Apple details 'extraordinary amount' of taxes it pays in testimony to US Senate

Posted:
in AAPL Investors edited January 2014
Apple on Monday published in full the formal testimony that Chief Executive Tim Cook plans to give before the Permanent Subcommittee on Investigations in the U.S. Senate.

The full document is available at Apple's website in PDF form, and is dated May 21, 2013, for when Cook is scheduled to appear before the subcommittee. Apple's CEO has been called before the U.S. Senate to testify on his company's offshore tax practices.

Subcommittee


The Senate hearing is a continuation of the panel's investigation into how the practice of keeping profits offshore affects U.S. taxes. Apple currently has more than $100 billion in cash stored overseas, and the company has made it clear it has no plans to repatriate those funds at current tax rates.

In the testimony published on Monday, Apple argued that the company already "pays an extraordinary amount in U.S. taxes." The company asserts that it is likely the largest corporate income tax payer in the U.S., having paid nearly $6 billion to the U.S. Treasury in fiscal 2012.

"These payments account for $1 in every $40 in corporate income tax the U.S. Treasury collected last year," the testimony reads.

For Apple's current fiscal year, the company plans to pay more than $7 billion in taxes to the U.S. Treasury.

The testimony also argues that Apple does not use so-called "tax gimmicks." Specifically, Apple has said it does not:
  • Move its intellectual property into offshore tax havens and use it to sell products back into the U.S. in order to avoid U.S. tax.
  • Use revolving loans from foreign subsidiaries to fund its domestic operations.
  • Hold money on a Caribbean island
  • Have a bank account in the Cayman Islands.
The justification for Apple's "substantial foreign cash," as the company put it, is because the majority of its products are sold outside of the U.S. The iPhone maker's international operations accounted for 61 percent of its revenue last year, and increased to two-thirds of its revenue last quarter.

The company has also suggested that legislators enact an "objective examination of the U.S. corporate tax system, which has not kept pace with the advent of the digital age and the rapidly changing global economy." In the eyes of Apple executives, the U.S. tax code is in need of "comprehensive" reform in order to promote growth and enable American corporations to remain competitive on the global landscape.

Apple also took the opportunity to highlight its job creation, noting tat the company estimates it has created or supported about 600,000 U.S. jobs, including 50,000 who are directly employed by Apple.

Since word got out that Cook has been called to Washington to testify, Apple has gone on the offensive to justify the amount of taxes that it pays. Cook himself did a series of interviews last week to argue that his company pays the U.S. government every dollar that it is owed. Many of the talking points used by Cook last week are covered in greater detail in the testimony published on Monday.

"I can tell you unequivocally, Apple does not funnel its domestic profits overseas," Cook said last week in an interview with Politico. "We don't do that. We pay taxes on all the products we sell in the U.S., and we pay every dollar that we owe. And so I'd like to be really clear on that."
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Comments

  • Reply 1 of 51
    cpsrocpsro Posts: 2,782member


    Corporate America paid just $6B X 40 = $240B in Federal taxes last year?


    Pathetic

  • Reply 2 of 51
    just_mejust_me Posts: 590member

    Quote:

    Originally Posted by Cpsro View Post


    Corporate America paid just $6B X 40 = $240B in Federal taxes last year?


    Pathetic



    Agreed. When its citizens pay a higher percentage you know you something is broken.

  • Reply 3 of 51
    jungmarkjungmark Posts: 6,800member
    But Apple hasn't paid MY taxes!
  • Reply 4 of 51
    quevarquevar Posts: 101member

    Just to put cpsro's comment in perspective:


  • Reply 5 of 51
    fracfrac Posts: 480member
    Two points...
    "These payments account for $1 in every $40 in corporate income tax the U.S. Treasury collected last year," the testimony reads.

    *********

    "I can tell you unequivocally, Apple does not funnel its domestic profits overseas," Cook said last week in an interview with <em>Politico</em>. "We don't do that. We pay taxes on all the products we sell in the U.S., and we pay every dollar that we owe. And so I'd like to be really clear on that."

    Too lazy myself, but I'd love to see a breakdown of who pays what. It would seem there is an awful lot of non-contributing going on by the other thirty nine fourtieths :\

    And can ANY politician, honestly-state similarly about their own tax dealings as Tim Cook's last quote?
  • Reply 6 of 51
    froodfrood Posts: 771member

    Quote:

    Originally Posted by Cpsro View Post


    Corporate America paid just $6B X 40 = $240B in Federal taxes last year?


