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Apple is accused of hording money and dodging taxes.
Corporate tax-dodging: not just a U.S. problem

In America Fortune 500 corporations pay 12.1 percent in taxes, on average, on their profits [source] versus the default rate of 34 to 35 percent that any small-to-midsize business (SMB) making over $335,000 USD per year in profit must pay.  With corporate tax rates plummeting in half over the last three decades, individuals and SMBs in America are increasingly left to shoulder the difference.  

The crippling inequality was highlighted in 2011 when General Electric Corp. (GE) pocketed $14B USD in profit, plus received a "generous" $3B USD tax refund from the federal government.  GE was a key donor to U.S. President Barack Obama and was repaid by its CEO being anointed head of America's "Council on Jobs" which helps advise Congress on corporate tax policy.

I.  Apple Pays Virtually No Taxes in Britain, While it Makes Billions

However, it's important to remember the U.S. isn't the only country struggling with the increasingly parasitic nature of politically active corporations.  Britain is currently grappling with similar issues.

American and domestic companies in Britain and other European Union states have been cleverly positioning their regional headquarters in the handful of member states with the lowest corporate tax rates.

For example Apple, Inc. (AAPL) made an estimated £6B ($9.50B USD) in Britain last year, but paid only £10M ($15.8M USD) in taxes.  That astounding figure, which has many British natives grumbling, comes thanks to the British tax code's rule that largely exempts companies based in Ireland from paying British taxes.

Apple has installed its regional headquarters in Cork, Republic of Ireland.  Thus it enjoys the low Irish 12.5 percent tax rate (which the British newspapers consider "ultra-low", but is ironically in line with the aforementioned current effective American rate for Fortune 500 firms), versus the 24 percent it would pay in Britain.

The Irish branch of Apple -- a subsidiary itself -- runs a series of shell companies that log British sales in "tax haven" regions like Ireland or the British Virgin Islands despite the fact that the physical point of sales is in Britain.  Apple Retail UK Ltd -- one of these shell companies -- made a reported £500M ($791.8M USD) in 2010, but only paid £3.79M ($6.0M USD) in taxes.

Experts cited in a report by The Daily Mail estimate that of the $99.8B USD (£63B) Apple made globally in 2011, 10 percent of it came from the UK.

Apple iPad Launch UK
Apple's loyal legion dutifully lines up for the iPad launch in London.  Apple is estimated to have to have only paid $15M USD in UK taxes, despite earning almost $10B USD from the island nation. [Image Source: Tim Ferguson/]

This figure is hinted at in Apple's U.S. tax filings.  While Apple pays well above the current hyper-evasive rate of the Fortune 500, it only paid an effective rate of 25.3 percent -- below the supposed tax rate of 35 percent.  Apple credits this good fortune to "undistributed foreign earnings", which it plans to hold "indefinitely".  Such commentary might draw greater scrutiny by auditors in the U.S., except that Apple wisely based its U.S. financial operations in Nevada -- a state known for a lax approach to tax enforcement.

Apple, which recently announced a dividend for shareholders, is hoarding $97.6B USD (£60B) in cash -- more money than the entire gross domestic product of Serbia.  Valued at $590B USD (£370B), Apple is the world's most valuable company, and some experts it expect it to soon become the world's first company to be valued at a trillion USD.

The situation for Apple could soon be changing -- the U.S. Internal Revenue Service (IRS), has reportedly audited the company's 2007 to 2009 figures and has "suggested" "certain adjustments".  Those adjustments could be in the form of forcing Apple to pay millions in unpaid taxes -- either to Britain's HM Revenue & Customs or to the U.S. IRS.

II. Apple is Not Alone, U.S. Companies Enjoying Field Day of Tax Evasion

While Apple draws the brunt of the scrutiny given that as the world's largest and most valuable corporation it is a beacon of corporatism, other American companies are following in a similar line., Inc. (AMZN) has placed its headquarters in the tiny European Union nation of Luxembourg -- the same nation where deceased North Korean tyrant Kim Jong Il reportedly sheltered his $4B USD fortune. Google Inc. (GOOG) -- makers of the world's most used smartphone operating system and the world's most used search engine -- based itself in Ireland and has subsidiaries in the Caribbean and Luxembourg for more tax dodging gains.

Google told The Daily Mail that this scheme -- which many would call "tax dodging" -- is necessary in today's corporate atmosphere, as responsibility to shareholders.  States a Google spokesperson, "We have an obligation to our shareholders to set up a tax-efficient structure, and our present structure is compliant with the tax rules in all the countries where we operate."

