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iHate Tax Dodgers Like Apple Computer
I’m an Apple fan. I’m writing on my third Mac laptop in a decade. I’ve purchased over $100,000 of Apple products on behalf of a company I’ve worked for over the same period. Plus all those iTunes gift cards for my teenage daughter.
So I was disappointed to learn that Apple is a tax dodger.
Sure, Apple pays some U.S. corporate income taxes. It looks downright patriotic next to master tax dodgers like General Electric and Boeing that have paid zero U.S. taxes for years. But Apple pays far less than it should.
Here's how: Apple shifts patents and intellectual property, which are among their biggest assets, to subsidiaries in other countries that are low and no-tax havens. These include Ireland and the Netherlands, which have especially favorable tax rates on royalties from intellectual property.
When Apple sells an iPad or a MacBook, it allocates a portion of the profits to the offshore subsidiary that owns the patent. This tax dodge is sometimes referred to as the “Irish Two Step” or the “Dutch Sandwich.” But for Apple, we should call it the “Offshore Tax Haven Shuffle.”
Last year, Apple claimed that just 13.9 percent of its profits came from U.S. operations. This is a fantastic fib. Consider all those Americans walking around with iPhones, iPods, iPads, and MacBooks. Think of all those folks buying music on iTunes, sending a buck to Apple for each song. Think of customers lined up at those glitzy Apple stores, like the three-story iPlex down the street from me in Boston.
How is it possible that less than 14 percent of this company's profits come from the United States? Is it because Europeans and the expanding middle classes of India and China are snatching up Apple products by the boatload?
Nope. That low percentage is an accounting fiction that goes to the heart of the tax dodge. Apple methodically shifts its U.S. profits off shore.
Another clue that Apple is ethically rotten is that they are spearheading a national coalition to lobby Congress for a “tax holiday” for offshore profits.
Apple has teamed up with other technology companies like Google, Oracle, Cisco, Microsoft and Adobe, drug giant Pfizer, and utility leaders including Duke Energy to form “WinAmerica,” a slickly messaged campaign to press Congress for an $80 billion tax cut.
U.S. firms have stashed over $1.2 trillion in profits offshore. They want Congress to allow them to “repatriate” these profits at a 5 percent tax rate rather than the 35 percent rate that's legally due when foreign earnings are brought back stateside. If Congress approves this “tax holiday,” Apple alone will dodge an estimated $4 billion in taxes.
Given the budget cuts our communities are facing, it seems reckless for Congress to even consider another tax giveaway to companies playing offshore games. It’s unfair to individual taxpayers and small businesses that have to pick up the slack for tax shufflers like Apple.
In 2004, Congress passed a similar tax holiday — with Apple dodging $255 million at the time. These tax dodgers argue they will create jobs if they’re allowed to bring their profits home lightly taxed. But independent studies show that the 2004 tax holiday did little to create jobs. In fact, profits mostly went to boost stock prices and CEO pay, and enable companies to buy back stock.
Apple should disclose more information to its shareholders, customers and the public. At a time of huge public service cuts and fiscal austerity, why should we the taxpayers give Apple a $4 billion tax break?
Congress should reject the corporate tax holiday for the obvious reason that it encourages bad behavior. If these global companies know that every six years Congress will bail them out with a tax holiday, they’ll continue their off shore games.
Apple may be cool, but until it stops gaming the system and pays its fair share, the company is just another lowly tax dodger.
This piece was originally published at Alternet.
28 Comments so far
Show All"other technology companies like Google, Oracle, Cisco, Microsoft and Adobe"
Newsflash buddy: (cr)apple and micro$oft are one in the same.
So, in order for me to be a patriotic corporate Amerikan, I should just have my (whole) paycheck direct deposited to my Cayman Islands account, and "import" the money minus a 5% tax?
Cool.
Now, if I were only a corporation instead of a mere peasant...
Steve,
That'l work. First, incorporate as Steve Woodward, Inc., and open a corporate checking acct. Then, create a Logo for your Corporation and trademark it. Then, compose an original work of authorship such as a song, an article, or a software program, and register the work with the copyright office, with the C being owned by your Corporation. Register your TM and C in Ireland. Now you can do the "Apple Shuffle."
Deposit your paychecks into your corp. acct. and then wire the money to your bank in Ireland. Then, as you say, "import" the money back, and tell the IRS that your income is largely due to your international intellectual property portfolio. Viola!
Corporations, the Perfect Monster (legal citizen): Avoid legal liability, avoid taxes, unfettered ability to spend money to influence elections.
