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How Apple Avoids Paying Billions in Taxes

29 points by jonah 14y ago

Centigonal 14y ago
Oh man, the math behind this stuff must be fascinating -- designing a system to shuttle money around while minimizing latency and tax rates would be so much fun. The economic/ethical implications of what Apple and others are doing according to this article are considerable and worrying, but all I can think of right now is some kind of sim-tax-evasion game.
- taligent 14y ago
  What math and what system ? It is simpler and easier the way Apple does it now. Money originates in each country that a sale is made some of which flows into the regions e.g. Americas or APAC. It would be much harder to be constantly moving money in and out of the US.
  - deleted 14y ago
    [deleted]
grecy 14y ago
Why do we as a society let them get away with this? They are benefiting from all the social services regular citizens are (police, roads, water, public schools, etc.) without paying for them. This is robbery. They are robbing America's future.
- tzs 14y ago
  Most of those services are local services paid for through property taxes, which I would expect they pay just as much as any other land owner pays directly or renter pays indirectly in any areas where they own or rent.
- mdonahoe 14y ago
  They pay the taxes for income in the US. This is about foreign earnings. If they stopped selling internationally, would you say it is no longer robbery?
- orangecat 14y ago
  They are benefiting from all the social services regular citizens are Who is "they"? Apple employees? They're paying lots of taxes.
- whazor 14y ago
  The society let them get away with this because the earnings are outside of the USA. If they do need to pay taxes for outside earnings then the company will just move to an other country.
  - grecy 14y ago
    Sounds great for the future of America
2buckchuck 14y ago
its despicable that companies like Apple reap enormous rewards and take advantage of American infrastructure and consumers, but don't have the decency to pay their fair share of taxes. I'm not a lover of taxes or the American government, but I think that successful corporations (and people) need to give back to the countries in which they operate.
- stock_toaster 14y ago
  Large companies even do it at the state level too. see[1] for an example of using an office in reno to avoid some (I don't think you can avoid some taxes like payroll, etc) taxes in California. [1]: http://www.nytimes.com/2012/04/29/business/apples-tax-strategy-aims-at-low-tax-states-and-nations.html http://www.nytimes.com/2012/04/29/business/apples-tax-strate...
- tzs 14y ago
  For 2011, Apple paid $8.28 billion in income taxes, on $34.2 billion income, for an effective rate of 24.2%. Similar for the other companies mentioned in the article. For instance, I believe Google paid around 20%.
  - buro9 14y ago
    Are those taxes that Apple paid because they were taxes on Apple as a corporate entity, or taxes paid by Apple onbehalf of its' employees who were being taxed on their income? I don't believe that there is an accusation that the workers at Apple are avoiding tax, but that the company is avoiding tax.
    - ridiculous_fish 14y ago
      It's corporate income taxes. Apple does not pay taxes on behalf of its employees.
      - buro9 14y ago
        Ah, my ignorance of US financials comes through then... so there is no US equivalent of the PAYE system or a withholding tax to ensure non-avoidance by employees? When tzs refers to income tax, that traditionally means personal/employee income in the UK whereas corporation tax is the tax on profits levied to corporations. Hence, tzs's statement above reads as if Apple did pay income tax on behalf of their employees, but makes no mention of corporation tax or an equivalent. Too many similar terms used differently from one place to another. Now I understand the downvote.
clobber 14y ago
NY Times infographic here: http://www.nytimes.com/interactive/2012/04/28/business/Double-Irish-With-A-Dutch-Sandwich.html http://www.nytimes.com/interactive/2012/04/28/business/Doubl... Sadly, this is the 'norm' for many, many corporations - including Google.
- paulsutter 14y ago
  Your criticism may be better directed at those who write the laws, not those who follow them. It's not only the norm, it a company's fiduciary responsibility to minimize tax liabilities. If these activities are against the intent of the law, a simple rule change should suffice.
  - ljf 14y ago
    Indeed, I personally believe that many corporations in the UK should pay more in tax - with less loopholes to escape from paying tax. But shouting at businesses isn't going to change anything, only shouting at politicians is going to to do that. It seems though the only way to mobilise people to do this is to outrage them with the disparity between how they have to act and how companies are allowed to act. As an aside, UK manufacturing is tiny, but from 2000 onwards , taken as a whole, has paid more in corporation tax than the entire huge banking system.
  - clobber 14y ago
    I certainly can't blame a company for taking advantage of existing loopholes and we should challenge our lawmakers to close said loopholes. However, I can question their ethics, stock market be damned. This whole "it was my duty" mentality and shifting the blame... hmm, now where have I heard that before?
    - paulsutter 14y ago
      If the behavior is unethical, what exactly would be the correct and ethical way for these companies to calculate their taxes? If it's so cut and dried for you, maybe you can help us all out here. You call it a loophole, suggesting that there is a design flaw in the law that is being exploited. What specific part of the law is flawed, and what was the drafting intent that has been misapplied in the law as it stands? I'm really serious. It's disappointing to me that so many people are ready to assume unethical intentions, when the details and issues are far from clear to me (and likely not clear to them). Maybe there is a country that has done it correctly? Accounting for business in multiple tax jurisdictions is really complex, and I can only assume that we had some really thoughtful people drafting the existing laws.
taligent 14y ago
The amount of stupidity in this article is startling. There are plenty of legitimate and common sense reasons for why Apple would keep much of their overseas earnings overseas. There are financial reasons e.g. minimizing wasteful forex conversions. There are legal reasons e.g posting collateral for court cases or tax disputes. There are logistic reasons e.g. having money on hand to make it easier to acquire companies or hire new stuff. If Apple really wanted to avoid paying taxes then they are plenty of ways they could do this. But they DO pay taxes. Just not US taxes for non-US revenues.
stock_toaster 14y ago
I wonder why Ireland doesn't change their "if the Irish subsidiary is controlled by managers elsewhere, like the Caribbean, then the profits can skip across the world tax-free"[1] law. If so many huge corporations utilize the tax loophole, you would think it would be in their interest to tax that at least somewhat. [1]: http://www.nytimes.com/interactive/2012/04/28/business/Double-Irish-With-A-Dutch-Sandwich.html http://www.nytimes.com/interactive/2012/04/28/business/Doubl...
- Scorponok 14y ago
  Because as soon as they do that, there's less of a reason to spend a lot of money setting up an expensive corporate HQ in Ireland.
  - stock_toaster 14y ago
    But is it actually that expensive to set up a corporation in Ireland?
Blara 14y ago
A better headline would be "How insert multinational coprp avoids paying billions in taxes" I'm no apple fan, but this is the norm for most (all maybe?) big corps.

