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If you haven't yet seen The New York Times article on Apple, go read it. I'll wait. It's a blockbuster.

As I wrote last month, Apple whines about the fact that it has to pay taxes. But of course, it does much more than whine. It sets up subsidiaries in tax haven states like Nevada to avoid U.S. state taxes, and establishes foreign tax haven subsidiaries in order to avoid U.S. and other government's taxes. Then, through the magic of transfer pricing, profits made in high-tax jurisdictions becomes taxable only in Nevada, Ireland, Luxembourg, etc. The Times reports estimates by Martin Sullivan that this saves Apple $2.4 billion a year in U.S. federal taxes alone, not to mention what it save in U.S. states or foreign countries. This is a conservative estimate, based on only 50% of its profits being due to U.S. operations. A more realistic 70% allocation of profits to the U.S. would mean that Apple's federal tax bill would be $4.8 billion higher, according to Sullivan.

Based on extensive interviews with former Apple executives as well as accountants for other firms, Charles Duhigg and David Kocieniewski show that not only does the company practice extensive legal avoidance of its taxes, but that the firm pioneered several of the most important tax avoidance techniques out there:

Apple, for instance, was among the first tech companies to designate overseas salespeople in high-tax countries in a manner that allowed them to sell on behalf of low-tax subsidiaries on other continents, sidestepping income taxes, according to former executives. Apple was a pioneer of an accounting technique known as the “Double Irish With a Dutch Sandwich,” which reduces taxes by routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean. Today, that tactic is used by hundreds of other corporations — some of which directly imitated Apple’s methods, say accountants at those companies.

 Not only that: Apple paid, according to The Times article, $3.3 billion in "cash taxes" on its $34.2 billion of worldwide profits, for a 9.8% tax rate, as opposed to the $8.3 billion the company's 10-K report said it paid. As the article notes:

“The information on 10-Ks is fiction for most companies,” said Kimberly Clausing, an economist at Reed College who specializes in multinational taxation. “But for tech companies it goes from fiction to farcical.”
Some commenters on my article last month actually cited these 10-K figures as proof that nothing was amiss at Apple. As it turns out, the company's reporting has other major gaps. Its 2011 10-K Annual Report states that it has only two "significant" foreign subsidiaries, both based in Ireland. Apparently its Luxembourg subsidiary -- with over $1 billion in 2011 sales, according to The Times -- is not significant. Nor are its subsidiaries in the Netherlands and the British Virgin Islands, despite their importance in keeping Apple's worldwide taxes low. Because Apple only deems its Irish subsidiaries "significant" and does not report on any others' existence, the Government Accountability Office report of 2008 on tax haven subsidiaries was misled into saying that the company had only one such subsidiary. We can only wonder how many other tax haven subsidiaries are omitted from companies' SEC filings.

Here's the kicker: Even "cash taxes" is not a figure that accurately represents a given year's tax payments, according to The Times.

As Richard Murphy points out, while Apple's tax strategy is no doubt all legal ("perfectly legal," as in the title of David Cay Johnston's great book), "It's also profoundly unethical." Apple largely rejects its duty to help pay for living in a civilized society, even as state (like its home of California) and national governments flounder with debt. Its behavior forces one or more of three outcomes, as I have written many times before: shifting the tax burden to others, more government debt, or program cutbacks. Apple's behavior shows that it's clearly okay with that.

The solution starts with Murphy's innovative "country-by-country" reporting, which does not require the tax havens to cooperate because all the information would be supplied by the company. Then, as I noted in November, we need worldwide unitary taxation to strip out the artificiality of companies' allocation of assets and profits. We could treat Apple's (and Microsoft's, and...) "ownership" of patents in Ireland as the fiction it is, and force these companies to pay their fair share of taxes.

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Comment Preferences

  •  Who's doing the whining here? n/t (2+ / 0-)
    Recommended by:
    sewaneepat, nextstep
    •  OK, fine. The tax avoidance was a blatant (5+ / 0-)
      Recommended by:
      OnlyWords, claude, Smoh, quill, Kenneth Thomas

      rip-off.  People whine when they do the right thing under protest.  Apple just cheated by taking advantage of government protections (trade agreements, patent rights guarantees, travel accommodations, a stable currency, etc.) without making the "voluntary" contributions and honoring their obligations.

