Print 55 comment(s) - last by Ammohunt.. on Nov 6 at 2:18 PM

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. (AAPL), 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 money
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. (GOOG), 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 [source].

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.

Source: Daily Mail

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RE: nation states?
By BZDTemp on 11/5/2012 12:22:22 PM , Rating: 5
The thing is Apple is doing what many(all?) multi-national companies do - they move their profit to locations with low or no tax. Thus in effect cheating everybody except perhaps the tax shelter where some lawyer is making a little money doing the work.

As it turns out Apple is not only being dicks with regards to how they make their money they are also dicks when it comes to paying taxes. Just one more reason to shop elsewhere.

RE: nation states?
By xti on 11/5/12, Rating: 0
RE: nation states?
By Solandri on 11/5/2012 1:03:11 PM , Rating: 3
Tragedy of the commons. Once one company starts doing it, other companies have to do it too just to remain competitive. Even if they don't want to do it. Punishing random companies that do it to make an example out of them won't change this, and so won't reduce the number of companies which do it. The tax laws need to be changed so there's no longer an incentive to do it.

RE: nation states?
By Schrag4 on 11/5/2012 2:31:49 PM , Rating: 2
How is NOT bringing profit from overseas to the US cheating anybody? If I'm not mistaken, Apple has already paid taxes on those profits where they were earned. What you're ask them to do is to pay a second tax on what's left in order to bring those dollars back to the US. If foreigners gave Apple money in exchange for products, how are US citizens being cheated out of taxes on those profits?

If I'm misinterpreting the situation, please let me know. Otherwise, what makes you think the US should be entitled taxes on foreign profits? It's not like Apple can spend that money in the US without first paying taxes to bring it here, right? Is it better to tax foreign profits again (already taxed overseas), incentivizing corporations like Apple to leave it overseas? Or would it be better to let them bring it back without a second tax hit so they can spend it on jobs/research/etc here?

And no, I'm not an Apple fan. The corporation in question is irrelevant to this argument. I happen to feel the same way you do about Apple, but for different reasons.

RE: nation states?
By Jeffk464 on 11/5/2012 3:31:40 PM , Rating: 2
Well, when you put it that way.

RE: nation states?
By Ringold on 11/5/2012 6:07:57 PM , Rating: 1
If I'm not mistaken, Apple has already paid taxes on those profits where they were earned.

Exactly. We're the only OECD nation that even tries to confiscate profits companies make overseas. It's the height of liberal arrogance to believe that the US can tax profit no matter where on the planet it is made. Money made in other countries and already taxed in other countries is not ours to tax.

It's worth noting that every time the US enacts a tax holiday when companies can move that money back in to the US without paying those taxes, hundreds of billions flow back in.

This whole thing always has been nothing but thinly veiled anti-corporate propaganda, preying upon the ignorance of the public.

RE: nation states?
By Reclaimer77 on 11/5/12, Rating: 0
"This is about the Internet.  Everything on the Internet is encrypted. This is not a BlackBerry-only issue. If they can't deal with the Internet, they should shut it off." -- RIM co-CEO Michael Lazaridis

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