“With the U.S. Senate reportedly finishing an investigation into how Apple and others dodge taxes, and with Apple fighting for an officially sanctioned tax holiday, it’s worth taking stock of Apple’s tax liabilities,” Ryan Tate reports for Wired. “Dealing with the tax man, it turns out, could cost the company upward of $28.5 billion or send it on a shopping spree abroad.”
“Even as Apple lobbies for corporate tax amnesty… Apple’s big tax liabilities are important considerations when thinking about the company’s vaunted cash and securities hoard, which reached $121.3 billion three months ago,” Tate reports. “Fully $82.6 billion of that money was held by Apple’s foreign subsidiaries, which collect much of Apple’s profit as part of a popular tax avoidance scheme in which offshore subsidiaries hold a tech company’s intellectual property and the U.S. parent then licenses the intellectual property back. Thanks to such maneuvering, Apple paid just 1.9 percent on foreign earnings in its last fiscal year.”
Tate reports, “Apple has been hoping a tax holiday will free up its overseas assets. Along with other big names in tech like Google and Microsoft, Apple is part of the ‘WIN America Campaign,’ which reportedly hired 160 lobbyists to push its stated agenda of repeating the ‘one-time’ 2004 corporate tax holiday bestowed by Congress… Apple, which did not respond to requests for comment, defended itself to The New York Times by saying ‘in fiscal 2012 we paid $6 billion in federal corporate income taxes, which is 1 out of every 40 dollars in corporate income taxes collected by the U.S. government.'”
Read more in the full article here.
MacDailyNews Note: “Tax dodge” is a loaded term. Apple, like any competent company, practices tax avoidance, which refers to reducing taxes by legal means, not tax evasion which is illegal, willful non-payment of taxes.
It’s ironic that Congress needs an “investigation” (read: “yet another dog and pony show”) into tax avoidance when Congress is the reason for the loopholes that permit tax avoidance in the first place.
[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]
Related articles:
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So how much did Apple really pay in taxes? – November 1, 2012
Apple’s showdown with the U.S. government over taxes on offshore cash – July 13, 2012
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Apple’s dividend move puts spotlight on foreign cash holdings, repatriation tax reform – March 20, 2012
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Apple’s foreign cash hoard piles up: $54 billion and rapidly growing – January 11, 2012
Senator John McCain eyes Apple’s $54 billion overseas cash pile – November 3, 2011
Google joins Apple in push for U.S. repatriation tax holiday – October 3, 2011
Apple lobbies Obama for tax holiday, wants to bring overseas bounty home – August 24, 2011
U.S Senate Democrat Schumer allies with Apple, other multinationals on repatriation tax talks – June 21, 2011
U.S. companies push for tax break on foreign cash – June 20, 2011
Apple, Oracle, Duke Energy, others organize lobbying blitz for tax holiday – February 17, 2011
Agree with MDN in that Congress has the most experts in tax avoidance and money laundering. Sadly, they make the laws then spend time and effort evading and ignoring them.
Congress currently has the LOWEST approval rating EVER.
Sad.
“Congress is the reason for the loopholes that permit tax avoidance in the first place.” Along with highly paid lobbyists and bribery^H^H^H^H^H^H^H I mean campaign contributions.
Indeed. Included in the deal to avoid the “fiscal cliff”, some $60 billion in tax breaks and subsidies to favored interests (like wind farms) covering the current year offsets the roughly $600 billion over ten years (so about $60 billion per year) in higher taxes on “the rich”, or rather those among the latter who aren’t counted among the favored.
Apple’s moment may have passed. There is increasing pressure on multi-nationals by major Western governments to pay tax where the earnings are generated: the British Gov is saying that closing down these loopholes by tax authorities will be the main initiative of their year as Chair of the G8. Just a follow up to chasing individual tax dodgers – to which the US Treasury gives high priority – and I thought the Supreme Court had decided that corporations should be treated as individuals.
Apple does pay tax where the money is generated. The revenue is earned outside of the United States, and they pay taxes in the country in which it was earned.
What’s happening here is that they want to bring that money back to the United States (repatriate), without paying taxes on it again. The government wants to dip their hand into something they with which they had nothing to do. It’s free money, from their perspective.
