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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 ebakke on 11/5/2012 5:00:07 PM , Rating: 3
I didn't advocate campaign finance reform. Or getting all of us to band together, for that matter.

The only thing I'd like Americans to agree upon is that we're not going to have consensus on the issues that dominate political discourse. So instead of swings of power where we're constantly using the force of government to oppress the other 49%, let's stop turning every damn thing into an issue for the federal government. It's hard enough to get agreement in a neighborhood. How we expect to get agreement with 311 million people is beyond me.

RE: nation states?
By someguy123 on 11/5/2012 5:45:50 PM , Rating: 2
Your ranting makes no sense. In order to remove authority from politicians abusing their position you would need some form of majority consensus. If you cannot obtain any sort of consensus how are you going to strip people from power? A group of people who can't agree on anything aren't going to suddenly agree about abuse of political power in general or which political figures are actually corrupt.

Our system ultimately relies on popularity and willingness to vote. You will not be able to magically retract political power or prevent lobbying without other people by your side.

RE: nation states?
By ebakke on 11/5/2012 6:21:13 PM , Rating: 3
The argument I'm making is that the "issues" we fight over on a daily basis will never be resolved. You're not going to get pro-lifers to become pro-choicers. You aren't going to get free-market proponents to suddenly endorse a single payer healthcare system. You aren't going to get gun control activists to start buying handguns. But all of the grievances, regardless of which side of the issue you're on, can be minimized. And without even trampling on others' rights in the process!

Yes, I'm arguing that we form a consensus for a single purpose/task, with the premise that it's a one-time only thing. The alternative being discussed is that we somehow "band together" for completely competing interests, and do so repeatedly. That isn't happening, and it won't happen. But I'm arguing there's an alternative other than throwing our hands up in the air and accepting defeat.

I hope you can see what I'm advocating and how it differs from getting Americans to "all band together for campaign finance reform".

"Can anyone tell me what MobileMe is supposed to do?... So why the f*** doesn't it do that?" -- Steve Jobs

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