Don’t blame Apple: U.S. corporate tax policies drive companies overseas

“The media spotlight has recently been on Apple Inc. for shifting profits overseas to avoid U.S. taxes,” Charles Kane writes for MarketWatch. “In its international tax strategy, though, Apple is no different from other American technology companies, which (like Apple) began moving manufacturing overseas starting in the early 1980s.”

MacDailyNews Note: Apple does not “shift profits overseas.”

“Initially, U.S. technology firms that went abroad during this period were drawn by the lower labor, sourcing, and procurement costs. They also found they could eliminate exchange-rate risk by producing and selling in the same currency,” Kane writes. “But these companies soon discovered another important advantage of being global: favorable taxation.”

Kane writes, “Foreign countries, eager to become part of the high-tech boom started in the United States, began courting U.S. companies with very attractive tax deals. Ireland, for example, sent representatives from its development authority to the headquarters of high tech firms in the United States. These emissaries offered qualified corporations a 10% tax rate — less than a third of the U.S. rate. Thus was born the Celtic Tiger.”

“There is plenty of blame to go around for this unfortunate situation. Both major political parties and a series of administrations contributed to the inefficient corporate tax structure we have today,” Kane writes. “We now have the highest tax structure in the industrialized world. As a result, many American companies, particularly in the technology sector, have created tremendous earnings and cash flow by locating manufacturing and services in locations outside the U.S.”

“We have thus created jobs overseas that could otherwise have been American jobs. And then there are the lost jobs that foreign companies might have located here if our tax rates were more attractive,” Kane writes. “The solutions are obvious. Don’t tax repatriated funds so long as they are being used to create American jobs. And going forward, we need a reduced corporate tax rate.”

Read more in the full article here.

Related articles:
Ireland in letter to Senators Levin and McCain: We did not cut any special tax deals for Apple – May 31, 2013
Bloomberg News’ awful reporting on Apple’s U.S. corporate taxes – May 30, 2013
Thomas Sowell on Apple, corporate taxes, and ‘the road to serfdom’ – May 28, 2013
Former Senator Sununu: Congress wrote the tax laws, so why blame Apple for obeying them? – May 28, 2013
Taxing Apple just taxes you – May 24, 2013
Don’t tax Apple, tax its shareholders – May 24, 2013
If Apple paid more tax, we might pay less or something – May 22, 2013
Apple CEO Tim Cook pounds another nail into the Keynesian coffin – May 22, 2013
Apple CEO Cook makes no apology for company’s tax strategy – May 22, 2013
Apple CEO Tim Cook charms Capitol Hill – May 22, 2013
Rush Limbaugh: ‘High-tech lynching: Senate attempts to crucify Apple’ – May 21, 2013
Nobody on U.S. Senate committee laid a glove on Apple CEO Tim Cook – May 21, 2013
Senator Rand Paul: Senate committee ‘should apologize to Apple for bullying one of America’s greatest success stories’ (with video) – May 21, 2013
Ireland: We have no special tax rate deal with Apple – May 21, 2013
Apple prepares for Washington onslaught: CEO Tim Cook isn’t taking any chances with senators looking to grandstand – May 21, 2013
Watch Apple CEO Tim Cook’s live testimony before U.S. Senate, starting at 9:30am EDT – May 21, 2013
U.S. Senate investigation found no evidence that Apple did anything illegal in avoiding taxes – May 20, 2013


    1. In fact, in January 2012 there were more unemployed Americans (12.8 million) than there were Americans who worked in manufacturing (just under 12 million).12 Indeed, as Figure 3 shows, this has been the case since 2009. The last time fewer Americans worked in manufacturing was before World War II.

  1. Too many large profitable American corporations pay little if any federal taxes. The 30% rate, app. is not paid my the majority of companies. It is actually around 15% and most don’t pay that either. In fact many corporations get back refunds at tax time. The laws about what corporate income is taxable is not new. It has been around for decades, at least. Taxes paid to other government are generally deducted from what is owed to the U.S. Government. The idea that corporations should not support the government of the country they call home is outrageous at best and criminal at worst. I pay my taxes, why can’t they.

      1. I could not agree more botvinnik. I have never been employed by a poor man, or woman for that matter. It’s not that we are, collectively, paying to little, it’s that we are spending to much. Until we as Americans realize that we can no longer expect the government to supply our every need, and stand on our own feet, we will keep burying ourselves…. sad.

  2. Good points all around. Corporations are mucking up the tax codes the past few decades because they want ridiculous exemptions and those that can exploit loopholes are the ones who can afford lawyers to hide their assets.

    Johnny X, you do realize many small business owners are barely breaking even some employees are technically employed by the poor.

    This isn’t a singular problem. This country needs to simplify the tax codes, people do need to live within their means but at the same time the rich can’t be given bailouts or golden parachutes on the baks of the tax payers. CEO’s that talk about caring for America should do what Steve Jobs did and take a $1 annual salary if they really care about their company.

  3. To RGKhan. Prove to me that corporations are not paying their fair share of taxes. Don’t single out a few. Give me a PhD type analysis across multiple types of corporations. An in-depth study/analysis, if you will. By the way, their shareholders pay taxes on top of the taxes the corporations pay out. If you’re a shareholder, you’ve paid more than your fair share. Remember, corporations are owned by shareholders, like you and I; they are not the bad guys.

