How Apple Minimizes its Corporate Tax Burden

[FloatingBones]

Fact is Apple has a cult like following who truly believe they can do no wrong. Therefore Apple gets a pass in many cases.

Sorry. I've never ever met one of those people. I'm certainly not one of them; you can find plenty of posts here where I've been critical of Apple. I'm really bothered that they failed to open up MagSafe licensing; they forced HyperShop to jump through hoops to sell a way for end users to create their own cable.

Can you name a single user here who is one of those True Believers? If not, I invite you to realize that your claim may be fiction.

Taxes & where they keep their money is their business, the only time I disagree with them is when they con the customers on certain product faults by putting a spin on things Or go silent and hide.

Agreed. The recent case of the Seattle blogger with his failed MacBook Pro was rather disturbing. OTOH, it should be fairly easy for a class-action suit.

I think Apple makes mistakes. I'm clearly not one of the true believers. As a matter of fact, I've never ever met one. Have you?

The bonus question: why do some here try to perpetuate this myth of true believers?

 

[the8thark]

The less taxes a business pays means the less taxes passed down to the end consumer (in the form of higher final product prices). So for this reason alone I'm all for Apple and other companies using all legal methods to reduce their tax.

If the government didn't like these tax reducing methods they should stop the methods from being allowed by passing a bill in parliament or something like that.

This is exactly why I hunt the lower prices for the same products in different stores. The only time I won't go the lowest price is if that company gives very bad service. I don't ever honour bad service with my sale. I'll dishonour their bad service by denying them the sale. My whole point though is the lower prices equates to me paying less of the taxes in the final product price.

I do understand that with zero taxes we'd have no public services in existence and the country would grind to a holt. But if I can help out a company with good service and who knows how to use their tax deductions properly to provide a lower final product price then I will help them out.

 

[JohnDoe98]

honestly, a lot of the people here are a joke. saying apple is unethical and are avoiding taxes, blah, blah, blah. it's all ********. apple is doing nothing more than everyone here does every year when doing their taxes- trying to lower their tax burden. granted, it is on a lot bigger scale, but it 's the EXACT same thing. i can promise that everyone here claims everything they can legally claim on their taxes so they don't owe the government more money. grow the hell up.

It's not the exact same thing on a larger scale. Read the New York Times article. Everyone aims to maximize deductions, granted. However, not everyone circumvents the nation's tax code by offloading sources of incomes to foreign countries. We as individuals pay taxes in the country where we earned the money. Apple pays taxes in countries where it didn't earn the money. That's the point the Times makes vividly.

 

[chirpie]

What's wrong with Apple making more money? Government wont do anything good with it.

I'm not exactly government's biggest cheerleader, but it's not like Apple's responsible for us being able to drive on a road, eat safe food, or have a police officer show up to the neighbor's house to solve a domestic dispute.

These are our gadgets, not the basic utilities of our lives. (Oh but I'll bet some would say au contraire to that last statement. ;-) )

 

[JohnDoe98]

What's wrong with Apple making more money? Government wont do anything good with it.

Nothing, but that isn't the issue. If you can't follow the thread of the argument, perhaps it's best not to engage.

 

[davidgrimm]

I don't know what all the stink is about. This is all perfectly legal. Unlike many members of President Obama's cabinet, Apple has filed its taxes correctly and legally.

To all those claiming Apple should be overpaying because they can, did you pay extra?

 

[FloatingBones]

The issue at hand is not what percentage of tax Apple ought to be paying, so your question is besides the point.

Of course it's the issue, and you should have some number that should make you happy.

So the issue regarding Apple's behavior is whether or not Apple circumvented, through legal means, the intent of the nation's tax code. That is the problem

That is the problem to you. But it's not to our Supreme Court:

"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."

- United States Supreme Court Justice Learned Hand

Did you read that this morning? Did you bother to go look up the case?

not the percentage they end up paying.

Talk to the Hand, baby! Read and learn from his words. There is nothing sinister in arranging affairs to keep taxes as low as possible.

Yes I would recognize the absurdity of that scenario, but that isn't applicable to what we are talking about. We aren't trying to determine how much tax Apple should pay, we are asking if Apple should be circumventing the nation's tax code.

There is nothing sinister in arranging affairs to keep taxes as low as possible.

I'm sorry if you cannot remember what you yourself say, but you said in post 580, and I quote:

Incorrect. You said Premise 2: What's legal can't be unethical. I never ever made such a blanket statement.