Google Ice Cream Sandwich
Google also successfully dodged British taxes. [Image Source: Main Device]

In the U.S., Britain, and other wealthy nation states, change over such inequity is slow coming.  After all, increasingly corporations are responsible of paying federal candidates' way into office -- regardless of their political affiliation.  In office, these candidates inevitably look to serve their masters -- not the populous, but the corporations.

A recent University of Kansas School of Business study [PDF] found that $1 given to a federal politician was worth $243 USD of tax breaks, if you contributed over $1M USD.

Source: The Daily Mail

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RE: Constitutional Amendment Flat Tax Time!
By retrospooty on 4/10/2012 6:40:20 PM , Rating: 3
"Then restructure federal services to work efficiently off the money that brings in"

I like the tax part... But your idea falls apart in the federal services section. Congress will never do it. Washington is broken and they cant do anything but add. Subtraction isnt part of thier skillset.

Good idea though.

RE: Constitutional Amendment Flat Tax Time!
By ritualm on 4/10/12, Rating: -1
RE: Constitutional Amendment Flat Tax Time!
By SPOOFE on 4/11/2012 2:08:29 PM , Rating: 1
Armed services? Perfect example: Military budget is up for debate every single year, with fierce battles waged over every nickel. If any expenditure could find ways to pinch pennies, this is it.

Compare that to social security, welfare, medicare/medicaid, which have their expenditures set in stone with nary a whisper of annual discussion over it. Not even the slightest prayer of reducing costs if nobody talks about it.

RE: Constitutional Amendment Flat Tax Time!
By bigdawg1988 on 4/11/2012 3:21:16 PM , Rating: 2
SS and Medicare are paid for through their own taxes. And they are debated every now and then. But try telling old people who have paid into the system for 40 years that you're now cutting those benefits!
I'd go up against the military any day....

By hiscross on 4/11/2012 3:22:38 PM , Rating: 2
I am 64 and I don't give a crap about SS or medicare, yet alone taxes. All 3 take money from me and provide almost nothing in return. For those who feel the government should give you someback after they took it from you by force (laws or by guns) then you deserve what you get.

By SPOOFE on 4/11/2012 6:04:59 PM , Rating: 2
SS and Medicare are paid for through their own taxes.

Technically, although the Treasury owes a humongous "second national debt" to the SS system for spending the '90s "surplus"; and the medical welfare systems partially paid for by the states are putting states into debt, requiring them to get money from the Feds... which comes out of the general fund.

And regardless all that: It's still less liquid capital in the nation. It's still money out of pocket for those little units of economic activity known as "people". It's still an obligation that the United States - its people and its government - have to cover.

And, finally... let's not forget that SS goes into the red this year.

RE: Constitutional Amendment Flat Tax Time!
By JasonMick on 4/10/2012 8:02:16 PM , Rating: 5
I like the tax part... But your idea falls apart in the federal services section. Congress will never do it. Washington is broken and they cant do anything but add. Subtraction isnt part of thier skillset.
Actually Congress would never approve a flat tax in the first place as it would remove a competitive barrier that helps limit the threat SMBs and upwardly aspiring individuals pose to their financiers.

Once you're in the 1% (or perhaps 0.001%) club, you do the best to keep anyone else from getting in.

But agreed, they would also take issue to eliminating waste, both in that it prevents them from serving their personal friends, themselves, and their financiers.

By retrospooty on 4/11/2012 8:44:41 AM , Rating: 2
True... they wouldnt agree to either part. So Ill just leave it as a great idea that will never happen.

Its pretty much human nature at work here. The problem with the human race is there are too many humans running it.

I always thing of Terminator 2 when John Connor asks the Term. "Do you think we will make it? (referring to the human race).The terminator says "it is in your nature to destroy yourselves".

By jRaskell on 4/11/2012 9:54:57 AM , Rating: 3
the 1% (or perhaps 0.001%) club

And someday, when the chasm between the top and everyone else finally becomes intolerable, that club will get a very rude awakening in the form of open rebellion. History is quite obviously doomed to repeat itself.

By Ringold on 4/11/2012 11:34:55 PM , Rating: 1
Once you're in the 1% (or perhaps 0.001%) club, you do the best to keep anyone else from getting in.

That's a zero-sum view, which a lot of those .001%'ers that I've met know better than to buy in to. More rich folk mean more customers, clients, companies to sell to and competitively buy from or invest in to usurp other established rich folk. They understand the capitalist process of wealth creation begets more wealth by being more inclusive, not by trying to be exclusive in some Middle Ages aristocratic class-based way. Democrats want us to think that way, though, to fuel class envy and warfare.

By jRaskell on 4/11/2012 9:52:55 AM , Rating: 3
Washington is broken

That's really all that needs to be said. Well, except maybe to add 'beyond repair'.

"I modded down, down, down, and the flames went higher." -- Sven Olsen

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