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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/silicon.com]

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.

Amazon.com, 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 juserbogus on 4/11/2012 10:55:43 AM , Rating: 3
quote:
Once you understand that the top 10% earners pay 70% of the total tax burden


Nice spin. whenever this to cited it almost always excludes the why they "shoulder" that burden. which is because the top 10% of earners OWN 80% of all the financial wealth in this country! So, given that, shouldn't they be shouldering 80% of the tax burden?


By SPOOFE on 4/11/2012 2:18:40 PM , Rating: 2
quote:
So, given that, shouldn't they be shouldering 80% of the tax burden?

No.


By just4U on 4/11/2012 3:13:56 PM , Rating: 2
The wealthy control the money.. If the poor are forced into paying more then that will be offset by the wealthy being forced into paying them more.


RE: Constitutional Amendment Flat Tax Time!
By wangkom on 4/11/2012 3:49:17 PM , Rating: 2
Why should someone making 30k pay nothing then? Because they choose to be lazy and work at McDonalds for 25 years they shouldn't contribute to our country at all?

You do realize you can tax the hell out of people that make a lot of money. Eventually they will take their money and flee the country.

We've already done a great job in moving all the jobs overseas, let's not move all the entrepreneurial people as well.


RE: Constitutional Amendment Flat Tax Time!
By Leper Messiah on 4/11/2012 5:23:36 PM , Rating: 2
You literally think people choose to be poor. Congratulations for being a terrible human being. Have you ever worked a retail or fast food job in your life? People working those jobs work FAR harder than some stiff pushing papers around making twice as much as they do. Success in this country has never about how hard you work, that's a Horatio Alger-esque myth perpetuated by wealthy people to divide Labor and ensure that they work harder. They say, "if you work hard, maybe one day you could be like me!" while neglecting to mention that they inherited their wealth from Daddy or Mommy and haven't done a damn thing in their life except leech off of society. Republicans and their ilk complain about welfare queens, when its the wealthy that leech far more from the government and society than the poor do. Privatize the profits, socialize the losses, that's been the Modus Operandi of corporations in this country for the last 30 years.

And if you want to go Galt and leave America because your taxes went up, don't let the door hit your ass on the way out. The last thing this country needs are more self-righteous, privileged assholes like you.


By Reclaimer77 on 4/11/2012 6:31:47 PM , Rating: 1
quote:
Have you ever worked a retail or fast food job in your life? People working those jobs work FAR harder than some stiff pushing papers around making twice as much as they do.


Yes let's start paying fry cooks and dishwashers $100,000 a year. I'm sure that wont cause an insane spike in the cost of food and other goods at all! The employer will just eat those costs and NOT pass them on to the population.

And to answer your question, of course I have. I still work hard. Don't hand me this working class hero crap, I am NOT a privileged person by any means. And I'll tell you one thing, putting myself through college and paying off all these goddamn loans were far harder than ANY fast food or warehouse job I've ever done. But it was worth it. Because now I don't HAVE to do those jobs anymore. There's a difference between a job and a career, moron.

Nobody told you to "work hard". Nobody took from you. Nobody gets rich working in fast food and everyone knows that. If that's as high as you aspire to be, that's all you'll EVER be! Your ideas are bitter, pathetic, and hateful. And you have the nerve to call me an asshole?

Thank you for being the poster child of the class warfare arguments I've been talking about. I couldn't have put such self-defeatist and vapid viewpoints down if I sat here and tried all day.


By wangkom on 4/11/2012 6:45:31 PM , Rating: 2
With the infrastructure of this country, yes. I think that people choose to be poor.

I worked and put myself through college with student loans. I wasn't handed anything.

Everyone has the ability to do the same and some people have everything paid for them without having any student loans.

It's the middle class that has the hardest time to get an education. For the rich, the cost is insignificant, for the poor, they get federal grants.

If someone is working for McDonalds for 20 years then yes, they chose to be poor because they elected not to invest in their own future.


RE: Constitutional Amendment Flat Tax Time!
By wangkom on 4/11/2012 6:53:06 PM , Rating: 2
And the reason why there is capital flight is because the government makes it an unfriendly environment for businesses to do what they are appointed to do (make money for their shareholders).

Sure, our government can tax them to hell until they have zero corporate profits but then they don't have money to give back to their shareholders and no money to reinvest into research and development.

With a cycle like that, they would soon become noncompetitive and be forced out of the market.

Why do companies like Microsoft and Apple keep on making amazing products? Because they have enough money hire the best employees and reinvest into the ideas/products of tomorrow.

The purpose of a corporation isn't to make a cash cow so that the government can keep on functioning with a budget (like ours has done for the past 3 years).

Like it or not, other countries will have different tax rates and regulations and corporations will always try to take advantage of that either domestically or abroad. It is up to our government to decide if they want to competitively tax them so that they will want to pay their taxes here rather than to some foreign government.



By Reclaimer77 on 4/11/2012 8:14:49 PM , Rating: 1
You're talking to a brick wall. These people do not believe in capitalism and that corporations reinvest anything. It's all greed this, money hoarding that, bla bla rhetoric, class warfare, jealousy.

quote:
The purpose of a corporation isn't to make a cash cow so that the government can keep on functioning with a budget (like ours has done for the past 3 years).


Well you have to understand how their side looks at this. Their conviction stems from a worldview comprised of:

1) the idea that the government actually owns every penny a person earns and they only allow people to keep so much (basically, they read tax rates in reverse, if someone has a tax rate of 25%, to big-government types, it doesn’t mean that the government gets 25% of their income, rather, it means that the government gives them back 75% of what they earned) and;

2) that the rich should pay progressively more in taxes so that the government has more money (because the government is the only entity that actually creates jobs).

If it were up to liberals, the wealthiest Americans would still be turning over 91% of their income to the federal government (or maybe only 70%, after JFK’s tax rates).


RE: Constitutional Amendment Flat Tax Time!
By Reclaimer77 on 4/11/2012 5:10:14 PM , Rating: 2
They earned their money. They don't "control" all the money. A fairy didn't decide to pick them above someone else with magical rich dust. Most people are rich because they worked damn hard for it or made better/different choices in life, and I'm sorry you people cannot accept that and hate them for it.

quote:
So, given that, shouldn't they be shouldering 80% of the tax burden?


No.


By juserbogus on 4/11/2012 5:51:45 PM , Rating: 2
and why?


"If you look at the last five years, if you look at what major innovations have occurred in computing technology, every single one of them came from AMD. Not a single innovation came from Intel." -- AMD CEO Hector Ruiz in 2007














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