How Apple Sidesteps Billions in Global Taxes

[LarryC]

This is from the New York Times website.

April 28, 2012
How Apple Sidesteps Billions in Global Taxes
By CHARLES DUHIGG and DAVID KOCIENIEWSKI
RENO, Nev. — Apple, the world’s most profitable technology company, doesn’t design iPhones here. It doesn’t run AppleCare customer service from this city. And it doesn’t manufacture MacBooks or iPads anywhere nearby.

Yet, with a handful of employees in a small office here in Reno, Apple has done something central to its corporate strategy: it has avoided millions of dollars in taxes in California and 20 other states.

Apple’s headquarters are in Cupertino, Calif. By putting an office in Reno, just 200 miles away, to collect and invest the company’s profits, Apple sidesteps state income taxes on some of those gains.

California’s corporate tax rate is 8.84 percent. Nevada’s? Zero.

Setting up an office in Reno is just one of many legal methods Apple uses to reduce its worldwide tax bill by billions of dollars each year. As it has in Nevada, Apple has created subsidiaries in low-tax places like Ireland, the Netherlands, Luxembourg and the British Virgin Islands — some little more than a letterbox or an anonymous office — that help cut the taxes it pays around the world.

Almost every major corporation tries to minimize its taxes, of course. For Apple, the savings are especially alluring because the company’s profits are so high. Wall Street analysts predict Apple could earn up to $45.6 billion in its current fiscal year — which would be a record for any American business.

The rest of this story can be read here.

 

[NewbieCanada]

It's the job of government to set taxes. It's the job of people and corporations to pay as little as they legally can.

 

[fireshot91]

It's the job of government to set taxes. It's the job of people and corporations to pay as little as they legally can.

This.

They aren't doing anything illegal.

 

[LarryC]

After the first two replies to this story, I feel it is necessary to point out that I found an Apple story and posted it here. I am NOT trying to say anything good or bad about Apple. I don't care if they ever pay any taxes or if they pay one or ninety percent. As far as I am concerned, the government taxes all of us too highly and spends too damn much money. So, do not attack the messenger… or in this case the poster.

 

[MacDawg]

I don't think anyone attacked the messenger
They just expressed their opinion about the content of the article

I happen to agree
All corporations do this, not just Apple

 

[ucfgrad93]

All corporations do this, not just Apple

Some corporations are even worse. Look at Berkshire Hathaway, Warren Buffet's company. While he is saying that millionaires should pay more taxes, he and his company haven't paid almost a billion dollars in taxes they owe since the early 2000's.

http://www.moneynews.com/Economy/Wa...cansforLimitedGovernment/2011/08/26/id/408799

http://www.huffingtonpost.com/2011/08/29/warren-buffett-taxes-berkshire-hathaway_n_941099.html

 

[snberk103]

All people do it too.... taking advantage of legal deductions. Just saying for the record and all.

 

[LaWally]

There are a lot of companies doing this besides Apple. I used to work for one of them.

 

[Les Kern]

There are a lot of companies doing this besides Apple. I used to work for one of them.

And that's why the middle class is shrinking. Pretty soon it will be the rich... and YOU.
The rich buy the pols, the pols make the laws and set tax rates and manufacture loopholes.
They are having a party, and you're not invited.
But you will be asked to pony up for the refreshments.

 

[Rennir]

I wish Apple would pay more taxes to California, since I'm going to Berkeley and state funding is getting cut. Completely biased and selfish opinion, I agree

But yeah a lot of companies do this. There's no reason to expect Apple to be any different or hold themselves to higher standards/ethics. It's just those unreasonable Apple fans that make it look like Apple is the best company in the world, and can do no wrong that make newspapers focus on Apple, even when it's not acting out of the norm.

So I'd say those diehard Apple fans are actually hurting the company by making them a target for the media...

 

[snberk103]

And that's why the middle class is shrinking. Pretty soon it will be the rich... and YOU.
The rich buy the pols, the pols make the laws and set tax rates and manufacture loopholes.
They are having a party, and you're not invited.
But you will be asked to pony up for the refreshments.

