U.S. Senators Claim Apple Has Avoided Paying Billions in U.S. Income Taxes Ahead of Tim Cook Testimony

[HarryPot]

I completely agree with everything you've said. I should've done a better job in most first post by saying that Apple certainly doesn't deserve the majority of the blame here. The real problem is these governments that have allowed these loopholes to remain open. They are who everyone should be blaming, and who I'm sure Tim Cook will blame during his testimony.

I'm sorry if my post came somehow aggressive or out-of-line, not my intention.

We'll see tomorrow what Tim says, it should be interesting.

Now, I do believe that the more money a company makes, the more they should do to spread that wealth. That means investing in more jobs, providing pay raises to employees, and giving to charitable causes and foundations. When I worked for Apple, you couldn't get then to donate a penny to any charity, and that was so disappointing to me. Yes, they are under no obligations to give anything away. But, when you're out there constantly touting how "life changing" your products are and how they've helped so many people, then you turn down the chance to give money to a charity that's doing the same thing and asking for fractions of fractions of fractions of a penny on the dollar to help them, it makes you think that these guys really aren't good people.

It sometimes feel like it. But, remember these guys work for all the people that have invested in the company. If you start making donations from the company pocket, somebody is going to disagree with it, dislike it, etc.

And, whatever charity these companies can give, it is very, very far away from what the government can and should do. They just don't have the knowledge and the means to make a big enough charity to change a country. I think it is better to let the government be the one who organises charities, or NGOs, and just help companies make what they do best: making business. Let them be greedy if they want to, let the CEOs buy yachts, planes, etc., as long as they play by the rules and keep looking out for their business they are already making a big deal of help to the country.

The only action that I do dislike is when CEOs or other directors mistreat "legally" their employees. With poor salary and an undesirable work environment. But in all honesty, Apple and most Silicon Valley companies seem to be very good companies to work for.

 

[BC2009]

It would seem that the US Senate and Apple are in disagreement on several points. According to Senator Carl Levin's website:

In addition to those standard multinational tactics, Apple established at the apex of its offshore network an offshore holding company that it says is not tax resident in any nation. That subsidiary, Apple Operations International, has no employees and no physical presence, but keeps its bank accounts and records in the United States and holds its board meetings in California.

But according to Apple's statement before the Senate:

To support its global business, Apple relies on a network of foreign subsidiaries incorporated in countries around the world to perform a variety of functions, from manufacturing to sales and support. Several subsidiaries are incorporated in Ireland, where Apple began operations in 1980. The Irish subsidiaries, which are involved in manufacturing, distribution, technical support, sales support and finance support services, include the following: Apple Operations International (“AOI”), Apple Operations (“AO”), Apple Operations Europe (“AOE”), Apple Sales International (“ASI”) and Apple Distribution International (“ADI”). Apple’s Irish subsidiaries employ nearly 4,000 people and pay taxes there as required by Ireland. Apple recently broke ground on an expansion of its campus in Cork.

The emphasis is mine in both quotes, but something clearly does not jive here. Why is the senate claiming that there are zero employees and no physical presence of AOI and Apple is talking about 4,000 employees and an expansion to their campus in Cork.

If the Senate really wants to rage war on "holding companies" then they are waging war on all of corporate America. Either way, after reading both it sounds like Apple's accountants used standard accounting practices via holding companies to keep overseas revenue overseas rather than trying to mask US revenue as overseas revenue and avoid taxes. Apple's playing by the rules and they are using the rules that give them an advantage to overcome the rules the rules that are overly harsh. For example, repatriating money earned overseas at a rate of 35% seems pretty silly since bringing that money home to the USA at ANY tax rate would be a huge incentive to the USA. What incentive does any company have to bring foreign earnings home if they are going to face those kind of taxes? Why not simply keep that money outside the USA and spend it outside the USA.

Imagine some alternate world where I was filthy rich and had $5M sitting in a French bank account and I wanted to buy a nice vacation home in France. Would it make sense to bring the money back to the USA and pay penalties in France for moving the money and then taxes in the USA for bringing the money in, only to move it back out again to purchase that vacation home? Heck no. If the money kept outside the USA then it can be spent outside the USA without incurring extra tax costs.

