How Apple Sidesteps Billions In Global Taxes

An anonymous reader writes "An article at the NY Times explains the how the most profitable tech company in the world becomes even more profitable by finding ways to avoid or minimize taxes. Quoting: 'Apple's headquarters are in Cupertino, Calif. By putting an office in Reno, just 200 miles away, to collect and invest the company's profits, Apple sidesteps state income taxes on some of those gains. California's corporate tax rate is 8.84 percent. Nevada's? Zero. ... As it has in Nevada, Apple has created subsidiaries in low-tax places like Ireland, the Netherlands, Luxembourg and the British Virgin Islands — some little more than a letterbox or an anonymous office — that help cut the taxes it pays around the world. ... Without such tactics, Apple's federal tax bill in the United States most likely would have been $2.4 billion higher last year, according to a recent study (PDF) by a former Treasury Department economist, Martin A. Sullivan. As it stands, the company paid cash taxes of $3.3 billion around the world on its reported profits of $34.2 billion last year, a tax rate of 9.8 percent."

Comments

Why does Apple hate America?

[Anonymous Coward]

Good citizens pay their fair share, so it must be asked: why does Apple hate America?

Re:Why does Apple hate America?

[PhunkySchtuff]

Why should anyone have to pay more tax than they're required to by law?

Corporations have more loopholes than natural people to reduce the amount of tax that they pay, but even normal people have a number of ways that they can minimise the amount of tax that they're required to pay. If these methods are perfectly legal, then why would you not avail yourself of them?

Would you voluntarily pay more tax than you are legally obliged to?

Furthermore, I can absolutely guarantee you that Apple are not the only company doing this, they're just the flavour of the month and they generate page views around here. s/Apple/Microsoft/g, s/Apple/IBM/g or s/Apple/Google/g or pretty well any other large company at all and the story will read the same.

Re:Why does Apple hate America?

[the eric conspiracy]

No they haven't. They probably haven't been even taxed once.

Your dividends have been, sort of....

Personally though I don't think corps should be taxed at all. It gives them too much ammo to say things like 'taxation without representation' etc.

If we didn't tax corps then I think it would be easier to ban political speech by corporations.

The income to individuals from corps would then be taxable as ordinary income and we wouldn't have the whining about dividends being taxed twice, or the baloney about US taxes on corporations being high.

We also wouldn't have the baloney regarding local jurisdictions competing for corps based on tax give backs.

All in all it would be a nicer world....

Re:Why does Apple hate America?

[Anonymous Coward]

It's not a straw man. You're of the opinion that it's immoral to avoid taxation, even when it's entirely legal, suggesting that your "fair share" is every tax that could possibly be applied to you if you volunteered to do so.

He's saying that's crap, and I have to agree. As far as I'm concerned, the tax liabilities you subject yourself to is largely an ammoral subject, as long as you're working within the law.

If you don't like the tax code, deal with that. There's no reason to be angry at individuals and companies doing what they legally can to avoid taxation above and beyond what they're required to pay. You're only owed what tax law says you're owed, and they're abiding by it.

Re:Why does Apple hate America?

[Anonymous Coward]

Taxing corporations is important for two reasons. The first obvious reason is that it raises revenue for the state. The second is that if you tax corporate income, then it is in the corporation's best interest to minimize income - i.e. to not pile up wads of cash as Apple is currently doing. It's not money per se, but the velocity of money, that moves the economy. Fat cats getting fatter is bad economics - unless you're the fat cat or one of their apologists of course.

Re:Why does Apple hate America?

[slowLearner]

Here's what happens when you try to start imposing some sort of "You're an American Company; pay American taxes" argument: Apple re-incorporates off-shore; its US operations are shunted to a US subsidiary, who works under contract with the main off-shore company. In the end, it pays a lot less tax, but is now a Cayman Islands company.

The old "if we don't pay what we want we will leave" argument. If they are not prepared to pay the appropriate taxes for the privilege of doing business in your country then why let them? This goes for Micro$oft and General Electric too!
Large corporations employ less people than small businesses (a small business is less than 500 people) and yet it is small businesses that bear the brunt of taxation while large corporates get the tax breaks, the ear of the government and multi-million-dollar CEO's

Re:Why does Apple hate America?

[Shazback]

As an individual, when I buy things, I directly fund companies, therefore keeping them and their employees in business. I also pay sales tax on these good, and payroll tax is just as much a tax on me as it is on my employer, since it affects a contract between us. I generate revenue for my employer, who pays taxes. I generate revenue for retailers of my employer's products and other businesses that work with my employer, who both also pay tax. I rent a home which provides an income for my homeowner, who in turn purchases goods and pays tax. I pay insurance for medical care (part of my contract with my employer), which funds an industry that pays tax. By having children and keeping in touch with my family and friends, I provide not only for the future of the country, I also directly improve their quality of life.

I hope this is a good argument to stop paying income tax. If not, I'll just move to another country. I'll pay a lot less tax, but it'll be in the Cayman Islands.

On a more serious note, Apple benefits from infrastructure and regulation provided by the federal and state governments, be they in education, in transport, in public safety, in healthcare, in environmental protection or pretty much anything else that these governments are involved in. If Apple could move their research, their product design, their product development, and as much back-office work as they can to China, they'd do it in a heartbeat. The problem is that's not possible. Apple wants the best engineers, the best designers, the best R&D teams... And those kind of people don't just want a big paycheck, they also want to live in a nice environment, where they are provided with sufficient opportunities for their spouses and children's development, where they won't fear for their life, where transport if sufficiently easy and reliable, and so forth. Apple want to become a Cayman Islands company? They'll still keep their corporate operations in the USA, because they know it's too hard to even attempt to move a dozen thousand of the best paid engineers and designers and their families off-shore.

