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back to article The truth about Apple's mind-boggling low tax rate

The New York Times has revealed, as a simple matter of fact, that Apple's cash-paid tax rate for 2011 was only 9.8 per cent. Which is a stunningly good result from the fruity tech titan's bean counters and one that should be applauded by us all, if only it hadn't been calculated using the wrong tax year. First, let's look at …

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FAIL

Estimates

So the rate they paid is either an overestimate (25%) of which some goes to other countries or could be refunded or it's an underestimate of 9.8% of which some additional profits tax has to be paid later.

I think the worrying thing we can all take away is that nobody (including the government presumably) actually knows how much taxes they actually paid in taxes. Yay for bureaucracy.

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Mushroom

On this occasion I am willing to accept the iPhanboi argument that.......

.....Apple is no worse than any other example of "BigCorp" in the US, the UK or anywhere else for that matter. Whether or not that is anything to boast about is of course another matter.

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IT Angle

Re: On this occasion I am willing to accept the iPhanboi argument that.......

Apple is a leader in tax avoidance, based on their origination of schemes like Double Irish and treating distributors as commissionaires instead of retailers. Even with the values of the tax numbers being wildly inaccurate, there's no question that Apple is avoiding a lot of taxes from the State of California (8.84%) and the US government (whopping 35% corporate rate). I would certainly not be shocked that they effective rate on all profits is less than 10%, though not all profits were earned in the US as the author points out.

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Anonymous Coward

Re: On this occasion I am willing to accept the iPhanboi argument that.......

Quite right, although I am curious how the Google-haters will respond to this.

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Happy

@Captain Save-a-ho.. I do not dispute your figures - they appear entirely believable.......

.......my point really was that they are all at and in the process they are hollowing out the tax-base to a degree that is causing the same society that they are dependent upon for their profits enormous harm by their behavior. Fundamentally I am saying that BigCorp in this context are a bunch of bastards - Apple is simply the poster-boy/example.

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Gold badge

Re: On this occasion I am willing to accept the iPhanboi argument that.......

People always moan about tax avoidance but when pressed about it they would not:

1. Offer to pay more tax themselves on their income (unless they have too much money to possibly spend of course).

2. Offer to pay more for a product so the company can pay more taxes.

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Anonymous Coward

Re: On this occasion I am willing to accept the iPhanboi argument that.......

I'm perfectly willing to give a greater amount of my income to the government so companies can avoid paying more tax on increased income from a higher price.

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Anonymous Coward

Re: On this occasion I am willing to accept the iPhanboi argument that.......

"Quite right, although I am curious how the Google-haters will respond to this."

I think they will have to accept that all large globo-corps are enthusiastic exploiters of tax law complexity and cross border tax arbitrage. The Yank ones are world leaders in this, so all much of a muchness between (say) Apple, Google and Amazon. Of course, our idiot politicians are to blame - the companies concerned are merely complying by all the treaties that fuckwit ministers signed without understanding, and the gazillion pages of the tax code, merrily added to each year by fuckwit representatives/MPs who rubber stamp it without even reading it. The more complex they make, the more chance to exploit it.

But given one of the foundation pieces of current UK tax revenues is a tax specifically on employment (employer's NI), you wouldn't expect any of the rest of it to make sense would you?

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Silver badge

Re: On this occasion I am willing to accept the iPhanboi argument that.......

Sorry, but the fact that "people" would not offer to pay more tax, quite apart from the fact that they are effectively taxed much more than corporations - and have a lot less wiggle room in terms of clever accounting - has nothing to do with this argument.

Companies are either paying enough tax or they are not. And, as they have a duty to perform as efficiently as possible whilst remaining within the law, it is the laws which may or may not need to be changed.

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Re: On this occasion I am willing to accept the iPhanboi argument that.......

If you take profits per country as being proportional to sales (which they are not, it is much more complicated than that), then I guess a bit less than half of Apple's profits are made in the USA.

There is another point to note which is that taxable profit is not the same thing as accounting profit.