29 points by jonah 14y ago

Oh man, the math behind this stuff must be fascinating -- designing a system to shuttle money around while minimizing latency and tax rates would be so much fun. The economic/ethical implications of what Apple and others are doing according to this article are considerable and worrying, but all I can think of right now is some kind of sim-tax-evasion game.

taligent 14y ago
What math and what system ? It is simpler and easier the way Apple does it now. Money originates in each country that a sale is made some of which flows into the regions e.g. Americas or APAC. It would be much harder to be constantly moving money in and out of the US.
- deleted 14y ago
  [deleted]

grecy 14y ago

Why do we as a society let them get away with this? They are benefiting from all the social services regular citizens are (police, roads, water, public schools, etc.) without paying for them. This is robbery. They are robbing America's future.

tzs 14y ago
Most of those services are local services paid for through property taxes, which I would expect they pay just as much as any other land owner pays directly or renter pays indirectly in any areas where they own or rent.
mdonahoe 14y ago
They pay the taxes for income in the US. This is about foreign earnings. If they stopped selling internationally, would you say it is no longer robbery?
orangecat 14y ago
They are benefiting from all the social services regular citizens are Who is "they"? Apple employees? They're paying lots of taxes.
whazor 14y ago
The society let them get away with this because the earnings are outside of the USA. If they do need to pay taxes for outside earnings then the company will just move to an other country.
- grecy 14y ago
  Sounds great for the future of America

2buckchuck 14y ago

its despicable that companies like Apple reap enormous rewards and take advantage of American infrastructure and consumers, but don't have the decency to pay their fair share of taxes. I'm not a lover of taxes or the American government, but I think that successful corporations (and people) need to give back to the countries in which they operate.