The context of the discussion implies that your last sentence is claiming that because Apple was operating legally, they did nothing immoral.

I certainly agree with Justice Hand's statement from that 1934 decision. There is nothing sinister in arranging affairs to keep taxes as low as possible.

Do you disagree with Justice Hand's statement?

The stink is there is a gap between what is legal and what is ethical.

Not exactly. The stink is that some perceive there is a gap between what is legal and what is ethical.

 

[JohnDoe98]

I don't know what all the stink is about. This is all perfectly legal. Unlike many members of President Obama's cabinet, Apple has filed its taxes correctly and legally.

To all those claiming Apple should be overpaying because they can, did you pay extra?

The stink is there is a gap between what is legal and what is ethical.

----------

Of course it's the issue, and you should have some number that should make you happy.

Either you respond to the issue I am concerned with, or you should talk to someone else.

I certainly agree with Justice Hand's statement from that 1934 decision. There is nothing sinister in arranging affairs to keep taxes as low as possible.

Do you disagree with Justice Hand's statement?

If you read the New York Times articles you would have understood the point they are making. Their point is the way digital content is taxed is fundamentally different from the way everything else is taxed. There was no digital age when Justice Hand made his claims. His points are not obviously applicable. If you want to make them applicable, you will need to explain their relevance.

Here let me make it clearer:

Apple serves as a window on how technology giants have taken advantage of tax codes written for an industrial age and ill suited to today’s digital economy. Some profits at companies like Apple, Google, Amazon, Hewlett-Packard and Microsoft derive not from physical goods but from royalties on intellectual property, like the patents on software that makes devices work. Other times, the products themselves are digital, like downloaded songs. It is much easier for businesses with royalties and digital products to move profits to low-tax countries than it is, say, for grocery stores or automakers. A downloaded application, unlike a car, can be sold from anywhere.

The growing digital economy presents a conundrum for lawmakers overseeing corporate taxation: although technology is now one of the nation’s largest and most valued industries, many tech companies are among the least taxed, according to government and corporate data. Over the last two years, the 71 technology companies in the Standard & Poor’s 500-stock index — including Apple, Google, Yahoo and Dell — reported paying worldwide cash taxes at a rate that, on average, was a third less than other S.& P. companies’. (Cash taxes may include payments for multiple years.)

 

[rdrr]

I work in one state that has an income tax, and live in another that doesn't. I even work at home in the non income tax state, but don't even think I can deduct that income from my state tax return. I wish I had the option through creative accounting to pay the lower tax rate.

 

[rgravell]

It's not the exact same thing on a larger scale. Read the New York Times article. Everyone aims to maximize deductions, granted. However, not everyone circumvents the nation's tax code by offloading sources of incomes to foreign countries. We as individuals pay taxes in the country where we earned the money. Apple pays taxes in countries where it didn't earn the money. That's the point the Times makes vividly.

the times article is kind of a moot point because they didn't even get their numbers correct. so tell me how this is different than people buying a house in florida, where there are no state taxes, then basing their income from the state? please tell me how you can make the claim that apple "offloads sources of income to foreign countries," when you can't actually give a point of reference for how much of their income comes from all of their individual sorces? i don't blame apple at all for keeping their money outside the states, as we have the highest corporate taxes of any country! talk about a bombed out economy, let's tax the hell out of the people who can actually afford to hire people both here and worldwide- makes a lot of sense to me?

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I don't know what all the stink is about. This is all perfectly legal. Unlike many members of President Obama's cabinet, Apple has filed its taxes correctly and legally.

To all those claiming Apple should be overpaying because they can, did you pay extra?

true story...the point i made exactly.

 

[davidgrimm]

The stink is there is a gap between what is legal and what is ethical.

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Following the law is ethical behavior.

 

[slrandall]

And if it was Microsoft you would be lambasting them to no end for doing this.

The hypocrisy is just OOZING from your elitist post.

I really wouldn't be. While I hate using Windows, I'm certainly not pro-monopoly or anti-business. On a macro scale, free and profitable businesses that don't have to worry about taxation are great. On a micro, personal scale, I'll choose Apple because they make better products in my opinion.

But that's not relevant to my post. I wasn't being hypocritical, or an elitist. You were just being an *******. You didn't even make a substantive post, you just accused me of something that's not true.

