How Apple Minimizes its Corporate Tax Burden

[AaronEdwards]

Pick your poison; Hyperinflation or 15%-20% interest rates. Both of which will destroy this country. One or the other is inevitable at this point. Heck I'm banking on QE3, QE4, & QE5 from Bernanke. No bank, automaker, or homebuilder would survive a jump in interest rates, let alone the federal government or the general public. He has to keep those interest rates artificially low. which means 0. Everyone would default, everyone's maxed out. That makes the end result obvious for the dollar.

Plus, I didn't know Greece could print Euros

Talk about disqualifying comment.

Do you know any more buzz words?

But then I should have known this from the fact that you had no clue about what path most European countries chose to battle the recession.

If Apple made $27b instead of $30b, the shortfall has to be made up somewhere, either in higher prices (on the revenue side) or cutbacks on the R&D, infrastructure expansion and/or maintenance, employee hiring/wages, management compensation, dividends for stockholders, etc. It's not like they're blowing it on coke and prostitutes (a la the Secret Service!).

Apple are piling money. The shortfall wouldn't need to be made up somewhere else, they would just have a smaller pile of money. They wouldn't have to cut down on R&D, raise their prices, cut jobs, or anything else.

 

[manu chao]

If Apple made $27b instead of $30b, the shortfall has to be made up somewhere, either in higher prices (on the revenue side) or cutbacks on the R&D, infrastructure expansion and/or maintenance, employee hiring/wages, management compensation, dividends for stockholders, etc. It's not like they're blowing it on coke and prostitutes (a la the Secret Service!).

You know exactly where Apple's profit end up: in its stock price (and now also dividends). But those poor stockholders (particularly those that made less than 100% gain) naturally have to be protected. Otherwise they might run out of money to spend on things like coke or prostitutes.

 

[JohnDoe98]

In any discussion where a company is utilizing legal venues to protect their bottom line, ethics has no place.

No company would reject protecting their bottom line legally because of ethics.

Perhaps your point makes sense in the tax discussion, but when you generalize it becomes very problematic. 50 years ago some companies dumped chemicals in rivers because it was cheaper than to safely dispose of it. Since no laws prohibitted such conduct, they did it to "protect their bottom line", and argued ethics had no place in the discussion, and that it was bad buisness sense to let ethics influence their conduct. Those practices were abominable. Ethics did have a place in the discussion, and their conduct made the creation of entities like the EPA a necessity since buisnesses wanted to dismiss "ethical" questions of relevance.

Ignoring ethics now just ends up screwing things up for the future for regulations will become necessitated, and those regulations often will be too strict and stiffle productivity. If you want to keep goverment out of your buisness, don't give it cause to feel obliged to step in.

Avoiding taxes will inevitably lead to new regulations that makes these circumventing practices no longer feasible, and again the risk is that the regulations will have inadvertent effects in other places. Just because everyone does it does not excuse Apple or anyone else. Good buisness practice now doesn't equate to good buisness practices long term.

 

[KPOM]

Why did you stop at Canada? How about Uganda, Somalia etc.? Those probably do not have any taxes. The funny thing is that even though corporations do sell their products worldwide they still need US to be able to produce the most advanced stuff. I say, the experiment with free trade failed US people, let's get rid of it and then we'll see who can or can not compete.

It's a combination of lower taxes and stable governments.

Free trade is a net benefit. If we stopped trading with the rest of the world, we'd lose out. For instance, we'd have no new computers, mobile phones, TVs, and we wouldn't be able to get out-of-season produce. We'd also quickly run out of oil and gas. A lot of our prescription drugs come from companies outside the US, as do about half our airplanes. We don't have enough engineering talent to build back all those industries in the US, at least not at the prices we've come to expect.

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Keynesian economics is flawed and is currently destroying western economics?
That's news to me.

Most European countries went with austerity and that's destroying their economies. The UK is double dipping.

Compare that to the US, where the stimulus and the bailouts saved the economy from something a lot worse.

