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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 JasonMick on 4/10/2012 7:15:51 PM , Rating: 5
As a single person living alone, I also think that you should pay for the $7,400.00 per person tax on behalf of your 3 kids and your non-working spouse. So you pay $37,000 in tax per year on your household's $50,000 income and I still pay $7,400 on my single person $1,000,000,000 income.

Ha, you had me up till there. :)

I think it's pretty unfair that I have to pay taxes at all. After all I am a billionaire and employing hundreds of thousands of people. Without me, they would have no money to pay taxes.

They should each have to pay $7,400 per person and I should have to pay nothing, for employing and tolerating your unwashed masses.

And by all means don't let the people vote on such a thing. They're too stupid. Let's instead isolate power in a small privileged group of people, most of whom are members of my millionaire club themselves.

Now which Congressman, do I have to write a check to next?

RE: Constitutional Amendment Flat Tax Time!
By quiksilvr on 4/11/2012 9:52:27 AM , Rating: 2

But in all seriousness. His logic would make sense if people under the age of 25 should be exempt from paying taxes, with or without a job. $7400 a year is roughly $300 a paycheck. I say this because:
1) For the first 21 years, you're essentially in school.
2) You have tens in thousands of dollars of debt thanks to said education.
3) Usually I would say 21 then pay taxes, however since Bachelor's Degree is as valuable as a high school degree in this day and age, going for a Masters is unavoidable.
4) I'm 24 :P

RE: Constitutional Amendment Flat Tax Time!
By wangkom on 4/11/2012 3:45:06 PM , Rating: 2
That's fine. Your parents should have to pay for your taxes until you are 21.

Would make people think twice before having unprotected sex.

By freedom4556 on 4/12/2012 6:15:19 PM , Rating: 2
make people think before having unprotected sex

No it wouldn't, because they already don't think at all, else no one would do it. Abstinence plans don't work, because having sex is not a logical decision. There could be a screaming baby in the room, and some people would still have unprotected sex.

By kmmatney on 4/11/2012 4:42:26 PM , Rating: 2
If you want to be an engineer, you don't have to go into debt! I received my Masters in engineering at UCLA, and I was "paid" to get it. The school paid my Tuition, and paid me $1500/month on top of that, with my official job title being "Graduate Student Researcher". I wasn't special - this is what practically every graduate engineer gets, at all universities. And yet we still have a shortage of engineers in this country...

RE: Constitutional Amendment Flat Tax Time!
By rrburton on 4/11/2012 12:27:26 PM , Rating: 3
Oh my god, I just up voted Jason Mick.

By abscode on 4/11/2012 1:54:28 PM , Rating: 3
Oh my god, by commenting you really didn't.

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