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The fight over online sales tax and how it impacts you
For over 20 years, the internet has made purchases easier than ever in human history. With one-click buying and free-shipping programs, people have flocked online to buy nearly a quarter of a trillion dollars of stuff per year. Many of those transactions happen without the burden of sales tax, making online shopping not just convenient, but also cost-efficient. That may all be about to change.
UK music industry pushes for a new tax on CD copying
Before October 1st this year, you were probably a criminal. On that day, UK copyright law changed to include a private copying exception that, simply put, means you're allowed to copy media for your own personal use (not distribution, obviously). This is especially important when it comes to music. Although it might be hard to believe, if you've ever ripped a CD and moved the digital copies to an MP3 player or your phone, you were technically committing a crime.
Spain is making Google (and others) pay news publishers a tax
For companies like Google, facing problems with the law across Europe has become a common thing. The most recent example of this is now taking place in Spain, where the country's parliament just gave the go-ahead to what's being known as the "Google Tax," a set of intellectual property laws that lets news publishers get paid every time their content is linked within search results. Last year, something very similar happened in Germany, and that fight ended recently with Google having to strip down its news service to accommodate the requests of German publishers.
Ireland will eliminate Apple's sweet tax deal within four years
Apple and other tech giants had better not lean too heavily on Ireland's super-favorable tax environment; at least one big perk is going away. Finance minister Michael Noonan has detailed a new budget that, among other things, will phase out the "double Irish" system that let companies operating in Ireland (including Apple) move their revenue to an Ireland-registered offshore tax haven. As of 2015, companies incorporated in the country will have four years to make sure that they're also tax resident -- that is, they'll pay the same as any other corporation operating on the Emerald Isle.
The EU is investigating Amazon for a potentially illegal tax deal
After setting Apple firmly in its crosshairs, the European Commission is now targeting retail giant Amazon's tax dealings. In a press release this morning, the Commission announced it's opened an "in-depth investigation" into the company's tax status in the tiny country of Luxembourg -- home to Amazon's European subsidiary. Since 2003, Amazon has recorded the majority of its regional profits in the country, but those profits are not taxed there. As with the aforementioned Apple probe, the Commission believes that the favorable tax deal is tantamount to illegal state aid, and will now investigate Amazon and Luxembourg in an attempt to prove that. So far, Luxembourg has failed to fully comply with requests for further information, but with the Commission turning up the heat, it's unlikely that either party will be able to hide from the investigation.
UK government swaps paper car tax discs for its vast camera network
The paper car tax disc has had a very good innings, but it's finally come to the end of its life. Presented proudly by UK motorists for more than 90 years, those circular bits of paper have today officially been replaced by an electronic register. What does that mean for you? Well, you'll still need to pay for your tax the same way each year, but you'll no longer need to fix the disc to your windscreen, even if it's still yet to expire. Authorities can't now physically check you've paid, instead they'll fully rely on the hundreds of thousands of ANPR (automatic number plate recognition) cameras that adorn Britain's roads. Considering replacement tax discs (well, forgetting to renew them) cost British motorists more than £7 million a year, some might be glad to see them gone. However, the government now allows you to pay by direct debit and "velologists" (tax disc collectors) might pay a pretty penny to get their hands on one of the last ever discs, as long as you've kept it in top notch condition.
Apple accused of receiving illegal state aid in Ireland
Apple's alleged exploitation of a tax ruling in Ireland is getting some attention from the European Commission. In a preliminary finding that labels the treatment the company has been receiving "state aid," Apple and several other large companies, including Google and Microsoft, could see their tax situation in the country change dramatically. While the company employs thousands of people in the Irish city of Cork, accusations of unlawful tax practices stem from the funneling of money through their operations in Ireland to offshore accounts. This results in a greatly reduced tax burden, and the Irish government has been talking about slamming the door shut on such practices for many months already. Apple will have a month to gather its argument and present it to the European Commission, though in a statement to Business Insider, the company noted that its tax payments in Ireland have increased tenfold since the launch of the iPhone, asserting that the company has always played by the rules. Unfortunately for Apple, it looks like the rules are the problem this time around. [via Electronista]
Apple announces US sales tax holiday for select states
Several states in the U.S. offer sales tax holidays around the start of back-to-school season to help parents save money on required purchases. This Tuesday Apple announced that they would be honoring these sales tax holidays not only in the retail locations, but also online. There are obviously some caveats to the promotion. First, you have to live in one of the nine states with sales tax holidays during the back-to-school season. Those states are: Alabama Florida Georgia Louisiana Massachusetts Missouri New Mexico South Carolina Tennessee If you make your purchase in the store, the sales tax will be automatically deducted for you. Ordering online, the sales tax will appear on your bill during checkout, but the corrected tax amount will be reflected on your email order confirmation. During the sales tax holiday, Macs, iPads, and common accessories like keyboards and mice are eligible for the discount. Depending on your state laws, iPhones and educational software may also be eligible. That eligibility changes from state to state, so look into the rules for your particular state before making any major purchases. Act quickly; the sales tax holiday is from August 1 through August 3 in every state except Georgia and Massachusetts. Georgia's holiday ends on August 2, one day less than other states, while Massachusetts hasn't set the dates yet for this year's sales tax holiday.