stock_toaster 14y ago
Large companies even do it at the state level too. see[1] for an example of using an office in reno to avoid some (I don't think you can avoid some taxes like payroll, etc) taxes in California. [1]: http://www.nytimes.com/2012/04/29/business/apples-tax-strategy-aims-at-low-tax-states-and-nations.html http://www.nytimes.com/2012/04/29/business/apples-tax-strate...
tzs 14y ago
For 2011, Apple paid $8.28 billion in income taxes, on $34.2 billion income, for an effective rate of 24.2%. Similar for the other companies mentioned in the article. For instance, I believe Google paid around 20%.
- buro9 14y ago
  Are those taxes that Apple paid because they were taxes on Apple as a corporate entity, or taxes paid by Apple onbehalf of its' employees who were being taxed on their income? I don't believe that there is an accusation that the workers at Apple are avoiding tax, but that the company is avoiding tax.
  - ridiculous_fish 14y ago
    It's corporate income taxes. Apple does not pay taxes on behalf of its employees.
    - buro9 14y ago
      Ah, my ignorance of US financials comes through then... so there is no US equivalent of the PAYE system or a withholding tax to ensure non-avoidance by employees? When tzs refers to income tax, that traditionally means personal/employee income in the UK whereas corporation tax is the tax on profits levied to corporations. Hence, tzs's statement above reads as if Apple did pay income tax on behalf of their employees, but makes no mention of corporation tax or an equivalent. Too many similar terms used differently from one place to another. Now I understand the downvote.

clobber 14y ago

NY Times infographic here: http://www.nytimes.com/interactive/2012/04/28/business/Double-Irish-With-A-Dutch-Sandwich.html http://www.nytimes.com/interactive/2012/04/28/business/Doubl... Sadly, this is the 'norm' for many, many corporations - including Google.

paulsutter 14y ago
Your criticism may be better directed at those who write the laws, not those who follow them. It's not only the norm, it a company's fiduciary responsibility to minimize tax liabilities. If these activities are against the intent of the law, a simple rule change should suffice.
- ljf 14y ago
  Indeed, I personally believe that many corporations in the UK should pay more in tax - with less loopholes to escape from paying tax. But shouting at businesses isn't going to change anything, only shouting at politicians is going to to do that. It seems though the only way to mobilise people to do this is to outrage them with the disparity between how they have to act and how companies are allowed to act. As an aside, UK manufacturing is tiny, but from 2000 onwards , taken as a whole, has paid more in corporation tax than the entire huge banking system.
- clobber 14y ago
  I certainly can't blame a company for taking advantage of existing loopholes and we should challenge our lawmakers to close said loopholes. However, I can question their ethics, stock market be damned. This whole "it was my duty" mentality and shifting the blame... hmm, now where have I heard that before?
  - paulsutter 14y ago
    If the behavior is unethical, what exactly would be the correct and ethical way for these companies to calculate their taxes? If it's so cut and dried for you, maybe you can help us all out here. You call it a loophole, suggesting that there is a design flaw in the law that is being exploited. What specific part of the law is flawed, and what was the drafting intent that has been misapplied in the law as it stands? I'm really serious. It's disappointing to me that so many people are ready to assume unethical intentions, when the details and issues are far from clear to me (and likely not clear to them). Maybe there is a country that has done it correctly? Accounting for business in multiple tax jurisdictions is really complex, and I can only assume that we had some really thoughtful people drafting the existing laws.

taligent 14y ago

The amount of stupidity in this article is startling. There are plenty of legitimate and common sense reasons for why Apple would keep much of their overseas earnings overseas. There are financial reasons e.g. minimizing wasteful forex conversions. There are legal reasons e.g posting collateral for court cases or tax disputes. There are logistic reasons e.g. having money on hand to make it easier to acquire companies or hire new stuff. If Apple really wanted to avoid paying taxes then they are plenty of ways they could do this. But they DO pay taxes. Just not US taxes for non-US revenues.

stock_toaster 14y ago

I wonder why Ireland doesn't change their "if the Irish subsidiary is controlled by managers elsewhere, like the Caribbean, then the profits can skip across the world tax-free"[1] law. If so many huge corporations utilize the tax loophole, you would think it would be in their interest to tax that at least somewhat. [1]: http://www.nytimes.com/interactive/2012/04/28/business/Double-Irish-With-A-Dutch-Sandwich.html http://www.nytimes.com/interactive/2012/04/28/business/Doubl...

Scorponok 14y ago
Because as soon as they do that, there's less of a reason to spend a lot of money setting up an expensive corporate HQ in Ireland.
- stock_toaster 14y ago
  But is it actually that expensive to set up a corporation in Ireland?

Blara 14y ago

A better headline would be "How insert multinational coprp avoids paying billions in taxes" I'm no apple fan, but this is the norm for most (all maybe?) big corps.