Apple and Taxes

Paul,

[Portion removed by Palo Alto Online staff.]

Apple is the goose that lays the golden egg, and employs all those high paid workers that pay property and income and sales taxes, yet you complain that Apple does not pay absurdly high corporate taxes. What planet do you live on, Paul?

As long as a company (Apple) is doing what is legal, it is no different to the rest of us trying to reduce our tax load.

Now how about getting uppity about the prop 13 people who are paying a miniscule amount of tax compared to me - and I have been in my home for over 10 years. The newbies must be paying a ton more.

Now that isn't right - particularly those that have grandchildren living with them who fill the schools. Yes, I know. It is perfectly legal. Just like Apple.

When Prop 13 passed, commercial interests paid 60% of the property taxes and residential paid 40%.

Now it's commercial paying 40% and residential paying 605.

We were sold a bill of goods about po' granny, and failed to see the huge loopholes businesses wrote into the bill. Just like we fail to see that Apple's (and all the Fortune 500) lobbyists have rewritten the tax code without our awareness.

The latest complaint from Paul. Perhaps Paul should familiar himself with tax law. Is apple doing anything illegal? If so then let's hear what it is, Paul.
Is there anything that you are ever happy with?

correction: "Now it's commercial paying 40% and residential paying 60 PERCENT."

Paul,

Simple question: Do you think that Obama's redistribution of wealth model is the correct one?

Apple is by no means the only one. Google and Genentech pay no taxes, either.

If they had to, they would go offshore.

It would be nice if the IRS would cut them a deal, since they do so much for the country, but they should still do the right thing. They have deeper pockets, after all. Their tax money, even at a reduced rate, could get a lot of things done

Here's an idea, let's just print new money to replace all the dollars that corporations have stashed offshore. If and when corporations bring their money home and we tax it, we'll just burn those dollars.

My point is, wouldn't it be inflationary for those overseas dollars to be repatriated and taxed? Money does not solve problems. Only productivity solves problems. Too much money floating around just makes everything more expensive.

You want a moral or ethical issue, how about the government program that collects a few dollars from millions of people and then gives 590 million to one person? How's that for redistribution of wealth? At least when private industry pays that kind of money to CEOs, the millions of customers get more for their few dollars than a worthless lottery ticket.

Web Link
This has known and going on for years. Cisco does it. Even worse they are off shoring all their engineers too.. Rumor is they are about to liquidate 8 buildings that used to house about a thousand engineers a piece.

It's precisely through the use of its offshore subsidiaries that Apple manages to pay no US income tax... so it's already offshored. Time to put an end to the loopholes that allow this. They should be paying income tax in the US. (and all the others, such as Google, too).

Web Link

Again nothing new, look at the dates in this article, look at all the companies mentioned. I suspect this has more to do with apple not contributing to the right campaign funds than apple doing any thing different from any other big corporation. They are doing it because congress does not fix it and why does congress not fix things? Follow the money.

> This ia a moral and ethical issue, not a legal or tax issue.

So .. do governments have a moral and ethical obligation to tax no more than is needed to provide essential services? Do governments have a divine right to redistribute wealth from those that earn it to those who don't want to work, but believe "it's a rich country and everyone deserves his fair share?"

If Apple did anything wrong--then the IRS needs to charge them. If Congress feels that are "loopholes" in the tax code--then it's the obligation of our Congress to close those "loopholes".

It might be interesting,by the way, to track down all of the lobbying dollars that have been given to US/California elected officials over the years, by Apple, Google and HP. Oh, and isn't Al Gore (the man who invented the Internet and who knows more about Climate Science than everyone else) on Apple's Board of Directors? What's Mr. "Big Government Al" got to say about Apple's approach to paying its taxes? If "Big Al" isn't concerned, then why should Paul Losch so bothered?

Of course, if Apple's corporate behavior is so bothering--protest by not buying any more Apple products!

I think this is definitely a topic worth debating. As of right now, I tend to side with Apple, Google, Cisco and all the other companies that take advantage of the loophole, on the grounds that profits from tech sales are more efficiently re-deployed when they end up in the hands of the employees and shareholders of those companies, than when used by our federal & state government, both of which only ever reduce spending in the most dire of situations.