So to reiterate my point, Apple - and ALL other businesses - don't owe **** to local, state, or federal governments, nor should they receive favors from said governments.

 

[guzhogi]

What's wrong with Apple making more money? Government wont do anything good with it.

I'll put it this way, if Apple's taxes go down and they reduce their prices proportionally, that means more money left in my pocket to pay for other things.

However, if Apple keeps the prices at the same level, it's up to the individual to determine whether or not they should buy the product.

I'm no expert in economics so help me with this: how does an individual's willingness to pay and ability to pay factor in?

Following the law is ethical behavior.

So if there was a law that said I must kill anyone with the user name davidgrimm and I followed it, that would be ethical?

 

[floridag]

Let he who's never shopped at an online retailer that doesn't collect sales tax cast the first stone.

As a business owner, I incorporate the tax burden into the cost required to run my business and pass the cost on to my customers. While it's true that a competitive market will cap the price we can charge, businesses will increase the sales price as much as possible to maximize profits. As our profits reduce, we cut back in other areas - ultimately cutting employees or we'd go out of business. If our government were proactive, we'd find ways to make it to a large or small company's advantage to keep their revenue here and pay their taxes in the U.S. rather than have some of the highest corporate tax rates in the world. Sadly, regardless of who is in power in DC, I don't see them doing that, so companies will continue to transfer more money oversees.

 

[JohnDoe98]

the times article is kind of a moot point because they didn't even get their numbers correct. so tell me how this is different than people buying a house in florida, where there are no state taxes, then basing their income from the state? please tell me how you can make the claim that apple "offloads sources of income to foreign countries," when you can't actually give a point of reference for how much of their income comes from all of their individual sorces? i don't blame apple at all for keeping their money outside the states, as we have the highest corporate taxes of any country! talk about a bombed out economy, let's tax the hell out of the people who can actually afford to hire people both here and worldwide- makes a lot of sense to me?

When 12 people in Luxembourg account for all the sales of digital content throughout Europe, Asia, Africa and the Middle East, you know something weird is going on. What is happening is people are developing the digital distribution networks and securing its content in one country, and then processing the payments somewhere else, even though the goods are being sold to the population in the original country.

For instance, people develop the iTunes store and software in one country, call it A. They then negotiate to get that content local to that country (A) through licensing agreements, and then the company sets up a server in another country (B) where 12 people maintain the server. All the transactions are then processed in country B, even though the goods are sold to the people of country (A). In this case all the income is, technically and legally speaking, "earned" in country (B) even though by any objective measure the value was created entirely in and for country (A).

And here's the important point, the sole reason for setting up the server in country (B) is to circumvent the tax code.




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Following the law is ethical behavior.

Not always. I gave plenty of instances where that is blatantly false.

 

[davidgrimm]

the times article is kind of a moot point because they didn't even get their numbers correct. so tell me how this is different than people buying a house in florida, where there are no state taxes, then basing their income from the state? please tell me how you can make the claim that apple "offloads sources of income to foreign countries," when you can't actually give a point of reference for how much of their income comes from all of their individual sorces? i don't blame apple at all for keeping their money outside the states, as we have the highest corporate taxes of any country! talk about a bombed out economy, let's tax the hell out of the people who can actually afford to hire people both here and worldwide- makes a lot of sense to me?

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true story...the point i made exactly.

I think the real problem some people have with some companies or people earning vastly more than others is the mistaken view that everyone is equal it terms of earning ability. So for someone like Steve Jobs to earn so much money, he basically cheated at life and therefore he should be punished by paying super high taxes, that then get funneled to the people that could have earned as much if they had cheated too. Of course, nobody can actually explain how Mr. Jobs has cheated to earn his extraordinary income, but they feel sure it wasn't earned fairly.

This view is, of course, complete poop! Steve Jobs worked hard for what he had, he took risks and should get to keep the results of his hard work.

Same goes for companies. The Apple hateboys out there are already mad that Apple makes good stuff with great design. Now it turns out they make lots of money and minimize their tax liability. They again must be cheating at this game.

 

[darkplanets]

Yeah, real interesting... You think it is fair for someone who owns 14 houses, 10 cars, god knows how much other junk, to pay for the same police protection of his private goods as someone who doesn't own anything worth stealing?

Oh, I'm sure that there are services the poor use that the rich don't, but the point is our needs aren't the same, why should our contribution be the same? How is that fair? To ignore the discrepancies in need is what is unfair.

