The Senate can grumble, but Apple is just taking advantage of what Congress has given it.
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Steve Wildstrom
Steve Wildstrom is veteran technology reporter, writer, and analyst based in the Washington, D.C. area. He created and wrote BusinessWeek’s Technology & You column for 15 years. Since leaving BusinessWeek in the fall of 2009, he has written his own blog, Wildstrom on Tech and has contributed to corporate blogs, including those of Cisco and AMD and also consults for major technology companies.
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9 thoughts on “Apple’s Right Not To Pay Taxes”
Most of this is grandstanding by congress. Apples complex foreign activities are mainly meant to shelter Apple from foreign taxes, not US taxes.
To shelter from US taxation, all Apple need do, is not take the money back into the USA. There is endless tax deferment until repatriation, and nothing forcing repatriation. As such it can keep foreign earned profits away from US taxation indefinitely.
Every US multinational does this and there is nearly 1.5 Trillion dollars parked out of country because of this. This is the real issue, not the smoke and mirrors roadshow about complicated foreign shell companies.
But I bet you won’t hear any real talk of changing this simple US tax policy that keeps all this money outside the USA. Unless it is to offer corporations a more favorable rate, or another repatriation tax holiday.
Because to end this simple loophole would have companies re-incorporating outside the US in record numbers. Because AFAIK, Only the USA (among Western countries) believes it has the right to tax it’s corporations on money earned everywhere else in the world. All the others go with the “tax where earned” principle. So if this were a UK company for instance, ALL that money could come home tax free.
If the USA ever ended this “loophole”, they would be the most non-competitive country to be incorporated in, and corporations would flee if possible. With this loophole they almost effectively equal to countries that have a “tax where earned” policy.
BTW I am not a tax expert, corrections gratefully accepted.
You pretty much have it right. The ultimate goal of Apple’s maneuvers is to minimize its global tax bite. For political, economic, and legal reasons it is quite difficult for a U.S. company to reincorporate elsewhere and get a huge tax benefit. But it is also very unlikely that Congress will change the current tax deferral on unrepatriated foreign earnings except perhaps as part of a sweeping reform of the corporate income tax.
I expect many like Apple wouldn’t practically be able to leave, but I expect others can/would and it would certainly deter future US incorporation if they really decided to enforce a tax grab on global earning with an end to tax deferment on foreign earnings.
I can’t see it even as part of sweeping reform unless the rate was cut significantly to something closer to 10%. If this effectively 0% in other countries, how much could it be without impacting the competitiveness of US corporations.
A quick comment about the site re-design: the line that contains the author name and date of article, right below article title, is just too light a shade of gray. Very hard to read. Please consider making it darker; maybe the same as the article text.
Sorry for being off topic, I didn’t know where else to submit this.
Most of this is grandstanding by congress. Apples complex foreign activities are mainly meant to shelter Apple from foreign taxes, not US taxes.
To shelter from US taxation, all Apple need do, is not take the money back into the USA. There is endless tax deferment until repatriation, and nothing forcing repatriation. As such it can keep foreign earned profits away from US taxation indefinitely.
Every US multinational does this and there is nearly 1.5 Trillion dollars parked out of country because of this. This is the real issue, not the smoke and mirrors roadshow about complicated foreign shell companies.
But I bet you won’t hear any real talk of changing this simple US tax policy that keeps all this money outside the USA. Unless it is to offer corporations a more favorable rate, or another repatriation tax holiday.
Because to end this simple loophole would have companies re-incorporating outside the US in record numbers. Because AFAIK, Only the USA (among Western countries) believes it has the right to tax it’s corporations on money earned everywhere else in the world. All the others go with the “tax where earned” principle. So if this were a UK company for instance, ALL that money could come home tax free.
If the USA ever ended this “loophole”, they would be the most non-competitive country to be incorporated in, and corporations would flee if possible. With this loophole they almost effectively equal to countries that have a “tax where earned” policy.
BTW I am not a tax expert, corrections gratefully accepted.
You pretty much have it right. The ultimate goal of Apple’s maneuvers is to minimize its global tax bite. For political, economic, and legal reasons it is quite difficult for a U.S. company to reincorporate elsewhere and get a huge tax benefit. But it is also very unlikely that Congress will change the current tax deferral on unrepatriated foreign earnings except perhaps as part of a sweeping reform of the corporate income tax.
I expect many like Apple wouldn’t practically be able to leave, but I expect others can/would and it would certainly deter future US incorporation if they really decided to enforce a tax grab on global earning with an end to tax deferment on foreign earnings.
I can’t see it even as part of sweeping reform unless the rate was cut significantly to something closer to 10%. If this effectively 0% in other countries, how much could it be without impacting the competitiveness of US corporations.
Nearly 1.5 *trillion* dollars parked out of country? Where are you getting that number?
That figure comes from Citizens for Tax Justice, It’s an advocacy critical of the corporate tax structure but they do good research. http://ctj.org/ctjreports/2012/10/which_fortune_500_companies_are_sheltering_income_in_overseas_tax_havens.php#.UZ0BNGQfZLg
A quick comment about the site re-design: the line that contains the author name and date of article, right below article title, is just too light a shade of gray. Very hard to read. Please consider making it darker; maybe the same as the article text.
Sorry for being off topic, I didn’t know where else to submit this.
“Sorry for being off topic” – qka
Not at all. Greatly appreciate the feedback.
Excellent article! We will be linking to this particularly great article on our website. Keep up the good writing.
There is definately a lot to find out about this subject. I like all the points you made