The immorality lies in the many area residents (maybe your neighbors who are lawyers and accountants and consultants) who work for Apple with the sole goal of reducing the amount Silicon Valley pays in taxes. It's the game everyone pays. Even Paul admits he hates paying taxes after all. So it's not the mythical corporation that gets away with things like this, it's the people who make them up. Jobs, our hero, was one of them. The buck (going to the IRS) stopped with him.

If corporations didn't sherk their tax responsibilities, the government wouldn't need to raise personal taxes. Not hard. Joe citizen participates in the country fairly, corporations want the protections of the U.S system, but not pay for it. It's like Joe Citizen refusing to pay income, land, or sales tax. Can a flashy accountant and lobbyist create and exploit the loopholes for me to do this?

Please.

I'm one of those immoral residents, legally underpaying my state and federal income tax by thousands of dollars every year, using the loophole that my donations to environmental, educational and philanthropic institutions are deductible.

Apple?s Tim Cook Testifies Before Congress About Its Tax Underpayment Problem:
Web Link

?To our knowledge Apple is the largest corporate taxpayer in America,? Cook said, saying that Apple?s U.S. tax rate was 30.5 percent. ?We paid $6 billion in cash to the U.S. Treasury ? that?s $16 million each day. And we expect to pay even more this year.?

..

?Apple has real operations in real places with Apple employees,? Cook said. ?We pay all the taxes we owe, every single dollar. We don?t only comply with the letter of the law, but the spirit of the law. We don?t stash money on some Caribbean Island.?
----------

So .. Mr. Losch?just how much should Apple be paying in taxes for you to stop fretting about their lack of ethics?

"I tend to side with ... companies that take advantage of the loophole,"

THEY are the companies that made sure this loophole was put in place! Their lobbyists/donations have bought key members of congress.

So they write the loophole, take advantage of the loophole, and apologists say "golly, they are obeying the law." Meanwhile, our country goes further into debt, schools are starved, 'forcing' the Apples/Googles to offshore more jobs...

Sheep.

Another scheme happening here in high cost Silicon Valley is corporations laying off middle-aged high quality personnel, including Ph.D.'s because their use of benefits is too high (having a second child, that kind of thing). I emphasize we are witnessing this happening, it is not for cause firing nor last hired, first fired kind of situation. Beware of becoming a middle manager type with dependents, your benefits may lead you to be laid off.
Apple is close with the current administration, so I assume they will be OK. It's difficult to follow the various machinations of these large corporate entities, but I thought another example is Google, which is also close with this administration and I remember reading in fine print somewhere is hoping to store or manage all of Americans' millions of medical records in conjunction with Obamacare, a huge contract.

> If corporations didn't sherk their tax responsibilities,
> the government wouldn't need to raise personal taxes.

It?s amazing that anyone could believe this. Where do corporations get their money from, with which to pay their taxes? Corporations get money from their customers?that?s where. It?s commonly believed that the cost of most products/services includes up to 40% hidden taxes?which is the statutory corporate income tax (before the lawyers step in). If corporations were not taxed, then we would see the true cost of government--because our taxes would be higher, but we?d have more money in our pocket to begin with. As it is, far too many people don?t know the truth about government costs because they don?t seem to want to know the truth about where government money comes from.

> schools are starving?

The US Department of Education documents that about 9% of the US GDP is consumed by pubic schools?more if all the private schools are considered. And even more yet when long-term pension obligations are definitely not in these calculations, either!

With the myopia exhibited in this country (and city) about how government is financed?it?s doubtful the US will last another fifty years. Democracy seems to be too complicated for the most educated people on the planet. So, what hope does it have in areas where people can not read, or write?

"...it?s doubtful the US will last another fifty years"

No hyperbole there, right?

"It?s commonly believed..."

Noted without comment.

> No hyperbole there, right?

It depends.

Got any idea how long historical republics lasted? (Clue--not that long).

The US has the resources to last longer, but with the ignorance openly expressed by so many people in the country about basic financing issues--how far off can the end be? (Clue--the US long-term debt could easily be $200T, and growing.)

