“Over the years, Apple Inc. has become the poster child for U.S. multinationals accused of sheltering overseas profits to avoid the IRS,” Andrea Wong reports for Bloomberg. “What’s gone largely unnoticed is that it’s been paid more than half a billion dollars by the U.S. government to do just that.”
“Taking advantage of an exemption tucked into America’s Byzantine tax code, Apple stashed much of its foreign earnings—tax-free—right here in the U.S., in part by purchasing government bonds, according to people with direct knowledge of the matter,” Wong reports. “In return, the Treasury Department paid Apple at least $600 million and possibly much more over the past five years in the form of interest, a Bloomberg review of its regulatory filings shows.”
“According to tax experts interviewed by Bloomberg News, the maker of iPhones is hardly unique. Many of the biggest U.S. multinationals have seized on the same exemption, which lets them avoid or delay repatriation taxes by buying Treasuries with their overseas cash,” Wong reports. “That, in effect, enables the companies to turn billions of dollars in potential tax liabilities into millions of dollars in taxpayer subsidies—all while they publicly bemoan the sky-high taxes that make it impossible for them to bring the money home.”
“The maneuver is perfectly legal and no one is suggesting that it’s a big money maker for Apple or anyone else at today’s low interest rates. If the companies sold the bonds, the cash would still be considered foreign earnings and subject to eventual taxation. What’s more, the interest they earn from buying U.S. debt — which helps finance government spending—is taxable,” Wong reports. “Apple, which has more than doubled those holdings of Treasuries to $42 billion since 2012, received the most in interest payments [$590 million] over that time, the data show. In the same span, the Treasury has paid Cisco Systems Inc. roughly $430 million, while Alphabet Inc. (Google’s parent) has gotten about $160 million.”
Read more in the full article here.
MacDailyNews Take: Yes, as we wrote back in May 2015, for Apple, this is “free money.”
Hopefully, the next U.S. administration can work with Congress to fix the broken U.S. corporate tax “system,” so that Apple (and other multinationals) can repatriate a significant amount of their offshore mountain of cash. — MacDailyNews, September 12, 2016
SEE ALSO:
Apple has now amassed nearly $80 billion in debt – September 12, 2016
Money goes where it is welcome.” – Rand Paul
It ain’t rocket surgery.
I wonder how much the U.S. government, or should I say taxpayers, are doling out to China, which I understand owns quite a bit of our debt? And, is that better than paying Apple or other American companies? Just wondering.
How Much U.S. Debt Does China Really Own?
Foreign governments hold about 46% of all U.S. debt held by the public, more than $4.5 trillion. According to the Treasury, the largest foreign holder of U.S. debt is China, which owns more than $1.24 trillion in bills, notes, and bonds or about 30% of the over $4 trillion in Treasury bills, notes, and bonds held by foreign countries.
In total, China owns about 10% of publicly held U.S. debt. Of all the holders of U.S. debt China is the third-largest, behind only the Social Security Trust Fund‘s holdings of nearly $3 trillion and the Federal Reserve‘s nearly $2 trillion holdings in Treasury investments, purchased as part of its quantitative easing program to boost the economy.
The current $1.24 trillion in U.S. debt is actually slightly less than the record $1.317 trillion held by China in 2013.
Economists suggest the decrease was due to China’s decision to reduce its U.S. holdings in order to increase the value of its own currency.
Isn’t it interesting how our US government has used our Social Security Trust Fund to finance our government’s debt? That’s worth considerable laughter considering the FAKE NEWS that Social Security contributes to US debt. No it never does, obviously.
“Isn’t it interesting how our US government has used our Social Security Trust Fund to finance our government’s debt? ”
you can thank Lyin’ Lyndon for that…in ’68, when the House refused to further finance the Vietnam War, LBJ, by executive order, moved the Social Security Trust Fund into the General Fund…guaranteeing its eventual bankruptcy.
The Vietnam fiasco, another bullshit war created by our wonderful politicians, just like Iraq. Wouldn’t it be a much better world if we could rid it of politicians and lawyers?
Sick and stupid. Thank you for pointing that out bot. Two parties, no rational brain between the two of them. 😛
55,000 American lives later, it is always interesting to me that the only cabinet survivor of JFK to Lyin’ Lyndon was Robert Strange McNamara.
Unquestionably, more evil than Dick “Quail Hunter” Cheney.
I attended a talk Mr. McNamara gave circa 1978. There was a definite creepiness when I attempted to connect his word with his deeds. I had a similar experience when I saw Edward Teller give a talk. Teller was creepier. I’ve never been in a room with Paul Ryan, but watching him speak, comparing his word with his deeds, positively gives me the willies. He wins on creepiness.
