Slashdot Mirror
NY Times Apple Tax Article Flawed
bonch writes "Forbes contributer Tim Worstall points out that the NY Times article claiming Apple pays less than 10 percent of its profit in taxes was based on a flawed assumption of the corporate tax system. The 9.8% figure came from Greenlining Institute, who compared Apple's 2011 profits to taxes calculated according to 2010 profits. In the corporate tax system, estimated quarterly tax payments are made based on the previous year's profits until actual profits are calculated at the end of the trading year, when the balance is then paid to the IRS."
It's fair to say that the figure is pretty damn likely to be incorrect. But I quite agree, the Forbes article should've gone one step further and done the correct calculation for the 2010 data (since, by their assertions, it seems that 2011 data is not yet fully available).
Aagh. I misread the summary. I guess I was wrong about Forbes this time.
So color me surprised.
According to their 10K filing with the SEC: "The Company’s effective tax rates were approximately 24.2%, 24.4% and 31.8% for 2011, 2010 and 2009, respectively."
Whoops. Well, I'm sure Slashdot's comments to the previous article were totally reasonable.
"Sufferin' succotash."
OK, so if you follow a link in TFA and manage not to balk at an even more inflammatory headline, you get to Mr. Worstall's claim that http://www.forbes.com/sites/timworstall/2012/04/18/apples-9-8-tax-rate-entirely-mind-gargling-nonsense/">Apple paid approximately 24.2%, 24.4% and 31.8% for 2011, 2010 and 2009, respectively -- which doesn't really answer the question of what they paid in 2012 but does explain why a figure of 9.8% sounds unreasonable.
[Sir Garlon] is the marvellest knight that is now living, for he destroyeth many good knights, for he goeth invisible.
We won't know until the actual profits are calculated at the end of the trading year, when Apple pays the remaining balance.
What?! Yes, you can. Because it was derived from 2010's, it doesn't reflect what Apple's actual tax rate will be for its 2011 profits, which were much higher than 2010's. Therefore, the figure is totally useless.
"Sufferin' succotash."
Apple's 2011 fiscal year end is September 2012. And I am sure they file extensions. So, no, we would not have the data yet.
Cause you're stupid and don't know how to shelter money (and refuse to learn). Apple - not so much!!!
When I say Apple, I mean ANY corporation and when I say you, I mean ANY of the unwashed masses that just wanna drink beer, eat cheetos, watch porn and then wonder why their wang is orange.
Yeah, the person named Apple has billions in cash, teams of accountants and lawyers. Other "people", not so much. And btw, I can tell from your post that you're part of the "unwashed masses". Self hate much?
Why? That just encourages them to move more and more of their operations overseas because they can't stay competitive if the US charges them 28% but their competitors pay a fraction of that elsewhere.
Furthermore, corporations just have to raise prices, so in the end consumers pay for it. And they pay for it in a regressive way.
And assuming you work for a corporation, those 28% that "you" paid was actually paid by your employer, because that's where all your money comes from.
Corporations should pay taxes proportional to the costs they impose on the community. Most of those are imposed through labor, and that's covered by the income tax. If they impose additional costs, they should pay for it. But just trying to milk them because you can makes no sense and only hurts people.
It's not unfair at all. Anyone can incorporate. Funnel your income through the corporate entity and enjoy what the Apple stockholders do - double taxation. Of course, like Apple, you can write off business expenses prior to being taxed the first time. You can also form a pass-through and only get taxed once, which is what I do as a contractor. But at no point can you deduct personal expenses... so just like Apple, you can deduct business expense rent but not your apartment. You can deduct education that is required to keep your job but not education that benefits only you. You can deduct business lunches but not food that you would have consumed anyway. You can deduct electricity used for your business, but not for your home.
Mind you, I think it is all BS and they shouldn't tax companies at all. Tax the money as it comes out - no special rates for dividends or capital gains. Not only would it make the US an attractive place to locate a corporation, it would encourage richie-riches to keep their money in their business. It might even improve politics, since it would be harder to hide corporate welfare in the tax code. Not that I have my hopes up there, since corporations have absolute free speech right now - but now we're on another topic.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
Oh, you! With your silly facts and rational economic concepts. This is Slashdot. You must drink from the Derp-Aide, and call for ALL the taxes to be 100%!
Tax Accountant Here - Whoever wrote the Forbes article is patently wrong. Large corporations like Apple cannot base all of their current year's estimated tax payments on their prior-year's tax liability (See Section 6655(d)(2) of the Internal Revenue Code), only their first quarter's estimated payment. Apple's 2011 Form 10-K shows that their current tax expense (the amount of cash taxes paid or payable on 2011 profits) was $5,415,000,000. They also have a deferred tax expense (taxes that have economically accrued on 2011 earnings but that aren't due until certain events occur in the future) of $2,868,000,000. Their total tax expense for 2011 was $8,283,000,000 on pre-tax profits of $34,205,000,000, an effective tax rate of 24.2%. They were able to "save" about $3.9 billion in taxes by keeping profits generated in foreign countries parked outside of the USA. Other tax savings came from utilization of the Research & Development tax credit ($167 Million) and the Domestic Production Activities Deduction ($168 Million).