Back in the real world: my mother had an inheritance from a relative in Italy who passed away years ago. The government of Italy would charge a fee for moving large amounts of money out of the country so the inheritance could not be sent to her in full, but only brought back a little at a time as family members went to Italy. What's more, once it arrived in the USA, the inheritance was subject to US taxes. That makes no sense since US infrastructure had ABSOLUTELY NOTHING to do with the earning of that money in Italy -- so what right does the US government have to any of it? Further, the Italian government was charging a fee because they wanted that money spent domestically to bolster their own economy even though the money was already locally taxed. It seems to me like two thieving governments are complaining that somebody has outwitted their strategy for stealing money.

 

[i.mac]

Meet Apple's new CEO: Tim Crook.

Seriously, there are really two major issues here: The US tax code is in need of a serious overhaul to close loopholes and align practices, and Apple's practices need to be further investigated globally for any potential illegal activities. Yes, Apple appears to have broken no laws here, while doing an excellent job of showing how greedy, unethical and dishonest a company can be and still be loved by the consumer.

I spent almost four years working at Apple, watching as the company moved from a customer focused culture under Steve Jobs to a focus on reduction in quality, cutbacks on customer service and anyways that can be thought of to increase profits under Tim Cook.

I love my Apple products enough to voice my concerns with Apple's current leadership.

Full.B.S.

 

[RBMaraman]

It sometimes feel like it. But, remember these guys work for all the people that have invested in the company. If you start making donations from the company pocket, somebody is going to disagree with it, dislike it, etc.

And, whatever charity these companies can give, it is very, very far away from what the government can and should do. They just don't have the knowledge and the means to make a big enough charity to change a country. I think it is better to let the government be the one who organises charities, or NGOs, and just help companies make what they do best: making business. Let them be greedy if they want to, let the CEOs buy yachts, planes, etc., as long as they play by the rules and keep looking out for their business they are already making a big deal of help to the country.

The only action that I do dislike is when CEOs or other directors mistreat "legally" their employees. With poor salary and an undesirable work environment. But in all honesty, Apple and most Silicon Valley companies seem to be very good companies to work for.

When I first joined Apple, I was all about drinking the kool-aid. It was, at the time, a very cool place to work! However, that Apple doesn't exist anymore. When Apple started reporting record revenues and profits during the economic downturn, they still cut out all employee bonuses below the Executive level, lowered the starting wages for new employees, and froze all pay below the Executive level. Then, when the economy recovered, and the revenues and profits were still climbing, the announced that they would not bring any bonuses back, the starting pay would be lowered yet again, and all raises were capped at 5%. That's when I knew it was time to leave. I love my Apple products, but I do not love Apple as a company anymore. Steve Jobs was an incredible and inspiring leader who cared deeply for every single customer and employee, but Tim Cook only cares about numbers on spreadsheets. It was very sad to watch as some of the most talented people I've ever met and worked with (and who also loved Apple), leave their dream jobs and careers because of poor leadership and a culture shift.

 

[IJ Reilly]

"I am shocked, shocked to find gambling going on in this establishment!"

 

[AdonisSMU]

The tax laws are nutty they need to be simplified so simplified that a 3rd grader could calculate their tax burden in within 5 minutes after knowing how much money they made in income.

 

[Mac21ND]

This is why I hate Congress.

 

[koban4max]

i know a better way...stop supporting Apple.

 

[apolloa]

i know a better way...stop supporting Apple.

Sure you could do that, but if you read up on this, you'll soon realise that their are several MAJOR corporations dodging tax in the UK and USA due to loopholes. Are you going to boycott Amazon too? Or even Google if you even can?

 

[Mac21ND]

Sure you could do that, but if you read up on this, you'll soon realise that their are several MAJOR corporations dodging tax in the UK and USA due to loopholes. Are you going to boycott Amazon too? Or even Google if you even can?

HP and MS are being investigated as well. This is McCarthism at its finest.

