Apple has avoided billions in taxes

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Even as Apple became the nation’s most profitable technology company, it avoided billions in taxes in the United States and around the world through a web of subsidiaries so complex it spanned continents and went beyond anything most experts had ever seen, Congressional investigators disclosed on Monday.      

 Timothy D. Cook, Apple's chief executive, is expected to come under sharp questioning at a Congressional hearing on Tuesday.                           

The investigation is expected to set up a potentially explosive confrontation between a bipartisan group of lawmakers and Timothy D. Cook, Apple’s chief executive, at a public hearing on Tuesday.       

Congressional investigators found that some of Apple’s subsidiaries had no employees and were largely run by top officials from the company’s headquarters in Cupertino, Calif. But by officially locating them in places like Ireland, Apple was able to, in effect, make them stateless — exempt from taxes, record-keeping laws and the need for the subsidiaries to even file tax returns anywhere in the world.       

“Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven,” said Senator Carl Levin, a Michigan Democrat who is chairman of the Senate Permanent Subcommittee on Investigations that is holding the public hearing Tuesday into Apple’s use of tax havens. “Apple successfully sought the holy grail of tax avoidance. It has created offshore entities holding tens of billions of dollars while claiming to be tax resident nowhere.”       

Thanks to what lawmakers called “gimmicks” and “schemes,” Apple was able to largely sidestep taxes on tens of billions of dollars it earned outside the United States in recent years. Last year, international operations accounted for 61 percent of Apple’s total revenue.       

Investigators have not accused Apple of breaking any laws and the company is hardly the only American multinational to face scrutiny for using complex corporate structures and tax havens to sidestep taxes. In recent months, revelations from European authorities about the tax avoidance strategies used by Google, Starbucks and Amazon have all stirred public anger and spurred several European governments, as well as the Organization for Economic Cooperation and Development, a Paris-based research organization for the world’s richest countries, to discuss measures to close the loopholes.       

Still, the findings about Apple were remarkable both for the enormous amount of money involved and the audaciousness of the company’s assertion that its subsidiaries are beyond the reach of any taxing authority.       

“There is a technical term economists like to use for behavior like this,” said Edward Kleinbard, a law professor at the University of Southern California in Los Angeles and a former staff director at the Congressional Joint Committee on Taxation. “Unbelievable chutzpah.”       

While Apple’s strategy is unusual in its scope and effectiveness, it underscores how riddled with loopholes the American corporate tax code has become, critics say. At the same time, it shows how difficult it will be for Washington to overhaul the tax system.

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drink-driving laws destroy the restaurant industry?

Could new drink-driving laws destroy the restaurant industry?
Under new proposals outlined by the U.S. National Transportation Safety Board, drivers returning from wining and dining could be pulled over. The board wants to impose harsher restrictions for anyone consuming alcohol and then driving, and so have suggested that blood alcohol content above 0.05 when driving becomes illegal.
Currently, the limit is 0.08. In drinking terms, this could mean that for some people, having a single glass of wine will set you over the limit — something that is beginning to panic restaurateurs.
Sarah Longwell, the managing director of the American Beverage Institute, said that the new legislation would have a “devastating impact” on the industry, and would take away “some of the magic, the ambiance of a night out.” Out of fear of being pulled over, it’s likely that social drinkers will forego the drink with dinner — not only impacting businesses and sales, but removing part of the fun of going out.
Restaurants, servers, suppliers and bartenders may take the hit — but as citizens look to enjoy a drink with their meal, it could mean that retail sales will go up as people stay at home and cook.
The new proposal is based on research which shows driving impairment begins with one drink, and after consuming any alcohol, the risk of being involved in a crash is “significantly greater.” However, when you take into account that 70 percent of drunk-driver incidents are caused by those with a blood alcohol level of 0.15 or higher — according to the American Beverage Institute — this blanket ban may not be the answer to lowering the annual 10,000 fatality rate caused by drink drivers.

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U.S. authorities to settle with tax evaders in Switzerland

Switzerland is on the brink of a deal to settle a long-running dispute with U.S. authorities over Swiss banks accused of helping wealthy Americans evade billions of dollars of tax, the finance minister said on Saturday.
"We hope that we will shortly be at the finishing line," Eveline Widmer-Schlumpf told Swiss radio in an interview. "The banks won't get it for nothing."
Widmer-Schlumpf declined to say how high fines might be, but added: "It is clear that it will not be a pleasant solution."
Bank secrecy, which has helped Switzerland become the world's largest offshore center with $2 trillion in assets, has come under fire since the financial crisis, as cash-strapped governments seek to clamp down on tax evasion.
The Swiss government has been in protracted talks to end U.S. investigations into Swiss banks, including Credit Suisse and Julius Baer, in return for expected heavy fines and a transfer of client names.
Bern said last month it was considering a possible solution to the U.S. probes, but declined to give further details as negotiations were still continuing.
A source familiar with the talks has told Reuters the two sides had agreed an outline for a deal that would divide more than 300 Swiss banks according to the extent they had helped U.S. clients hide money, to determine how they are dealt with.
Under the outline deal, banks already under investigation would settle with individual deferred prosecution agreements, the source said. Credit Suisse has already made a 295 million Swiss franc ($303 million) provision towards a settlement.
A second group of banks which had U.S. clients but have not yet been targeted by investigators would have to agree to pay fines and hand over data on their customers, the source said.
The country's biggest bank UBS was forced in 2009 to pay a fine of $780 million and hand over the names of more than 4,000 clients, delivering the U.S. authorities information that allowed them to then pursue other Swiss banks.
Switzerland's oldest private bank, Wegelin & Co, said in January it was closing down after pleading guilty to helping Americans evade taxes, paying a fine of nearly $58 million.