      One of the advantages of arguing that government is a coercive body is that it excuses resistance to it.  The truth is that, while tax legislation insists on compliance, our agents of government only have access to the information citizens voluntarily provide. They can't insist on documentary support, unless there's probably cause to suspect fraud (or a gross mistake).  When individuals and private corporations hide their assets, they're hard to detect.

      Not paying one's fair share is a gross moral failing. And, just as it is true that the accumulation of money is not a sign of acumen or talent (the easiest way to get money is still to steal it, legally or illegally), talent is no guarantee of moral probity.  Lots of very talented and innovative people are crooks because they are self-centered and fail to recognize the social supports upon which their success rests.
      People of genius are often very unpleasant people, but we forgive them because we appreciate their talents.

      People to Wall Street: "LET OUR MONEY GO"

      by hannah on Mon Apr 30, 2012 at 03:00:54 AM PDT

      [ Parent ]

      •  hannah - Apple isn't cheating (7+ / 0-)

        Apple is paying taxes according to the current US tax code taking advantage of every favorable tax strategy that it can. By definition following the rules isn't cheating.

        Like all Fortune 500 companies every annual tax return filed by Apple is audited by the IRS.

        "let's talk about that"

        by VClib on Mon Apr 30, 2012 at 03:06:57 AM PDT

        [ Parent ]

        •  "Taking advantage of tax strategy" (4+ / 0-)
          Recommended by:
          OnlyWords, Hannibal, Miggles, quill

          is the equivalent of the wolf claiming the laggard sheep.  It's appropriate behavior for predators, not for members of a social organism.
          The tax strategy is not favorable to the citizenry, the employees, other contractors or even other countries.  Indeed, since money is worthless, it's not even favorable to the artificial person known as a corporation.
          Personally, as a regular buyer of Apple lap tops, I'd prefer if they were more generous with their manufacturers and the quality control people so the hardware doesn't start to fall apart the first month.
          Increasingly, Apple innovation seems to be following the model set by the automotive industry where getting a "new model" every year covered over the fact that the old one was designed to fail at 70,000 miles or sooner.

          Btw, the NYT link up top leads to today's paper.

          http://www.nytimes.com/...

          People to Wall Street: "LET OUR MONEY GO"

          by hannah on Mon Apr 30, 2012 at 03:40:17 AM PDT

          [ Parent ]

          •  Re (4+ / 0-)
            Recommended by:
            soros, nextstep, FG, VClib

            The government has the ability to fix these supposed tax problems anytime it wants. Your opinion about this is just that: an opinion. The law is the only thing that governs.

            Maybe California should cut its taxes if it wants a share of Apple revenue. Keep in mind that all Apple employees pay income tax if they live or work in a state that had it.

            (-5.50,-6.67): Left Libertarian
            Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

            by Sparhawk on Mon Apr 30, 2012 at 05:24:13 AM PDT

            [ Parent ]

            •  Indeed, and a judge's rulings are (1+ / 0-)
              Recommended by:
              SethRightmer

              "opinions," as are the findings of the SCOTUS.
              So?

              The law is man-made and what man has made, he can un-make or change.
              So?

              When the law is made to advantage some people and deprive others, it is unjust.  

              Yes, some of our laws are unjust.  The U.S. excels in that.  Before the ink on the Constitution was dry the commitment to "all men are created equal" was violated.  Conservatives will admit that indeed, "all men are created equal," but after that it's each man for himself and let the "best" man win in the competition to dominate his own kind.  

              The birds of the air and the lilies of the field don't have to worry about what they eat because nobody's conditioning their lunch on them doing what they're told.

              People to Wall Street: "LET OUR MONEY GO"

              by hannah on Mon Apr 30, 2012 at 07:33:22 AM PDT

              [ Parent ]

            •  Can't disagree more. What is this libertarian (0+ / 0-)

              hokum that cutting taxes will make companies willing to pay them?  Corporate taxes are now at their lowest in a century, and all we see are more and more examples of companies avoiding even those low taxes!