Politicians are elected. What's the voter turn-out in the US now? Has it dropped below 50%? I can't remember.... imagine what would happen if 85% of the population could be bothered to vote. If there are crooked politicians, it may be the people who bribed them who are criminals... but the fault squarely lies with the people who can be bothered to vote.

I read a wonderful explanation about what democracy is about. It's not about voting the best person in... it's about being able to vote them out of power. Get tired of a politician? Vote 'em out. Give the good people some reason to throw themselves into the political arena.

I've voted in every single election I've been entitled to. Over 30 years now. I've sometimes voted for the protest party (Rhinocerous sp?) but I've voted.

 

[Rodimus Prime]

This.

They aren't doing anything illegal.

while not illegal I would call it unethical. Sadly the big companies can pull stunts like this and it only takes a quick look to see that at best it is ethically questionable.

Way to many companies pull these stunts world wide.

 

[Tomorrow]

while not illegal I would call it unethical. Sadly the big companies can pull stunts like this and it only takes a quick look to see that at best it is ethically questionable.

Way to many companies pull these stunts world wide.

There's nothing unethical about it. Jurisdictions lower their tax rates with the explicit intent of attracting people and businesses. There's nothing unethical about taking them up on the offer.

 

[Rodimus Prime]

There's nothing unethical about it. Jurisdictions lower their tax rates with the explicit intent of attracting people and businesses. There's nothing unethical about taking them up on the offer.

the unethical part is putting an office that say has 20 people at it yet it is where all the profit some how goes to.

Or the trick of having pretty much nothing more than a PO box in another country to dodge taxes.

If the company HQ was really there and most of the employees were there then yeah it would be fine but the crap that the article points out (which I know many companies do) is were the unethical part comes into play.

 

[Abstract]

Apparently, corporations love Ireland, though it's not for the Guiness.

 

[thewitt]

while not illegal I would call it unethical. Sadly the big companies can pull stunts like this and it only takes a quick look to see that at best it is ethically questionable.

Way to many companies pull these stunts world wide.

There is nothing unethical about escaping confiscatory taxes.

And it doesn't a genius or a large corporation to incorporate in a state where you can avoid a large tax burden. My own company has done so and it has allowed us to hire more employees by avoiding spending that cash on taxes.

 

[throAU]

As I said on /., don't hate the player, hate the game....


Apple is a publicly traded company - not a person, not a charity. It is their DUTY to shareholders to maximise profits. To do this (amongst other things), they minimise taxes.

This is all within the law, if you disagree with it then petition the relevant governments to alter the relevant taxation laws to fix this. Apple is merely choosing how they operate within the law to maximise their return on investment.

Apple is doing nothing wrong, and on the contrary, if they where to NOT seek out ways like this to maximise their profits, they would be doing their shareholders a disservice.

 

[snberk103]

the unethical part .... but the crap that the article points out (which I know many companies do) is were the unethical part comes into play.

Is the unethical part the bit about the companies taking advantage of legal ways to reduce their taxes, or the way that tax codes have been written with holes you can drive a truck through?

Companies have an ethical duty to return the best value to their shareholders.... including taking advantage of legal tax minimizing strategies. People do it too... investing in certain ways to minimize the tax of profits, or borrowing money in such as way as to take advantage of writing off certain expenses.

The problem, it seems to me, are the arcane tax laws in the US (especially) and internationally. I can point a finger at the tax code smugly because I do have an example of how inefficient it is.

In the US, say you open a store in a city. That may be 5 tax codes you need to deal with. City (sales tax), County (sales tax), State (sales tax and corporate income) and Federal (corporate income). Plus your HR department needs to make payroll deduction calculations for at least 2 codes (state and federal personal income). Add a store in the suburbs of the same city. Add a tax code (different county sales tax). Open a 2nd store in the same state, but different city - add two more tax codes (City and County sales) Open a store in a city in a different state, add 4 tax codes (City, County, State Sales & State Corporate) plus add a tax code for the HR department (State personal income tax).