This week end, a senior advisor to the President proclaimed on national TV, in response to questions about the IRS being used to targer political enemies of the President, this senior advisor arrogantly responded: "the law is irrelevant!"

Wonder how many people in the US took objection to this clear attack on "the rule of law"? If the law is "irrelevant" to the President, how long before it is "irrelevant" to every level of government? And once we've reached that point--there won't be much left of our constitutinal republic.

Fifty years is not that long, given the abuses, and growth, of government in the US.

@ECR, "Their lobbyists/donations have bought key members of congress."

Can you name one of the 53 representatives in California they bought? Or was that a figurative accusation? When you have a huge economic engine in your district, or your state, employing thousands of voters and supporting many adjacent businesses, it would be silly not to make some calculation of give and take. Both sides know that it can't be all take or all give. Short of a kingdom or dictatorship, everything is negotiable, and that's what lobbyists are, negotiators.

The Paulies, the Brietbart types, along with the silly Corsi types, complete with the $200T figure, amaze me. Keep stoking the IRS so called 'scandal', fringies, the rest of America is laughing at you. Obama's popularity rises, while the GOP has the lowest unfavorables in years.

"...it?s doubtful the US will last another fifty years" How many conservatives, back in '68, thought America was doomed, with hippies and bombings on campuses?

"...it?s doubtful the US will last another fifty years" How many liberals thought, back in '73 (Watergate) that America was doomed, or at least, to quote the poster "given the abuses, and growth, of government"?

"...it?s doubtful the US will last another fifty years" How many conservatives thought we would not survive the Nixon recession and oil embargo under Ccarter?

"...it?s doubtful the US will last another fifty years" How many fiscal conservatives thought we would not survive Reagan's tripling of the national debt, and Reagan's 11 middle class tax hikes?

I repeat: "...it?s doubtful the US will last another fifty years"

No hyperbole there.... Ha!

> hyperbole

Actually, these are estimates .. and like all estimates, are subject to possible error.

> No hyperbole there

And No "there there" here.

Not one fact to refute the estimates, and data, presented.

Not one fact to SUPPORT the estimates, and data, presented (by you; ie.. $200T)

My claim: "Obama's popularity rises, while the GOP has the lowest unfavorables in years."

Facts:

Obama popularity rises (CNN poll released this week: "CNN reported on Sunday that 53% of people questioned in the survey said they approve of the job the president is doing, with 45% saying they disapprove. The president's approval rating was at 51% in CNN's previous poll, from early April. The new numbers indicate that Obama remains popular, with 79% of Americans saying the president is likable."

"Republicans, at 59 percent unfavorable, are at their highest unpopularity level since CNN started polling the question in 1992."

On topic, off topic.

I have been doing this PA Online long enough that I am grateful that I have some readership, I engender opinions, really don't mind when people disagree with my point of view, struggle to understand why aspersions are directed at me personally. I can handle the aspersions, and my aspersion back is get back on topic. It's not about me.

This topic is a great example of how people drift and drift. It is about whether a major company that is part of our communty should be paying taxes. In this case, it is Apple,and it could be any number of other companies that are less visible.

I lived in the Twin Cities for a few years, and the major companies based there, such as General Mills and 3M, paid taxes and contributed mightily the make the area a vibrant community.

I love Apple products, i do not view Apple as a good local citizen.

Seven Apple facts Web Link :

1. Almost all of Apple?s foreign operations are run through an Irish company with no employees.

2. Apple pays 2%?or less?in corporate income tax in Ireland - The already low-tax country gives Apple special treatment with a negotiated 2% income tax rate. But that?s just the top-line number: Between 2009 and 2011, one Irish subsidiary, Apple Sales International, earned $38 billion and paid $21 million in taxes, for an effective rate of .06%.

3. Apple Operations International, which provided 30% of Apple?s worldwide net profits from 2009 to 2011, doesn?t pay taxes anywhere.

4. Apple?s US profits keep ending up in Ireland, too: ...It also argues that Apple is effectively sending US profits to its Irish subsidiaries, too. How? Transfer pricing. ...From 2009 to 2012, Apple allocated $4 billion in R&D costs to its US unit, which had $38.7 billion in profits, while its Irish subsidiary had $4.9 billion in R&D costs?and $74 billion in profits.