    Pathetic



     


    With total taxes collected being around $2.5 Trillion, corporations paid their slightly less than 10% of the burden.  What more do you want?


     


    The good news though is that with an income of $2.5 trillion, we managed to only spend $3.5 trillion

  • Reply 7 of 51
    al_bundyal_bundy Posts: 1,525member

    Quote:

    Originally Posted by Just_Me View Post


    Agreed. When its citizens pay a higher percentage you know you something is broken.



     


    what are corporations made up of? citizens


     


    time for all of you to take a pay cut to pay your fair share of taxes

  • Reply 8 of 51
    icoco3icoco3 Posts: 1,467member

    Quote:

    Originally Posted by Just_Me View Post


    Agreed. When its citizens pay a higher percentage you know you something is broken.



     


    And just who do you think pays those corporate taxes in the end????  Individuals pay ALL the taxes in this country as the tax burden is considered a cost of doing business and is reflected at the cash register.

  • Reply 9 of 51


    Any taxes levied on corporations result in higher priced products, period.  They aren't simply going to reduce their profits by that much.  It comes into the calculation of what they need to charge to survive.  Over tax the local corporations, and out of country corporations suddenly have a huge advantage and can undercut the local businesses.


     


    I'm all for taxing anyone that generates income on an individual basis, including profits from capital gains, stocks, etc.  But to simply tax a corporation on its profits doesn't solve a thing.

  • Reply 10 of 51
    I recalled that a while back, there was a corporate tax decrease for a short time under Bush. Did the tax decrease make a difference? Not really. The more you get, the more you want.
  • Reply 11 of 51
    SpamSandwichSpamSandwich Posts: 33,408member

    Quote:

    Originally Posted by Frood View Post


     


    With total taxes collected being around $2.5 Trillion, corporations paid their slightly less than 10% of the burden.  What more do you want?


     


    The good news though is that with an income of $2.5 trillion, we managed to only spend $3.5 trillion



     


    Although unfunded liabilities have now reached more than $16 trillion.


     


    That is an unfathomably large number that people have continually ignored at the peril of our country's solvency.

  • Reply 12 of 51
    cpsrocpsro Posts: 2,782member

    Quote:

    Originally Posted by Brian Jojade View Post


    ...to simply tax a corporation on its profits doesn't solve a thing.



    Taxing citizens on their income doesn't solve a thing either, eh?

  • Reply 13 of 51
    SpamSandwichSpamSandwich Posts: 33,408member

    Quote:

    Originally Posted by Brian Jojade View Post


    Any taxes levied on corporations result in higher priced products, period.  They aren't simply going to reduce their profits by that much.  It comes into the calculation of what they need to charge to survive.  Over tax the local corporations, and out of country corporations suddenly have a huge advantage and can undercut the local businesses.


     


    I'm all for taxing anyone that generates income on an individual basis, including profits from capital gains, stocks, etc.  But to simply tax a corporation on its profits doesn't solve a thing.



     


    The income tax is a failure that is riddled with exceptions and favors for groups. Mind you, I'm against all taxes, but real reform could be made in the form of the FairTax.

  • Reply 14 of 51
    maestro64maestro64 Posts: 4,908member


    I have said this before, as much as I would like to avoid paying any taxes and keep everything I make and earn. However, I realize tax $ most times bring lots of value to everyone, such as the highway system in this country. With that said, taxes do have place to ensure we all have things we would never otherwise have, do not believe me go to a country which do not have a means to fund capital project and see what it looks like there.


     


    What needs to happen is the US needs to go to a flat tax everyone pays the same not matter what, no deduction and loop holes, total income before anything time X% is what you owe. This will get ride of the IRS, a bunch or highly paid lawyers and tax accounts , and the government will know exact how much they get and we all know what we pay, no need to filling a tax return either since you owe nothing after you pay and you get no refund since you should have never over paid in the first place.


     


    If you want to see what how much Tax the US government would raise each year, just look at the GDP numbers and take X% of it. What is nice about this system is if the government wants more  money the only way to get it is by making sure companies and people all make more money. 

  • Reply 15 of 51
    MarvinMarvin Posts: 14,430moderator
    "These payments account for $1 in every $40 in corporate income tax the U.S. Treasury collected last year," the testimony reads.

    For Apple's current fiscal year, the company plans to pay more than $7 billion in taxes to the U.S. Treasury.