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European Commission raided the offices of Shell, BP

English: Platts logo (Photo credit: Wikipedia)

English: Platts logo (Photo credit: Wikipedia)

Some of the world's biggest oil companies may have a new mess on their hands.

The European Commission raided the offices of Shell, BP and Norway's Statoil this week as part of an investigation into suspected attempts to manipulate global oil prices spanning more than a decade.
None of the companies have been accused of wrongdoing, but the controversy has brought back memories of the Libor rate-rigging scandal that rocked the financial world last year.
UBS (UBS), Royal Bank of Scotland (RBS) and Barclays (BCS) have already reached settlements with regulators in the U.S. and U.K. over Libor-rigging, paying over $2.5 billion in fines after admitting to attempts to manipulate interest rates to appear more credit-worthy and to benefit trading positions. Roughly a dozen other global banks remain under scrutiny over rate-rigging, and three people have been arrested so far.
Reams of email and instant-message transcripts disclosed in the settlements so far reveal how the banks' scheme worked, and experts have since warned that influential pricing data from publishers serving the oil market could be similarly vulnerable to manipulation.
A review ordered by the British government last year in the wake of the Libor revelations cited "clear" parallels between the work of the oil-price-reporting agencies and Libor.
Libor-setting is overseen by the British Bankers Association, an industry trade group, though U.K. law was changed last month to allow financial regulators to supervise the process.
Oil-price benchmarks are set by independent "price-reporting agencies," the most influential of which is Platts, a division of McGraw-Hill (MHFI). Platts' data is used help set prices for billions of dollars' worth of physical oil and derivatives contracts.
As the Libor scandal gathered force last year, Platts and its fellow price-reporting agencies, Argus and ICIS, issued a joint statement emphasizing what they called the "fundamental differences" between their "reliable and robust" methods and those used in calculating Libor. Some observers, however, say the processes are similarly vulnerable.
There are also concerns about the fact that reporting to Platts is done by traders voluntarily. In a report issued in October, the International Organization of Securities Commissions -- an association of regulators -- said the ability "to selectively report data on a voluntary basis creates an opportunity for manipulating the commodity market data" submitted to Platts and its competitors.
Responding to questions from IOSCO last year, French oil giant Total said the price-reporting agencies, or PRAs, sometimes "do not assure an accurate representation of the market and consequently deform the real price levels paid at every level of the price chain, including by the consumer." But Total called Platts and its competitors "generally... conscientious and professional."
"While there is the risk of market actors voluntarily submitting false data to the PRA assessment process, most PRAs have effective processes to verify submissions and generally avoid this problem," Total said.
Platts describes its methods as "structured" and "highly transparent," saying the submissions it collects must reflect verifiable transactions or executable bids and offers. The agency vets submitters and restricts them from altering their bids and offers beyond defined increments to mitigate against sudden price swings.
Platts declined to comment in detail on the European Commission investigation, saying only that investigators visited its office in London on Tuesday and that it is "cooperating fully" with the probe.

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billion dollar profits from student loans

Federal Reserve Bank of NY, 33 Liberty Street (Photo credit: Wikipedia)

The Obama administration is forecast to turn a record $51 billion profit this year from student loan borrowers, a sum greater than the earnings of the nation's most profitable companies and roughly equal to the combined net income of the four largest U.S. banks by assets.
Figures made public Tuesday by the Congressional Budget Office show that the nonpartisan agency increased its 2013 fiscal year profit forecast for the Department of Education by 43 percent to $50.6 billion from its February estimate of $35.5 billion.
Exxon Mobil Corp., the nation's most profitable company, reported $44.9 billion in net income last year. Apple Inc. recorded a $41.7 billion profit in its 2012 fiscal year, which ended in September, while Chevron Corp. reported $26.2 billion in earnings last year. JPMorgan Chase, Bank of America, Citigroup and Wells Fargo reported a combined $51.9 billion in profit last year.
The estimated increase in the Education Department's earnings from student borrowers and their families may cause a political firestorm in Washington, where members of Congress and Obama administration officials thus far have appeared content to allow students to line government coffers.
The Education Department has generated nearly $120 billion in profit off student borrowers over the last five fiscal years, budget documents show, thanks to record relative interest rates on loans as well as the agency's aggressive efforts to collect defaulted debt. A spokesman from the Education Department did not respond to a request for comment. A Congressional Budget Office spokesman could not be reached for comment after normal business hours.
The new profit prediction comes as Washington policymakers increasingly focus on soaring student debt levels and the record relative interest rates that borrowers pay as a potential impediment to economic growth. Regulators and officials at agencies that include the Federal Reserve, Treasury Department, Consumer Financial Protection Bureau and Federal Reserve Bank of New York have all warned that student borrowing may dampen consumption, depress the economy, limit credit creation or pose a threat to financial stability.
At $1.1 trillion, student debt eclipses all other forms of household debt, except for home mortgages. It's also the only kind of consumer debt that has increased since the onset of the financial crisis, according to the New York Fed. Officials in Washington are worried that overly indebted student borrowers are unable to save enough to purchase a home, take out loans for new cars, start a business or save enough for their retirement.

