Apple paid 2% in taxes on $36.8B of foreign revenue for fiscal 2012 - Page 5

You can't be as clueless as you make yourself sound.

I was earning $76k a year while living (and earning) in Japan, and paid an even lower rate than Apple did. I paid 0% in taxes!

 

 

Wait, let's be JUST a little more specific here, so it isn't quite so disingenuous….

 

I paid no U.S. Federal Income Tax specifically. You bet I paid plenty of local taxes though. If I'd been earning over $80k, I'd have had to start paying double taxes. That's right. If you earned over $80k you would have to pay both local AND U.S. taxes on that additional income...

 

And that brings us back to this story. Yes, Apple paid "only" 2% in U.S. tax on foreign-earned income (where you can bet they ALSO pay plenty of "local" domestic tax in each country where that money is earned). It isn't like they are avoiding paying taxes here (actually, they are always working to reduce their tax liability, but that isn't illegal or even ethically wrong)… they are paying that 2% on top of, and in addition to local taxes.

 

Let's also look at what they earned IN the U.S., and see what that tax rate was? Because as I understand it from the quarterly reports, they pay a pretty high rate on their domestic profits...

 

In some of the previous earnings reports, they show that for domestic earnings they are paying above 30%, give or take, on their net profits? PLUS another 2% on foreign-earned income, which they do pay tax on in the countries where they earn it.

 

I don't see why this is "disgusting" or upsetting to anyone. Hell, their Federal tax liability went from under $4bn to OVER $12bn across three reporting years? Doubling year on year and people are complaining?

 

Unbelievable….

It depends on the setup they have. They might not be required to pay much local tax if their profits are taxed in the US but they aren't bringing those profits home and in fact reinvesting a significant amount permanently overseas. If you were due to pay corporation tax on overseas profits in the US on repatriating it and instead just spend most of it on foreign suppliers, you'd pay little to no corporation tax.

Their filing amount is not being reported as US tax liability but "overseas corporation tax on foreign profits":

http://www.guardian.co.uk/technology/2012/nov/04/apple-paid-low-overseas-tax

"The famous US company paid about £445 million in coporation tax outside the US... According to reports, the company shifted money off through low tax countries and tax havens such as the British Virgin Islands to avoid the regulations. It has been estimated that Apple's UK tax bill which came in at £14.4 million should have looked more like £570 million."

http://www.taxguide.co.uk/content/apple-paid-only-19-tax

Whatever it is, some of the companies doing this got their asses hauled before a committee:

"Google, Amazon and Starbucks will be hauled before the Commons public accounts committee on Monday to explain why they pay so little tax to the exchequer."

I think the Monday in question was yesterday - there's a protest planned by the usual unwashed at Starbucks:

http://www.guardian.co.uk/business/2012/nov/12/starbucks-tax-avoidance-controversy

Some of the responses from the companies are here:
http://www.theinquirer.net/inquirer/news/2224239/house-of-commons-grills-amazon-for-avoiding-uk-taxes
http://www.theinquirer.net/inquirer/news/2197482/google-won-t-be-paying-much-uk-tax

Any regulations that come from it will affect anyone who has been doing the same. I won't hold my breath, if government was as efficient at enforcing legislation as companies are at circumventing it, companies would probably be happy to pay their fair share.

To some people the amount is more important than the rate. They have increased profits over that time period so if the rate stays the same then of course their tax amount increases. Paying what they are due in some areas doesn't excuse tax avoidance in others. This is where people are quick to point out that these companies are paying what they are legally due but using legal loopholes isn't tolerated for criminals who escape justice for violent offenses and it shouldn't be tolerated when it involves wealthy people becoming unfairly more wealthy.

The issue does create a class divide between the wealthy who point to the amount they pay rather than the rate and proclaim they pay more than the 'moochers' who earn small amounts (because obviously they are either not working hard enough or not doing important enough work). If you run a business, you inevitably feel the weight of government more than employees because you have to make the payments. Employees have their portion taken before they can do anything about it so they aren't as much aware of it but there is a sense that employees can do nothing to avoid it whereas the people benefitting from their work can.

