Can we please get this straight, Apple does not avoid U.S. corporate tax

“A couple of stories out there that touch on one of my personal bugbears: this idea that Apple and Google somehow “avoid” the US corporate income tax,” Tim Worstall reports for Forbes.

“Which they don’t: they do exactly what the rules encourage them to do which is not what tax avoidance is all about,” Worstall reports. “No, not even by the definitions of the groups campaigning to make corporates pay more in tax. For there is a reasonably strict definition of what is “tax avoidance” and as far as the US tax code is concerned neither Google nor Apple are indulging in it.”

“It is most certainly true that the arrangements that Apple has in both Ireland and Singapore reduce the tax bills it has to pay to various countries. And you can indeed call them tax avoidance if you like. But these arrangements make absolutely no difference at all to the tax due in the US. Actually, sorry, that’s not true. They actually increase the amount that might be theoretically due in the US at some future date,” Worstall reports. “Therefore it’s important to distinguish between what Apple is doing to the tax income of, say, the UK, or India, and what it is doing to the tax income of the US.”

Read more in the full article here.

MacDailyNews Take: One thing is crystal clear: The U.S. corporate tax rate is obviously way too high.

Under the current U.S. corporate tax system, it would be very expensive to repatriate that cash. Unfortunately, the tax code has not kept up with the digital age. The tax system handicaps American corporations in relation to our foreign competitors who don’t have such constraints on the free flow of capital… Apple has always believed in the simple, not the complex. You can see it in our products and the way we conduct ourselves. It is in this spirit that we recommend a dramatic simplification of the corporate tax code. This reform should be revenue neutral, eliminate all corporate tax expenditures, lower corporate income tax rates and implement a reasonable tax on foreign earnings that allows the free flow of capital back to the U.S. We make this recommendation with our eyes wide open, realizing this would likely increase Apple’s U.S. taxes. But we strongly believe such comprehensive reform would be fair to all taxpayers, would keep America globally competitive and would promote U.S. economic growth.Apple CEO Tim Cook, May 21, 2013

Related articles:
European Commission attempts to close corporate tax loophole – November 25, 2013
John F. Kennedy, tax policy, and Apple Inc. – November 22, 2013
Not in Taxes anymore: On site at Apple’s famous Irish ‘headquarters’ – November 2, 2013
Senators Levin, McCain say Ireland faces questions even as Apple tax loophole tightened – October 16, 2013
Ireland to close Apple’s tax loophole, but leave bigger one open – October 15, 2013
U.S. SEC ends review of Apple taxes, overseas cash – October 5, 2013
Obama, world leaders push big companies like Apple, Google to pay more taxes – September 6, 2013
G20 think tank OECD proposes blueprint for global crackdown on tax avoidance – July 19, 2013
Apple again faces scrutiny after paying no UK corporate taxes for 2012 – July 1, 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
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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
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Apple’s showdown with the U.S. government over taxes on offshore cash – July 13, 2012
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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

29 Comments

    1. Businesses are not evil they are made up of people trying to make a product that customers will want to buy.

      Governments are more likely evil because power corrupts and when the government makes the laws it can force people to do things under threat of punishment.

      Yet so many people think governments act altruistically and can be trusted. History contradicts this in nearly every case of societal evolution

  1. Funny, I write what Worstall wrote all the time. When Apple pays less tax in Europe, they are obligated to pay more in the US. So, the US Congress and Treasury should be happy about that, but of course, they’re not, since Apple has to repatriate that cash in order for them to get their hands on that tax revenue. At least Apple accounts for the vast majority of that potential tax bill, about 2/3rds of their foreign income, while many of their tech competitors account for far less. You only need to look at their net effective tax rates to get a rough idea of who is accounting for more and who is accounting for less. Apple’s net effective tax rate is typically around 25%. Most others are less.

      1. Gotta disagree with your characterization there, Gotcha. fuds shitty little statement is way too low in the sewer to qualify for the much more lofty level of “political points scoring dumbworld”.

        1. These silly attempts to derail thoughtful discussion (e.g. Mr. Fud) are paid for. It’s piecework for young republicans, $5 bucks per post or something like that. Using mega-campaign warchests for TV ads is so last-century.

  2. Tax avoidance is the legitimate minimizing of taxes, using methods approved by the IRS. Everyone, if they are smart, should avoid paying more tax then they owe. I can tell a lot of MDN reader’s are like Android users in this regard = not too smart.

    Tax evasion, on the other hand, is avoiding taxes using methods not approved by the government.

    1. Indeed. Even the USSC has stated there is nothing patriotic about paying taxes, and that every citizen should do their best to look at every means to pay as little as possible.

      Of course, the best solution is a 4852 accompanied by the knowledge to put the IRS in their place. But that’s a different subject and a different website.

    2. The real problem with “tax avoidance” is that it is a “trolling term,” in which the blogger/news’s intentionally uses to give the perception that they (the companies) are doing something to illegal or close to it, – or using the term influence nitwits into believing that the companies are rich and don’t deserve it. It is a hit-whore trolling term.

      That term results in creating a situation not much difference from an interviewer asking (out of the blue) a question such as this: “Next subject: ‘Do you deny that you are having an affair with your boss?'”
      There is no good or truthful answer to that “troll” question – as all answers are already tainted.

  3. Re-establishment of proper corporate tax rates, in conjunction with realistic import duties, would allow a significant reduction or complete elimination of the federal income tax.