          •  So I'm assuming that when you pay your taxes... (3+ / 0-)
            Recommended by:
            FG, sewaneepat, in the Trees

            ...you don't take advantage of every deduction available to you, because that wouldn't be fair?

            "When I give food to the poor, they call me a saint. When I ask why the poor have no food, they call me a communist." --Dom Helder Camara, archbishop of Recife

            by JamesGG on Mon Apr 30, 2012 at 07:18:23 AM PDT

            [ Parent ]

        •  Apparently everything that Enron did (2+ / 0-)
          Recommended by:
          OnlyWords, quill

          was legal as well . . . . .  the point being that there is legal and then there is legal, which totally depends on your ability to hire the best lawyers!

          •  Well, the fact that the top brass all went to jail (3+ / 0-)
            Recommended by:
            nextstep, FG, sewaneepat

            means that what Enron did was not legal.  Apple is simply taking advantage of tax strategies, and being an American company that actually creates something of value, I don't have a problem with it.  Banks, on the other hand, are actively take massive amounts of money from the government for moving paper around, and I do have a big problem with that.    

            •  My understanding was that these people (1+ / 0-)
              Recommended by:
              Hannibal

              went to prison because of what they did to Enron and/or its shareholders.

               Not because what Enron the company did was illegal (e.g., rig the system to massively transfer $$s out of CA to TX . . .. ).

              •  Are you referring to gaming the CA power market? (0+ / 0-)

                I believe Enron traders were convicted for that, as well.  

                •  Well, I am glad that you used the word (0+ / 0-)

                  "believe" in that allegation (you know, referring to something that is to be taken on faith, not on the underlying facts involved).

                  •  ?? Or, "I believe" is a common (0+ / 0-)

                    figure of speech that doesn't mean faith, but "To my knowledge, ___ is true, but I'm not 100% sure," but don't let that stop you.    

                    •  I'm not . . . at least not in the (0+ / 0-)

                      sense that it's stopping you (from posting any actual evidence of your quite amazing allegation).

                      Or, to do a public service for everyone, why not fix Wikipedia to include that?   Because, at present, there is no hint that any criminal prosecutions of that type presented there (it's all related to the coverup and other shennigans that took place while the company was collapsing - when to my POV, the real crimes did not take place then but rather when the whole thing was being built -i.e., not on the way down but on the way up).

                      •  I don't get my info from Wikipedia (1+ / 0-)
                        Recommended by:
                        Roadbed Guy
                        Two of three former Enron traders accused of driving up energy prices during California’s power crisis in 2000 and 2001 were each sentenced on Wednesday in federal court to two years of court-supervised release.
                        http://www.nytimes.com/...

                        While they avoided prison, they did get convicted and sentenced.  So please do us all a favor and write to the NYT about YOUR amazing allegation that there were no convictions regarding Enron's energy trading.  

                        •  Oohhh, so they really cracked down (0+ / 0-)

                          e.g., the title you couldn't bear mentioning: 2 Enron Traders Avoid Prison in Sentences

                          In other words, they went after two low level traders - yeah, like they dreamt up the whole scheme.

                          Reminds me of this county's "a couple of bad apples" approach to prosecuting torture . . .

                    •  Another way to look at this is to consider (0+ / 0-)

                      another massively criminal organization that has been largely untouched - i.e., Goldman Sachs.

                      But just imagine if they suffered an Enron-style meltdown.  At that point there no doubt would be any number of show trials as the government puts on a charade to demonstrate how tough they are on financial malfeasance.  Again, that's not what I'm looking for - not to kick them when they're down but to make them accountable while they are still powerful.

            •  One top buy died; the other went to jail (0+ / 0-)

              but was later exonerated.
              "Personal services fraud," if I remember correctly, did not hold up as a charge.

              People to Wall Street: "LET OUR MONEY GO"

              by hannah on Mon Apr 30, 2012 at 07:20:44 AM PDT

              [ Parent ]

          •  Much inequity is perpetrated under cover of (3+ / 0-)
            Recommended by:
            Miggles, quill, Kenneth Thomas

            law.  The rule of law is an ideal instrument of subordination and deprivation because it leaves no finger-prints.