Corporate taxes in general are bogus. Corporations don’t pay taxes, they just pass them onto consumers. Regulations are the only thing akin to taxes from the corporations’ perspective.
Sorry do not agree. This whole tax strategy had its genesis during Clinton’s presidency. The wholesale sale of intellectual property to offshore tax havens created a huge one time windfall in taxes t o the government. That was the basis of the balanced budget we had those couple of years. Since that time the movement of massive yearly monies off shore in the form of royalties (tax deductions in the US) has been huge and now they are looking to bring it back at a highly reduced rate. Fact is the money was never “earned” overseas. And this tax dodge was not just high tech companies, but most major multinationals like GE, PPG, Boeing, etc participated.
One thing is certain, US companies cannot be taxed at rates much higher than other developed countries or we risk losing more than just the off shoring of on intellectual property.
Look at the earnings reports. More than half of Apple’s revenue is generated outside of the United States.
You all do realize that any ‘corporation’ does not pay any tax at all….
*YOU* pay the tax (priced into the product)…. it is yet simple ONE MORE tax YOU pay…..
Not a problem. I drive on roads, my kids go to school, law enforcement is on the job, inspectors make sure my food isn’t adulterated, etc.
I’m perfectly fine with pulling my weight.
It’s got to be worth Apple either buying its own offshore tax haven or terraforming one somewhere nice?
Sorry, MDN, tax avoidance is looking at the existing tax law and asking what is the best way to paying the least amount of taxes.
Tax avoidance isn’t, on the other hand, creating a vast, million pieced contraption that at the end requires that Congress change the tax laws just save your sorry ass.
Many of the “loopholes” exist because they aren’t loopholes–they are tax regimes that have as a final fallback that you have to pay your home country’s tax rate when you bring the money home. Take apple’s UK operations. If companies have a UK branch they pay UK corporate taxes. If they don’t have a UK branch they pay corporate tax at home. That isn’t a loophole; it is a choice.
Apple wants congress to create a loophole and eliminate the fallback behind all of the tax schemes apple has been trying.
There’s a simple legal phrase in response: tough noogies.
A holiday is terrible policy and always has been. Congress was told this the last time they were stupid enough to fall for it in 2005. They were told the repatriated money wouldn’t be used to expand us operations, even though that was the selling pitch, and that all that would happen is that companies would expect more holidays in the future and would then routinely keep money abroad waiting for the next holiday.
And that’s just what happened.
Stupid.
And for anyone that bitches about how the US treats foreign profits, you’re an idiot. A tax holiday does nothing to change that treatment, and actually lowers the amount of pressure to permanently change the law–just look at now, apple and their buddies could be pressuring lower permanent rates but would rather get a super low holiday rate.
The real problem here is the US tax system which attempts to tax all income of US citizens no matter where it is earned — a position that is almost unique among modern democracies. Thus, you have seen and will see an increasing wave of people giving up US Citizenship in favor of another country that does not try to tax all income no matter where earned. The attempt to grab and tax corporate revenues is no different. The US tax system is forcing people and companies to go off shore, and that is only going to get worse unless and until there is a fundamental change in US income taxes.
Saying that corporations don’t pay taxes is a semantic fallacy. I worked in industrial engineering for a number of years. When I laid out a production line and the cost of building a product was generated and costed to a bill of materials there was no line items for taxes of any sort. taxes are computed after cost of goods sold are deducted and investment tax credits are applied. So after a corporation has computed the cost to manufacture and sell an item and credits for R&D and other items are taken into account and depreciation, them a corporation is taxed on the balance. Now clever accountants can shift cash flow around depending on the industry. But no corporation can add a tax factor to it’s bill of materials because
a. you don’t know where it will be sold and
b. goods and services are subject to the laws of supply and demand.
It’s amazing how many people tent to forget that.
Live and work in countries other than the USA. I am a US citizen. I must pay taxes on my foreign earnings. What I pay locally is credited against what I owe to Uncle Sam. My first $92k of income is not tacked by USA. But since exchange rates are crap, I pay in Luxemboug and the US. Aple should, too. The US government spends a fortune keeping the world safe for Apple to succeed in. Dancers must pay the piper.