Study claims Apple avoided paying $65.08B in US taxes in 2015 through offshore arrangements

AppleInsider

Apple managed to avoid paying $65.08 billion in U.S. taxes last year by keeping $218.55 billion offshore, according to a study produced by an activist group and a non-partisan think tank.

The sums made Apple the biggest avoider of corporate taxes in the U.S., said Citizens for Tax Justice and the Institute on Taxation and Economic Policy, quoted by the U.K.'s Daily Mail. The organizations noted however that three quarters of Fortune 500 companies used offshore tax havens, cumulatively funneling $2.42 trillion and dodging $715.62 billion in American taxes.



The top 30 U.S.-based companies ranked in the study operated 2,509 subsidiaries in tax havens.



Following Apple, the next biggest offshore holder was pharmaceutical giant Pfizer, which relied on 181 subsidiaries to funnel $192.57 billion in income.



"The hard fact is that the US tax code incentivizes tax haven abuse by allowing companies to indefinitely defer taxes on offshore profits until they are 'repatriated'," argued the Institute on Taxation and Economic Policy's Matthew Gardner.



While the U.S. is Apple's home and its most important market, most of the company's revenues and cash reserves have been kept overseas. The iPhone maker has refused to repatriate those reserves unless it's granted a "tax holiday" reducing the amount of money it owes.



As for revenues, for years Apple has funneled billions from various countries through its Irish subsidiaries, exploiting loopholes to pay extremely low tax rates. The arrangement eventually drew the scrutiny of the European Commission, which in August ordered Ireland to collect $14.5 billion in back taxes. Both Apple and the Irish government have vowed to fight the decision -- the latter has been working to close some of the loopholes, however.

spice-boy

The last "tax holiday" was granted by the US in 2004 for multinational companies. The rate was heavily reduced to a mere 5.25%. I as a small business owner pay about 35% on my profits. Corporations like Apple expect another Reparation tax holiday sooner or later so there is little incentive to bring this money back to the US until Congress caves in. How did this all happen? Well look at the people we citizen elect to political office, who funds their campaigns, who are they in debt to when the get into office? It is not the US citizen but these huge corporations. Laws are written to make these tax havens possible as a pay back for a cushy seat in Congress. Are corporations like Apple breaking the law? Not as the law is written. Is Apple morally wrong for taking advantage of these laws? Yes. Tax breaks and incentives were originally designed to help small to large businesses grow and have positive impact on a local or regional area. These incentives often have time limits unlike these tax haven laws. I am a big fan of Apple's products and services and have been for decades but don't let you love admiration of this company blind you to the fact they are positioned as many huge international corporations above the tax laws most citizens must follow. 

[Deleted User]

I don't understand why any profits generated on sales abroad should be expected to be taxed in the US also?
If I emigrated to Australia for example and worked there I'd expect to only pay tax in Australia, not to Australia AND my home country.
If the companies were shifting (or hiding) profits offshore to actively avoid paying tax then that's a different matter but as far as I know, Apple doesn't sell in the US via Apple International so all sales in the US is declared and taxed as such.

cali

 If Apple did nothing illegal then what's the problem?

Why should Apple pay taxes to a country that treats them like s*it and doesn't honor their patents? 

crofford

DELAYED paying taxes. 

lkrupp

“Citizens for Tax Justice and the Institute on Taxation and Economic Policy” Typical monikers for extreme left wing socialist organizations. Notice how the terms “tax avoider” and “tax haven abuse” are used instead of “illegal” and “fraudulent.” Those terms would get them sued for slander. Subjective labels with wide open interpretations are the norm for outfits like this. Plant the thought seed of illegality without actually saying it. If these outfits want to get their hands on some of that $65 billion then pressure Congress to reform the tax code. Tim Cook said he would be happy to repatriate those off shore assets if conditions were right. By the way, I personally AVOID paying every tax dollar I can by paying a tax accountant to find every legal deduction and loophole possible. I don’t give a rats ass about “fairness” or “tax justice. I care about paying as little tax as possible and I sure as hell won’t be sending an additional check to the Treasury because I “feel” guilty.

ppietra

Talk about ignorance or misdirection. They (at least daily mail) confuse current offshore financial assets with yearly profits.

thewhitefalcon

None of which is illegal, which these idiots conveniently forget. It's the same thing with Trump. 

lkrupp

spice-boy said:

Is Apple morally wrong for taking advantage of these laws? Yes.