5. Most of the $102 billion Apple is keeping ?overseas? is in US banks.

6. The magic of ?check-the-box? makes whole companies disappear: One of the most favored tax loop-holes for multinationals is known as ?check-the-box.? It allows companies to instruct the government to completely disregard certain foreign subsidiaries for tax purposes. Apple?s main Irish subsidiary, AOI, checks the box for its entire global distribution network. This allowed the company to avoid paying $12.5 billion in taxes that would have been assessed for foreign sales by its network of global distributors.

7. Apple is seemingly terrible at estimating its own taxes: In annual reports between 2009 and 2011, the company told investors it was setting aside $13.7 billion to pay federal taxes?but it has actually paid only $5.3 billion. Those set-asides are only advance estimates, but it?s pretty strange that each year they?re off by many billions of dollars. As a result, Apple?s actual US tax rate is only 20.1%, much lower than the 24% to 32% it said it was paying.

Absent this congressional investigation, we wouldn?t know the difference.

>I lived in the Twin Cities for a few years, and the major companies based there, such as General Mills and 3M, paid taxes and contributed mightily the make the area a vibrant community.

Paul,

The old notion of the company town actually worked, until the unions decided to tear it up. I doubt that Apple wants to run/support Cupertino, although it will pay local/state/national taxes that it is obligated to pay. Steve Jobs was not a big social giver...he created wealth for himself and his employees, then it was up to them to contribute to social causes, if they chose to do so.

"It is about whether a major company that is part of our communty should be paying taxes."

Given that Apple does indeed pay taxes, direct taxes, in this county, in this state, in this country, in the billions, the only question I see here, Paul, is whether Apple is paying their fair share.

Do you really think Apple is taking more away from Silicon Valley than they are bringing in? Or is this a "from each according to his ability, to each according to his need" kind of thing?

A cadre of lawyers and shell game of foreign subsidiaries sure makes it look like Apple is getting away with something, but perhaps that's the only way to compete with Samsung (which pays a similar global tax rate). Thomas Friedman or Joseph Stiglitz may be required reading here.

Congratulations on the active thread.

Apple must pay taxes like everybody else! Apple must be investigated ; for loopholes and all other expenditures. I struggled to pay $90 for 2012 IRS and $225 for the accountant , and I still have to file with state of CA. Figure out how to come up $$ for copies, postage etc! If I don't do it state of CA will fine me again: 1000% for being homeless. This all is happening on expense of people like me; and if I find out Apple is and has been cheating on their taxes: I will no longer be their customer; regardless of how much I love Apple products. Why should I keep sending $$$ to Apple if they cheet? I will spend the $$ for food instead and if there is something left; share it with other screwed up citizens on the streets, including Palo Alto homeless !

Musical.

Thanks for your observations.

Apple's situation really is a poster child for what tax policy should be in the States.

I have a very cynical point of view about how multinational companies such as Apple manage their finanacial and tax responsibities.

Even Tim Cook, Apple CEO, testified in Congress that the US tax code needs significant reform. He said Apple is playing by the rules.

I say change the rules.

Current fiscal policy is why our infrasture has led to collapsed bridges, dilapidated schools, excessive hidden deficits from defense spending, and not taxing people appropriatly during the GW Shrub adminstration

To John: Thank you for posing your questions. I will not reply.

>To John: Thank you for posing your questions. I will not reply.

That's a curious answer, Paul. If you have the privilege to run a public blog, you should be willing to reply to honest questions.

Great video of Senator Rand Paul at Apple hearing on May 21: "Sen. Paul ruins the Apple show trial."
Web Link

?I?m offended by a $4 trillion government bullying, berating and badgering one of America?s greatest success stories. Tell me one of these politicians up here who doesn?t minimize their taxes. Tell me a chief financial officer you would hire if he didn?t try to minimize your taxes legally. Tell me what Apple?s done that?s illegal."