I concur.
On some things we agree. I can at least count on you to be thoughtful.
Funny how the U.S. guv’mint has rather had zero overseas repatriation tax money than some at a more reasonable rate, following the world standard. The money could be used to build those factories here, people hired who will then pay U.S. taxes. Hopefully some of those factories will include advanced component manufacture and not just assembly.
BOTH Republicans and Democrats are responsible for the current high tax on overseas profits. Be sure to watch Apple’s hearing with the Senate subcommittee on taxation from May, 2013. You’ll hear:
Sen. Carl Levin, D-Mich., the subcommittee chairman, called Apple’s quest for lower corporate taxes “the Holy Grail of tax avoidance…. What may not be so well known is that Apple also has a highly developed tax avoidance system — a system through which it has amassed more than $100 billion in offshore cash in a tax haven.”
. . .
Arizona Sen. John McCain, the panel’s ranking Republican, praised Apple as a tech giant and major U.S. corporation and taxpayer. But, McCain added, “in my view, Apple has violated at least the spirit (of federal tax laws) if not the letter of the law.” McCain also said Congress was at fault for not simplifying the tax code.
. . .
Sen. Rand Paul, R-Ky., said the subcommittee should “apologize” for “bullying” one of the greatest U.S. business success stories. “This problem is solely created by the awful tax code,” said Paul, who added that “Congress should be on trial.”
“What we’re talking about is what every company in America does, and that’s minimizing their tax,” said Paul, stressing that Apple has not been accused of any wrongdoing.
http://www.usatoday.com/story/money/business/2013/05/21/apple-tax-hearing/2344351/
Just following the arcane tax laws, the govt made.
Corporate lobbyist made, you mean. “the govt” as you can see is once again being assembled by empty suits that think rich corporations make America great — all while ignoring the working class.
Don’t think for a minute that the current system had zero corporate input. 🙂 There was a time when short sighted companies thought they’d never make that much overseas, so they talked the government into ONLY taxing what they make there when they bring it BACK to the US.
What perplexes me is that corporations and their lobbyists working with a friendly government should have had this reworked a LONG time ago. Fortunately, this appears to the the slammiest of slam dunks ever within the first few months of next year.
Simplicity is the only way to tax fairly, reasonably, and equitably. We need to simplify the tax code removing all exemptions for both business and personal taxes. Letting the government pick winners and losers by manipulating tax laws is counter productive and leads to corruption and wasted resources. Read the book the “Fair Tax” – real eye opener.
Haven’t read that, but I do have 2 major concerns about any notion of a “fair” tax plan.
1) Who determines what is “fair”?
Clearly, you have what you think is a good definition. I have serious doubts a unanimous definition can be agreed upon about what “fair” means. I can guarantee that Trump and Bernie (along with most other people) have different ideas about constitutes “fair”… in any scenario, let alone taxes.
2) Government revenue.
Simplifying the tax code is a great idea and I agree with removing exemptions, but… government revenue has to go down to go along with that.
The State can’t continue to take in the same amount it does now, or all that will happen is the tax burden of the country will simply get redistributed in a way that will end up taking toll on those who least afford it.
Unless your idea of “fair” means progressive tax rates. And therein is a problem. Under my definition of “fair”, progressive tax rates are unfair.
Also, the responsibility of corruption lies solely with unethical parties in positions of political power (elected or not), not lobbyists, special interests, or anyone seeking favor. It is those with goods for sale who have control, not those with the money.
No amount of money can buy what isn’t for sale.
Paying interest to a bond (that is, a loan by Apple to the feds) is not a subsidy, and caliing it that misleads and misinforms. And the MDN headline is another distortion: Apple isn’t being paid to shelter funds overseas: it is being paid to lend our profligate federal government money.
This article claims that the US Taxpayer is subsidizing Apple by allowing them to keep money off shore and using THAT money to invest in US Treasury bonds. That is patently false. The money Apple uses to invest in US Treasuries is money earned HERE and KEPT HERE, not the money earned off shore and kept off shore.
If the money had been earned off shore and returned here to buy US Treasuries it would have been taxed by the US IRS at a 35% income tax rate, a very unwise move to earn the very small return paid by US Treasury notes. That would have been extremely stupid of Apple’s financial experts! I assure you they simply are not that stupid. The money off shore is still off shore.
What is the underlying motive this author and Bloomberg has to lie about this in this article?
By the same argument American Taxpayers are paying China to build a navy to challenge the United States. China, I believe, owns the most US Treasury bonds in the world.
“China’s share of the debt is sizable — about 7% — but it’s hardly the largest holder of U.S. government bonds.