And what “moral” code are you referring to? Some self-evident, ethereal, socialist pablum?

plovell

These folks conveniently ignore the fact that Apple is not a single U.S. company but has a separate non-U.S. subsidiary. There is NO requirement for Apple (US) to pay tax on the non-US company's activities. It's not tax avoidance at all - there's no tax that has to be paid. The situation with EU is entirely separate. That relates to how some subsidiaries of Apple International moved money around (Ireland - Netherlands - Ireland, for example). There might well be some tax payable there, as the EU alleges. But the US complaints are pure bunk coming from people who don't understand.

ncil49

lkrupp said:

spice-boy said:

Is Apple morally wrong for taking advantage of these laws? Yes.

And what “moral” code are you referring to? Some self-evident, ethereal, socialist pablum?

My thoughts exactly. If I hear 'fair share' one more time from someone.....I'll send them into the educational and social abyss areas of this country so they can see where THEIR fair goes.  When 45 percent of the US pays no federal tax who do you think they will...... eh.... screw it.....long live apple upgrade cycles and dividend raises.  

jd_in_sb

These people who think Apple is doing something wrong are either dumb or intentionally misleading or both. What a joke. 

jungmark

Money was made outside the US. Why should any company bring money back in at a high tax rate? Lower the repatriation tax rate to 15-20%. It should not be less than that. 

Why dont these reports show much taxes Apple did pay in the US?

kent909

sog35 said:

spice-boy said:

The last "tax holiday" was granted by the US in 2004 for multinational companies. The rate was heavily reduced to a mere 5.25%. I as a small business owner pay about 35% on my profits. Corporations like Apple expect another Reparation tax holiday sooner or later so there is little incentive to bring this money back to the US until Congress caves in. How did this all happen? Well look at the people we citizen elect to political office, who funds their campaigns, who are they in debt to when the get into office? It is not the US citizen but these huge corporations. Laws are written to make these tax havens possible as a pay back for a cushy seat in Congress. Are corporations like Apple breaking the law? Not as the law is written. Is Apple morally wrong for taking advantage of these laws? Yes. Tax breaks and incentives were originally designed to help small to large businesses grow and have positive impact on a local or regional area. These incentives often have time limits unlike these tax haven laws. I am a big fan of Apple's products and services and have been for decades but don't let you love admiration of this company blind you to the fact they are positioned as many huge international corporations above the tax laws most citizens must follow. 

Apple also pays 35% tax on ALL USA profits. You are in the same boat. You are barking up the wrong tree. The problem is the ridiculously high 35% tax rate in the USA. By far the highest tax rate in the world. 

It costs a lot of money to be the greatest country in the world.

macxpress

sog35 said:

This is TOTAL AND UTTER BUNK.

These idiotic people think Apple should be paying USA taxes for goods sold in China, Japan, EU, ect.  That's flatout stupid. Apple pays its taxes to THOSE countries. There is no reason why Apple should pay USA taxes on goods sold in China or other countries outside of the USA.  These estimates are based on the PURE STUPIDITY of USA tax laws that DOUBLE TAX foreign profits that are brought back to the USA. No other civilized country has such an utterly stupid tax rule.

Last year Apple paid $13.3 billion in taxes. The most BY FAR of any company in the entire world. They are the USA's biggest tax payer BY FAR.

Here is the proof: Apple's FY2015 Statement of Cash flow. Something these ridiculous Watchdog organizations refuse to disclose:

$13.3 billion in Taxes PAID
$53.4 billion in Profits
That's a 25% tax rate on profits
Is that not ENOUGH?  

And it doesn't end there. Those profits are then passed on to shareholders by dividends or stock appreciation. And those are taxed from 15%-40%. So the total taxes on Apple's profits is 40-55%.  How the HELL is that not enough taxes?

Amen brother! People just see this as negative and that Apple isn't paying taxes, or are avoiding taxes. I don't think they always see (or read) that its about profits made outside the US. 