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Free WiFi for FIFA World Cup

FIFA World Cup 2014 logo. (Photo credit: Wikipedia)

When Brazil was selected to host the 2014 FIFA World Cup, many Brazilians hoped the event would jump-start many needed infrastructure improvements - especially things like airport capacity and traffic congestion. While in most cases any upgrades in those areas have fallen short of expectations, the World Cup may still provide at least one tangible improvement to residents of São Paulo, the country’s biggest city.
With next year’s World Cup in mind, the city mayor’s office published a list this week of 120 public spaces, including parks, squares, and public transit stations, where it plans to install free WiFi access.
According to Prodam, the IT and telecoms company run by the city of São Paulo, the hotspots would cover 6.7 million square meters (more than 4,000 square miles) and would allow 24,200 simultaneous users. The WiFi will have to be available 24 hours a day, with a minimum speed of 512 kbps per user for downloads and uploads. Moreover, the connection must be sufficient to ensure access to streaming video and VoIP telephone services. Companies will now have to bid for the contracts to implement the service.
If things proceed according to schedule, the city government hopes to conclude bidding for the project by July, and intends to start the WiFi installation by October. The mayor’s office plans to spend R$45 million ($22 million) over the initial 36-month contract.

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Gibraltar is inside the EU but outside the EU Customs Area

There has been much discussion on forums and social media about the possibilities of using Temporary Importation License as a tax efficient way of owning a vessel.

Gibraltar is inside the EU but outside the EU Customs Area
Temporary Admission (or Temporary Importation) is a mechanism that enables non European Union (EU) resident yacht owners to bring their vessels into European waters for a limited time and under certain conditions without having to pay VAT on their yachts.
The mechanism has been designed to allow visiting vessels to cruise in EU waters unmolested for an extended period without becoming obliged to be VAT-paid under EU regulations.
However, an EU national can establish residence outside the EU VAT Zone (e.g. Gibraltar) and therefore avail themselves of the Temporary Importation laws.
Anecdoctal evidence and contributors to forums such as cruisingworld would suggest that a short trip across the water to Morocco for a night could be sufficient evidence of exiting the VAT zone (although many also note that it is good to get marina berth receipts or fuel receipts to evidence as simply floating into international waters is not sufficient!).

Temporary Importation License for yachts in the EU

Criteria for Temporary Admission

• The yacht must be owned by a natural person (i.e. an individual) or a legal person (i.e. a company) who is established (i.e. resident) outside the VAT territory of the EU.
• The yacht must be used privately, i.e. no charter

Time Allowed for Temporary Admission

The yacht can only be used within the EU for a maximum of 18 months after its first arrival. Under certain conditions this time frame can be extended to a maximum of 24 months.

Restricted Actions under Temporary Admission

The sale of a yacht whilst lying within the EU under Temporary Admission would breach the conditions of the relief.
The key stages of an example non-EU structure are as follows:

• Incorporation of a yacht owning company in a location outside the EU VAT zone such as Gibraltar or the BVI.
• This company contracts for the build or purchase of the yacht which will be registered in the name of the company at the owner’s preferred offshore port of registry, (for example the Gibraltar, Cayman Islands, BVI).
• The yacht is delivered to the company outside the VAT Territory of the EU.
• The yacht will enter the EU and begin its Temporary Admission period.

Where can you find the legal texts?

The legal provisions on temporary importation are found in: • Articles 137 to 144 of the Customs Code (Council Regulation (EEC) N° 2913/92 of 12 October 1992 establishing the Community Customs) • Articles 553 to 562 of the implementing provisions of the Customs Code. (Commission Regulation (EEC) No 2454/93 of 2 July 1993)

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Small Business Optimism

A gauge of confidence for small businesses rose in April to its highest in six months, a sign of resilience in an economy beset by Washington's austerity drive.
The National Federation of Independent Business said on Tuesday its Small Business Optimism Index rose 2.6 points to 92.1, the highest reading since October.
About half the gain was because businesses expect better business conditions over the next six months. Firms also were more optimistic about creating jobs and about sales.
Economic growth is being crimped this year by tax hikes enacted in January and federal budget cuts that started in March. Congress and President Barack Obama agreed to the measures in a bid to tame the federal budget deficit.

Offsetting some of austerity's bite, the U.S. Federal Reserve has kept interest rates exceptionally low, while falling gasoline prices have recently helped household finances.