiring of the Tea Party trying to up end the American financial system.

    That Ukraine is in trouble for Treasury employee fraud is funny, given its other problems. Someone tell the IMF it will not likely get a dime.

    It is good that Michigan is getting its act together on roads. Although it rivals Idaho as the home of right wing militia groups (some say that the Oklahoma City bombing originated there, but no one ratted them out), it also has Gerald Ford style Repbulicans who will make a deal for the welfare of the state. I hope they pick a gas tax rather than a sales tax – which would fall on non-drivers.

    Ohio Republicans are not like those in Michigan. They have a budgetary death wish. The revenue bubble was for one year, and one year only, due to massive realization of capital gains in 2012. Nothing like that is going to happen again any time soon.

    The problem with student debt us actually the fact that it contained so many loop-holes to not pay and capitalize the interest – or just lower the payment. The new debt forgiveness after 20 years of payments at 10% of income would be nice, except I don’t plan on living 20 years. Fairly soon the Department of Education is going to have to build in borrower death into their revenue models (which are way too lucrative to the Government – which is the problem – its fake wealth).

    It is good that the IRS lists the rights many anti-taxers fought for. Of course, this hides the fact that we still have to file at all rather than having employers both file and get us the deductions we need – not in April or May but with payroll.

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