 

[macman34]

Excuse me guys, am I the only one taking issue with the grammar here, wtf is that:

Apple's claim that two key offshore companies are not tax residents of Ireland, where they are incorporated, or of the United States, where Apple executives manage and control the companies.

Wtf is the main verb and the object?

The sentence preceding is:

The subcommittee, which previously explored tax avoidance by other multinational corporations using offshore subsidiaries, found similar practices at Apple. In addition, the subcommittee review discovered an unusual tax scheme:

What was the tax scheme, it certainly wasn't "apple's claim".



As far as the topic goes, this is not solely about apple, multinationals have repeatedly pocketed governments worldwide (their bribing ELECTED officials is only comparable to what big booze and drug rackets are paying them) so they could create laws with plenty of loopholes for them to dodge enormous amounts in tax. Not only in the states, the world over. Speculating on the economy worldwide by the financial institutions, aka institutionalized casinos almost destructed the world in 2008 and it's after effects in terms of unemployment and poverty are felt until now and they aren't going away. Another problem is that of big companies avoiding the right share of tax.

Now where the hell is that mac pro apple?

 

[echo44]

The government needs to make the corporate tax rate
more acceptable and companies will bring back manufacturing and business
back to the US.

 

[Small White Car]

Did you purposefully create shell companies offshore to shift your assets and lower your taxable income?

You claim they've broken no laws but are immoral for paying the lowest amount the law will allow. That describes me as well.

So, no, I've done nothing like that but the specific differences hardly matter.

 

[macman34]

This is why I hate Congress.

No offense, but I can just nominate this for moronic post of the month?

This is akin to someone being mugged and scolding the coppers who come to his rescue by arresting the mugger.

HP and MS are being investigated as well. This is McCarthism at its finest.

Huh? What does an ideological witch hunt and black listing on anyone not 100% aligned with state dictated political ideology have to do with elected officials finally starting to crack down on this major worldwide plague that is the powerful and mighty (be them individuals, or, more often corporations) using their clout and power to first influence legislation to go their way and then using the loopholes they instigated in order to avoid paying tax ANYWHERE in the world or at the very least paying peanuts in some tax haven.

 

[Undecided]

Well in the UK, as individuals, their isn't anyway really to con the tax system. The government works out how much you owe and takes it out of your pay cheque automatically, but I don't know about self employed people.

These aren't cons, though. The government says you can deduct home mortgage interest (including second home), medical expenses (above a certain threshold), dependents, contributions to retirement plans (with some restrictions), etc., etc.

Corporations deduct other things, and they are explicitly not taxed on income earned outside the US so long as the money is kept outside the US.

Whether an individual or corporation, taking advantage of available tax deductions (to reduce your taxable income) is not a "con" at all.

Why do corporations keep income offshore to avoid US taxes? Because the US tax rate is so much higher than the rest of the world. Ireland is 12-14%. Bermuda is zero. The US is, what, 39% at the federal plus state taxes, like more than 10% in California. That's a combined rate of 50% or so (and doesn't even include payroll taxes). Most international US companies have operations in Ireland, routing all non-US revenue and expense through there and that Irish company pays most (but not all) revenue to a Bermuda company.

People think that by changing to tax the companies on worldwide income they'll still remain US companies and just pay the tax. Not so. They'll leave.

US citizens DO pay US taxes on income earned anywhere in the world (with deductions for local income taxes and there is a threshold). Why is that different? Because by and large US citizens can't just leave and renounce their citizenship. In fact, if you say you are renouncing your citizenship to avoid draconian taxes in the US, it will be denied. And if you do renounce your citizenship, you must pay taxes on everything you have, including UNREALIZED gains. The entire system is geared to tax those who can't avoid it.

But the entire notion of a corp. paying any taxes at all is just a fiction. Shareholders are the ones who really pay the income taxes, employees are really the ones who pay payroll taxes, and customers are really the ones who pay sales and other such taxes. The corporation, in reality, doesn't pay any taxes at all. It's all just a fiction.