Ha. What a knee-jerk reaction. Your statement is actually the OPPOSITE. Let's take your scenario head-on, and let's say we have a family of four that lives in a bad part of any city. They "have nothing worth stealing" (which is an impossibility, by the way, since even homeless people have valuables) -- they still need police protection; more so than the rich person. Let's tally up those governmental costs real fast, shall we?

-Food stamps
-Welfare/unemployment/social security
-Health insurance (depending on the year), Medicaid (for the kids), Medicaid if any elderly
-Police protection (because gang violence; bad neighborhood since they're poor)
-Schooling for the kids

Now the rich person:
-No schooling for the most part; if kids, then probably private school
-Healthcare paid for by self
-Police protection... but because they live in a nice neighborhood, the crime rate is much lower than a poor neighborhood. Also they have security, guards, etc if they are that rich. How many rich people get robbed? Compare that to the middle to lower class people.

Do you see the issue with your argument? Social services for a poor person invariably costs more, much more, than any rich person. So while your knee-jerk reaction is to shift all the taxes to the wealthy, they're actually costing less than the poor. And, as you said, "but the point is our needs aren't the same, why should our contribution be the same? How is that fair? To ignore the discrepancies in need is what is unfair." Ergo, you would therefore be supporting HIGHER taxes on the poor.

That is precisely why an unfair tax system is utter ********; it should just be a flat cut across the board for everyone. You are not more special then joe blow millionaire and vise versa -- no one deserves to be docked more simply because of their social standing in life. Let's say for example that you were taxed 10%.... 1 mil gross income gives 100000 in taxes. Someone earning 45000 gives 4500... what's not fair about that? Everyone pays the same percentage. Period. Were supposed to be the land of equal rights.

 

[derickdub]

This is news?

Like the article says, Apple isn't the only one. Plenty of large companies do the same thing. I can't blame them though, the U.S. has ridiculous tax rates and isn't great about giving breaks.

 

[guzhogi]

Let he who's never shopped at an online retailer that doesn't collect sales tax cast the first stone.

I live in Illinois and when I did my state taxes using Turbotax, something I noticed is that they had a screen that asked me if I bought something from out of state. If I did, I had to pay a 6.25% "use tax" that basically replaces the state sales tax. So in Illinois, you still basically have to pay sales tax, regardless of whether you bought the item at a physical store or online.

And before anybody tells me to move, it's not easy to pick up everything, find a new place to live, find a new job, etc.

Ha. What a knee-jerk reaction. Your statement is actually the OPPOSITE. Let's take your scenario head-on, and let's say we have a family of four that lives in a bad part of any city. They "have nothing worth stealing" (which is an impossibility, by the way, since even homeless people have valuables) -- they still need police protection; more so than the rich person. Let's tally up those governmental costs real fast, shall we?

-Food stamps
-Welfare/unemployment/social security
-Health insurance (depending on the year), Medicaid (for the kids), Medicaid if any elderly
-Police protection (because gang violence; bad neighborhood since they're poor)
-Schooling for the kids

Now the rich person:
-No schooling for the most part; if kids, then probably private school
-Healthcare paid for by self
-Police protection... but because they live in a nice neighborhood, the crime rate is much lower than a poor neighborhood. Also they have security, guards, etc if they are that rich. How many rich people get robbed? Compare that to the middle to lower class people.

Do you see the issue with your argument? Social services for a poor personal invariably costs more, much more, than any rich person. So while your knee-jerk reaction is to shift all the taxes to the wealthy, they're actually costing less than the poor. And, as you said, "but the point is our needs aren't the same, why should our contribution be the same? How is that fair? To ignore the discrepancies in need is what is unfair." Ergo, you would therefore be supporting HIGHER taxes on the poor.

That is precisely why an unfair tax system is utter ********; it should just be a flat cut across the board for everyone. You are not more special then joe blow millionaire and vise versa -- no one deserves to be docked more simply because of their social standing in life. Let's say for example that you were taxed 10%.... 1 mil gross income gives 100000 in taxes. Someone earning 45000 gives 4500... what's not fair about that? Everyone pays the same percentage. Period. Were supposed to be the land of the equal rights.

