Monday, April 30, 2012

Apple Responds To Tax Dodging Questions

Over the weekend The New York Times released an article reporting that Apple is legally evading billions of dollars in taxes worldwide through various completely legal methods. The article seemingly raised some red flags for a few, who feel while its legal, its unethical for multibillion dollar companies to dodge what they see as a responsibility to the people. Today, Apple looks to settle those claims, citing it has been playing by the rules all along and pays an "enormous" amount of taxes.

Apple’s response on its tax practices (via The New York Times)
Over the past several years, we have created an incredible number of jobs in the United States. The vast majority of our global work force remains in the U.S., with more than 47,000 full-time employees in all 50 states. By focusing on innovation, we’ve created entirely new products and industries, and more than 500,000 jobs for U.S. workers — from the people who create components for our products to the people who deliver them to our customers. Apple’s international growth is creating jobs domestically since we oversee most of our operations from California. We manufacture parts in the U.S. and export them around the world, and U.S. developers create apps that we sell in over 100 countries. As a result, Apple has been among the top creators of American jobs in the past few years.

Apple also pays an enormous amount of taxes which help our local, state and federal governments. In the first half of fiscal year 2012 our U.S. operations have generated almost $5 billion in federal and state income taxes, including income taxes withheld on employee stock gains, making us among the top payers of U.S. income tax.

We have contributed to many charitable causes but have never sought publicity for doing so. Our focus has been on doing the right thing, not getting credit for it. In 2011, we dramatically expanded the number of deserving organizations we support by initiating a matching gift program for our employees.

Apple has conducted all of its business with the highest of ethical standards, complying with applicable laws and accounting rules. We are incredibly proud of all of Apple’s contributions.

Where it all started!
Apple isn't the first multibillion dollar company to come under fire for using legal loop-holes in local tax laws to effectively avoid paying what many would see as their fair share in taxes. They are just the latest, and likely most highly visible and profitable. GE, Microsoft and several others are just as guilty. So what makes Apple different? Nothing really, other than the fact that they are sitting on billions in cash while the economies in the states and countries they are avoiding taxes on are struggling.

According to The New York Times article Apple has effectively managed to dodge billions of dollars in taxes in several countries all around the world. Last year, the tech giant reportedly paid $3.3 billion in taxes around the globe on its 2011 profits of $34.2 billion at a tax rate of 9.8 percent. Approximately 70 percent, or $24 billion, of the total $34.2 billion in pretax profits was earned outside of the country while 30 percent was earned in the United States.

MacMall Best Sellers
In one instance alone, Apple who's headquarters are in Cupertino, Calif. saved millions of dollars by putting an office in Reno, just 200 miles away. The office, maned by a skeleton crew, is used to collect and invest the company’s profits, allowing Apple sit sidestep California's state income tax of 8.84% to pay virtually zero taxes in Nevada on some of those gains.

This is just one way Apple is saving millions in the US. Setting up the subsidiary called Braeburn Capital as well as setting up other companies in states without taxes on the selling of digital content allows Apple to further shave their tax costs. As it has in Nevada, Apple has also 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.

Earlier this month, it was discovered that Apple made $9.5 billion in Britain last year, but only paid $15.8 million in taxes. This figure was attributed to the fact that British tax code rules exempt companies based in Ireland from paying British taxes. It was discovered at the time that Apple had setup a similarly small office in Ireland to funnel their profits through.

Just because its legal doesn't make it right!
Almost every major corporation tries to minimize its taxes, it would be bad business if they didn't and of course these moves are perfectly legal. Apple, for one makes an easy target. What with their billions in the bank and recent questions regarding working conditions and pay in some of their component manufactures plants.

The question for me doesn't become one of legality but of morals and ethics. Apple has always lauded their corporate headquarters and their support for Silicon Valley yet they want to avoid supporting the very state that they cut their teeth in? They want to proclaim the creation of jobs yet by their own numbers they only directly employee 77,000 people.

Apple's mantra for years and years was support us because we are the little guy fighting the power of the big corporations and "big brother". Now they have once again shown us how far they've veered off that path.

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