The video's music was shit. Keep the mute on if you choose to watch or else get a headache.
Reporting live from the Vatican, I'm Benny Dick.
And that factory that recently had an explosion and killed some workers in China - from construction begin date to operation - 76 days. Oh, Apple and FOXCONN (from Taiwan not mainland China).....and Americans are worried about Tibet....sob, sob, sob........
And like the writer of this article, I'm typing this on a Mac......aye yi yi..........
Well, since the factory was in China, what did the Chinese gov do? Did the Chinese gov "sob sob sob"?
Aye yi yi........we're all in this together..........aye yi yi..........
Apple is also reportedly sitting on some $40 billion in cold, hard cash. Apple was started in a garage by two clowns making devices to get free pay phone calls. So much for an ethical foundation for a business.
Tax avoiders do piss me off but it's not fair to blame them for doing somethiong legal to save money. The solution is to change the laws. Yeah that's gonna be easy, huh?
As to tax breaks to create jobs, there already is one. It's called a deduction! What a company does is to hire an employee and then they deduct that employee's salary and benfit costs from their declared income. Who knew?
I wouldn't mind if Congress got clever and maybe gave companies a double deduction for creating a new job. The devil IS in the details and it would need to be boiler plate to prevent hankey pankey (like 'eliminating' a position to 'create' a new one) but it could be done. The point is that tax breaks and insentive must have strings attached or they are pointless.
The problem is it is not going to happen until there is a new philosophy to rally around. The operative thrust must be that it is PATRIOTIC to create good jobes for Americans and pay taxes. Hey Mr. Corporate CEO, AMERICA - LOVE IT OR LEAVE IT!
Corporations and CEOs owe allegence and are patriotic to no nation. They have total allegence to profit. Patriotism is on their radar only to the extent that paying lip service to patriotism makes their customers feel good.
As much as it hurts, I have to say that the problem is not that corporations are immoral, it is that the laws require that those running the company do whatever is legal to maximize the return to their shareholders.
Take that requirement out of the law and the picture changes. Then you can talk about patriotism.
Mr. Collins, you shouldn't be a "fan" of any corporation and certainly not Apple. You should also open your eyes to the fact they are despicable for reasons other than just tax evasion.
Apple and Obama have both become cult figures and history has proven many times where cult followers end up..
How can the people ever tax the oligarchs that make the tax laws?
Direct democracy
No need. Just hit Apple products with a 100% import duty.
Who would assess that 100% import duty?
The same governetment servants, at the ports of entry, who do customs. Which you know, obviously.
What's the difference between the oligarchy and the government? Why would I know them obviously?
This article is spaghetti: "love" Apple's products but "hate" the tax cheat? There is no difference between the two, so this comes across like another soft-peddled Obama excuse - 'You're fundamentally flawed, but we still cheer on the illusion.'
Boycotting Apple is the obvious solution, but apparently Chuck's staff couldn't type that into their iLeash. If Collins was serious about this issue, he'd attack Apple for the most obvious reason: their products are ridiculously overpriced and yet Apple still cheats like a fiend. A video for this could play on shifting from the silhouette/product meme forward to the damage in the real world.
Boycott Apple, and instead support -- Microsoft? The company that made its billions through monopolizing the market for its (initially) mediocre and unstable computer products?
At least Apple (and Microsoft) generate products that are of real value to businesses and consumers. As opposed to the grossly overpaid 'investment industry' swine who infest Wall Street, and who produce nothing of real value to businesses or consumers.
Better to just change (and enforce) the corporate tax laws instead. (I know, I know ... not so easily accomplished in 2011, when corporate America basically buys the national politicians it likes. However the U.S. has overcome long odds before ... e.g. during the Gilded Age of the 1890s, and during the New Deal age of the 1930s, both periods when wealthy interests dominated the economy. So, there's no reason we couldn't do it again -- if people would just turn off their damn televisions for 10 minutes and think).
Besides I have always felt that earnings derived from patents and copyrights protected by governments, at the cost of government, should be taxed at a higher rate, if really protected, than the revenues of those who have to compete naked, with no protection at all, in the markets.
I agree with previous comments that take issue with the author's goofy posture of "I may hate the sin, but never the sinner!"
But I have problems buying into the simplistic concept of wagging fingers at "corporate tax cheats". And it's decidedly NOT because I think corporations have redeeming qualities.