            People to Wall Street: "LET OUR MONEY GO"

            by hannah on Mon Apr 30, 2012 at 07:18:28 AM PDT

            [ Parent ]

          •  Yes, but no one liked Enron. Apple has fanboys. (1+ / 0-)
            Recommended by:
            Roadbed Guy

            In any discussion of Apple, it is important to note the existence of a large coterie of fanatical proponents. In their eyes, Apple can do not wrong. I don't pretend to understand this fanatical devotion to a brand myself, but it is very real. I would say Apple fans are almost like a cult.

            •  What do you think Apple has done that is illegal? (0+ / 0-)

              You can't scare me, I'm sticking to the Union - Woody Guthrie

              by sewaneepat on Mon Apr 30, 2012 at 01:18:17 PM PDT

              [ Parent ]

              •  In this case? Unethical, not illegal (0+ / 0-)

                But you knew that. Apple is no different than any other large, evil corporation.

                •   Enron executives were not charged and convicted (1+ / 0-)
                  Recommended by:
                  VClib

                  of crimes because people did not like Enron; it was because they did something illegal.

                  When you make the comparison you did, it sounds like you are equating the actions of the two. Apple paying only the taxes they are legally obligated to pay is not a crime. Lobbying for laws to benefit yourself is  not a crime.  I'm not inclined to think either action is unethical.

                  You can't scare me, I'm sticking to the Union - Woody Guthrie

                  by sewaneepat on Mon Apr 30, 2012 at 01:51:57 PM PDT

                  [ Parent ]

                  •  Why am I not surprised you feel that way? n/t (0+ / 0-)
                    •  Do you think it is unethical for unions to lobby (0+ / 0-)

                      for laws that benefit them? I think all sides should be able to lobby for what they believe is in the best interests of those whom they represent. The problem, as i said  earlier,  is that lawmakers are so easily swayed by what is in their (the lawmaker's) interest, rather than in the interest of those whom they are supposed to represent. And the laws that enable that behavior.

                      I don't understand the singling out Apple. It is the laws, not the company who takes advantage of the laws, that is the problem.

                      You can't scare me, I'm sticking to the Union - Woody Guthrie

                      by sewaneepat on Mon Apr 30, 2012 at 03:20:27 PM PDT

                      [ Parent ]

                    •  And FYI, personally, I call my representative and (0+ / 0-)

                      ask them to vote for legislation that is not in my financial interest, but in the interest of my spiritual and moral well being.

                      You can't scare me, I'm sticking to the Union - Woody Guthrie

                      by sewaneepat on Mon Apr 30, 2012 at 03:23:55 PM PDT

                      [ Parent ]

        •  How is Apple any different (3+ / 0-)
          Recommended by:
          FG, VClib, sewaneepat

          than a couple where both work that decides to buy a house instead of rent, so they can reduce their taxes?

          Or the person who buys a Chevey Volt and takes the $7,500 tax credit?

          Or the person who makes a contribution to a 401K or IRA and reduces their income tax?

          Or the union that negotiates for a very expensive Heath insurance benefit instead of higher pay because the pay gets taxed but not the health insurance?

          Or the person who buys solar panels for their home and takes the tax credit?

          Or the couple who both work taking the child care tax credit?

          Or the low income family that takes the Earned Income Tax Credit.

          Government puts in the tax laws and a person or business is not doing anything wrong in working to their best advantage under these government rules.

          It is a simple fact that all but the simple minded, change their behavior in response to tax policy.

          The most important way to protect the environment is not to have more than one child.

          by nextstep on Mon Apr 30, 2012 at 08:02:03 AM PDT

          [ Parent ]

          •  That's easy (0+ / 0-)

            The person who buys the Chevy Volt didn't spend millions of dollars to put that tax credit into the tax law. And that's the same for every other example you give, except when you're talking about Mitt Romney and his tax maneuvers (such as keeping the 15% carried interest exemption, which he lobbied for).

            The rich have tremendous influence over tax law, even if they don't get out of taxes completely, and surprise, the tax law is full of provisions that benefit them. I have a hard time understanding how some people at Daily Kos can't accept this.

            •  What changes in tax law did Apple cause? (2+ / 0-)
              Recommended by:
              FG, VClib

              BTW, GM lobbied for the tax credit that results from Volt sales.