European countries are now finally rethinking choosing austerity, it's all over the news...

Talk about selective use of statistics. Europe's economy is faltering because they have inflexible job markets (it's next to impossible to fire someone), and bad demographics (i.e. too many retirees vs. productive people in the job force). We're approaching an issue with demographics, but aren't at European levels yet, partly because we don't promise as generous of pension benefits as European countries did. They adopted austerity not because they wanted to, but because they had to. They finally ran out of other people's money.

Germany's budget is probably the most austere in all of Europe. Angela Merkel resisted the urge to pass any sort of stimulus even in the depths of the crisis. Yet their economy is stronger than ours, and the strongest in Europe. It's because her government and her predecessor's government made some bold labor reforms over the past 15 years (in response to the recession that occurred after the merger of East and West). Germany specifically told GM to take a hike when they asked for a bailout of Opel. Canada and Australia also didn't do "stimulus" spending, either, and they recovered a lot more quickly than we did.

If Keynesian economics were worth anything, we wouldn't have had a recession, since the "illegal wars" that Bush started generated $1 trillion of "stimulus" spending from 2002-2008. Most of our military spending is in the US for security reasons (we don't trust China to build our tanks and artillery). Yet I don't hear Paul Krugman and other prominent Keynesians writing about how the Iraq War led us to prosperity. Under Keynesian economics, government spending is government spending. It doesn't matter what they spend it on, just that they spend it.

 

[adamantpradeep]

Accountability? The real question is ..

Nice to see so much people so concerned about accountability. I wonder whether they have questioned the evasions of their own government first

When it comes to printing mountains of debts claiming various altruistic sacrificial ethics. Evasion on a scale which is simply mind boggling. The govt. has already blown away several generations worth of wealth and now wants to mop up any remaining wealth generating companies?

When it engages in continuously interfering between employer/employee relationship thereby increasing the costs at either side.

When it threatens any business that grow based on ability.

When it strong arms them to obey by using federal agencies/numerous laws to subdue them and eventually replace them by SOGOPORATIONS (Socialist Government Favoured Corporations).

Place your priorities correctly people.

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I wish the communist bitches at NyTimes just shut up. More correctly Tim Cook should not feel himself prodded to reply to such statements. He should standby his/Apple values (the best of Ability should get rewarded and it doesn't mean the best should get automatically ripped by all handout craving losers).

The communist bitches will get what is coming to them.

 

[reedmartin]

Perhaps your point makes sense in the tax discussion, but when you generalize it becomes very problematic. 50 years ago some companies dumped chemicals in rivers because it was cheaper than to safely dispose of it. Since no laws prohibitted such conduct, they did it to "protect their bottom line", and argued ethics had no place in the discussion, and that it was bad buisness sense to let ethics influence their conduct. Those practices were abominable. Ethics did have a place in the discussion, and their conduct made the creation of entities like the EPA a necessity since buisnesses wanted to dismiss "ethical" questions of relevance.

Ignoring ethics now just ends up screwing things up for the future for regulations will become necessitated, and those regulations often will be too strict and stiffle productivity. If you want to keep goverment out of your buisness, don't give it cause to feel obliged to step in.

Avoiding taxes will inevitably lead to new regulations that makes these circumventing practices no longer feasible, and again the risk is that the regulations will have inadvertent effects in other places. Just because everyone does it does not excuse Apple or anyone else. Good buisness practice now doesn't equate to good buisness practices long term.

I'm sorry this a bad analogy. You're comparing dumping chemicals into rivers to avoiding taxes. If you cannot see the problems with your analogy, there's really not much i can say to convince you otherwise.

 

[blow45]

Easy.
1. Companies aim to make at least a minimum profit. If they don't then they either raise prices or stop doing whatever they're doing (airlines for example). Apple, I suspect, achieves its goal with respect to profit. This is standard micro theory.