Take for example the costs of developing the iPad. Under accounting rules, that is treated as an expense over the life of the product. For development costs related to a specific iPad model, that would be about a year, but for the stuff related to coming up with the general idea of selling a giant sized iPod touch, that would be expensed over probably about 10 years. In the UK, for corporation tax purposes, you can claim all that expenditure as an expense for tax purposes when you actually spend the money, which would be before you sell a single fondleslab.

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Re: On this occasion I am willing to accept the iPhanboi argument that.......

"...quite apart from the fact that they are effectively taxed much more than corporations..."

Fixed:

"I have to pay several thousand in taxes and apple only pays 3.3 Billion. Boo hoo, thats not fair, they should pay more."

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Thumb Down

Re: @Captain Save-a-ho.. I do not dispute your figures - they appear entirely believable.......

"Fundamentally I am saying that BigCorp in this context are a bunch of bastards - Apple is simply the poster-boy/example."

Actually, in this particular case, I think General Electric is the example. I seem to recall that they have an effective *negative* tax rate; that is, the US Treasury pays them money (in the form of "tax incentives" for building manufacturing plants in the US, which they then transfer to a shell company organized offshore so as to avoid paying tax on revenue generated from that plant, or something like that).

"People always moan about tax avoidance but when pressed about it they would not:

1. Offer to pay more tax themselves on their income (unless they have too much money to possibly spend of course).

2. Offer to pay more for a product so the company can pay more taxes."

I notice option 3 is missing from your list: Expect the company to take a lower profit. A company that's got approximately $100,000,000,000 in cash on hand is clearly making sufficient profit to afford to pay more tax without throwing people out of work or raising their prices.

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Anonymous Coward

Re: On this occasion ...

> Of course, our idiot politicians are to blame - the companies

> concerned are merely complying by all the treaties that

> fuckwit ministers signed without understanding, and the

> gazillion pages of the tax code, merrily added to each year

> by fuckwit representatives/MPs who rubber stamp it without

> even reading it. The more complex they make, the more

> chance to exploit it.

I don't think the MPs are idiots, or fuckwits, they have worked out very smartly that business friendly legislation (like who wants to be business-unfriendly!) is easy to pass, rarely contested and rewards them very well. In particular tedious tax-law favours are mostly only reported in Private Eye since they are so unpopular as a topic for conversation among the voting public. Once political parties stopped being ideology driven government became a popularity contest rewarded by one-step-away-from-legally-bribery backhanders.

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Anonymous Coward

Re: On this occasion I am willing to accept the iPhanboi argument that.......

There is a difference between offering to pay more and hiring a bunch of lawyers and accountants to figure how how to pay less.

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Anonymous Coward

Double standards

It's funny how we all hate paying tax and try hard to get out of it, yet when some company is accused of dodging tax we start mounting high horses.

Maybe people (or companies!) who criticise people for tax dodging should be required to add a 10% tip to their next tax return and decline a couple of tax breaks?

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Flame

Re: Double standards

The thing is, for the average Joe, on PAYE* it is pretty damn IMPOSSIBLE to avoid paying tax. Even if you wanted to. But as soon as you move into the league of the Masters Of The Universe, you can set up companies, pay yourself in dividends, in foreign currencies (and accounts) etc etc etc.

That is why the man in the street hates tax evasion so much.

*UK-based refererence

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Re: Double standards

Agreed.

Plus the hypercorps spend large sums lobbying lawmakers to obtain a tax regime as favourable as possible to themselves.

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Mushroom

Re: Double standards

The article says that the Apple company paid around £2,000,000,000 in taxes. That is in addition to what they will have paid for the various employees taxes plus the shareholders will be paying taxes their incomes and the VAT and duty they will have paid.

How much tax did you pay last year? Was it as much as that?

Thought not.

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Facepalm

Re: Double standards

Aaaawww, sniff sniff. How sad. Those poor people...

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Anonymous Coward

Re: Double standards

Tax Evasion = Illegal.