One-time tax holiday for Apple's overseas cash gains traction in D.C.
Apple today has over $150 billion worth of cash in the bank. Only problem is, the vast majority of that cash (~$138 billion) is held in overseas accounts. For some time now, Apple has been reluctant to bring that cash back to the United States because it would be subject to a 35 percent corporate income tax -- the highest rate anywhere in the world. Indeed, Apple's reluctance to brings its cash back stateside is why the company decided to issue debt to fund its ever-increasing capital return program. For quite some time, Apple and a number of other blue chip companies with vast cash holdings overseas have made it known that they'd love some sort of one-time tax holiday that would allow them to bring their cash over without taking a 35 percent hit. Now comes word via Reuters that the idea may be gaining traction in the halls of Washington. Top Senate Democrats and Republicans on Tuesday said they were considering offering American companies a one-time tax break if they repatriate profits stashed abroad. The senators anticipate the proposal would generate a windfall in revenue that would be used to fund federal transportation projects. U.S. Senate Minority Leader Mitch McConnell told reporters in the Capitol that Republicans had discussed a corporate tax repatriation "holiday" idea and "it enjoys a good deal of support in our conference." Back in May of last year, Tim Cook touched on the topic of a tax holiday during an interview with the Washington Post. "If you look at it today, to repatriate cash to the US, you need to pay 35 percent of that cash," Cook said. "And that is a very high number. We are not proposing that it be zero. I know many of our peers believe that. But I don't view that. But I think it has to be reasonable" Supporters of the tax holiday argue that enabling companies like Apple to repatriate billions of dollars in foreign cash at a significantly reduced tax rate would provide a much needed influx in federal funds. In particular, supporters articulate that the resulting revenue could help replenish the quickly depleting Highway Trust Fund. While no legislation has yet been put into motion, it has to be encouraging to Apple that the powers-that-be are talking. The last time Congress allowed a tax holiday was in 2004 when companies were able to bring back their foreign cash at a paltry 5.25 percent tax rate.
Europe opens investigation into Apple's tax deals
Apple has said on more than one occasion that it pays its fair share of taxes, but it appears that the European Commission isn't so sure. Today, the regulator confirmed it's launched an investigation into whether the company is enjoying better tax deals than are warranted under EU law. It all centers around Apple's Irish subsidiaries, Apple Sales International and Apple Operations Europe, which may have benefited from pricing arrangements that allowed it to minimize the overall amount of tax it paid. At 12.5 percent, Ireland's business tax rate is lower than most EU member states, but Apple has previously been accused of securing rates as low as 2 percent.
UK government closes tax loophole on digital media, could mean the end of the 99p song download
Buried within the latest budget plan for the UK, Chancellor George Osborne announced new laws that would ensure internet downloads from the likes of iTunes, Google Play Amazon and game networks would be taxed in the country they're bought in. In the case of the UK, that would be around 20 percent VAT, substantially more than selling through countries like Luxembourg where the rate can be around 3 percent. Separate to the government's grand plans for its digital future, the new rule would start January 1st 2015 -- "ensuring these are taxed fairly and helping to protect revenue." According to the government's estimates, it could net around £300 million in extra tax income, although it's likely to bring digital download pricing (unfortunately) closer to physical media in the process.
