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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 just4U on 4/11/2012 1:16:08 AM , Rating: 2
A flat tax (in my opinion) would simplify things overall. I would like everyone to be paying it though. Rich and poor alike. Oh sure, those living on government assistance would still get a pass.. but the rest wouldn't.

In the end though the wealthy would still land up shouldering the brunt of it. Why is that? Well, for one thing they'd probably have to pay more to those under them in order for those people to pay their fair share so that would mean they make less..

RE: Constitutional Amendment Flat Tax Time!
By Iaiken on 4/11/2012 5:07:55 PM , Rating: 2
Rich and poor alike.

You can't get blood from a stone. What do you do about the impoverished? Jail them for not paying their taxes? They didn't die this year so they obviously must have at least made enough to buy food. At some point you have to make exceptions so that the system makes rational sense. The problem is that the current exceptions are slanted both towards both the very poor and the very rich.

By Reclaimer77 on 4/11/2012 6:46:47 PM , Rating: 2
Exactly. And that's the problem with the "fair tax". It cannot really be "fair".

At some point you have to make exceptions so that the system makes rational sense.

We already have that. Literally half the country pays NO federal taxes.

By marsovac on 4/12/2012 4:23:31 PM , Rating: 2
You need to change the game to have fair taxes.
You need to pay them LATER, NOT UPFRONT.

Taxes should go like this:

- The country is only me and you
- I make 1000$ per month
- You make 3000$ per month
- Basic living costs for a single person per month is 1000$

This means:

- After a month I have exactly 0$ of savings
- You have 2000$ of savings
- Average savings is 1000$
- I pay AVG/(2/myRateInAVG) = 1000/(error) = 0
- You pay AVG/(2/YourRateinAVG) = 1000/(2/2) = 1000

Other scenario /3 people/ same basic live cost per month:

- P1 3000$, P2 5000$, P3 10000$
- average = (3000-1000+5000-1000+10000-1000)/3 = 5000$
- P1 pays: 5000/(2/(2/5)) = 5000 / 5 = 1000 (half savings)
- P2 pays: 5000/(2/(4/5)) = 5000 / 2.5 = 2000 (half savings)
- P3 pays: 5000/(2/(9/5)) = 5000 / 1.8 = 4500 (half savings)

Now adopt a constant as a multiplicator to adapt the percent of savings you want to take, higher or lower than 50%. And you have a fair tax.

It simply is not fair to tax the revenue you have. But the amount of money you save after each month.

Some people are NEVER saving anything because they are getting less by being PRE-taxed and have a low salary...

"Let's face it, we're not changing the world. We're building a product that helps people buy more crap - and watch porn." -- Seagate CEO Bill Watkins

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