Tax Avoidance = Legal, because not illegal.

Tax Mitagation = Legal, because explicity allowed for, e.g ISA.

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Anonymous Coward

Re: Double standards

Use an ISA to save money? That's tax avoidance.

Have any premium bonds? That's tax avoidance.

There are any number of schemes the average Joe can use to avoid paying tax (especially on savings), you just don't think of them as tax avoidance.

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Nev

Re: Double standards

"Tax Evasion = Illegal."

Just get your head or corp tax affairs to have lunch with the head of HMRC and the evasion/avoidance point becomes moot.

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FAIL

Re: Double standards

Actually as percentages go yes I did. I paid my 40% plus my 11% NIC up to the 40% mark and then an additional 1% above that. At the same time I saw my VAT payments increase, car tax and fuel taxes increase and half a dozen other little taxes that the govt levies on me each tax year.

At the same time Apple, Google, IBM, Microsoft and co are all paying less tax as a percentage of their income than I do on my salary. Apple in the UK would pay a tax for employees which is employers NIC but they do not pay employee taxes, we the employees pay that money out of our salaries.

In terms of amounts, paying £2 billion would not be a problem for me if I still had £29 billion left to play with, to be honest even paying £30 billion and being left with a £1 billion would be pretty nice.

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Joke

Re: Double standards

Wow, 1 for you and 30 for me? That's way worse than 1 for you and 19 for me. There could be a song in that.

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Anonymous Coward

Re: Bluenose

There are many out there who will think that you haven't paid enough. After all you are working and earning enough to be in 40% bracket therefore you should be taxed more to pay for those less fortunate. Personally I think we all pay far to much for far to little.

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Trollface

Re: Double standards

Because it must be so hard existing on the £19billion leftover. ..

Always amusing seeing a response that can't differentiate between the amount of tax paid and the proportion of what you earned is taken as tax..

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Joke

@ Nev--Re: Double standards

Especially if it involves one giving just that to the other one...

SCNR

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Anonymous Coward

Re: Double standards

I agree with OP. My effective tax rate last year was actually in the range of 17% - which if you take the 9.8-25% rates posted in the article, is slap bang in the middle of the range.

I could have gotten it slightly lower if I had kept better records on other taxes paid but given the fact that it was a slightly lower effective rate than previous years, yet I had a higher gross income than the previous tax year. You can see what the problem is with the system... I earned more yet paid, effectively, less tax. I can see how this scales up to bigger companies.

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FAIL

Re: Double standards

As a proportion of my income, much more. What's your point?

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Anonymous Coward

What a good corporate citizen GE and Apple are

...or not. It's a disgrace.

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since

Apple Charge at least a 50% premium on every single Apple product. how about a FIX 50% taxes on all the cash Apple possess.

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Anonymous Coward

Overly simplistic view of the world hooo

"why should something made in China and sold in Germany raise cash for the US government?"

Because all the way through this process, the company enjoys the protection of the US government. Their products are protected by US patents, respected in other nations through treaties negotiated by the US government. they can work in china because of herculean diplomatic progress between the chinese and US governments. And perhaps most importantly, because Apple agreed to it. Apple are a multinational company with unparalleled cash reserves. If they wanted to move their corporate headquarters to a tax haven, they could probably buy a nation and establish their own tax haven, but they want all the benefits of being a US company without paying any of the taxes, which is why they're campaigning for a tax holiday on offshored earnings.

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Re: Overly simplistic view of the world hooo

Right. Also, if every private company in the world were able (or allowed) to do what Apple does, then most nation-states would simply collapse.

This is all happening on the backs of the many companies and citizens who do make fair and responsible contributions to the state, without which, it's "Mad Max to the Thunderdome", trying to beat a lizard to death with your bricked iPad for dinner, and banging the metal backs of two iPods Classic together to start a fire.

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Anonymous Coward

Re: Overly simplistic view of the world hooo

You make it sound like countries' only source of tax revenue is from corporate taxes. Wrong. You pay personal income taxes, right?