Cause you're stupid and don't know how to shelter money (and refuse to learn). Apple - not so much!!!
When I say Apple, I mean ANY corporation and when I say you, I mean ANY of the unwashed masses that just wanna drink beer, eat cheetos, watch porn and then wonder why their wang is orange.
Yeah, the person named Apple has billions in cash, teams of accountants and lawyers. Other "people", not so much. And btw, I can tell from your post that you're part of the "unwashed masses". Self hate much?
I am not part of the "unwashed masses" however, if the supreme court wants to rule that corporations are people and have the same rights, then why not tax them like people? People can deduct interest paid on their primary residence from taxes. Why not only allow corporations to deduct interest on their primary headquarters? People are limited on most deductions to a percentage of AGI. Why not the same thing for corporations?
If I am a small business, employing 150 people, why should I pay more in income tax as a sole proprietor or a partnership, where business income flows through and is taxed as personal income, than if I run the same business but structure it as a corporation? (I know all the reasons to form a corporation, so please don't respond in that way).
Corporations in America get far more state and federal "welfare" than people get. We just don't call it that. Maybe it's about time they pay their fare share, too.
those are effective taxes, not the total percent they paid based on their profits. Do you understand what an "effective" tax rate is? An effective tax rate of 24% is not 24% of their total profit.
Do you? No, you don't.
Ceci n'est pas un sig.
Furthermore, corporations just have to raise prices, so in the end consumers pay for it. And they pay for it in a regressive way.
That's not true. There's no economic law or theory that says a corporation MUST make a certain amount of profit. Taxes are on profits, not on revenue, so the taxes reduce the amount of profit a company makes, but they don't make it any more expensive to produce and sell a product. Saying that companies "have to raise prices" is ridiculous. Companies set prices according to what the market will bear (notwithstanding monopolies and such), and profits follow based on how efficient the company is at producing and distributing its products.
And you need to stop and use your brain for a moment. How much in taxes do you think an employer pays on the salary for an employee? If your answer is anything other than zero, think some more. That salary is an expense to the employer (along with benefits, etc) and so is not part of the operating profit. As such, no taxes were collected on that money.
Perhaps you should pick up a copy of "Economics for Dummies".
If you like the Wal-Mart economy approach...a shattered peasant class with little money buying cheap crap, then you're on the right track. What you prefer depends on who you are. Rich and corporations and those stupid enough to be indoctrinated by corporations (Teabaggers, Ron Paul, etc) want lower taxes on the rich and corporations or the same as everyone else pays. The rest (people who aren't living off of capital gains, educated people who aren't subject to corporate propaganda) would prefer a more progressive tax system. If people had more money...like say things were manufactured in the US again, they wouldn't mind paying $65 more for an iPhone. And since 28% is capital gains, that means you don't know if I'm getting my money from my employer and paying in that bracket or capital gains. The fact that you assume to know where my income comes from, shows that you're not a real disciplined thinker, but more the Teabagger type who makes emo assumptions based on limited information. You know, like how teabaggers seem to think they know how the global political and economic system work even though they barely got a HS diploma?
Leaving aside all the immature rhetoric and petty name calling, your comment doesn't even make sense. The current system is obviously flawed, but you don't add to your credibility by rudely portraying an ill-thought out populist idealism.
In theory everything the OP said is 100% right on the money, in practice there are too many loopholes for it to function the way it should, but don't confuse the system's current disfunction with the capitalist system that has brought more wealth and more prosperity to an enormous amount of people than any other system in human history.
Corporate taxes are in theory meant to encourage reinvestment in a company, making it cheaper to reinvest than pay yourself. The problem is that it's possible (and totally legal) to do a huge number of things which effectively allow you to "pay" yourself at the corporate rate, like loaning yourself money from the corporation or buying yourself property and then leasing it to the corporation, etc. etc. etc. The solution is to ensure that if actual people take money from a corporation (they make a financial gain), that this money is taxed at a fair rate and then be done with it. People don't have problems with companies reinvesting in themselves (it's the reason I support low corporate tax rates in theory)... people have a problem with some rich jackass rigging the system to pay way less than his fair share of taxes. Tax code reform is the key, anyone going on about tax rates for the super rich clearly doesn't understand how the system works, they don't really care if you raise their taxes as they'll find a way around them anyway.
Is 24% close enough? http://apple.slashdot.org/comments.pl?sid=2842145&cid=39958777
Is 24% close enough? http://apple.slashdot.org/comments.pl?sid=2842145&cid=39958777
Truthfully, I was expecting it to be about half that.
I'd agree to that after we get the unproductive members of society off of the government teat. Get those welfare bitches in the ghettos and trailer parks to work or let their dead beat asses starve. Then we can talk about fair taxation.
If we want to talk about who's leeching off the federal government, let's start by looking at it on a state-by-state level. The states that are most heavily subsidized by the government- the states that receive more federal dollars than they pay in income taxes- are almost entirely Republican-leaning states. So we have Democratic-leaning states like California, New York, and Massachussetts subsidizing Republican-leaning states like Alabama, Alaska, and West Virginia.