              Unions opposed taxing the compensation from premium health insurance.

              The housing industry lobbies for tax deductibility of mortgage interest and the home buyer tax credit.

              The most important way to protect the environment is not to have more than one child.

              by nextstep on Mon Apr 30, 2012 at 10:16:17 AM PDT

              [ Parent ]

              •  Your examples were all non-rich individuals (0+ / 0-)

                Apple is not a non-rich individual. Similarly, GM lobbying for the electric car tax credit is not equivalent to an individual claiming that credit on their tax return.

                Aside from the fact that you are forgetting about lobbying to prevent tax changes, and that companies lobby in coordination  so you can rarely attribute a particular change to one company, I can in fact give you an example of Apple getting the law changed to specifically benefit it, in North Carolina.

                In 2009, Apple got the state legislature to pass a law letting it use single sales factor allocation to determine how much of its income for a data center is taxable in the state, which the Legislative Research Division says will save Apple over $300 million over 30 years -- all for 50 jobs.

            •  While it is true that the rich have influence over (0+ / 0-)

              tax law, that is a problem with the lawmakers, not a problem with the rich person or company who is lobbying for what is in his or its best interest. There is nothing wrong with that. The problem is again with the law which allows them to buy the lawmakers and the lawmakers who are bought.

              You can't scare me, I'm sticking to the Union - Woody Guthrie

              by sewaneepat on Mon Apr 30, 2012 at 01:21:21 PM PDT

              [ Parent ]

        •  You didn't reply a month ago (0+ / 0-)

          So I'll repeat what I said late in the thread then.

          Just because Apple and other companies don't get everything they want from the tax laws doesn't mean they don't get most of what they want, and it doesn't mean that they don't get have tremendous influence over the content of the law. Therefore, they can't simply say they are "just following the law," because they had a ton to do with what the law allows them to do.

          And Apple did get everything it wanted from North Carolina when it built a data center there a couple of years ago. It demanded a new law giving it the benefit of single sales factor apportionment, saving it hundreds of millions of dollars over the next 30 years, and the legislature gave it to Apple.

          A nice display of raw power.

      •  Do you take your exemptions and deductions? (2+ / 0-)
        Recommended by:
        cheerio2, FG

        If you have capital gains and dividends, do you pay the legal rate of 15% or do you count it as earned income and pay a higher rate? Do you voluntarily pay more? Do you think the Republicans are right that Warren Buffett should just shut up and voluntarily pay more than he legally owns instead of paying what he owes and fighting to change the law?

        If you don't like the law, work to change it. But I don't see complaining about people or companies who follow the law.

        You can't scare me, I'm sticking to the Union - Woody Guthrie

        by sewaneepat on Mon Apr 30, 2012 at 05:28:31 AM PDT

        [ Parent ]

        •  Ad hominem arguments are always suspect (0+ / 0-)

          because they distract from the real issue.

          People to Wall Street: "LET OUR MONEY GO"

          by hannah on Mon Apr 30, 2012 at 07:22:53 AM PDT

          [ Parent ]

          •  That's not an ad hominem argument at all. (1+ / 0-)
            Recommended by:
            sewaneepat

            You're suggesting that Apple should voluntarily pay more than it legally owes in taxes, so the question of whether you personally are willing to do the same—or if you're just demanding it from others—is an absolutely fair one.

            "When I give food to the poor, they call me a saint. When I ask why the poor have no food, they call me a communist." --Dom Helder Camara, archbishop of Recife

            by JamesGG on Mon Apr 30, 2012 at 07:26:47 AM PDT

            [ Parent ]

            •  If you're asking whether I move my (1+ / 0-)
              Recommended by:
              Kenneth Thomas

              money around to other venues so neither the IRS nor shareholders can't find it, the answer is "no."

              The issue is whether corporate entities, which are organized to insulate individual members from personal obligations and accountability, have to meet a lower or higher standard of probity.  I'd argue for higher, since it doesn't come out of any individual's hide. But, in any event, turning the argument back to an individual is an effort to distract.  
              I wouldn't bother addressing it, except this is a good example to point out to other readers.
              Corporations (public and private) are not persons.  The participants in the organization are shielded by their charters from liability.  In exchange we can and should expect a higher commitment to social obligations than we expect from individuals. If we haven't made that clear in granting the charters, then that's an omission we can correct.