Proposed GOP bill excludes violent software makers from tax credit
The recently revealed Tax Reform Act of 2014 by House Republicans has caught the attention of some folks in these here parts for preventing makers of violent video games from qualifying for tax credits. The Washington Examiner correctly points out that in the bill's executive summary (a fancy term for overview) that violent video games are specifically called out. The Entertainment Software Association, the US trade organization that puts on the annual E3 show in Los Angeles tells Joystiq, "This industry, like all software developers who would be impacted under this proposal, invests billions of dollars every year in research and development and this proposal threatens American technological advancement and economic growth. We look forward to continuing to educate policymakers on our societal and economic contributions and the need to preserve and expand this unique industry." Although the executive summary mentions video games, the actual bill's language doesn't. However, it does exclude software development from the tax credit, which would be an even bigger issue. [Image: Pixel-3D via Shutterstock]
UK government scraps the paper car tax disc after more than 90 years
Almost a century after its introduction, the UK government is set to scrap the paper car disc and go all in with its electronic register. According to the BBC, its death was confirmed by the UK Treasury ahead of Chancellor George Osborne's Autumn Statement later today, meaning motorists will no longer need fix a disc in their car window to prove they've taxed their car. "This is a visual symbol of how we are moving government into the modern age," says the UK government, which will also announce that vehicle owners can pay for their duty by monthly direct debit, adding 5 percent to the overall cost. From October 2014, authorities will identify whether tax has been paid through a car's license plate, allowing it to recoup £7 million in admin costs and save UK drivers the hassle of waiting for that little paper disc to come through the post.
EU hoping to close off corporate tax loopholes utilized by Apple and others
To say that Apple's off-shore tax practices came under scrutiny in 2013 would be an extreme understatement. Though the tax minimization schemes Apple employs overseas are no different than those used by other multinational corporations, the spotlight in typical fashion seemed to shine exclusively on Apple. That being said, Reuters is reporting that the EU is taking a closer look at how US corporations like Apple use what can sometimes be a complex maze of subsidiaries to reduce their overall tax liability. The European Commission will attempt to close a loophole that allows companies to cut their tax bill, a top EU official said on Monday, but the EU executive will first need to persuade member countries to back the change. The Commission wants rules to prevent companies setting up "letter-box subsidiaries" in countries, such as Ireland or the Netherlands, solely to qualify for a softer tax regime and cut their bill. Algirdas Semeta, the EU's taxation commissioner, wants to insert an anti-abuse clause by the end of next year, allowing authorities to target artificial 'parent-subsidiary' schemes that flout the spirit of the tax code. Now whether or not the proposed tax clause will gain any traction is an entirely different matter. The report notes that getting smaller EU countries on board may prove challenging to say the least. With so many countries having what often amounts to competing interests, it's hard to see this type of legislation being pushed through.
Apple accused of tax fraud in Italy
Reuters is reporting that an Apple subsidiary in Italy is currently under investigation for tax fraud. According to a judicial source cited by Reuters, authorities in Italy are currently investigating whether or not the Apple subsidiary in question hid US$1.34 billion in revenue from tax authorities. The maker of the iPhone is the latest prominent corporation to become the target of a tax probe in Italy amid a global crackdown on tax cheating by multinationals. In Italy, where tax authorities have become more aggressive in their dealings with global companies, fashion designers Domenico Dolce and Stefano Gabbana were handed in June a 20-month suspended prison sentence and a heavy fine for hiding hundreds of millions of euros in unpaid taxes. Both deny any wrongdoing. For whatever reason, Apple seems to have a penchant for running afoul of various Italian laws. You might remember that Apple previously had a drawn-out spat with Italian regulators with respect to its AppleCare Protection plan.
SEC concludes review of Apple's tax policy
Four months after the US Senate's Permanent Subcommittee held hearings to look into Apple's off-shore tax practices, the Security and Exchange Commission has ruled that Apple did not violate any laws. As AllThingsD reports: In a September letter to Apple, released late last week, the SEC said it had completed its review of the company's fiscal 2012 annual report, and would take no action against it at this time. Evidently, there's no need to, as the agency has found Apple's disclosures to be sufficient, particularly now that it has agreed to provide investors with more information about its foreign cash, tax policies and plans for reinvestment of foreign earnings. In the SEC's eyes, Apple accounts for taxes in accordance with generally accepted accounting principles. While the Senate's Permanent Subcommittee hearing found that Apple kept US$74 billion from the IRS between 2009 and 2012 in overseas account, it did so lawfully. The SEC's finding probably did not surprise Tim Cook, who sat down with The Washington Post earlier in the year and said, "I can tell you unequivocally Apple does not funnel its domestic profits overseas. We don't do that. We pay taxes on all the products we sell in the US, and we pay every dollar that we owe. And so I'd like to be really clear on that." The SEC's report, which was filed last week, means that Apple probably won't be facing any other legal tax scrutiny from the US government.