    This is the usual route to mention how much is being paid but always misses out the point that it's still less than what they owe. They pay so much of Corporate Taxes because they make so much profit, that's how it works. It's a percentage system, you pay a percentage of what you make. You don't get to decide that a particular fixed amount is good enough - $6b would still sound high even if you made $1 trillion profit when you don't mention the $1 trillion. They've said openly that their effective tax rate is around 25%, which is less than the 35% expected and other people have worked it out to be less than 25% from what they paid. The billions in taxes don't matter because the profits are many more billions, it's the percentages that matter.

    Their profits so far this year are about $13b and $9b so if it's $9b, $9b for the next quarters, they'll pay $7b out of $40b for 2013 = 17.5% tax. Their profit was $41.6b in 2012 so $6b paid is 14%.
    <ul><li>Hold money on a Caribbean island
    <li>Have a bank account in the Cayman Islands.</ul>

    :lol: Keep going, there's more tax havens than that. They're going full diversionary on this one.
    The company has also suggested that legislators enact an "objective examination of the U.S. corporate tax system, which has not kept pace with the advent of the digital age and the rapidly changing global economy." In the eyes of Apple executives, the U.S. tax code is in need of "comprehensive" reform in order to promote growth and enable American corporations to remain competitive on the global landscape.

    The reform would have to be fair to other US companies though, which don't have the scale to manage international operations. The corporate tax rates would have to be lowered for every company, which isn't being paid enough as it is. This just puts more tax burden elsewhere. There's a list of tax rates here:

    http://en.wikipedia.org/wiki/List_of_countries_by_tax_rates

    You can see the UK has much lower corporate tax rates but the sales tax is double. All that would happen if there was a reform is that companies will just push even further and pay half of a lower tax rate until it becomes as close to zero as possible.

    When they talk about competition, what they mean is that if they stop avoiding taxes, other companies that still avoid them will be in a better position. Everybody has to follow the lowest common denominator - same reason why they move manufacturing to China. The only way to fix it is on a global level.
    Apple also took the opportunity to highlight its job creation, noting tat the company estimates it has created or supported about 600,000 U.S. jobs, including 50,000 who are directly employed by Apple.

    They put up a page on their website about this:

    http://www.apple.com/about/job-creation/

    Commendable but not the issue.
  • Reply 16 of 51
    e_veritase_veritas Posts: 248member

    Quote:

    Originally Posted by icoco3 View Post


     


    And just who do you think pays those corporate taxes in the end????  Individuals pay ALL the taxes in this country as the tax burden is considered a cost of doing business and is reflected at the cash register.



     


    Unfortunately, this is not an accurate statement. Taxes are derived from profit, and have nothing to do with the process of delivering products and services. Taxes are a cost associated with making a return on your business, not doing business as you are trying to imply.

  • Reply 17 of 51
    SpamSandwichSpamSandwich Posts: 33,408member

    Quote:

    Originally Posted by e_veritas View Post


     


    Unfortunately, this is not an accurate statement. Taxes are derived from profit, and have nothing to do with the process of delivering products and services. Taxes are a cost associated with making a return on your business, not doing business as you are trying to imply.



     


    Costs are most definitely factored into the ultimate price of goods and services. Taxes are a liability and they are part of the calculation.

  • Reply 18 of 51
    anantksundaramanantksundaram Posts: 20,172member

    Quote:

    Originally Posted by e_veritas View Post


    Quote:

    Originally Posted by icoco3 View Post


    And just who do you think pays those corporate taxes in the end????  Individuals pay ALL the taxes in this country as the tax burden is considered a cost of doing business and is reflected at the cash register.



     


    Unfortunately, this is not an accurate statement. Taxes are derived from profit, and have nothing to do with the process of delivering products and services. Taxes are a cost associated with making a return on your business, not doing business as you are trying to imply.



    Investors don't give a hoot about a company's pre-tax returns. All they care about, in valuing a business, is after-tax cash flows and after-tax returns.


     


    Therefore, from an investor standpoint, corporate income taxes are indeed like a cost of doing business.

  • Reply 19 of 51
    richlrichl Posts: 2,213member


    Make extraordinary profits, pay extraordinary tax. It's not rocket science.

  • Reply 20 of 51
    I love all the people manipulating the numbers to show their point of view. While you are at it why not include the percentage of people who pay no taxes just to be fair? And don't forget to include GE, whose head seems to be a close advisor to the president and whose company apparently paind no taxes.

    Let's can singling out one company that actually pays a lot of taxes and admit the system is broke. The answer is simple, start demanding your representatives reform the tax code for all. And avove all stop being stupid and sending the same people back to DC time after time expecting different results.
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