              People to Wall Street: "LET OUR MONEY GO"

              by hannah on Mon Apr 30, 2012 at 07:46:26 AM PDT

              [ Parent ]

              •  That was not the question. (0+ / 0-)

                The question was do you take advantage of legal deductions in the tax code to pay the amount you are legally obligated to pay. That is what Apple is doing also. The law may not be what you or I would like, but the answer to that is to change the law, not blame a company or an individual who pays their legal obligation.

                I don't believe that Apple is moving money to other venues so the IRS or its shareholders can't find it. It is not money laundering; people are aware where the money is. The article points out clearly where the money is.

                What you said before is that

                Apple just cheated by taking advantage of government protections (trade agreements, patent rights guarantees, travel accommodations, a stable currency, etc.) without making the "voluntary" contributions and honoring their obligations.
                That is legal and is not hiding money. I suspect Apple shareholders would not be happy if Apple made "voluntary" contributions above and beyond their legal obligations. We, as individuals, also take advantage of government protections and advantages and are not morally or ethically obligated to voluntarily pay the IRS more than we owe. I, like every other American, get more from the government than I pay in, but I certainly do not voluntarily pay more than I am legally obligated to pay, and I don't think many people do.

                You can't scare me, I'm sticking to the Union - Woody Guthrie

                by sewaneepat on Mon Apr 30, 2012 at 12:58:33 PM PDT

                [ Parent ]

          •  I am not attacking you. (0+ / 0-)

            The real issue is the law, not companies or individuals who follow the law. That was exactly what I was pointing out.

            You can't scare me, I'm sticking to the Union - Woody Guthrie

            by sewaneepat on Mon Apr 30, 2012 at 07:35:00 AM PDT

            [ Parent ]

            •  The real issue is relative influence on the law (0+ / 0-)

              Multinationals like Apple, tax lawyers, and the Big 4 accounting firms have had virtually unchallenged influence over tax law, even if they haven't gotten everything they want (0 taxes). As a result, they can't say they are just following the law.

              Over the past 10 years, there has been increasing expertise going to proponents of fairer taxation at the international level, and what you see in my post (and even more in the work of the Tax Justice Network and Richard Murphy's Tax Research UK) is an example of that.

          •  BTW, I don't even think you should pay more (0+ / 0-)

            than you legally owe the government.

            You can't scare me, I'm sticking to the Union - Woody Guthrie

            by sewaneepat on Mon Apr 30, 2012 at 07:36:13 AM PDT

            [ Parent ]

  •  asdf (3+ / 0-)
    Recommended by:
    sewaneepat, nextstep, VClib
    This is a conservative estimate, based on only 50% of its profits being due to U.S. operations.
    Its US revenue was about 35% of the total.  (see page 30 of the 10-K)
    •  You're Going To "Relie" on Apple's 10-K? (1+ / 0-)
      Recommended by:
      quill

      Even after it was documented in the diary that Apple's 10-K is full of, ahhhh, $hit?

      “The information on 10-Ks is fiction for most companies,” said Kimberly Clausing, an economist at Reed College who specializes in multinational taxation. “But for tech companies it goes from fiction to farcical.”
      Using Apple's 10-K to defend Apple is like using the "Bible" to defend believeing in god. Then again, maybe I just misssed your {snark} tag...

      I am not now, nor have I ever been, a member of the Republican Party.

      by OnlyWords on Mon Apr 30, 2012 at 05:11:17 AM PDT

      [ Parent ]

      •  why your comment is stupid: (2+ / 0-)
        Recommended by:
        nextstep, VClib

        the issue isn't whether apple's 10-k is unreliable, its that none of the tax reporting numbers perfectly capture what we think of as tax liability.

        if you knew the first thing about accounting, I wouldn't have to explain that.

        •  Sorry, I quit smoking recently, (2+ / 0-)
          Recommended by:
          VClib, sewaneepat

          so I'm much more irritable than usual.