This forum is about discussion of Apple. I have Apple iPhone to be on line, and yet I never signed up to pay for Face Books, tweets, tags, or whatever they are called. I signed up with Apple to use it as computer . My monthly Apple bill is huge : to be exact it's $ 197.62 per month. I want to know what I have been for just be on line, not one time have I gotten a bill from Apple, since the Apple iPhone came out 2+ yrs ago. I just want to make sure I have not been charged undisclosed hidden fees for the services I have never used. If I have: it's govternement fraud on expense of the poor! Sincerely; S.T.L.

It's all legal, just like you making a 401(k) contribution, Roth IRA contribution, or paying your property tax bill before 31-Dec to accelerate the deduction. And if you've been following these hearings, you'd know that what Apple is doing has actually been standard practice for 30+ years, but some of the other companies in the Valley are taking more aggressive positions, such as HP (watch the HP hearings to see some folks more nervous than a long tailed cat in a room full of rocking chairs).

You may disagree with how our tax code is written. You may not like the "spirit" of what these companies are doing. Yet what is blindingly obvious is that if you simply wave your magic wand and force these companies to pay 35% on all their profits (before the state tax load!), you will
(i) put them at a competitive disadvantage vis-a-vis their foreign competitors (yes, there are a lot of them out there, we don't have a monopoly on tech) as these companies have effective tax rates at 25% and lower, so they will have more after-tax proceeds to reinvest in their business,

(ii) force future start-ups to form a non-US legal entity (Ireland, or wherever) and operate in the US via a subsidiary of this non-US Parent. This will allow them to leave their intellectual property outside the jurisdiction of the US tax net and essentially force the US to a territorial system of tax (which again hammers the incumbents as they wouldn't be able to replicate this).

A lot of the recent corporate tax reform proposals offer very viable solutions in lowering the corporate tax rate and offering a lower rate of tax on these offshore profits, but of course as with any change there will be some winners and some losers.

Two parting thoughts for anyone still reading this:
1) If you think what Apple has done is egregious, go look at what is going in the Pharma industry. Apple is at least paying full tax on its earnings on sales in the US. Pharma companies engage in what is called "round tripping" where they actually avoid US tax on a large portion of their sales to US customers.
2) A lot of the "offshore" cash is actually sitting in US Banks. It's not like the cash is just sitting under the mattress. The banks are using it as capital to fund their lending. If anything, this could potentially be viewed as a subsidy to the normal folks, in that there is an excess supply of cash in the banks that may serve to drive borrowing rates down. Of course, with all cash the Fed has been printing it probably isn't making a meaningful impact...

Apple is not accountable, because I had a contract with them when the phones came out. I signed up with a written contract for monthly bill . Cost was $175.00 ( from my pocket) for 2 years accountability. I don't know who is at fault, because I'm being billed through 3rd party, but I think it's Apples fault, that 2-3 times or more my monthly bill has been over $215 .i never know what they charge, so every month I have to count my pennies.
I never signed up to pay for face books, tweets, etc. what they are using the $175 for that I paid to Apple 2x?? And the overcharged monthly bills that that I have paid , amounts that I never agreed to pay. When , I went to the third party payment office to inquire about my monthly bills, they were rude and I was hushed out of the store making me to feel I was on the way of new customers they had to sign up!

Today, Lois Lerner, a career government lawyer, refused to answer any questions from a Congressional oversight committee that is examining the possible targeting of ?Conservative? groups that were seeking legal exemptions from taxes under the existing tax code.

Ms. Lerner claimed that she had broken no laws, or any of the extensive IRS code, for that matter. She claimed that she had a right not to testify under the Constitution?s Fifth Amendment, and she asserted that right to refuse to provide Congress any information about her activities, and mindset, when managing/directing the 900 employees, and $100M budget under her control.

Apple?s CEO?on the other hand?answered all of the Committee?s questions, did so in a respectful way, making no effort to evade any of the questions put to him.

Paul Losch?s suggestion that Apple is somehow unethical because it has minimized its tax liability is ludicrous?particularly when watching the pitiful performance of IRS officials evading questions, claiming, effectively, that targeting the political enemies of the White House was ?probably? not illegal, and having Senior White House ?advisors? claim that ?the law is irrelevant? on national TV leaves some of us wondering if Paul Losh has any idea what ?ethics? is, or if he is such a ?big government? guy that he is willing to ignore the need for ?ethics? to apply to everyone?private sector entities, as well as government.

