For a long time, Apple successfully built up an image as the good guys, cool and hip compared to the stodgy and evil
Microsoft IBM, beginning with its classic ’1984′ ad that aired during the Super Bowl of that year
I like Apple products. Users of any product, especially if it is pricey, tend to want to think they are supporting a good company. But Apple is being increasingly revealed as being as greedy and unscrupulous as any other big corporation, even worse perhaps, and practices the same kinds of despicable tax avoidance schemes as they do. How do these companies it?
There are many ways but one of the main strategies is to is create off-shore subsidiary shell companies in countries like Ireland. Why Ireland? Felix Salmon explains how by doing so companies like Apple end up paying taxes at a much lower rate than one would expect.
This is particularly shocking to the US public, which has to pay taxes on its global income. Every other country’s billionaires are extremely good at escaping into a state of tax-free statelessness; America’s aren’t, and we expect that if you’re rich American, you’re going to pay a substantial amount of US taxes.
American multinational corporations, in this sense, lie somewhere in the middle: they don’t need to pay income tax on their global income, and so they can avoid billions of dollars in taxes by moving income to tax-friendly jurisdictions like Ireland, or to subsidiaries such as Apple Operations International and Apple Sales International, which pay taxes in no jurisdiction at all. (Their headquarters are in Ireland, so they are sheltered from US taxes, but since their operations are mostly in the US, they don’t pay Irish taxes, either.)
The only real punishment for avoiding taxes, if you’re a US corporation, is that your offshore profits are stuck offshore, where it can be hard to invest them or return them to shareholders. So when Apple claims in its testimony that it “supports comprehensive reform of the US corporate tax system”, note its two key provisos: that such reform be “revenue neutral”, and that it allow “free movement of capital back to the US”. The first would mean that US corporations wouldn’t actually pay the taxes they’re avoiding right now: total corporate taxes would remain at an all-time low. And the second would mean that the biggest corporate tax loophole of all — the ability to pay no taxes on foreign earnings — would be made substantially bigger.
The group Citizens for Tax Justice shows how much taxes Apple has avoided paying.
So these corporations make profits globally without paying US taxes and then pressure US lawmakers for a ‘one-time’ amnesty (also called a ‘repatriation holiday’) so that they can bring their profits back to the US without paying the taxes they avoided by being off-shore, thus getting the best of both worlds. But the ‘one-time’ merely means a short time until their overseas cash holdings get so large that they want to bring them back again. They achieved this trick back in 2004 and now they are trying to do it again. And then they will go back to avoiding taxes off-shore until it is time for another ‘one-time’ amnesty.
Apple CEO Tim Cook is currently answering questions before a Senate committee.