  4. I am one of the bad guys: a Canadian shareholder. As such, even if my taxable income was virtually nil, 15% is withheld and goes to the U.S. federal government, in but even though over 60% of Apple’s sales are earned outside North America, and on those sales, at least in Canada, a sales tax rate of 13% (5% GST plus Ontario 8%) is paid, and in Europe sales are subject to VAT, which amount is paid before the earnings reach Ireland. In my case I am paying the U.S. 15% and the Canadian government I receive no deduction for double taxation. As the dividend is under 3% of the stock price, the entire investment is being taxed by inflation, which is paid, but by stealth. The full dividend is taxed at full Canadian Corporation income taxes. However, the dividend income is offset by the inflation rate. If Apple’s after tax income were to reflect even a 30% rate, the stock would be unattractive, and the market value seriously reduced. Many posters on the tax issue have no concept of what taxes an investor faces. Not a single one has pointed out that the loss on the investment via inflation is an extremely serious negative ROI component, but off the radar. As for the Grandstanding Senators vs. Mr. Cook, it is in fact astounding that after all these years the 35% rate remains. If they think that’s so good maybe they should try for 50 and see what happens.

  5. The multinamtionals don’t go overseas to pay less tax. They go overseas to pay NO taxes. Apples most proditable division, an entity which exists soley on paper for tax purposes, doesn’t pay taxes in ANY country.

    1. That’s false. That division is where Apple puts the funds AFTER all the taxes have been paid. They, like many other companies, do not want their already taxed cash assets in a location where they can be seized by a greedy government as was witnessed recently in Cyprus. Read something accurate before you spout off.

  6. Bull! Just because you can do something to your own self advantage doesn’t mean you should. That’s limited thinking for short term greed. Despite Gekko’s infamous mantra: “Greed is good!”, its not good for anyone in the long run. It results in a lopsided population of 1 percenters controlling everything. Pay you fair share of taxes.

    1. >Pay you[r] fair share of taxes.

      And what, oh King Walt, would be defined as a “fair share” of taxes? Is it up to you? Or is it up to… oh, I don’t know… the people who make the laws?

      And if someone is following the laws, what you have them do differently to determine and pay their “fair share?”

      I’ll tell you what. Since you likely take advantage of the tax breaks that are in the law for your own income (and thereby aren’t paying YOUR fair share), when you’re willing to forgo those tax breaks and show us your tax return where you did so, just because it’s such a good thing to pay your “fair share,” come back and tell us about it.

      Until then, either define “fair share,” or STFU.

  7. These corporate tax rates have actually “bought” bigger markets for US goods, particularly arms. This huge transfer of wealth to poor countries created new markets for companies around the world, especially American: Intel, Google, Yahoo, Cisco, Oracle, IBM, etc. all benefitted from the high US corporate tax that moved money out of America. With that came a peace dividend: the US is now the only country starting big wars is the US! Apple will now build the Mac Pro in America and pay high taxes for the privilege.

  8. Most of the commentary reminds me of the Tea Party screed “Keep your government hands off my Medicare!” It shows a complete lack of understand of even simple economics, of the role of corporations and government, and a total lack of compassion for the less fortunate. Pogo was right, ” rel=”nofollow”>”We have met the enemy and he is us.”

  9. The people who cry “fair share” and refuse to concretely define WHAT fair share should be are, semantically, simply whining like a toddler.

    If the laws are unjust, then get your representative to change them. If the representative will not do so, elect someone new. If a corporation is using its earnings (as it is entitled to do) to lobby for laws that work to its interest, and you object to that, don’t buy from that corporation.

    But if you don’t think that every entity subject to the laws should be entitled to the full benefit of the laws as well, then, to be as kind as possible, you haven’t thought it through. (And if you think that taxing corporations somehow isn’t going to affect what you pay, you REALLY haven’t thought it through.)

    In other words: if you can even THINK “fair share” without being amused at the ridiculousness of it, seek professional educational help.

    1. Would it really make any difference if “fair share” was defined for you in terms of % infrastructure use, or in % consumption, or in % addition to measured GNP? We could define those numbers, but they are ALWAYS dismissed by corporate apologists who have been brainwashed to believe that the whole purpose of living is to serve the market, and that the corporate legal structure is the best way to do that.

      Tax policy SHOULD fundamentally serve the people, not the corporations. It should FULLY fund what the people use, without deficit spending, and those taxes should be levied on ALL legal entities that use the people’s infrastructure, not just the people who paid for it the first time.

      Corporations have no legitimate reason to gripe about the size or complexity of the tax code, considering they are the ones who lobby incessantly to get every loophole and exemption they wanted. There is not one corporation on the planet that pays nominal tax rate anywhere. As a percentage of GNP, corporations have never skirted more public obligation — the infrastructure maintenance on which we all depend — than they do today. That is completely unacceptable.

      1. In case you were not aware of it, but corporation DO NOT PAY TAXES, EVER! This is a fact. All taxes ostensibly paid by corporations are a COST that is passed on to the consumers of that corporation’s products or services in the price they pay for them. All corporate taxes are paid by the customers, ALL. . . in higher prices for the goods and services, and lower distributed profits to the share holders where it properly should be taxed as income.

        Without the burden of direct taxes on corporations and businesses, more investment by corporations and businesses could be made in plant and equipment, resulting in more employment, more products being made, growing the business, and increasing the overall economy. Many nations have figured this out, but NOT the USA. Of course, Congress would have to give up their carrot and stick approach of tax credits and special taxation to control business decisions.

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