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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 Jeffk464 on 11/5/2012 1:06:19 PM , Rating: 2
Unfortunately the adults that are succesfully making changes are big money interests. Seems like every year they lock it down more and more. The corporations are people allowing unlimited money to buy elections was the nail in the coffin.

RE: nation states?
By Jeffk464 on 11/5/12, Rating: 0
RE: nation states?
By ebakke on 11/5/2012 4:43:34 PM , Rating: 4
You have missed the point entirely. WHY do people spend money on elections? They only spend money because it's effective. They only do it because they believe it will benefit them. And history has shown that belief to be accurate.

If we take back the power/authority we've given them (or maybe more accurately, they've taken without any contest from us) then it won't matter who spends whatever amount of money on the election. Sure, spend $5B convincing the electorate that John Doe is the best would-be Senator on the planet. Great. Good for you. Seems like a big waste of money when Sen Doe's authority isn't more than the true enumerated powers listed in our Constitution.

But as long as we're willing to accept a strong central government, we also must tolerate individuals seeking to take advantage of this power, as well as individuals seeking to gain the favor of those in power. Corporate, individual, and interest group lobbying is symptom; it is not the problem!!

"The whole principle [of censorship] is wrong. It's like demanding that grown men live on skim milk because the baby can't have steak." -- Robert Heinlein

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