The top holder by far is U.S. citizens and American entities, such as state and local governments, pension funds, mutual funds, and the Federal Reserve. Together they own the vast majority — 67.5% — of the debt.”
http://money.cnn.com/2016/05/10/news/economy/us-debt-ownership/index.html
I appreciate the correction. I didn’t bother to look up the stats. Regardless of the percentage, however, and taking China out of the conversation, the point I was making is still valid. A buyer’s motivation to buy US Treasuries is immaterial. The Gov is selling and they want buyers. The taxpayers are going to have to pay the cost of loan regardless of the lender, what they do, or where they got the original money to buy the bonds. The article’s author ascertion that Apple has “been paid more than half a billion dollars by the U.S. government” to avoid IRS taxing is idiotic.
Don’t point to Apple only – that’s unfair, and BS. The entire country is made up of companies that have fled for lower taxes overseas. Lower pay for workers in India and Costa Rica. Apple is doing what the rest are, and that won’t change until we reform taxes here to be reasonable. There may be hope in POTUS Trump. I’m neither a Dem or Repub, but I hope this guy can do something good. If not, we’re running out of time here before we become just another has-been world leader…
Just a minute. Government bonds are a means for the government to borrow money from people willing to buy them to support the government. In a sense Apple is loaning money to the government and Apple is receiving interest on the money they loaned. I see nothing wrong in this. Apple could be loaning the money to somebody else. But here they are supporting their home government and people are griping about it. Stupid!
Should be an editorial embarrassment to Bloomberg to stoop to this absurd sensationalism. Treasury is not “paying” apple to keep their dough unrepatriated; Treasury is paying them for the privilege of using their dough to cover the growing deficit.
The tax code is a shambles. I know it’ll never happen but here are my “Three Pillars of Good Economic Governance” which I’ve been preaching to an empty choir from day one. I expect a lot of flames but the best minds in economics stand behind these principles.
1. Flat or Slightly Progressive Tax:
– no tax loopholes, no tax shelters, no tax incentives;
– Everyone pays on a level playing field; the poor should have a stake in the system as well by paying a small token amount;
– Promotes more efficient allocation of monetary resources; financial decisions based upon true economic drivers and not tax avoidance considerations.
2. Free businesses to hire at market rates by abolishing the minimum wage:
– Stop and even reverse the exodus of factories and jobs from the U.S.;
– Stimulate new business development;
– Reduce unemployment;
– Increase the tax base.
3. Bring tax transparency by abolishing corporate taxes:
– Corporate taxes are an illusion; individuals pay them indirectly through increased cost passed along during the procurement of goods and services; employee pay them through lower wages, on which they are taxed again;
– Corporate taxes are regressive; the consumption of goods and services takes a disproportionately larger percentage of income from the middle class and especially the poor;
– Reveal the true tax burden to individuals and families;
– Permit better cost/benefit analysis of Government spending.
Modify the way the government allocates money, under the spend-it-or-lose-it rules for not losing money on next years budgets. Change the rules to make the various “departments” are held to responsibly spend and openly report how well they did towards achieving a best use policy.
I agree with much of what you propose, but let’s not be melodramatic. Tax code is just like software — everyone wants it modified just for their narrow desires. Problem is, government keeps giving people what they want. Greatest problem of our time is that the people who control great wealth have established rules that ensure they never lose, and they never pay because corporate officers have zero personal liability for anything, and golden parachutes to ensure they will never want for anything. Meanwhile the working class plays by the slanted rules and loses most every time.
1. You say you like a flat tax. Why? It sounds so simple but what if it leads to inferior outcomes? Believe it or not, taxes can be too low to provide a good outcome for the long term good of individuals and society. You’re not going to be able to invest much in national infrastructure if you collect pennies from the poor. 80% of personal assets are held by less than 1000 families in the USA. Multitudes more is locked in corporate vaults unused. Isn’t the real goal to provide the best possible long term health and well being for citizens? That means going to where the money is, as Eisenhower did.
Don’t forget that citizens are taxed in different ways locally and at the state level. Most of these are NOT progressive at all. Sales taxes and travel surcharges, for example, are highly regressive. So if you want the overall tax burden to be relatively flat, then income taxes MUST be progressive.
Note also that the best way to incentivize the rich to reinvest capital back into domestic business generation is to tax the hell out of capital gains. If you were making tons of money and knew that sitting on it would cost you, you would instead reinvest that money into your company’s growth, into payroll, or into infrastructure. All good ways to keep the nation’s economy growing. When there is no incentive to reinvest money, and lobbyist tax holes allow companies to sit on hordes of cash, then by definition the economy is hampered. No longer willing to reinvest real cash assets tied up by the Fortune 500, the banking industry discovered that complicated credit schemes makes money out of thin air — right up until the time someone asks to be paid in real currency.