I own a company with one employee (myself). I pay ~35% in income tax. Do you want my company to also pay 35% in "corporate tax" so my effective tax rate will be 57%? Great, thanks.

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Re: Overly simplistic view of the world hooo

I'm not sure about China, but I do know for sure that Germany wants it's cut, too.

Hey, we too paid some 12 Billion Euros to defend freedom and democracy at the Hindukush!

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Thumb Down

A thought strikes me.....

When Apple collects it's 30% from all the Apple walled-garden fans who simply hand over their credit detials without a moments notice, does Apple pay tax on that or is it somehow "lost" in the ether... ?

It would be interesting to know how much UK Tax Apple has paid.

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Anonymous Coward

Re: A thought strikes me.....

I thought the article mentioned iTunes being run (funneled?) through Luxembourg:

"they do indeed sell iTunes stuff through Luxembourg"

Not being familiar with the tax laws in play I can't say what that means, but I doubt they'd be doing that just for the hell of it.

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Bronze badge

Re: A thought strikes me.....

Apple UK tax? Almost nothing.

On retail through the stores and that will be about it.

iTunes in Luxembourg, wholesale and channel through Ireland. So just UK retail, almost certainly. And there's some fun stuff that goes on there too.

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Re: A thought strikes me.....

The big ISPs have been doing that for years. When you sign up online, the registration server is in Luxembourg, though you would never know unless you check the IP.

Nothing new here (but not saying it is entirely ethical either).

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Holmes

Re: A thought strikes me.....

It just means 15% VAT instead of 21% and up.

Check the last paragraph here (services sold via Internet):

http://www.fiduciaire-lpg.lu/tva-e-commerce-luxembourgeoise.html

With the Eurozone failures discussing "VAT alignment" (i.e. let's steal from everyone equally as this will keep our governments running a few minutes longer before the guillotine comes out) this is probably not going to last too long.

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Re: A thought strikes me.....

Since Mastercard and Visa work for free and Servers and big data pipes don't cost money, I think they just keep the loot.

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jai
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i wonder...

how much tax the New York Times manages to avoid paying...

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Re: i wonder...

Just for fun research the NYT's current problem with golden pension plans. NO ONE at the NYT works a day past their 65th birthday because the pension plan is so rich.

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"For example, thanks to a one James Gordon Brown, here's how the UK system works: the taxman will ask you, "How much do you think you're going to make this year, and why don't you send us that?" You even have to pay interest if you get the calculation wrong, such as if you have a good last week of the year or something."

erm... what?

corporation tax is based on your last financial years actual profit figure, where did you get this statement from? because it makes no sense to me

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Bronze badge

Not quite

Large companies (umm, I think over £1.5 million in profits?) have to make estimated payments through the year. And these should be based on estimations of current year profits.

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Re: Not quite

it still happens after the quarter end though, so it's not an estimate of future income it just means you have to do full accounts on a quarterly basis and you still get 4 months after the quarter end to actually make the calculation/payment

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What idiot came up with the idea of looking at tax paid in the year as a percentage of revenues for the year?

You should be comparing like with like. Taxes paid in the year relating to revenues in the year. The historical deferred tax paid is added to that, and the deferred tax held until a future period is deducted from it, which generally will pretty much net itself off anyway.

You cant do a cash-flow as a percentage of revenue, thats just ridiculous. Because revenue does not equal cash received. So you're not comparing apples with apples (see what i did there?).

If they're saying the tax bill in 2011 is $9.8bn then they should be comparing it to the appropriate years sales. Else they're just retarded.

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Anonymous Coward

Simplified taxation

Yet another argument, if one were needed, for the drastic simplification of tax codes: corporations pay X% on their takings; private individuals pay Y% on their income; tax avoidance and evasion becomes a federal crime. Tax law becomes understandable by everyone, tax avoidance becomes much harder, and as an added bonus many accountants would be made redundant.

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Re: Simplified taxation

we already do pay tax on takings, it's called VAT

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