Over the past few years, wealth has been sharply redistributed from the poor to the wealthy:

http://www.nytimes.com/interactive/2011/10/26/nyregion/the-new-gilded-age.html

That sort of thing happens when rich people avoid taxes. Now we know how much rich people hate wealth redistribution so I have no doubt they must be absolutely livid about this.

So Apple can create another company say iStore and that can sell stuff online. iStore wouldn't have to charge sales tax as Apple has the physical retail stores, not iStore. Creating subsidiaries and routing profits is what they do so save income tax, so why doesn't it work here.

 

Apple is kind enough to allow UK iTunes customers to pay 3% more than the standard UK sales tax rate.

 

Why?

 

Apple (understandably) wanted to minimise their own tax liabilities even though it means that their customers have to pay higher sales taxes.

?

 

Isn't the standard UK rate 20%

 

iTunes prices in Europe include 15% VAT (Luxembourg).

Hi JLL

 

The UK VAT is indeed 20% but Apple set up the UK iTunes servers in Ireland and so it follows that UK customers pay the higher Irish VAT http://store.apple.com/uk/help/payments#tax

 

 

Are you sure that you are paying 15% VAT?

 

I have looked at the following Apple pages for France and Germany and they say that customers are charged 23% Irish VAT as well

 

http://store.apple.com/de/help/payments#tax

 

http://store.apple.com/fr/help/payments#tax

 

 

I believe that Luxembourg has differing rates of VAT for digital downloads, with music at 15% and eBooks at 3%.

 

 http://europa.eu/rapid/press-release_IP-12-740_en.htm

 

 

I am not a tax expert by any stretch of imagination but I suspect that Apple may be using a model similar to that of Amazon whereby they themselves pay the preferential VAT rates in Luxembourg on any purchases and then charge their customers higher rates of VAT.

 

Apple have this in Luxembourg

 

source: http://translate.google.com/translate?sl=fr&tl=en&js=n&prev=_t&hl=en&ie=UTF-8&layout=2&eotf=1&u=http%3A%2F%2Fowni.fr%2F2011%2F09%2F16%2Fou-apple-planque-ses-thunes-luxembourg-itunes%2F

 

 

 

and this in Ireland

 

 

 

Of course it should be noted that some EU residents that live in countries with higher rates of VAT aren't neccessarilly any worse off as a result of Apple's corporation tax minimising. To date memebers of 7 of the smaller EU members are better off (out of a total of 27 member states)... 

 

EDIT___

 

Muddying the waters even more, I have just noticed that Apple list Apple Inc as being their web host. I guess that Apple Inc charge Apple Distribution International a nominal fee that attracts very little in the way of sales taxes in the USA. If we,as Europeans were purchasing directly from the host, Apple Inc, we would not have to pay any VAT on most iTunes purchases under the Low Value Consignment Relief scheme

Edited by hungover - 1/14/13 at 5:09am

 

That's for Apple Store (store.apple.com/uk) where you pay local tax (or Irish tax if it's a service).

 

App Store and iTunes Store are not the same as Apple Store.

Hi jll

 

 

I was refering to the vat rate at iTunes, ie music, apps, eBooks etc, all of which are classified as electronic downloads. ITunes purchases are 23% regardless of the vat rate in your (EU) country (i might be wrong! Does one purchase from Itunes SARL

 or Apple International Distribution?).

 

if the servers were based in Luxembourg customers would pay 3% for some electronic downloads but on the downside, apple would pay a higher corporation tax than in Ireland.

 

TBH I get more confused the more time I spend looking into this

 

 

Are you able to confirm that electronic downloads are at the local tax rate, the apple site does not make it clear?

Edited by hungover - 1/22/13 at 10:40am

HI JLL

 

My bad.

 

I emailed Apple about the rate of VAT and they tell me that Itunes purchases are indeed at 15% (Luxembourg VAT).

 

You were correct that it is software purchased through the store (as downloads) that is charged at 23%.

 

Thanks