          If I could go back in time, I'd write the following:

          Even after it was documented in the diary that Apple's 10-K is full of, ahhhh, $hit?
          No such thing was documented.  The problem, such as it is, is that the financial statements were drafted to be useful to investors, not to Kenneth Thomas.  He wants to know the exact tax liability for a given year, while investors want to know how much tax they're going to have to pay ultimately.

          The 10-K isn't "full of shit," it just doesn't tell Kenneth Thomas exactly what he wants it to.  And if you're familiar w/ GAAP accounting, none of this is surprising and none of it is scandalous.  It's a nontroversy entirely of the diarist's imagining, IOW.

        •  I presume you understand the principles (0+ / 0-)

          of allocation of income for tax purposes. That means you know that sales is normally only one of three factors that determines how much of a corporation's income a government gets to tax. So I therefore don't understand why you point out that Apple claims only 35% of its sales in the U.S. as if that's the end of the story. The article documents that an overwhelming proportion of Apple's employees are in the United States as is the case as well for the company's tangible assets. It also shows that even the location of sales as reported by the company is manipulated.

          And yes, three-factor apportionment does not exist internationally, but that is a result of a strenuous campaign by the multinationals in the OECD (as explained by Michael Webb in a book I co-edited in 2001) as well as other efforts by MNCs.

          Clearly a much bigger proportion of its intangible property is located overseas, presumably Ireland since those are significant subsidiaries. But I think that ownership of these assets was transferred to Ireland at non-arm's length prices, and the royalties charged other subsidiaries for their use is similarly abusive. But we'll never know because the company isn't saying.

          BTW, not perfectly capturing is not the same thing as designed deliberately for deception.  As Murphy argues, GAAP is itself part of the problem.

          And as he also points out (http://www.taxresearch.org.uk/...), since Apple puts far more resources into designing the tax law than you or I are able to, it can't simply claim it's just following the rules. It did a lot to make the rules, even if it hasn't gotten everything it wants.

      •  OnlyWords - the information in Apple's 10K (1+ / 0-)
        Recommended by:
        sewaneepat

        is accurate based on GAAP accounting principles. Annual 10K reports give little detail about tax issues, because they are not required. In addition, every public company has two sets of books, one for GAAP and one for tax. That is because the accounting board and the IRS have very different rules on how items are treated and flow through the P&L, or a tax return. Public companies, like Apple, and particularly post SAR-BOX, put a great deal of time and effort in preparing their SEC filings. There are criminal as well as civil penalties for inaccurate SEC reporting and that includes the CEO, CFO, and members of the Audit Committee of the Board of Directors. In addition, both internal auditors and a team from Ernst & Young are at Apple on a full time basis.

        There are many critics of GAAP accounting and the information that is provided in the annual 10K and quarterly 10Q reports to the SEC, but the numbers are accurate based on the accounting principles required under current US law.  

        "let's talk about that"

        by VClib on Mon Apr 30, 2012 at 09:28:46 AM PDT

        [ Parent ]

    •  re: significant subs: (3+ / 0-)
      Recommended by:
      erush1345, nextstep, VClib

      The rule for significant subs is a mechanical one; it's not about whether Apple deems the subs significant, it's whether the subs have more than 10% of assets or 10% or income.  (link)

  •  Oh playing with fire on this site (1+ / 0-)
    Recommended by:
    quill

    Dissing Apple here is dangerous, people will defend Apple no matter what. Believing that somehow Apple is special, progressive, whatever. Same mindset many have when it comes to Google. Loyalty to corporations, even ones you work for, is at best ill-placed.

    As for the specific content of the diary, it's not a surprise. Businesses, especially massive ones like Apple, do everything they can to avoid paying taxes. It's part of how publicly traded corporations work though. They have a responsibility to maximize profits. It's why CEOs are mostly sociopaths, they'll maximize profits a lot more than someone who gives a fuck about other human beings will.

    So Apple behaves as any other corporation behaves. They've come up with a few innovative ways to do it, but they're no different than all the rest. Cheap labor, tax avoidance, convincing people to buy silly shit. Apple might disguise it beneath a veneer of "Oh we're so different and special!" But they're just another corporation after your money.

    Nothing brings people together more than mutual hatred.

    by Hannibal on Mon Apr 30, 2012 at 06:49:27 AM PDT

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