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Undertaxed Apple Looks for More Tax Savings

The U.S. Senate Permanent Subcommittee on Investigations is scheduled to hold a hearing today titled “Offshore Profit Shifting and the U.S. Tax Code – Part 2 (Apple, Inc.)” with Apple’s Tim Cook. Apple holds more than $100 billion in tax haven countries with the benefit of evading U.S. taxes. At the hearing, Cook (2011 compensation $378 million) is expected to offer a proposal for changes in the corporate tax system.

Cook’s proposal is likely to be for a “tax repatriation holiday” and a “territorial tax system,” both of which mean giant, multinational companies like Apple will pay less in taxes, people like Cook will have even more money, and We the People will end up with higher taxes, fewer good schools, good roads, police, teachers and the other things government provides to make our lives better. As a "bonus," this makes giant multinationals that move jobs and profits overseas even more competitive against smaller American companies that keep jobs and profits here and do not have foreign subsidiaries located in tax havens.

New Report On Apple’s Tax Avoidance

Citizens for Tax Justice (CTJ), Americans for Tax Fairness (ATF) and the AFL-CIO held a conference call yesterday to talk about a new report by CTJ, “Apple Holds Billions of Dollars in Foreign Tax Havens,” documenting Apple’s offshore tax avoidance. The report states:

An analysis of Apple Inc.’s financial reports makes clear that Apple has paid almost no income taxes to any country on its $102 billion in offshore cash holdings. That means that this cash hoard reflects profits that were shifted, on paper, out of countries where the profits were actually earned into foreign tax havens.

How much is this costing us? First, with Washington all aflutter over deficits, the tax dollars: $35.3 billion. From the report:

Applying this same U.S. tax rate to Apple’s $102.3 billion offshore cash hoard as of March 2013 would generate $35.3 billion in U.S. income taxes, without deferral.

Worse, however, is the cost in jobs and manufacturing infrastructure. The current tax laws encourage companies to move jobs, factories and profit centers out of the country. They actually subsidize this with tax breaks!

“Back-Alley Thief”

On the call were Bob McIntyre, Executive Director of CTJ, Damon Silvers, Policy Director and Special Counsel for AFL-CIO and Frank Clemente, Campaign Manager for ATF.

ATF’s Frank Clemente said Apple is “acting like a back-alley thief trying to pick the pockets of American taxpayers.” Clemente also said the proposal for a tax holiday is “another mugging of the American taxpayer.”

CTJ’s Bob McIntyre said that Apple has more than $102 billion accumulated offshore, “virtually all in tax havens, never taxed. Often profits made in the U.S. that they pretend to earn abroad.” McIntyre said Apple is a “poster child for why we need to get rid of deferral ... [and if] they are doing business in real countries and paying taxes, give them a credit, but [with] companies like Apple, it all ends up in a situation where they pay very little in taxes. Deferral has cost the U.S. taxpayers in Apple’s case $35 billion and is growing every year.”

Hurts Smaller American-Based Businesses

AFL-CIO’s Damon Silvers described the terrible cost we pay for this: its effect on smaller American-based businesses. Silvers spoke of the tax policies Apple seems likely to advocate in terms of the current “sequester” cuts, saying, “As Apple testifies, we are dismantling vital government services, laying people off because we are in theory in a fiscal crisis. Head start, cancer research, national defense … there is a long list of vital functions not being carried forward because in the view of Congress we don’t have revenues to support it.”

“Apple is one of the most profitable corporations in America and perhaps the world, setting aside $102 billion, not paying tax. On a cash basis Apple only paid $3.3 billion in taxes worldwide, less than 10 percent. Walmart is paying 24 percent. But more damaging is what Apple is saying we should do with corporate taxes in general. Deferral lets companies with overseas subsidiaries avoid taxes. This is not something available to most companies, only to global corporations that can move profits and operation offshore.”

“Small business is paying the full freight as are all of us as individuals. But Apple is asking for a special rate on offshore profits of 10 percent. And now key lobbyists, led by Fix the Debt, are proposing foreign overseas earnings tax free.”

Resources

ATF has an extensive facts page at “Apple Is a Bad Apple when It Comes to Paying Its Taxes” and you can download the fact sheet by clicking here. You can tweet using the #BadApple hashtag.

CTJ has a page describing their new report, Apple Holds Billions of Dollars in Foreign Tax Havens and you can read a PDF of the full report by clicking here.

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