Apple shares - Invest or not invest?

atypical

Article in Slate about Apple might be of interest:
http://www.slate.com/articles/technology/technology/2013/01/apple_earnings_report_don_t_let_its_stock_slump_fool_you_the_company_is.single.html

quotememiserable

mania112 wrote: »

Aren't those two opposing statements?

No. Its demonstrating that as even when they sell at capacity they're losing ground in the market.

grey_gym_sock

gadgetmind wrote: »

No sign? Really?

yeah, 1 or 2 have left. no sign of "very few companies being left to tax".

I guess Luxembourg and Ireland appeal to multinationals because of the weather rather than their more business-friendly tax rates.

their appeal makes it obvious that the system for deciding in which country profits were really made, and therefore where they should be taxed, is completely broken. profits that were actually made in other EU countries are artificially funneled into ireland or luxembourg, where corporate tax rates are lower.

the tax system is broken in this respect, and it should be fixed. there is no virtue in a "race to the bottom", where (e.g.) ireland tax multinationals lightly, so everybody else does the same.

Tax is complicated and knee-jerk "make them pay!" responses tend to have consequences other than what was intended.

http://www.snopes.com/business/taxes/howtaxes.asp

well, the "story" in your link is a gross simplification, or worse: a analogy that doesn't work.

so far as cash currently being hoarded outside the US by US companies, when it would be taxed if it were returned to the US, goes ... the simple solution - make it taxable regardless of where it is - makes sense. it's past profits, so it how it's taxed now won't affect their future behaviour.

also, what is the alternative to the impasse? the money isn't useful to shareholders if they can't repatriate it, and don't want to invest it outside the US. that the companies bribe enough congressmen until the law is changed to let them repatriate the money without paying tax on it? do you really prefer that option?

for future profits, i'd rather have a better system for working out where profits are really made, so they get taxed in the right place.

gadgetmind

grey_gym_sock wrote: »

yeah, 1 or 2 have left. no sign of "very few companies being left to tax".

Companies know they would leave, governments know they would leave, and there is evidence of it happening as soon as the tax system is even slightly tilted in this direction.

profits that were actually made in other EU countries are artificially funneled into ireland or luxembourg, where corporate tax rates are lower.

Exactly. Hats off to Ireland and Luxembourg for having a basic understanding of taxation.

As for "race to the bottom" there comes a point where taxation is sufficiently fair and simple that it's cheaper to pay it than avoid it.

well, the "story" in your link is a gross simplification

Sometimes things need to be presented in very simple terms.

for future profits, i'd rather have a better system for working out where profits are really made, so they get taxed in the right place.

So, if (say) Shell have an oil well in Mexico, the profits from that well should all be taxed in Mexico? Ditto for all the whisky that Diageo sells in South Africa?

Sorry, but if I own shares in one of those companies, I want them to do everything they (legally!) can to get as much profit as possible back into the pockets of the owners of the company. If that upsets some overseas country, well that's life. If some country creates a tax system that punishes overseas investors, well there are lots of countries in the world.

This is always going to be a complicated compromise (remember the story?) and it's important that everyone understands this and makes changes with their heads rather than their viscera.

Reaper

Apple's success depends on being able to maintain high margins. They did this in the past by bringing out unique products and maintained it even when competitors arrived by keeping their products significantly better. Now I feel that has been eroded and there is little to choose in hardware terms between Apple and, say, Samsumg.

They still have an advantage in their app store where developers often first supply apps and then only later port them to Android if at all, but with Android device sales increasing I suspect this may change too. Developers will go where the money is, they have no particular loyalty.

However despite being bearish on Apple everything has its price. If they go low enough I might buy. I used the example of Nokia previously and how its share price had dived spectacularly which some others picked up on, but they have had a mini revival recently based on sales of their Lumia phone. The question should never really be whether or not you should buy a share, it should be at what price are you willing to buy it.

N1AK

quotememiserable wrote: »

No. Its demonstrating that as even when they sell at capacity they're losing ground in the market.

They're the most profitable company on the planet. It's profit margins are 10x that of Samsung who just had an incredibly good year with their best profits by far.

Analysts constantly forecast huge growth from Apple and normally Apple still manage to surpass them. On this occasion they didn't. Even if Apple was a mature business with little room for further growth (which I don't think they are) then their current share price would be low.

The only reasons I don't own Apple stocks directly is I don't buy individual stocks and because Apple's sales are based on image and that image has started to become seriously tarnished lately.

grey_gym_sock

gadgetmind wrote: »

Companies know they would leave, governments know they would leave, and there is evidence of it happening as soon as the tax system is even slightly tilted in this direction.

i was referring to the system we already have in the UK, under which we tax UK corporations' overseas profits if they haven't (or to the extent that they haven't) already
paid tax on them in the jurisdiction they were made in.