I forget where I saw it, but I remember seeing a chart that showed how much the government got back on different systems. Stuff like food stamps returned more money than the government put in while tax breaks for the rich returned only pennies on the dollar. Hmmm…

 

[rgravell]

When 12 people in Luxembourg account for all the sales of digital content throughout Europe, Asia, Africa and the Middle East, you know something weird is going on. What is happening is people are developing the digital distribution networks and securing its content in one country, and then processing the payments somewhere else, even though the goods are being sold to the population in the original country.

For instance, people develop the iTunes store and software in one country, call it A. They then negotiate to get that content local to that country (A) through licensing agreements, and then the company sets up a server in another country (B) where 12 people maintain the server. All the transactions are then processed in country B, even though the goods are sold to the people of country (A). In this case all the income is, technically and legally speaking, "earned" in country (B) even though by any objective measure the value was created entirely in and for country (A).

And here's the important point, the sole reason for setting up the server in country (B) is to circumvent the tax code.




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i fully understood what was going on before your explination, and i still see nothing wrong with it. it's perfectly and rightfully legal.

 

[gotluck]

Following the law is ethical behavior.

Quoted for falseness

 

[samcraig]

I'm not exactly government's biggest cheerleader, but it's not like Apple's responsible for us ...have a police officer show up to the neighbor's house...

I just had to smirk - not at you - but simply because last year proved that Apple security believed they were "police" when they showed up at someone's house...

 

[reedmartin]

This is news?

Like the article says, Apple isn't the only one. Plenty of large companies do the same thing. I can't blame them though, the U.S. has ridiculous tax rates and isn't great about giving breaks.

It's news only because it's Apple. With great success comes great scrutiny. It's fun watching everyone talk about how unethical Apple is though!

The lack of business sense here? Astounding.

 

[FloatingBones]

The stink is there is a gap between what is legal and what is ethical.

That is indeed the perception that you have. But perception is not the same as reality. You provided three analogies; all three were failures. I asked you to provide some workable analogies; you haven't provided any.

Perception does not seem to match reality in this case.

Either you respond to the issue I am concerned with, or you should talk to someone else.

I'm asking you what alteration in Apple's tax payment would make you happy. You have no answer -- and neither does the Times. That speaks volumes.

I certainly agree with Justice Hand's statement from that 1934 decision. There is nothing sinister in arranging affairs to keep taxes as low as possible.

Do you disagree with Justice Hand's statement?

If you read the New York Times articles you would have understood the point they are making.

The NYT didn't mention any Supreme Court case, and it didn't quote Justice Hand. Justice Hand's writing in the opinion of that tax case is quite clear. I am asking you to do some original thinking. You seem to think that Hand's assessment doesn't apply here. Can you explain why you think that?

Bonus Question: why do you think the NYT failed to mention this Supreme Court decision in their story?

Their point is the way digital content is taxed is fundamentally different from the way everything else is taxed. There was no digital age when Justice Hand made his claims.

In your ever-so-humble opinion, no doubt.

Unfortunately, (actually fortunately), the opinions of the Supreme Court have a higher standing than opinions in this discussion. You're welcome to believe that some precedent should be changed but that has not happened. You have a house of cards of opinions -- none of which have any legal standing. Your "ethical" pronouncement is in serious doubt.

Nobody answered me before: is this the origin of the phrase "Talk to the Hand"? Don't you think that's funny?

His points are not obviously applicable.

Really? Do you have some legal case that agrees with your casual opinion here?

If you want to make them applicable, you will need to explain their relevance.

This is a discussion about taxation and arranging affairs to pay as little as possible. Supreme Court Justice Hand explicitly said, "There is nothing sinister in arranging affairs to keep taxes as low as possible."

Here let me make it clearer

You are going to need to do some original thinking here. The NYT failed to address what our justice system -- our Supreme Court -- has said about taxes in its precedents. If you think that the Supreme Court precedents do not apply, the onus is on you to explain why. Sadly, the NYT article failed to address that issue.

 

[JohnDoe98]

Were supposed to be the land of equal rights.

Exactly, and there are multiple meanings of equality. Equal can mean everyone gets the same, regardless of merit or need, or it can mean everyone gets what they deserve/need, to name just two examples. What's being challenged is your notion of equality and fairness. You notion trivializes differences that most would consider quite substantial.

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i fully understood what was going on before your explination, and i still see nothing wrong with it. it's perfectly and rightfully legal.

Well then you and I are at an impasse. Our conceptions of propriety are fundamentally different.