Its just a situation where Apple is raking in TONS of revenue and everyone around the world thinks they deserve some of it. Its me or you winning the lottery for $100 Million and now everyone thinks you owe them money and will go to great lengths to get it. 

Apple didn't avoid anything...they used the taxes laws that are in place. I don't know what is so hard for people to understand this. If this was illegal, it would have been stopped years ago and someone most likely would have been arrested as a result. 

eightzero

I'm a pretty left leaning, blue guy. But this headline needs to be fixed: "Report shows Apple complied with all requirements of law and paid taxes as required by Congress." Or maybe "Congress cheated the US Public by Writing a Tax Code that Encourages US Businesses to Offer Valuable Products and Services Outside the US."

But then, analysis of political issues like this is generally beyond the comprehension of the public. 

cwingrav

spice-boy said:

The last "tax holiday" was granted by the US in 2004 for multinational companies. The rate was heavily reduced to a mere 5.25%. I as a small business owner pay about 35% on my profits.

This 5.25% was assessed after all other international taxes. So, if they paid 20% in France, then they were taxed another 5.25% for 25.25% overall. If Apple brought that money back now, they would be hit for 20% taxes in France, and then another 35% to the US for a 55% tax rate overall. This is why they keep their cash overseas. There needs to be a tax policy similar to other countries that accounts for already paid taxes. Of course, we all know they pay almost nothing because of how their use Ireland. But, that's how the laws are structured.

I'd love to see a comprehensive tax policy that keeps accounting tricks out of honest to goodness buying and selling. Instead of large corps paying near zero and small businesses paying higher rates because they can't use loopholes, let them all pay a similar rate, say 20% or so. But hey, I want to ride a flying unicorn over a rainbow too. Won't see that happen anytime soon either.

anantksundaram

sog35 said:

This is TOTAL AND UTTER BUNK.

Here is the proof: Apple's FY2015 Statement of Cash flow. Something these ridiculous Watchdog organizations refuse to disclose:
$13.3 billion in Taxes PAID
$53.4 billion in Profits
That's a 25% tax rate on profits
Is that not ENOUGH?  

Careful wth your facts there, @sog35... the $53.4B is an after-tax number, so in coming up with the "25%" you're double-counting. The correct proportion is 13.3/(53.4+13.3) = ~20% (which, of course, is still non-trivial).

anantksundaram

The analysis done by these two think tanks is bogus. Apple, in its financial statement footnotes, clearly states what it would owe in deferred taxes. It is about $30B. This would be owed to the US government if brought back after it has paid everything owed abroad under current rules and law. Period.

I honestly think that Tim Cook and the Board should save Apple this stupid PR and money-grabbing-by-all-and-sundry headaches, take its lumps, bring the cash back to the US, pay the $30B, and move on. Then, let's see if these little non-US scolds and nitpicks can deal with the US Treasury to get their fantasy tax dollars.

battiato1981

Wait - Apple reported $53 billion and change profit, and this 'study' claims that they owe $65 billion in US taxes? That's whack.

If a company pays taxes on earnings/sales made in a foreign country, (and also pays the taxes on domestic earnings/sales), why should they pay again for repatriating those already taxed earnings. As long as there is a way to control gaming the rules so that a domestic sale isn't funneled through a foreign sales agent, I don't see why corporate earning have to be taxed twice. And as has been pointed out already on the board, money that flows to shareholders as dividends gets taxed again according to the tax bracket of the individual or entity that holds the shares. 

I'm a supporter in progressive taxation for individuals, but there has to be more common sense applied to corporate taxation, not just milking the most successful companies that we have. 

techwarrior

Isn't this the same question EU is mulling? The business entity Apple Ireland is the company that sells products in the EU. They pay taxes on sales and profits in the EU based on Ireland's tax laws. Presumably, the EU, like the USA, taxes based on the domicile of the business entity rather than requiring companies to pay taxes in every state in the union which would be a bookkeeping nightmare. If the EU has a problem with Ireland's tax laws, that is between the EU and the Irish state, not the companies that legally do business in the jurisdiction. Seems that the politicians see a deep pocket and go after these companies (Apple is not alone) because they can't win the argument using the lawmaking process. The only thing unfair about tax haven rules is that most small businesses find it hard to compete with the big guys because they lack the legal prowess to take advantage of the opportunity.