Wednesday's Top 10 with NZ Mint: Apple's effective tax rate of 0.06% in Ireland; Just print me a pizza; 'Hallelujah, it's raining Yen!; Solar panel settlement may hike prices; Dilbert

Here's my Top 10 links from around the Internet at 1 pm today in association with NZ Mint.

As always, we welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.

See all previous Top 10s here.

My must read is #2 on raining Yen. Hallezlujah. 

1. Apple in the tax hunt firing line - The big business news over the last 24 hours or so has been the explosive US Senate report detailing just how clever Apple is at avoiding paying its taxes overseas (in places like New Zealand).

Here's the full senate sub-committee report.

It's a cracking read that's bound to make any normal taxpayer's blood boil.

It's symptomatic of the pathologies inherent in many large multi-nationals around taxation, executive salaries and long term employee relations.

Do they realise actions like this are forcing governments to cut funding to kids, schools and hospitals?

Do they realise it will eventually hit their own customers?

This will be a theme governments, consumers and voters will return to time and again over the years to come.

Here's Quartz with the first 3 of the 7 craziest ways Apple avoids paying its fair share:

1. Almost all of Apple’s foreign operations are run through an Irish company with no employees. The company told investigators that it lost all records concerning why Apple Operations International was originally set up in 1980, and why all of Apple global sales go through it. You might have a few ideas why if you keep reading.

2. Apple pays 2%—or less—in corporate income tax in Ireland. The already low-tax country gives Apple special treatment with a negotiated 2% income tax rate. But that’s just the top-line number: Between 2009 and 2011, one Irish subsidiary, Apple Sales International, earned $38 billion and paid $21 million in taxes, for an effective rate of .06%.

3. Apple Operations International, which provided 30% of Apple’s worldwide net profits from 2009 to 2011, doesn’t pay taxes anywhere. This move is devilishly brilliant: The US decides if it can tax you based on where you incorporate your company. Ireland decides if it can tax you based on the location of the people managing the company. So if you incorporate a subsidiary in Ireland, and manage it from the US, you don’t (so far) have to pay taxes in either country. And that’s exactly what Apple has done, not filing a tax return for AOI anywhere in the world in the last five years.

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2. It's raining yen, Hallezlujah  - Satyajit Das explains here at Economonitor how the currency wars now sweeping from America and Britain to Japan and soon on to Europe are just part of a wider economic contest.

New Zealand still naively believes its a fair contest.

Currency conflicts are merely skirmishes in the broader economic wars between nations. Most developed nations now have adopted a similar set of policies, to deal with problems of low economic growth, unemployment and overhangs of high levels of government and consumer debt.

In a shift to economic isolationism, all nations want to maximise their share of limited economic growth and shift the burden of financial adjustment onto others. Manipulation of currencies as well as overt and covert trade restrictions, procurement policies favouring national suppliers, preferential financing and industry assistance policies are part of this process.

Central banks are increasingly deploying innovative monetary policies such as zero interest rates (“ZIRP”), quantitative easing (“QE”) and outright debt monetisation to try to engineer economic recovery.

Artificially low interest rates reduce the cost of servicing debt allowing higher levels of borrowings to be sustained in the short run. Low rates and quantitative easing measures help devalue the currency facilitating a transfer of wealth from foreign savers, as the value of a country’s securities denominated in the local currency falls in foreign currency terms.

The policies also force the cost of economic adjustment onto other often smaller nations especially emerging countries, via appreciation of their currency, destabilising capital inflows and inflationary pressures, for example through higher commodity prices. Given that emerging markets have underpinned tepid global economic growth, this risks truncating any recovery in developed nations.

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3. The Eurozone's woes in one chart - Courtesty of Ed Dolan at Economonitor.

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4. Yum yum - Quartz looks at moves to make food using 3 D printers and food powder.

New Zealand will be rich, given we produce so much milk powder! HT Dave Pell via emai

Anjan Contractor, a mechanical engineer with a background in 3D printing, envisions a much more mundane—and ultimately more important—use for the technology. He sees a day when every kitchen has a 3D printer, and the earth’s 12 billion people feed themselves customized, nutritionally-appropriate meals synthesized one layer at a time, from cartridges of powder and oils they buy at the corner grocery store. Contractor’s vision would mean the end of food waste, because the powder his system will use is shelf-stable for up to 30 years, so that each cartridge, whether it contains sugars, complex carbohydrates, protein or some other basic building block, would be fully exhausted before being returned to the store.