2. There was no collusion between Apple and the publishers. Apple got it's standard 70/30 deal - just like for app developers and the newspaper/magazine publishers. If you're curious as to why the prices on Amazon went up, the publishers went from the wholesale model (all the books you want at 'X' price and charge whatever you want) to the agency model (we'll set the price and you take a cut). Article in the Wall Street Journal by Daniel Henniger.

3. I don't believe that Greenpeace is really interested in conservation anymore. I do believe they enjoy hectoring large companies and putting out press releases. The founder of Greenpeace feels quite the same way.
Go here: http://www.abc.net.au/radionational...ore-and-the-future-of-the-environment/3336998
Or here: http://iowntheworld.com/blog/?p=120750

Hope this helps.

1. I "suspect" they achieve their minimum profit too. Ok then, why would apple not be making their required minimum profit if they had profits of 26 billion instead of 30 billion and they would have to make their products more expensive as per your original suggestion, i need not quote you btw. I 've read standard microeconomic theory too you know, I try to not misapply it though. I certainly wouldn't teach it if I did though.

2. I am not curious at all prof, I ve read the case inside out the past few days. The agency model came with a MFN clause, and all evidence points to the fact that apple colluded with publishers to fix prices and take away amazons competitive pricing advantage via the wholesale model. The app store model btw cannot be compared to iBooks because apple do not provide coding tools for ebooks, nor app verification, and they certainly don't have an MFN clause. Curiously when it comes to music on iTunes apple does use the wholesale model...I suggest you inform yourself better about this because the Doj has a case and they ll win it. I guess your assertion that bad publicity seeking government is attacking the wholy grail that are the mega rich and powerful corporations such as google and ms might have a few cracks.

3. I enjoy their hectoring of large corporations very much, if there was ever anyone who needed hectoring it would be them. The alternative of letting say bp or shell to their own devices...well I wouldn't even want to think about it. Btw, apple can tout their greenpeace credo for marketing but as soon as greenpeace are on their back the latter become the bad guy?

 

[JohnDoe98]

I'm sorry this a bad analogy. You're comparing dumping chemicals into rivers to avoiding taxes. If you cannot see the problems with your analogy, there's really not much i can say to convince you otherwise.

Reread my first sentence.

 

[jlasoon]

Instead of talking in vague generalities, how about being a little more specific?

This is not the place or the time for such an explanation. The information is complicated and unpopular. If you read all my posts in this forum you'll get a general idea of where I stand on most economic issues.

To make a long story short, I believe that the federal government of the United States is totally bankrupt, done, kaput, no gold in Fort Knox kaput. And to prop up the phony economy, massive printing and revenue is required e.i., QE1, QE2, Operation Twist, Bailout 1 & 2, overtaxation, and so on. Watch for QE3 around June. The country currently sits on $100+ Trillion in unfunded liabilities (Social Security, Medicare, Medicaid, FDIC, Fannie/Freddie, Student Loans, public debt and so on). Without drastic steps to reduce spending, the countries economics fail through either [hyperinflation; $17 gas, $10 milk, a worthless currency, think Zimbabwe] or through [higher interest rates; housing market collapse, destruction of auto industry & banking system, federal government default]. The printing just prolongs the inevitable fall i.e., "it's better to die tomorrow rather than today". The French have already told us that they don't believe any of our financial numbers, the Chinese are warning us about the devaluation of the dollar, and many governments around the world are discussing an alternative to the current reserve currency, the dollar. Like I've said previously, watch the bond market (big bubble), and watch the dollar. We are in essence exporting inflation to the world by killing the dollar. That's why there're pissed.

What comes after? Who knows, but it won't be pretty.

 

[faroZ06]

On the whole, maybe...the US patent system has turned a bit anti-capitalist and parasitic over the last decade or two. More because of poor court decisions than the system itself

Patents definitely help corporations more than citizens but that was not my point. The healthcare system benefits both citizens and corporations by keeping all citizens healthy and productive, which makes for more $ to spend which means more profit potential.