2. The minimum wage isn’t even relevant at the level it is set today. It hasn’t been set to self-adjust for inflation, so there is zero reason to consider it a problem today. The most successful companies in the world recruit the best employees by paying more anyway.
3. Tax transparency and corporate taxes are two dissimilar concepts altogether. Corporate taxation IS important, because that is where the bulk of assets are controlled. Unless the USA was willing to abandon the corporation and require that all companies have a fully liable owner, then corporate taxes will exist. They must exist in order to fund the USA, again, because that’s where the real money is.
Okay, so maybe your real beef is that you don’t like the concept of an income tax. That’s understandable. Perhaps that needs to change. So to fund society, we could turn instead to estate taxes, pollution taxes, or consumption taxes. I propose that every business entity and individual should pay greater taxes on consumption — that can directly fund the infrastructure that provides your utilities and fuel. Moreover, if a consistent consumption tax is levied on companies, it would incentivize them to become more efficient.
Or look at it another way — if companies are supposed to be so much more efficient than government, then it’s easier and more transparent for the government to tax companies, who will efficiently pass those taxes to customers in a more efficient way, right?
Let’s address some of your other sticky points.
– Level playing field. Great idea, one we all like. But that’s why loopholes got carved out in the first place. To build a bridge, you can install expensive traffic-jam creating tolling, or you can levy taxes on the citizens who use to bridge and suffer the whining of the people who live furthest from the bridge that it’s not on their daily commute and therefore they were unfairly taxed. Never mind that every day they rely on products transported across the bridge — their narrow self interests are all they consider!
– America has a fascination with being big and uniform, then you start asking citizens about the federal government and they immediately bitch and moan about any proposal for a uniform federal standard to replace 50 balkanized state policies that complicate interstate commerce.
– Simple solutions are not the best solutions. The goal first and foremost is to fund the needs of the nation for the long term. Making arbitrary rules that sound simple are not useful if they get in the way of long-term opportunity and prosperity for ALL citizens.
– Thanks to the Bush administration’s overseas war adventures, the USA dug itself a very big financial hole and that means
– Finally, the government has tons of cost/benefit analysis. The problem is, citizens refuse to read them and instead we have botvinnik and firstthenwhatever cutting and pasting hate speech from their partisan blowhard rags on tech blogs. I bet neither of them have ever read an entire CBO report in their lives.
My God, Melvin, you are so fulla crap.
Our tax laws are proof that we have the best government money can buy.
The rich get richer, the poor, poorer, and the middle class…wait. What middle class?
Sign to the left says: Walk through this door to pay much higher taxes.
Sign to the righ says: Walk through this door to pay much lower taxes.
Which door will you walk through?
And if you do the smart thing and opt for lower taxes, it really seems to upset certain people.
Cute, but totally ridiculous thinking. Certain people must know a lot more than you about this stuff.
If you change the analogy from national budget to kitchen table economics, your signs would NEVER get you to a balanced budget and you would starve.
Moreover, it is totally misleading to characterize the left as always demanding more taxes while the right always lowers them. Different taxes and fees were raised by Republicans and many were lowered by Democrats. The bigger difference is in spending — in the last 40 years, Republicans administrations have spent significantly more (foreign wars in every single republican administration since Ford), whereas Democrats tend to use less troop deployments and instead spend on domestic issues. BOTH have added to the national debt and are out of control spenders.
Reality is, personal taxes are the lowest they’ve been in a generation. Interest rates on personal loans are the lowest they’ve been in four generations. But despite all the rhetoric about low taxation supposedly spurring economic prosperity, wealth is being hoarded and demand for government services knows no limit. Thus, the debt keeps racking up. Don’t walk through any tax door until you figure out how to get the deficit under control and start paying down the obscene national debt.
“Trust Me” is not a strategy either. Trickle down was attempted, and it did not work. That’s why Reagan and Bush had to raise taxes, remember?
One more thing to prove what poor comprehension skills US voters had this year: the working class got suckered again —
http://www.alternet.org/election-2016/reich-every-aspect-trumps-trickle-down-economic-plan-benefits-him
Wow, good points. “Read My Lips” and an unpopular war doomed what was otherwise a pretty good president to one term. Too bad his son didn’t learn anything from that.
Now let’s be very clear here. It is not only Apple that does this.
Every company that is worldwide does this too. If they were not unfairly penalized for bringing the money back to the states this would not be an issue.