Germany recognizes Bitcoin as private money, makes it tax-free for personal use
So far, governments have had polarized reactions to Bitcoin: they either recognize it as a fully regulated currency or ban it outright. Germany, however, has just taken a more nuanced position. The country now recognizes Bitcoin as private money that stays tax-free for personal uses, such as non-commercial internet auctions. You'll only have to pay taxes on business transactions. While the decision doesn't give Bitcoin as much weight as the euro, it should reassure Germans who want to stay on the right side of the law. [Image credit: Zach Copley, Flickr]
Apple promotes tax-free shopping days
Apple on Monday began reminding folks that a number of states are holding sales tax holidays beginning on August 2nd. As the name implies, sales tax holidays enable consumers to purchase certain types of items and forgo having to pay sales tax. Come early August, 10 different states will hold sales tax holidays for varying lengths of time wherein certain Apple products will qualify.. The states where deals can be had include Alabama, Florida, Georgia, Louisiana, Missouri, New Mexico, Massachusetts, North Carolina, South Carolina, and Tennessee. Note that every state has its tax holiday begin on a different date, so make sure to check out Apple's website for more details. Further, keep in mind not every item under the sun qualifies for the holiday sales tax exemption. You see, the intent of the sales tax holiday is to help subsidize back to school shopping, which is why computers in some states are included. So unfortunately, that big screen TV you've been eyeing at Best Buy doesn't qualify, which is a shame because there really is a lot of educational programming out there these days. Kidding aside, it's worth noting that the sales tax exemption can be applied on top of Apple's current back to school promotion. Also note, per Apple's informational page, that when you purchase a qualified item from Apple's online retail store, the normally applicable sales tax will show up in your shopping cart. The "correct no-tax amount", however, will be evident upon receipt of your email purchase confirmation.
UK games industry still waiting on promised tax breaks
UK games industry trade association TIGA has urged the European Commission to deliver promised tax relief for local game developers after failing to meet a proposed implementation date. The UK government planned to issue a total of £50 million in tax breaks for UK developers, starting in April of this year and extending through 2015. The proposed Games Tax Relief (GTR) plan offered 25 percent tax relief on 80 percent of a qualifying game's budget, and required passing a "cultural test" for consideration. In April, the European Commission launched an investigation regarding the plan's necessity, delaying its implementation.
Ireland says it has no special "tax deal" with Apple; Senators Levin and McCain dispute claim
Despite claims to the contrary, Ireland Ambassador Michael Collins this past week penned a letter to US Senators Carl Levin and John McCain exclaiming that Ireland has no special tax deal with Apple. The letter reads in part: First, Ireland's tax system is set out in statute - so there is no possibility of individual special tax rates being negotiated for companies. All tax resident companies in Ireland are liable to corporation tax on the chargeable income at the rate of 12.5% on trading income and at 25% on non-trading income. The tax rates attributed to Ireland in the Memorandum appear to be calculated by reference to the companies' entire profits, as if those companies are tax-resident in Ireland. This is despite the fact that the Memorandum clearly states that the companies concerned are not tax-resident in Ireland. The tax rates attributed to Ireland are wrong and misleading. Second, building on this analysis, the Memorandum refers to Ireland as a "tax haven". As you will be aware, the OECD has identified four key indicators of a tax haven. None of these criteria applies to Ireland. Understandably, many politicians are upset over Apple and other multinationals leaving billions upon billions of profits overseas. However, in their ostensible effort to paint Apple as the bad guy, they are not only ignoring the tax code which allows Apple to do what it does, but have also gotten a number of key facts wrong. For instance, Carl Levin initially stated that Apple's operation in Ireland was nothing more than a ghost operation with no employees. Come to find out, Apple actually employs upwards of 4,000 employees in Ireland. In any event, both Carl Levin and John McCain responded to Collins' letter wherein they disputed his assertions. Their statement reads: Records obtained by the subcommittee clearly reflect that, for years, Apple paid Irish tax authorities a nominal rate, far below Ireland's statutory rate of 12.5 percent, on trading income. Testimony by key Apple executives, including CEO Tim Cook and Head of Tax Operations Phillip Bullock, corroborates that Apple had a special arrangement with the Irish government that, since 2003, resulted in an effective tax rate of 2 percent or less. Most reasonable people would agree that negotiating special tax arrangements that allow companies to pay little or no income tax meets a common-sense definition of a tax haven. Well, this clearly isn't a topic that's going to die down anytime soon. Note, though, that until Congress changes the law in some regard, Apple will continue to keep its $100 billion cash hoard overseas.