Corporations ain't exactly lining up to pump money into healthcare.Would it benefit citizens if they did the same thing to patent enforcement in the US?

Corporations are forced to pump money into healthcare, and citizens are forced to pump money into patents. Neither are "lining up" to do that. The citizens already steal from companies by downloading their digital content illegally, and I'm sure they don't care about the patents. Arguably, each indirectly help everyone, as you said.

Although I find healthcare very easy to waste. When you have too big of a safety net, people begin to just rely on it. I've heard bad news about France's system coming from French citizens. Now look at Europe.

 

[blow45]

[/COLOR]I wish the communist bitches at NyTimes just shut up. More correctly Tim Cook should not feel himself prodded to reply to such statements. He should standby his/Apple values (the best of Ability should get rewarded and it doesn't mean the best should get automatically ripped by all handout craving losers).

The communist bitches will get what is coming to them.

The fact that you think the ny times have anything remotely to do with communism attests to the fact that you have not picked up a world history (and/or history of ideas) book, ever in your life. You can buy one on iBookstore, about 40% more expensive than what you d pay for a couple of years ago but hey it's apple, they are worth it.

 

[JohnDoe98]

this is not the place or the time for such an explanation. The information is complicated and unpopular. If you read all my posts in this forum you'll get a general idea of where i stand on most economic issues.

To make a long story short, i believe that the federal government of the united states is totally bankrupt, done, kaput, no gold in fort knox kaput. And to prop up the phony economy, massive printing and revenue is required e.i., qe1, qe2, operation twist, bailout 1 & 2, overtaxation, and so on. Watch for qe3 around june. The country currently sits on $100+ trillion in unfunded liabilities (social security, medicare, medicaid, fdic, fannie/freddie, student loans, public debt and so on). Without drastic steps to reduce spending, the countries economics fail through either [hyperinflation; $17 gas, $10 milk, a worthless currency, think zimbabwe] or through [higher interest rates; housing market collapse, destruction of auto industry & banking system, federal government default]. The printing just prolongs the inevitable fall i.e., "it's better to die tomorrow rather than today". The french have already told us that they don't believe any of our financial numbers, the chinese are warning us about the devaluation of the dollar, and many governments around the world are discussing an alternative to the current reserve currency, the dollar. Like i've said previously, watch the bond market (big bubble), and watch the dollar. We are in essence exporting inflation to the world by killing the dollar. That's why there're pissed.

What comes after? Who knows, but it won't be pretty.

ty.

 

[hypnos58]

Taxes

We have the highest corporate tax code in the world and if there are legal loopholes and apple takes advantage good for them. Simplify and lower the taxes on corporations then we would bring back corporations to the US and the tax revenue will greatly increase. Quite bitching about how much success and taxes buisness and individuals pay. Celebrate success and leave your misguided petty jealousy behind.

 

[jlasoon]

Talk about disqualifying comment.

Do you know any more buzz words?

But then I should have known this from the fact that you had no clue about what path most European countries chose to battle the recession.

Do you want them to print Euros? How can Greece, Spain, Portugal, Italy print Euros? Please explain that to me.

 

[dericks0n]

No company pays taxes in this county. The consumer of the company pays the taxes. You want to charge apple, Walmart, AT&T, whomever more, they'll just pass it along to the consumers.


Anyone who thinks different is fooling themselves.

Your absolutely correct.

 

[hipnetic]

The best way to solve this problem and make sure that they "pay their fair share" is to reduce tax rates to 0%, so everyone is on a level playing field.

On a related note...it's not too late to support Ron Paul. End the wars. Support peace and prosperity!

 

[iEnvy]

Apple Fanboys would defend the company on anything

 

[adamantpradeep]

The fact that you think the ny times have anything remotely to do with communism attests to the fact that you have not picked up a world history (and/or history of ideas) book, ever in your life.

No history book likes to say that communists have now rebranded themselves as leftists/progressives or the glorious bastards. I don't care.

