“You’ll recall that claim from earlier in the year that Apple only paid a 9.8% tax rate on its profits. Cue much wailing and gnashing of teeth in the New York Times and other places,” Tim Worstall reports for Forbes. “The problem was that those doing the calculation seemed unaware of how the corporate tax system actually works: in arrears. In this time period you pay taxes on the profits you made in the last time period. How can it be any other way given that you’ve got to add up the numbers to see what profit you made?”

“Sure, there are estimations and advance payments and so on, the government doesn’t like to wait too long for its money. But the general principle still stands: what you pay over in actual cash in this time period is not the tax that is due from this time period. With that in mind, now that we’ve got Apple’s 10-K for 2012, we can have a look at how much they’re really paying in tax,” Worstall reports. “Apple’s own claim is as follows: ‘The Company’s effective tax rates were approximately 25.2%, 24.2%, and 24.4% for 2012, 2011, and 2010, respectively. The Company’s effective rates for these periods differ from the statutory federal income tax rate of 35% due primarily to certain undistributed foreign earnings for which no U.S. taxes are provided because such earnings are intended to be indefinitely reinvested outside the U.S.’”

“This is the well known dodge: if you don’t bring foreign profits back to the US then you don’t have to pay US taxes on them. An entirely legal dodge it should be pointed out,” Worstall reports. “However, that’s not what they actually paid out in this financial year: ‘Income before provision for income taxes [$55.763 billion]; Cash paid for income taxes, net [$7.682 billion].’”

Worstall reports, “Divide one by the other and we get a tax rate of 13.8%. Which is certainly different from the 25.2% they claim. And no, this difference is not because of the offshore profits thing. That’s already been accounted for in the 25.2%. There’s several things going on here.”

Read more in the full article – recommended – here.

MacDailyNews Take: As Worstall points out so well in his full article, Apple’s paid tax rate seems “low” because Apple’s profits have been growing so quickly from year to year and “to a large extent, corporate income tax paid this year refers to profits made last year.”

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