Apple’s taxes: Why the Fed’s argument is simply silly …

This week, Apple CEO Tim Cook was hauled in to DC to testify about Apple’s low corporate tax rate …

Cook explained that Apple makes a lot of money outside the U.S. … selling products that are made outside the U.S. under licenses held by foreign subsidiaries and sold in non-U.S. countries.

Said simply, no part of that income is earned in the U.S. either thru the development, manufacture, sales, or distribution of the products.

None.

But, our wise Senators think that Apple should pay U.S. corporate income taxes on that money any way.

Why?

Because Apple was legally formed in the U.S. and has it’s Corporate headquarters in the U.S.

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Here’s the code-breaking question to ask …

Imagine that all of Apple’s foreign operations were taken over by a foreign company … say, Samsung, just to attach a name.

Would our Fed’s try to tax Samsung’s foreign earnings at U.S. tax rates just because they do some business in the U.S.?

Answer: They might try, but no way do they succeed.

Think, Budweiser and its owner InBev.

Does the U.S. tax domestic U.S. Budweiser profits.?

You bet.

Does the U.S. try to stake a claim on InBev’s non-U.S. earnings?

Nope.

Now, just substitute “Bud” for Apple U.S. and InBev for Apple International.

Get my point?

All Apple U.S. has to do is move its corporate HQ out of the U.S. and reform in, say, Bermuda … and Bingo – it’s Bud and InBev.

Is that what our Feds want?

= = = = =

And, a couple of fun questions:

1) Do you think the Feds would have called Steve Jobs in for a grilling on the subject?  I think not.

2) Will Eric Schmidt – Obama’s bud – be called in and grilled about Google’s taxes?  I doubt it.

3) Do you think the Feds would have gotten a higher or lower ROI on the $25 billion in estimated “avoided taxes”? I’m betting the under.

I say: tip your cap to Apple for brilliant tax planning …

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4 Responses to “Apple’s taxes: Why the Fed’s argument is simply silly …”

  1. Alexander S Says:

    I thought the question isn’t just about US taxes on foreign earnings, right? It is also about the fact that, with the handy use of BVI, Netherlands Antilles, Ireland, Luxembourg and other TAX HAVENS, they can dodge a huge amount of income tax that might otherwise be owed not just in the USA, but in the UK, France, Germany, Mexico, etc etc. The real IRS problem is the ability to use tax havens and shell companies at the expense of the tax authorities of – for example – the OECD countries into which they sell their products. In short, there are earnings earned somewhere in the world that simply are not paying their fair due in tax ANYWHERE but in offshore jurisdictions.

    Or did I misunderstand the global ramifications of this issue?

  2. TK Says:

    Companies doing business and shipping goods under the protection of the U.S. military should pay taxes on foreign revenue.

  3. Alexander S Says:

    Apparently, the IRS is not alone in wanting its fair share of the take:
    “Tax avoidance: Developing countries take on multinationals”
    http://www.bbc.co.uk/news/business-22638153

  4. Alexander S Says:

    Ken, you might like this…

    “…instead of trying to tax Apple, we would tax its shareholders. Individual taxes are simpler than corporate taxes, and it’s a lot harder for an individual to shift his tax residence, so we could expect less avoidance.”

    http://www.bloomberg.com/news/2013-05-24/don-t-tax-apple-tax-its-shareholders.html

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