You can buy one on iBookstore, about 40% more expensive than what you d pay for a couple of years ago but hey it's apple, they are worth it.

Gee thanks for the tip. I get to choose between iBookstore/Kindle App and sometimes epubs synced from my mac.

Did you want to point out any federally mandated app that I should be using instead?

 

[nick_elt]

As someone living in Poland you should be infuriated that apple isn't taxed at proper rates in your country of residence in iTunes so your country of residence can afford more in terms of public spending for your communal good, but they are instead dodging tax in Luxembourg. Instead you have need with the ny times...whatever... Some people never learn...wake up and smell the coffee that the world almost bankrupt itself to 1920 three years ago because international capital is so above the law...Wake up and smell the coffee that two whole continents, Europe and north America are in historically deep recessions precisely because some companies make 30 billion dollars yet via worldwide loopholes they end paying a mere 10% as tax...Yet your problem is the new York times...unbefrigginlievable...

Are the laws Apples responsibilty? I was just pointing out the fact that apple are paying the legal requirement of tax. Do you pay more tax than you are meant to???? Exactly. Just like the ********e that the new york times blameing apple for all of chinas workplace problems. Sure, things should change, i pay alot more tax (rate) than apple does. But do i pay more than I have to? No chance! The angle of the story is wrong.

 

[blow45]

No history book likes to say that communists have now rebranded themselves as leftists/progressives or the glorious bastards. I don't care.

Gee thanks for the tip. I get to choose between iBookstore/Kindle App and sometimes epubs synced from my mac.

Did you want to point out any federally mandated app that I should be using instead?

the doj has got your back they ll easily take apple to the cleaners for collusion and anticompetitive practises and soon you ll be buying from both amazon and apple (should they wish to maintain a proper store with managers who set prices and strategies instead of just sitting back and getting 30% per sale) for much less when the competition is restored. No need for a federal mandated app

 

[lilo777]

If Apple made $27b instead of $30b, the shortfall has to be made up somewhere, either in higher prices (on the revenue side) or cutbacks on the R&D, infrastructure expansion and/or maintenance, employee hiring/wages, management compensation, dividends for stockholders, etc. It's not like they're blowing it on coke and prostitutes (a la the Secret Service!).

Employee hiring and wages obviously are not counted as profits, you are wrong here. Same goes for infrastructure expansion and/or maintenance and R&D. Nobody taxes this stuff. This "shortfall" may only affect the management compensations (even that I am not sure) and dividends for stockholder. And those definitely may blow this money on prostitutes.

 

[jarroyo1031]

Typical

 

[jimjulian]

Great idea! Corporations are just pass throughs. If we must tax income, then we should tax the income that flows to individuals.

Econ the key is not to tax income or investment at any level, tax the spending and provide everyone a rebate, in advance, for spending on the basic necessities of life.

 

[FloatingBones]

I suspect that most people defending Apple here are AAPL shareholders.

It's a ludicrous, unverifiable, and divisive conjecture.

They should put a disclaimer in their posts.

That's an utterly nonsensical and completely unworkable proposal. Did I mention that it's divisive?

And I am not that naive.

We can't tell. Were the details of yesterday's NYT story really a surprise to you?

I say we should blame both corporations and government for doing a poor job in tax legislation and collection.

How about 100% on the government. With legislation like SOX, corporations are obligated to operate in a way to maximize returns for the stockholders.

Say whatever you want, for profit corporations should not pay 9% taxes

Do you have a more complete theory of what is "fair" for corporations to pay? What number would make you happy?

(even if their shareholders want just that).

No. Your point of view doesn't trump others. Further, there are plenty here defending the system who are not stockholders. You'll never know which are and which aren't; it's none of your business.

Personal attacks and innuendo will not work. You need to defend your claims with facts and reasoning.

 

[ProwlingTiger]

I like how the NYT is going all-out in demonizing Apple. Not just one story but a full series. Like Apple is the only company doing these things.