Today, we have seen the Apple?s CEO provide respectful answers to Congress, and a high-ranking IRS lawyer/manager/executive demonstrate nothing but contempt, and arrogance towards Congress, and the American people.

And this from ?the most transparent government?ever!? Right ..

Agree with all of those who back Apple as doing what is legal and has nothing to hide.

@ homeless - sorry but I believe you are mistaken in you're assessment of responsibility for the "contract". You buy the phone from Apple and they're responsible for the hardware and the iOS. Your service contract (with Verizon, AT&T, etc.) is the responsibility of the carrier, not Apple.

Apple and other public companies have a fiduciary responsibility to their shareholders to maximize their value and their profits. Taking advantage of tax loopholes is smart business and good for the shareholders of Apple. Our tax code - personal and corporate - is broken. Perhaps this will provide some incentive for a bipartisan effort to change the codes. But I doubt it.

For every billion Apple hides in an employee-less Irish shell company, that's a billion that gets raised from individuals and small business persons who don't have lobbyists to bend and rewrite the rule for them (us.)

And another billion that doesn't go to our schools, roads, first responders, disaster prevention, etc..

Think there are some parents in Oklahoma who wish their school had an extra 20 grand to build a shelter basement?

-----

John McCain said the company "enjoys reminding the public" that its $6 billion in tax payments last year may make it the nation's largest taxpayer, even as the "same executives fail to mention the less attractive fact that the company is one of the nation's biggest tax avoiders."

...

Richard Harvey, testifying as a tax expert from Villanova University law school, said the creator of the iPod, iPhone and iPad had achieved the "utopian" ideal of tax planners - "creating an entity that is taxed nowhere."

Read more: Web Link

John McCain really had the nerve to talk about "...one of the nation's biggest tax avoiders"???

Williard Mitt Romney?

Mr. Forty (cayman islands and swiss bank accounts) Seven Percent, who only pays 13%? McCain was talking about that guy, wasn't he?

Sorry, I know it's been 6 months, but I still find it hilarious that the GOP chose that guy, of all people, and then wondered how they lost. Solid gold satire masquerading as performance art.

Priceless.

So fix the tax code if they don't like how it works today. Apple didn't break the law nor did it try to hide how the company manages its revenues and taxes. All above board.

> musical, a resident of the Palo Verde neighborhood, on May 21, 2013 at 11:25 am wrote:

> @ECR, "Their lobbyists/donations have bought key members of congress."

> Can you name one of the 53 representatives in California they bought?

Sure.

You want it in bulk, or by politician?

Okay, let's look at one guy, Kevin McCarthey, R, Big Business:

Top 5 Contributors, 2011-2012, Campaign Cmte and Leadership PAC
Blue Cross/Blue Shield $42,000 = $7,000 $35,000
Comcast Corp $36,000 = $13,500 $22,500
Elliott Management $35,000 = $35,000 $0
Oracle Corp $31,500 = $24,500 $7,000
Goldman Sachs $31,000 = $11,000 $20,000

and

Top 5 Industries, 2011-2012, Campaign Cmte and Leadership PAC
Industry Total = Indivs PACs
Securities & Investment $460,008 = $267,858 $192,150
Insurance $342,727 = $43,477 $299,250
Health Professionals $325,778 = $56,600 $269,178
Pharmaceuticals/Health Products $288,900 = $33,650 $255,250
Oil & Gas $281,700 = $115,200 $166,500

Congressman McCarthy took a half million from Wall Street, a quarter million from Big Oil, a third of a million from Big Insurance, a quarter million from Big Pharma.

Who do you think McCarthy listens to? His voters? Ha! When Wall Street Banksters want a tax loophole inserted into a bill, what do you think happens?

Again: musical asked - "Can you name one of the 53 representatives in California they bought?"

Yes, I can name many, but there's your one - Rep Kevin McCarthy, R, Big Business.

Rather, nominally representing CA23 (Bakersfield)

Rep Kevin McCarthy, R, Big Business - bought and paid for by Wall Street, Big Oil, Big Insurance, and Big Pharma, among others

Am I the only one who doesn't really mind paying taxes?