Ubiquitous food synthesizers would also create new ways of producing the basic calories on which we all rely. Since a powder is a powder, the inputs could be anything that contain the right organic molecules. We already know that eating meat is environmentally unsustainable, so why not get all our protein from insects?

5. Trade war stand-down - The New York Times reports Europe and the United States look settle with China over their anti-dumping complaints against Chinese solar panel suppliers. 

This is good news for those worried about the beginning of some sort of Smoot Hawley trade wars. It's not so good for environmentalists who want really cheap solar panels.

The plan that is starting to take shape would essentially carve up the global solar panel market into a series of regional markets. It would sharply raise the price of solar panels exported from China, the world’s dominant producer, by requiring Chinese companies to charge more while limiting the total number of solar panels they could ship.

In exchange, Chinese companies would no longer be charged steep taxes on their exports of solar panels. The United States is already collecting tariffs totaling about 30 percent while the European Union is expected to impose similar tariffs of about 50 percent on June 5, and may backdate them to March 5.

Parallel decisions by the Obama administration and the European Union to separately negotiate high prices for imported solar panels may prove unpopular among environmentalists. Some environmental groups are already upset that the tariffs have made solar energy less affordable, making it less competitive with more polluting fossil fuels.

6. The Great Chinese Housing Boom - Here's the Federal Reserve Bank of St Louis with a research note on the scale of the credit-fueled housing boom in China.

Let's hope the US Federal Reserve doesn't do a similar study of New Zealand house prices...our price to income multiples are not much better in some places.

Housing and land prices in China have increased continuously and dramatically for the past two decades. In fact, housing price growth has significantly outstripped income growth. Current housing prices are roughly 11 times annual income; in large cities such as Beijing and Shanghai the price-to-income ratio is as high as 23 to 1.1 By comparison, Tokyo house prices were 15 times income and U.S. house prices 5 to 6 times income when the Japanese and U.S. housing bubbles, respectively, burst in 1990 and 2006. Rapid price growth, large price-to-income ratios, and high vacancy rates (between 25 and 30 percent) suggest the possibility of a bubble.

 

The top chart compares key facts for the Chinese and U.S. housing booms and the bottom chart compares the recent mortgage debt as a share of gross domestic product for both. While in both cases nominal house prices increased by close to 50 percent over a 5-year period, the differences are striking. The U.S. housing boom reflects overconsumption and overborrowing, whereas the Chinese housing boom reveals large investment in construction and apartment holdings. Most of the “vacant” Chinese homes have been sold to private owners but are being held as investments alongside multiple other homes.

7. Europe faces a lost decade - So says incoming Bank of England Governor Mark Carney in this Telegraph piece. 

In words that will underline his status as a monetary activist and fuel speculation that he will try to relaunch quantitative easing (QE) when he arrives in the UK, Mr Carney applauded Japan’s “bold policy experiment” to boost dramatically its own QE programme.

He said: “Europe can draw lessons from Japan on the dangers of half measures... Europe remains in recession. Deep challenges persist in its financial system. Without sustained and significant reforms, a decade of stagnation threatens.”

8. Say what? - Australia's superannuation industry wants a lump sum tax put on withdrawals from its schemes, the Sydney Morning Herald's Michael Pascoe reports. 

At first, it might seem a “very brave” decision for the super industry itself to want a tax on lump sum withdrawals, or a cynical soul might suggest it is self-interest at work for the big super funds wanting to keep their hands on individuals savings and thus continue to clip a bigger ticket. ASFA argues that it is necessary to encourage individuals not to run their retirement savings.

“The primary purpose of superannuation is to provide financial security in retirement. This purpose is not currently being achieved with any certainty as there are many potential leakages that are a cost to the system's integrity and the taxation concessions provided."

ASFA says the leakages include both using superannuation benefits too slowly for estate planning purposes and using them too quickly. In the latter case, the result is having insufficient protection against the financial consequences of living a long time or longer than most other people and “excessively running down retirement savings when they become available to either fund excessive consumption and/or debts that were built up in the lead up to retirement in the knowledge that a lump sum would be available”.

9. The new normal for coal - Bloomberg reports Indonesia's second biggest coal producer saying the 'new normal' for the coal price is now US$100/tonne, half what it was in 2008. Someone should have told Don Elder. Perhaps his board, or his minister. Just someone. 

10. Totally Jon Stewart on the US health system's need for a decent computer system