Apple Shuffles Revenue Out of U.S., Pays Only 1.9% in Taxes on Foreign Earnings
November 5, 2012 11:40 AM
comment(s) - last by
Apple does not count foreign tax savings in its reported profits
Whether you're voting for Romney or Obama tomorrow, neither candidate comes close to offering a tax rate sweet enough to
sate the appetite
of Apple, Inc. (
), the world's most profitable technology company, and
most valuable firm
in terms of present market capitalization.
In 2011, Apple
made a fortune on foreign earnings
, paying a lowly 2.5 percent on the $25B USD it earned outside the U.S. Financial documents
filed last week
indicate that the company's fiscal year, which concluded in September, saw an even bigger revenue boom outside the U.S.
Apple in calendar Q4 2011-Q3 2012 paid a
mere 1.9 percent
in foreign taxes, while ballooning foreign earnings to $36.8B USD. That's a pretty hefty sum considering Apple's full-year reported earnings were $41.7B USD on revenue of $156.5B USD.
Here's where things get a little confusing. The $41.7B USD is a post-tax figure that assumes Apple's effective U.S. tax rate extends to its foreign earnings. Apple is currently hoarding that cash overseas -- an estimated $82.6B USD, but it breaks from some in not reporting all of it as earnings.
It also has avoided spending the massive profits, gained by using tax shelters like the Cayman Islands, Ireland, and small European tax-haven nation states. It is estimated that Apple's decision not to include the tax-sheltered earnings in its bottom line cost it an extra $10.5B USD of profits (on paper, at least) over the last three years).
Apple paid less than 2 percent in taxes on its overseas earnings.
[Image Source: SomanyMP3s]
Apple's decision to not report the gains as profits is interesting, and perhaps a reflection that Apple believes that the U.S. government will eventually force technology companies to "pay up" amid growing scrutiny of corporate tax sheltering practices.
Apple, which almost exclusively manufacturers its products in China, is not alone in its smart-sourcing of profits to tax shelters and manufacturing to cheap Asian labor sources. Google Inc. (
), Apple's perennial smartphone foe has engaged in similar practices, although not to such a massive extent.
The on-paper general corporate tax rate in the U.S. is 35-percent, however, that figure is misleading as the complex U.S. tax code typically leaves a wealth of loopholes available for big businesses to lower their rates. With loopholes considered, the average for Fortune500 tech companies is around 16 percent [
Apple does indirectly contribute a great deal to the U.S. economy, directly and indirectly
creating 304,000 U.S. jobs
, plus an additional 210,000 U.S. iOS developer jobs.
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Real tax rate
11/5/2012 12:16:22 PM
Apple reported a US tax rate of over 25% for the year. As over 60% of its sales are out of the country, those profits are as well. We can look to every company whose sales are not in the US as doing the very same thing, such as Microsoft. Most of these companies would love to bring much of that money back to the US, but tax policy makes it very expensive.
Business and the Republican Party want corporate rates to drop to 25% from the nominal 35% of today, as 25% is the typical rate for most foreign countries. But they don't want the loopholes that exist today to be closed at the same time. Foreign countries (those that aren't much more corrupt than the US) have few loopholes. As Apple pays that 25% here now, I see no real problem. What they do elsewhere, if legal, can't be complained about.
After all, the nominee of the Republican Party has most of his money in foreign country tax shelters.
RE: Real tax rate
11/5/2012 4:04:48 PM
Except that individuals *do* owe taxes on foreign held income, unlike corporations (as long as it's reported to the IRS). Romney pays taxes on all the foreign held assets that we know about. The only ones he's not paying taxes on are any that we don't about it, if they exist.
Some corporations do pay the high tax rate. Among those are retaliers, like WalMart, and insurance companies (since insurance companies are charted and regulated state-by-state, they can't move cash around like tech companies.) Exxon pays fairly high taxes as well.
corporations; tech companies are actually the worst on this.
RE: Real tax rate
11/5/2012 6:18:44 PM
No company pays tax on foreign profit that's not brought back in to the US.
What I'm not seeing is anyone bother to explain where the US has the right to do any of this, anyway. I read an interview of someone in New Zealand, technically a US citizen because both parents were but had no memory of ever being in the US. IRS discovered them, demanded their slice of their income, despite already paying NZ taxes. Like tens of thousands of other US ex-pats living abroad in recent years, they went to the nearest US embassy and rescinded their US citizenship. What right do we have to their income? None.
Same with companies. If Apple builds an iPhone through a complex Asian supply chain, ships it to, say, Greece, then goes on to sell it in Germany, and keeps that profit there (or moves it, say, back to Asia), where in that equation does the US get the right to be a global tax collector and confiscate some of that money? As it is, we generally can't, but we can when they try to take those foreign profits and bring it back to invest in the US. That amounts to nothing but discouraging domestic investment on the back of foreign profits and exports.
As I said above, we're also the only rich nation in the world that feels entitled to do that. Far more commonly, countries give tax credits against foreign taxes paid when that money is repatriated.
Again. Thinly veiled anti-corporate propaganda with a mix of arrogance at the idea we have any right to claim tax on foreign economic activity.
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