My problem is that, as the extinct Irish Elk evolved enormous, intricate antlers that may have become a "maladaptation" hastening their demise as a species, so too has Amerika evolved a byzantine, baroque, labyrinthine tax code that is deliberately abstruse, recondite, and mystifying.
At some indefinable point or threshold, it leaves the earthbound realm of common sense and accessibility, and becomes a sort of ultra-sophisticated game or contest requiring expert advice and administration. And it acquires an adversarial flavor, in which the government sets up a maze of sticks and carrots that effectively "dares" taxpayers to devise elegant methods for legally reducing liability.
This doesn't ignore or excuse the possibility and fact of bad faith, irresponsibility, criminal evasion, and so forth. But articles like this seem to project individual "conscience" onto corporations that just doesn't exist-- despite the appalling legal convention that created and reinforces the dreadful notion of "corporate personhood".
I have the same trouble with the charge that corporations are appallingly "playing" or "gaming" the system as I do when "welfare queens" are accused of the same sort of thing.
Personally, I have neither the talent nor urge to minimize my tax bill, much less seek out a crafty expert to do it for me. But if a sharp and aggressive duly certified tax lawyer or accountant reviewed my circumstances and told me that I could legitimately save big bucks by declaring that the pear tree in my back yard was actually a pet, which entitled me to a certain deduction or break-- why not?
Because it seems counter-intuitive, or just plain "wrong"? Because, like some all-Amerikan Jimmy Stewart protagonist in a Frank Capra movie, I should eschew such dodgy subterfuge and insist on Pulling My Weight and Paying My Fair Share?
I advocate a return to a level of civic accessibility and simplicity which I don't expect to ever occur, in part because it would clarify moral and ethical issues. But the status quo is a deliberately overcomplicated Hell arising from misguided exaltation of self-interest and intellectual hubris. "Splitting hairs", "cutting corners", and "taking advantage" has long since become standard practice in kill-or-be-killed Big Business and Big Government.
I've always found Apple off-putting because of its "cult appeal", but is it Apple's manipulation of the tax code that's rotten, or the swamp in which the orchard's planted?
At least they're not paying taxes that go into bombs and drones dropping them on innocent folk at weddings in Iraq and Afghanistan, etc. Tax resistance is an ethical thing to do. Oh wait, that's not their motive. Oh well, at least they're not paying taxes that go into bombs...
loopless:
In 1970 corporations paid 29% of the US income tax bill. In 2010 they paid 6% and within a decade they will pay 0%.
Corporations don't resist taxes. They own the politicians who write the tax laws that shift the tax burden off the corporations and on to you and I.
So some of you guys want to Boycott Apple? Not every other comany that uses these same flawed tax laws? They are the bad guys? So you buy Microsoft and Dell and whomever? They are the good guys huh?
Bored by these adolescent politics.
I guess it's too much of a challenge for you to force government to change the tax laws.
Ah yes the marketplace it solves all problems.
Tax Evasion.
There's an app for that.
*****
Meanwhile, where Sheepherder writes: "...the problem is not that corporations are immoral, it is that the laws require that those running the company do whatever is legal to maximize the return to their shareholders[,]" I don't know who keeps promoting this line of bullshit, but it keeps showing up on CD threads. Nothing in law prevents me from investing a million dollars in a corporation designed to spend it down for just about any social benefit I might deign.
*****
I'm with Obedient Servant in observing:
"My problem is that, as the extinct Irish Elk evolved enormous, intricate antlers that may have become a "maladaptation" hastening their demise as a species, so too has Amerika evolved a byzantine, baroque, labyrinthine tax code that is deliberately abstruse, recondite, and mystifying.
"At some indefinable point or threshold, it leaves the earthbound realm of common sense and accessibility, and becomes a sort of ultra-sophisticated game or contest requiring expert advice and administration. ..."
I found myself simply unable to complete an income tax form this year, totally overwhelmed by the gibberish in the 1040, quarter-inch-thick manual, even though by most standards my financial situation is relatively simple. Part of this, no doubt, is psychological resistance to the prospect of having to spend days and days answering to a government I find essentially corrupt. I mailed all the relevant data/forms to the IRS and asked them to do my taxes for me. They are the experts. Send me the bill; I'll pay it.
I'm oppressed and I know it, but please...
I'm supposed to be somewhat bright. I often wonder how math-deprived people file their taxes. H&R Block? It's a racket. The Irish Elk needed an accountant, a couple of shots of good Irish whisky and a Family Trust assuring that that wrack would find a place in a museum.
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