    The age-old argument that avoidance is not evasion is intellectually weak. If one can use the same words as synonyms to describe, for example, a quarterback deftly avoiding/evading/escaping a blitzing defense, then the terms should be used interchangeably in finance. Deluding yourself into thinking that one term is more socially acceptable than another is missing the entire point. Stop allowing yourself to be psychologically manipulated by Wall Street apologists.

    This is reality:

    This chart proves that constantly lowering corporate tax rates is a fool’s errand. It does not guarantee prosperity for either company nor community. Low corporate taxation does not retain local industry, nor does it incentivize a more efficient tax system. On the contrary, it merely forced the federal government to go after the most productive workaholics with an income tax in order to sustain the services that all citizens demand.

    The tax burden of maintaining civilization always falls on the end to the people — if, however, corporate entities are intelligently taxed, then efficient innovative nonpolluting companies can pass their cost savings onto consumers, benefiting all, while laggard companies will die a deserved death.

    When inefficient or super-low taxes are levied on companies, then corporate behavior stops reinvesting its profits into company maintenance and efficiency, it immediately puts its brightest minds to work managing the obscene profits. They sit on the money instead of fostering rapid innovation, or, just as bad, hire lobbyists instead of engineers to further their entrenched economic position. They buy congressmen while shuttering domestic production. Then they wonder why an increasing percentage of consumers cannot justify buying the latest and best products. Well, it’s obvious. When the corporation decimates the middle class, who’s going to buy your products? The poor people who sew Levis and screw together iPhones cannot realistically justify buying them. Nor can the hard-working, honest, 3-job part timer in the USA.

    A healthy economy is one where everyone, including corporations, pay for the resources and infrastructure they use — sustainably. Granting corporations special favors is welfare. If you dislike welfare for individual citizens, how can you possibly defend special breaks of any kind for corporate entities?

    1. According to the current salary scales, the American CEOs of today are at least ten times smarter and more productive than CEOs of 50 years ago. In other words, wile in the 60s, the average American CEO used to make 20 times more than the average worker, today, he makes 273 times as much; therefore, he must be that much better…

      And the requirement that executive pay be fully disclosed only made things worse. Now every board of directors knows how much money are other CEOs making. In their deliberations, they will always give their CEO the pay that is above the average in the industry (who wants an under-paid, under-performing CEO), but will never put any conditions (such as stock or revenue/profit performance) on that above-average salary. In most cases, boards go for 90-percentile salary bracket, that way telling themselves that their CEO is better than 90% of other companies. And obviously, this generates a perpetual cycle of astronomic rise of executive pay, which brought us to the current ratio of 273:1.

      It is obvious that there is no man on the planet who is capable of doing the value of work equal to that of 273 other AVERAGE people; but nonetheless, American corporate boards love to believe that their own man is just such person. Not to forget that such a man usually never pays nearly as big a share of his income to taxes as do those 273 average workers. And when he pays that tax, what’s left of his salary is 273 times bigger than of the average worker.

      1. True. That’s why all the MDN bluster that corporations need lowered tax rates is ridiculous. First address government efficiency, close ALL loopholes, cancel frivolous government services, pay down accumulated debt, and THEN we can talk about a reduction in corporate or individual tax rates. No corporation has ever been overtaxed relative to the rest of us, but corporate leaders all claim to need special treatment.

    2. Hey Mikey, based on your argument, why don’t you lead the charge by refusing to take any tax deductions. Pay your fair share, regardless of how many kids you have, donations you’ve made, mortgage interest payments. Damn, by your logic you are an unethical, tax avoiding criminal! Go research the Acton Institute for a decent education.

  4. “The U.S. corporate tax rate is obviously way too high.”

    Bullshit. We heard at Apple’s appearance for gods sake. There are magabillion global US corporations that pay literally no tax.

    1. I assume you meant “their” instead of there or “mega” instead of maga or…..or… never mind.

      I take it you don’t pay corporate taxes and at the look of it, you didn’t bother finishing elementary. How’s that working for you?

  5. Tax rates are irrelevant. When the highest marginal tax rates in the USA were 90%, then 70%, then 50%, then 43%, we became the most powerful nation on Earth. Now that the highest marginal tax rate is at its 3rd lowest in my lifetime, the economy is morose, people need government assistance at highest levels since the 1950’s. Tax rates can be 100% if tax loopholes mean you only pay 4%. So please stop with the tax rate argument – it is pointless. Tax rates need to be reasonable and payable. No corporation that I know of pays 35% in corporate income tax despite that being the rate. If it were so bad, don’t you think the Bush administration would have gotten rid of it? The US government uses it as puppet strings to force the kind of investments hey want business to make so if they don’t make them, they will pay over ⅓ their earnings in tax. Ireland is a dog’s breakfast of an economy despite its low taxation so taxation is only a minor part and tax rates even less relevant. Tax rates paid is all that counts.

    1. It isn’t the tax rate that screwed our economy; it’s the government meddling:
      1) guaranteeing bad mortgages led to the mortgage meltdown (still the main cause of our terrible economy today),
      2) taking over the student loan industry has created an education bubble where college costs are twice what they should be and saddling young Americans with debt many will never escape,
      3) the Obamacare medical industry takeover (crisis problems ahead).

      We need this government to get its tentacles out of everything in our lives and shrink to an affordable size.

  6. There are many people, mostly members of the political species and some others who believe that all money is the governments and that which they allow you to keep for which you should then be grateful to them.

  7. I agree with MDN, the burden of paying taxes should fall on the middle class and poor. Corporations and Rich people have paid enough and they should continue to shelter their money offshore and out of the clutched of government. The government would just waste money on socialism like Medicare and Social Security, which doesn’t benefit rich people at all.

    #sarcasm. Because some of you can’t tell.

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