In effect, the Republicans seem to have been able to engineer things so that there's a redistribution of wealth from high-earning Democratic states to low-earning Republican states. Sounds a lot like socialism to me. It seems like the Republicans are, when you get down to it, perfectly fine with receiving government handouts, they just don't like to see other people get any help.
Almost none of our taxes go to that as it is.
Not to be too picky, but yeah, it does.
This is just a quickie list of what the impoverished get by dint of being impoverished:
--
Medicare/Medicaid/CHIP (which eats 21% of the total budget)
Non-Medicare "Safety Net" programs (which eat an additional 13% of the total budget)
--
That's over 34% of the total US tax revenue going towards the poor. By contrast, the defense budget is around 20% of the pie in spite of two simultaneous wars in progress.
Source.
Quo usque tandem abutere, Nimbus, patientia nostra?
Apple reports a worldwide effective tax rate of 24.2 percent. A lower effective tax rate increases a company’s reported book profits. Apple would have a lower reported effective tax rate and higher profits if it recorded its tax expense the way most other companies do. Under generally accepted accounting principles, U.S. companies do not have to book tax expense on foreign profits if the company deems them to be permanently invested overseas. To lower their reported effective tax rates and boost their reported after-tax profits, most companies assume all of their unrepatriated foreign profits are permanently reinvested offshore. If Apple asserted that all of its foreign earnings were permanently invested outside the United States, it would have booked an estimated $3.6 billion less in tax expense, and its effective tax rate would be 12.8 percent. (See the table.) When assessing Apple’s tax situation relative to that of most other companies, this adjusted rate is probably more relevant than the reported 24.2 percent rate.
Why doesn’t Apple maximize reported profit like most other companies? We can only speculate. Perhaps because it is breaking all records for profitability now, it is saving some profits for less fortunate times in the future. As the Joint Committee on Taxation recently wrote: ‘‘If the company accrues the tax expense in the year the profits are earned, it may later decide that those funds will not be repatriated after all. At that later time it may then reverse the tax expense and shift financial statement income from the prior period into the current period.’’ (See ‘‘Present Law and Background Relating to the Interaction of Federal Income Tax Rules and Financial Accounting Rules,’’ JCX-13-12, Feb. 7, 2012, Doc 2012-2443 or 2012 TNT 26-15.)
An alternative explanation is that perhaps Apple — with its young, socioeconomically elite customer base — does not want the negative publicity that a low effective tax rate could generate with groups like Citizens for Tax Justice and US Uncut.
The profit a corporation makes is compensation for the financial and personal investments of its owners and shareholders. If these people get less profit, they'll invest their time and money elsewhere, often in countries with lower corporate tax rates.
Don't be so daft. Obviously, a company doesn't pay the employee's income tax directly to the IRS, but it pays the money that the employee uses to pay the income tax, and that money goes to the US government. In the end, the US government receives tax revenues commensurate with the number and salary of employees of that corporation.
Like Canada?
"When life gives you lemons, don't make lemonade. Make life take the lemons back!" -- Cave Johnson
For why socialism is bad in general, see every socialist and communist country ever.
You are, as most Fox-watchers, confusing socialism/communism with fascism. Also, note that one reason those regimes fail is the heavy-handed way the US and other countries deal with them. For example, we've been fucking Cuba up the ass for decades.
The problem is not socialism, the problem is receiving government handouts while spouting rhetoric about government handouts being bad and how you got where you are by your own hard work. See also: Ayn Rand.
I am TheRaven on Soylent News
You played your anti-business hand a little too soon here. The iPad operates in a very free market. Profit will be whatever the market will bear, whatever the people are willing to pay. The ultimate democracy. What is obscene is how much is consiscated from those who do create jobs and wealth.
This figure is federal income tax only. Apple separately and additionally pays taxes for police/fire/rescue and other infrastructure through local and state taxes, and communications services are taxed separately. Roads are paid for by a mix of state and federal gas taxes, and Apple already contributes a huge chunk to each employee's healthcare and pays its half of Social Security. And then of course each employee individually pays all of his taxes. We also haven't yet calculated the millions Apple will spend to ensure compliance with tax regulations.
The German price converts to $620 for the base iPad 3 that is $499 here. The disparity is worse with the iPad 2, where $399 here becomes about $515. However, that includes 19% VAT*, which is added by state and local governments here as sales tax (yet another tax layered onto the price), but at a lower rate. Still, you're close to $100 ahead.
* VAT started at 10%, and I can remember when it was 15%. They raise it every few years to balance their obscene spending habits.
When the total tax burden in a country hits 25% you should start to get worried about how much the government is sucking out of the economy. Even if taxes go to things you think are worthwhile, there is a huge overhead cost in material and economically unproductive workers. The countries you admire tend to run around 40% and up. Think about that, about half of a krone generated in the Danish economy goes to the government. That is sick.
BTW, China's total tax burden is less than ours, and their top corporate tax rate is less than ours.