But if we continue further with the fiction and make US companies pay taxes on worldwide income, they'll simply leave and take what few jobs are left with them (and the taxes). We'll be a nation of haircutters, lawn mowers, cleaning ladies, and repairmen.

In short, we'll be Detroit on a national scale. We simply need to be less hostile to business and then businesses will open, flourish, and we'll all be better off. The government has killed the goose the laid the golden egg. So sad to see this in my lifetime.

 

[RBMaraman]

You claim they've broken no laws but are immoral for paying the lowest amount the law will allow. That describes me as well.

So, no, I've done nothing like that but the specific differences hardly matter.

I didn't say anything about immoral. I'll also be the first to admit that I seek ways to lower my taxable income! Personal income tax is completely different than corporate tax. My apologizes if I offended you, but I'm speaking strictly to corporate taxes.

BTW, in tax year 2012, personal income tax generated $1.1 trillion for the US government. Corporate taxes paid were at an all-time high of $181 billion in tax year 2012. I just think that corporate taxes paid should at least be a little more than that.

 

[tjl3]

So is Apple being singled out or are they going after every large corp? Because they are all doing it...

You fry the big fish first and then the dominos will all fall in place.

 

[pacalis]

Apple do pay the taxes on the profits they made in USA, they should not be paying taxes on profits they made from selling in China and leaving the profits there.

Majority of Apple's cash reserve are not in USA and they did not make those money from US's market.

Over half of their revenue are from the international markets, they leave the money to expand their businesses there. Apple should not be paying taxes that are not related to their businesses in US.

I chose this post, but I could have chosen many others.

Apple seems to be moving the "profits" around so that all the expenses are passed through the US (i.e. the US is very unprofitable) and all the "profitable" revenue (i.e. nearly no expenses are booked) is passed through places like Ireland.

According to the Sen. Levin's site, $104 billion of revenue has been claimed by two entities in Ireland, both of which while incorporated in Ireland are technically not Irish tax residents (because of their weird laws and special deals) or US tax residents either. One of these Irish entities booked $36B in revenue and has never paid taxes. The other only paid a fraction (5/100ths) of a percent in taxes.

As the these entities are in Ireland, the US doesn't control that loophole.

 

[sclawis300]

Doesn't the IRS check for these kinds of things when companies file every year? Considering how money hungry the government is, you'd expect them to pay closer attention to large international public companies such as Apple.

What are you talking about. They are not doing anything against the law. They are doing what they are required to do for their shareholders, maximize profits.

 

[radio893fm]

I have the feeling that if you change the name "Apple" for "Microsoft" or "Google", most of you will also change your point of views.

 

[sclawis300]

Don't get me wrong, I blame the strict and unfair tax laws setup here in the States, but at the same time, if I gotta pay my fair share of taxes, it's only right that big time corporations do the same.

You know it will just cause them to increase the price of the products they sell, right? They won't reduce profits, they will just raise prices to compensate.

 

[burnside]

You know it will just cause them to increase the price of the products they sell, right? They won't reduce profits, they will just raise prices to compensate.

I don't care, but do you really think Apple is using these tax loopholes to save the consumer money?

 

[griz]

When will the oil companies be dragged before a Senate subcommittee?

 

[Alx9876]

Bravo Apple. Keep sticking it to the man.

 

[Rogifan]

I chose this post, but I could have chosen many others.

Apple seems to be moving the "profits" around so that all the expenses are passed through the US (i.e. the US is very unprofitable) and all the "profitable" revenue (i.e. nearly no expenses are booked) is passed through places like Ireland.

According to the Sen. Levin's site, $104 billion of revenue has been claimed by two entities in Ireland, both of which while incorporated in Ireland are technically not Irish tax residents (because of their weird laws and special deals) or US tax residents either. One of these Irish entities booked $36B in revenue and has never paid taxes. The other only paid a fraction (5/100ths) of a percent in taxes.

As the these entities are in Ireland, the US doesn't control that loophole.

Why should we believe Sen Levin? I don't trust anyone in Washington. Of course these days it's fashionable to hate on Apple so not surprised to see people assuming what the senate is alleging to be the gospel truth.