Exactly. Hats off to Ireland and Luxembourg for having a basic understanding of taxation.

tax havens are parasitic. they're taking tax revenue that should go to other countries, while reducing the total tax take worldwide.

you may like the effect (lower tax take). not everybody does, though, and disagreeing about that has nothing to do with whether 1 understands tax.

whatever the overall level of taxation should be, there is also the question of how it should be divided up. when we go down the path of lighter taxation on companies, and especially multinational companies, and higher taxation for real people, there is an issue of fairness. why is UK corporation tax going down every year, approaching 20%, when basic rate employees are paying 32% marginal rate (income tax + NI), higher rate employees are paying 42% (or more), and low earners are getting benefits clawed back at effective tax rates of 80%+?

Thrugelmir

gadgetmind wrote: »

I guess Luxembourg and Ireland appeal to multinationals because of the weather rather than their more business-friendly tax rates.

These are only conduits to other tax havens. Tax paid even in these countries is low.

Apple Inc. might have made Silicon Valley famous, but it prefers to let someone else pick up the check for Northern California's freeways, bridges, and airports.

How? By pretending to be Irish.

In the late 1980s, Apple decided that Ireland's 12.5 percent corporate tax rate was a much more comely figure than America's 35. But Steve Jobs didn't want to move to Dublin. Fortunately, Congress allowed him to fake it.

Apple created an Irish subsidiary. Then, with a flourish of paperwork, it transferred its most valuable assets—its patents—to Ireland, comically forcing its U.S. headquarters to pay leasing fees for its own inventions.

Nothing had actually changed in the way the company operated. Apple simply had new paperwork saying it was partial to warm beer and fiddles, allowing it to dodge a substantial part of its U.S. tax bill.

But that wasn't the end of the scam. The Irish subsidiary is partially owned by another company, Baldwin Holdings, which doesn't even publicly list an office address or a phone number. But it does have paperwork saying it's headquartered in the Virgin Islands, where it can stockpile its income tax-free, outside the reach of the IRS.

http://www.villagevoice.com/2012-10-10/news/the-10-most-corrupt-tax-loopholes/

gadgetmind

grey_gym_sock wrote: »

tax havens are parasitic. they're taking tax revenue that should go to other countries, while reducing the total tax take worldwide.

They provide a business-friendly environment in a perfectly legal way. You may not like it, but it's the way the world works.

you may like the effect (lower tax take). not everybody does, though, and disagreeing about that has nothing to do with whether 1 understands tax.

Agreed.

why is UK corporation tax going down every year, approaching 20%, when basic rate employees are paying 32% marginal rate (income tax + NI), higher rate employees are paying 42% (or more), and low earners are getting benefits clawed back at effective tax rates of 80%+?

Because we need to keep companies in the UK, which is hard given all the others taxes and levies imposed on businesses here.

We have to pay zany import duties on goods we bring into the country (duties that are usually imposed out of misguided protectionism), then act as unpaid tax collectors for a high level of VAT, then pay 13.8% employer's NI, then have to pay individuals far more than we would elsewhere as HMRC takes a huge slice before it hits the employee's pockets, and don't get me started on all the other red tape.

Regards "fairness", I hate this word when applied to tax as everyone takes a totally different position as shown by the diner's parable.

I also hate the media screeching about how little tax some companies pay when they focus only on corporation tax and ignore all the other ways that HMG gets their pound of flesh.

Where I do think *some* companies in the UK get a free ride is because of our benefits system where even those in work can often get more back from HMG than they pay in tax. If we reformed this, companies would have to pay a "living wage". While this might push up some costs and/or reduce some corporate profits, I'd much rather this than our bloated welfare state.

grey_gym_sock

gadgetmind wrote: »

They provide a business-friendly environment in a perfectly legal way.

yes. my real point is not to make a moral judgment about what tax havens do. it's that the fact that they're able to do it is a failure of tax systems and international tax treaties. tax law should be changed, to focus on taxing the substance of economic activity, rather than the legal form. very little actual economic activity takes place in tax havens.

the standard approach for dividing the profits of multinationals among different territories - transfer pricing - simply doesn't work. because very often there simply is no open market price for the goods/services transferred. and when there is, the information is often difficult to find. at least for the tax authorities.

it would be better to divide a multinational's global profits up in proportion to a variety of factors - where they employ ppl, where they have assets, where they have sales, etc.

that would give an obvious win in the case of companies such as amazon. the UK would at least get the part of the tax in proportion to UK sales, instead of virtually nothing, as now. clearly amazon wouldn't leave the UK because of that. they'd just be throwing away a chunk of their profits.

yes, it is possible to drive companies away with tax changes. it need to be taken into account. it doesn't mean you can't attempt to improve the tax system.

ppl will always disagree about what is fair in taxation. but you can't get round that by leaving fairness out of the discussion. that would be unfair!