They pay taxes in the US on US profits (along with payroll taxes, etc)
They pay local taxes on profits earned overseas. Then they gather up those profits in an Irish subsidiary, where they get the most most favourable tax treatment available to them.
Why would they, as a multinational company, not do that? Why would they repatriate those profits, not earned in the US to the US and take a second tax hit?
If the contention is that they are somehow hiding US profits by misrepresenting them as overseas profits to avoid taxes, then that would obviously seem rather sleazy. But if that's not the case, what's the moral or legal argument against what they're doing? Or are they misrepresenting what they're doing? It's hard to get a handle on the underlying issue with all the congressional posturing.
First of all, when Apple pays income tax in most countries, they will receive tax offset credit in USA so they don't have to pay tax twice on same profit.
But Apple doesn't even do this. The whole point of having Irish subsidiary is to give it intellectual property which is the real money maker here.
What happens then is quite simple. Subsidiary company in Ireland is charging Apple in other countries huge licensing fees. In fact, so huge that it amounts to 100 billion dollars. Licensing fees are tax deductible so Apple is basically avoiding paying corporate tax all over the world because licensing fees and royalties eat up all the profit.
Of course, Apple as a group of entities is making billions in profit but as far as overseas tax authorities (Australian Tax Office, UK Revenue & Customs etc) are concerned, Apple is barely breaking even therefore is not paying its fair share of tax.
Obviously this whole scheme comes at cost. All these billions are basically stuck somewhere in Ireland and can't be used. They just sit there and earn interest.
Eventually money will have to come to America. How? Irish subsidiary will pay dividends to parent company Apple Inc. At that point all these billions in profits will get finally taxed at ~35% by IRS.
Congress is just asking Apple when they are going to bring to USA all those profits and what's the point of deferring it. Apple is saying, we will bring it when you lower our tax rate. They are basically blackmailing the government.
edit: I was wrong by saying Apple doesn't pay corporate tax in USA. I modified my comment to reflect what I have learned from comments bellow.
Cook explicitly denied this in his testimony. Are you simply assuming Apple is doing the same thing some other companies have done, or do you have evidence they have done this?
Is this really true, though?
http://www.bloomberg.com/news/2013-05-23/apple-tax-rate-igno...
Among various other points it says Apple paid 6 billion in taxes last year which sounds unlikely if they were 'barely breaking even'.
I don't have any trouble believing that a large multinational has the means, opportunity and incentive to exploit every bit of every tax code it is subject to in order to minimize its tax liability. I'm just finding it difficult to get a handle on the basic issues between the 'zomg corporations, our evil overlords' and 'leave Britney/Apple/the free global market alone' rhetoric. My vain hope is to somehow summon up some grellas-like entity who is knowledgable in these matters and will provide a bit of level-headed insight.
Note - my answer to that is very, very quickly you would find that successful US companies re-incorporating in other countries, in much the same way wealthy Americans will sometimes give up their US citizenship.
Because the law doesn't say they have to. That's enough for me.
I'm a left-wing, pro-high-tax guy, but I can never understand people who get angry at corporations for obeying the law. Besides being nonsensical, it's actively counter-productive. So long as people are focusing their attention on the corporations, nobody is pressuring the politicians to fix the actual problem.
But I don't think the objections (or counter-arguments) to Apple's behaviour as simplistic as that - it's just I don't quite understand what the source of the controversy is and was hoping that someone else did.
3. You are a citizen or resident alien of the US whose physical absence from the US constitutes a minimum of 330 days out of any 365.
When I lived overseas I knew US citizens counted the number of days they spent visiting family to make sure they stayed under 30 days each year.
Any royalty for patent, trademark, design and copyright licenses should be deducted in the country where the patent is awarded, not where the owner of the patent happens to be situated. This way all the shenanigans would come to an end.
As a European, I am quite appalled that Apple almost doesn't pay tax in Europe either. Apple's European profits are compareable to their American profits, http://investor.apple.com/secfiling.cfm?filingID=1193125-11-....
Apple is competing with European businesses for customers and through European patent and trademark rights Apple is awarded competitive advantages in the European market. Not paying tax is another advantage. So what if the research is done in America? The European patents and trademarks apply in Europe. Let them pay tax income tax on American profits in America, on Irish profits in Ireland, German profits in Germany.
Please tell us of your experiences. Thanks.
Hence smaller (lean?) countries will exploit this, it only makes sense to exploit this.
My question is, why would I ever want to be resident in any of those places? Never in my life have I ever considered living there. I barely tolerated San Jose for 9 months before I moved to Santa Clara.
There are plenty of reasons to live outside megacities, taxes are way down on the list.
This is a variant of my argument. I may add: It is against many governments' _perceived_ interests. I do not think that a race to the bottom (Come here, 15% tax! No, here 10%! No, here 5%! ...) will help any government in the long term. So far, I seem to be correct.
1) Corporate tax is only about 10% of total budget revenues.
2) Zero corporate tax promotes business growth.
3) Corporate taxes are ultimately paid by individuals.
[1] I realize that companies pay separately, or use private collection in many cases. It's just an example of a company using a resource that can be (and in some cases is) paid for by taxes.
Didn't they just answer themselves!
Edit: I would appreciate it if someone told me what I said was incorrect or wrong in anyway.
In my opinion they should spend the money as they get it, but if they didn't I don't care HOW they didn't...
1) For publicity reasons, to make the public believe corporations are held accountable
2) To extort some lobbying money from Apple
http://gigaom.com/2013/05/23/apple-in-political-crosshairs-i...
This mentality is also common among thieves, who rationalize their thefts by believing they are taking things that they are somehow owed.
They should abide by local laws, and pay taxes on whatever they are making there. They are doing business there, so clearly they believed that market is worth it for them, and it should be worth to pay the taxes there, too - after all if they do pay a lot in taxes, most of that will be transferred to the consumers in those local markets anyway. But what they're doing is taking their cake and eat it, too. Making those customers pay more, but then avoiding paying the taxes that were most likely already included in the price the consumers paid there.
Then taking virtually all the profit from all the countries and transferring it to Ireland so they pay the absolute minimum, while pretending they are barely making anything in all the other countries, because they get their Ireland subsidiary to take all the money, so there's "barely anything left" to tax in other countries - is not okay at all.
Some may say that it's Apple's "duty" to do this, but it's their duty in the same way it's their "duty" to sue many other companies for infringing on "slide to unlock" and other such trivial patents, by (legally) abusing the patent system.
So just because it's not illegal to do something, and it's their "duty" to maximize profit by any means necessary, doesn't mean we should pretend it's "morally okay". It's also the governments' duty to fix these loopholes, and restrict the companies from doing this as much as possible (some international treaty is going to be necessary). And I also think it's the consumers' duty to not be okay with this, and protest against it.
Since the great depression, corporate shares of taxes has been steadily falling. One can only speculate where it might lead.
2011 USA Taxes:
Total corporate tax: 200.8 Billion.
Personal income tax: 1.1 Trillion.
http://www.npr.org/blogs/money/2012/04/13/150441259/what-ame...