Apple want the benefits from the infrastructure and the regulation that the USA provides, but doesn't want to fund the cost of maintaining and improving them. That's a free rider problem, and being a knowing free rider, that's hating the driver.

Re:Why does Apple hate America?

[Anonymous Coward]

If we didn't tax corps then I think it would be easier to ban political speech by corporations.

Let me explain why that isn't a good idea. Corporations are given rights under the law, not as entities themselves, but as an extension of the collective rights of the individuals that it is composed of. A corporation is formed by a group of individuals agreeing to pool resources to achieve a goal. So let's take a look at how that can play out.

You have a right to say "Screw the Government." So does your best friend. If you pool resources to say it (e.g. you make a sign, he drives you to city hall), you both still have that right. If you agree formally to do the same, you still have the same rights. 1,000,000 people signing an agreement that they have joined the "Screw Government Organization" to send 1,000 of them to DC to protest doesn't diminish the right. Forming a group to sell "Screw Government" bumper stickers doesn't reduce the group's rights to less than that of any individual. Forming a group that sells indy band bumpers stickers, and the occasional political bumper sticker, doesn't diminish the collective rights. Calling the group a corporation doesn't change things either. The name, size, profit motivation, etc do not change anything.

An so on. The basic rule is the rights of individuals can be exercised collectively. One name for this phenomena is "Corporations are people." Not a person. Though for simplicity, it's treated like a person. Because the rights of a person and the rights of a group are the same. For example, a person can own property and so can a group.

Ok, there are some exceptions. For instance, while a person can hold office, a group cannot. Same with a vote. Some rights do not scale and can't be collective. But most can.

So now look at your suggestion. How much can you restrict the rights of a collection of people without restricting the rights of individuals? Pretty difficult. Not something to be done lightly.

Re:Why does Apple hate America?

[blackraven14250]

The problem is that a corporation, unlike a massive grassroots protest, is largely controlled by the wealthy, and will be used in most instances to further the goals of those at the top, rather than the group as a whole. This give the impression that a company's entire workforce (10,000 people) is pushing for something, when in reality it's the C-level executives and the board (30 people) who are the ones benefiting from it. There are sure to be instances where what the 30 are pushing for is a boon to the entire company, but there's also the likelihood that a significant portion of stances taken "as a corporation" will be done in the advancement of only the 30.

Doesn't every big company do this?

[sam_paris]

I mean, I know it's the fashion to bag Apple now they're the biggest company in the world, but I thought it was common knowledge that virtually all big companies do everything they can to avoid taxes. In fact, I don't see how it's much different from pretty much every individual in the USA trying to pay as little tax as possible either. If an accountant said, "Oh hi there, I can help you avoid $3000 bucks in taxes and it's all legal" what would you say, no?

Don't hate the player, hate the game

[sycomonkey]

Apple has a fiduciary responsibility to avoid as much taxes as legally possible. This is more indicative that the laws are not written correctly, rather than that Apple is doing something "wrong". Of course, congresscritters might be hesitant to fix these loopholes, since a lot of their sponsors directly benefit from them. In fact, that may or may not be why they are there in the first place, but the saying "don't attribute to malice what you can attribute to incompetence" probably holds here.

Re:So, the story is...

[artor3]

Everything the GP said is correct.

1) Roads. Did you read that article you posted? I encourage everyone to do so, so that they can see the pure, unadulterated crazy that right-wing think tanks like the von Mises Institute churn out. "Thousands of people die in traffic accidents, therefore we should privatize the roads." Because unregulated private industry does such a great job at promoting safety. That's why organizations like the FDA and OSHA never needed to be created.

Learn some goddamn history. Corporations were quite happy to let people die to boost their bottom lines until the government stepped in and made such behavior unprofitable.

2) Schools are just, in your own words, "starter-prisons" that "indoctrinate" the youth. Corporate controlled schools, I suppose, would be beacons of free thought. That's why ITT Tech grads are so much better than UC Berkeley grads. Oh, wait, that's backwards. American education needs work, but suggesting it would be better if it was fully privatized is stupid.

Without public funds, it's not profitable to educate most people. Far better to keep them stupid and set them to work in a factory, while only providing education to the rich kids whose parents can afford it.

3) Product safety. I swear, have you ever even seen a history book? Product safety before the government got involved was nothing short of abysmal.

I notice you didn't even address his other points:

4) Regulating insurance companies and the like. Without government courts you can take them to, they could simply refuse to pay out one claim in every ten, and there'd be no downside. If they get a bad reputation, they just change their name.

5) Cops to keep you safe. I suppose you think that should be privatized as well? I'm sure they wouldn't spend all their resources defending the homes and offices of the 1%.

6) Toxic waste being dumped in public watersupplies. Are you gonna try to deny that this one happened over and over and over again? Are you going to try to deny that without government oversight, corporations have no reason not to exploit public resources for private gain?

Privatization is the mantra of the robber barons, seeking absolute authority over every aspect of our lives. They've been winning so far, taking more and more from us and giving us nothing in return. They don't need idiots cheerleading for them from the sidelines.