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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 FITCamaro on 11/5/2012 2:59:44 PM , Rating: 3
I guess your point would be valid if people weren't the one's who elect politicians.

No matter how much money corporations spend on elections, it is still up to citizens to be informed and decide for themselves how to vote. In that way, we have the power to change laws.


RE: nation states?
By Jeffk464 on 11/5/2012 3:21:04 PM , Rating: 1
Except for the fact that to be informed you need information. Over the last couple decades all the news outlets have been bought up and are controlled by about 3 mega corporations. Fair and balance, ha, has changed to you hear what they want you to hear.


RE: nation states?
By ebakke on 11/5/2012 5:04:57 PM , Rating: 2
You're implying that more information exists than is presented by the news media. Yet for you to know this, you must have been able to attain this information from another source. That directly contradicts your argument that our access is controlled.

So clearly the information is available. Maybe you were attempting to make the argument that it isn't spoon fed to you. Fine. I'll concede that. But it still doesn't change the fact that it's your power to vote, and your responsibility to be informed before doing so.


RE: nation states?
By Jeffk464 on 11/5/2012 11:52:20 PM , Rating: 2
Ah yes but you have to reach the average jane who spends most of her attention watching dancing with the stars.


RE: nation states?
By ebakke on 11/6/2012 12:14:17 AM , Rating: 2
So most people are stupid and lazy, but somehow you and I managed to figure it out? And you want to cater to the stupid and lazy?

Why don't we a) give people some credit. If you can figure it out, so can someone else. And b) let's stop these stupid "ROCK THE VOTE!!!!" campaigns that encourage the most uninformed among us to vote. Educate yourself and vote if you care. Don't, if you don't.


RE: nation states?
By FITCamaro on 11/5/2012 5:11:30 PM , Rating: 2
Yes because the only information in the world comes from major news corporations.

It's not like we have this giant repository of data at our fingertips that is from thousands of different sources all over the world. If only we did. We could call it.....the world wide web....shame....


RE: nation states?
By ebakke on 11/5/2012 5:16:41 PM , Rating: 2
That sounds like a brilliant idea! I'd suggest the backbone to this repository be a massive series of tubes.

Hmm... what to do when they are filled?


RE: nation states?
By MadMan007 on 11/5/2012 4:40:03 PM , Rating: 2
Doesn't work when every candidate is bought, or if not the few who aren't are too outnumbered to mean anything.


RE: nation states?
By FITCamaro on 11/5/2012 5:12:30 PM , Rating: 3
And who's fault would that be? You're not intelligent enough to think and vote for yourself?


RE: nation states?
By jimbojimbo on 11/5/2012 7:30:50 PM , Rating: 2
If you're talking to the typical American, yes. We really are too dumb to think for ourselves. In fact most of us will vote one way just because one of the candidates is black, not only blacks but other so called progressives because they think they're being hip. Sure, another group will vote one way because one of the candidates is white but no blacks will vote thinking it'll be cool to vote for someone white.

Also, many people will vote one way because they know it's more likely the welfare checks will keep coming. This basically means their votes are bought.

As long as the ignorant and dumb are allowed to vote, and breed like crazy, this country will continue going to hell.


RE: nation states?
By Jeffk464 on 11/5/2012 11:55:08 PM , Rating: 2
Yup, when they do studies on why people vote the way they do its very discouraging. By the way the political machines spend a huge amount of attention to these things to manipulate the voting public.


RE: nation states?
By Noonecares on 11/5/2012 11:59:07 PM , Rating: 2
Hrmm. I like how you are missing the real point of elections. The average person's votes only matters to the lesser people on the ballots. Presidential ballots are done by electoral college votes. Popular vote can't vote in a president. It just makes the less informed (you) think they did something about it. You can't run a country like a business if your business made money off of restructuring companies. You can't build a super government to fix everything. Bush Jr and Cheney's company made lots of money in Iraq/Afganistan. No one ever mentions that. Or why we went to Iraq in the first damn place(hoping for lower gas prices I bet). Last time I checked Iraq didn't have a WMD... oh well. Dem or Rep is a system made to make you feel you are choosing between two different things. But in reality they are the same puppets for the corporations. Also in regards to welfare checks, some people do need the help I believe. But like everything else, it gets abused like the tax code.


"And boy have we patented it!" -- Steve Jobs, Macworld 2007














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