In Canada (and in many other countries) the number of tax codes have been minimized. You have Provincial Sales Tax (PST) and Federal Sales Tax (GST) - except in those jurisdictions that have harmonized the two taxes in to the HST. And single sales tax for the entire province, regardless of where you are. No county and city codes to worry about. (There are exceptions of course, especially around hotels - but they are the exceptions).

Same thing for corporate income tax. The provincial corporate taxes is calculated as part of your federal return. When you pay your federal corporate taxes it includes the amount due to the province, which the feds pay on your behalf. Saves a ton of money for the province, incidentally since they don't need to staff a whole government department. Same thing for personal income tax... it is calculated (and paid) as part of the federal return. Which means the HR department has a lot less work to do calculating payroll deductions.

In other words... a Canadian chain store in BC with a dozen stores has to deal with 3 tax codes (combined corp. income, combined sales tax, combined payroll deductions) while a similar chain in the US will need to deal with a minimum of 2 or 3 dozen tax codes.

So, getting back to the original question.... is it the company that uses the gaps between archaic, conflicting, contradictory, and overlapping tax codes to its advantage that should be blamed or the society that has creating the mess of tax codes in the first place as way to take personal advantages?

 

[davisnewman]

Unethical?

Is the unethical part the bit about the companies taking advantage of legal ways to reduce their taxes, or the way that tax codes have been written with holes you can drive a truck through?

Companies have an ethical duty to return the best value to their shareholders.... including taking advantage of legal tax minimizing strategies. People do it too... investing in certain ways to minimize the tax of profits, or borrowing money in such as way as to take advantage of writing off certain expenses.

The problem, it seems to me, are the arcane tax laws in the US (especially) and internationally. I can point a finger at the tax code smugly because I do have an example of how inefficient it is.

In the US, say you open a store in a city. That may be 5 tax codes you need to deal with. City (sales tax), County (sales tax), State (sales tax and corporate income) and Federal (corporate income). Plus your HR department needs to make payroll deduction calculations for at least 2 codes (state and federal personal income). Add a store in the suburbs of the same city. Add a tax code (different county sales tax). Open a 2nd store in the same state, but different city - add two more tax codes (City and County sales) Open a store in a city in a different state, add 4 tax codes (City, County, State Sales & State Corporate) plus add a tax code for the HR department (State personal income tax).

In Canada (and in many other countries) the number of tax codes have been minimized. You have Provincial Sales Tax (PST) and Federal Sales Tax (GST) - except in those jurisdictions that have harmonized the two taxes in to the HST. And single sales tax for the entire province, regardless of where you are. No county and city codes to worry about. (There are exceptions of course, especially around hotels - but they are the exceptions).

Same thing for corporate income tax. The provincial corporate taxes is calculated as part of your federal return. When you pay your federal corporate taxes it includes the amount due to the province, which the feds pay on your behalf. Saves a ton of money for the province, incidentally since they don't need to staff a whole government department. Same thing for personal income tax... it is calculated (and paid) as part of the federal return. Which means the HR department has a lot less work to do calculating payroll deductions.

In other words... a Canadian chain store in BC with a dozen stores has to deal with 3 tax codes (combined corp. income, combined sales tax, combined payroll deductions) while a similar chain in the US will need to deal with a minimum of 2 or 3 dozen tax codes.

So, getting back to the original question.... is it the company that uses the gaps between archaic, conflicting, contradictory, and overlapping tax codes to its advantage that should be blamed or the society that has creating the mess of tax codes in the first place as way to take personal advantages?

President Obama complained that he, like Warren Buffet, pays less tax than his secretary. So, Did he send the difference to the IRS? I think NOT! I'd like to see the hands of everyone who pays extra taxes to feel "ethical". Ethical is to follow the tax law, to do otherwise is stupid.
;-)

 

[r.j.s]

Continues here: https://forums.macrumors.com/threads/1364739/