Apple : The Largest Taxpayer in the World

Apple: The Largest Taxpayer in the World

The facts about Apple’s tax payments

By paying over $35 billion in corporate income taxes in the last three years, Apple has become the largest tax paying company in the world. Because Apple’s worldwide effective tax rate is higher than average, at 24.6 percent, the company states that they are happy with the amount of economic contribution they have brought to the various communities around the world. In order to provide proof for the public, Apple published a few facts about their tax payments on November 6, 2017. Prior to this release, there had been a report by the International Consortium of Investigative Journalists that suggested some foul play by Apple and its leaders. The November tax release brought many of these accusations to light and discounted them

Apple pays billions of dollars in taxes to the US at the required 35% on investment income from all overseas cash and they pay a consistent 21 percent on their foreign earnings.

The 2015changes Apple made to its corporate structure, were specially designed to preserve its tax payments to the United States. They denied doing it in order to reduce its taxes. Apple also denied that operations or investments had been moved from Ireland. Apple put out an official statement saying, “When Ireland changed its tax laws in 2015, we complied by changing the residency of our Irish subsidiaries and we informed Ireland, the European Commission and the United States. The changes we made did not reduce our tax payments in any country. In fact, our payments to Ireland increased significantly and over the last three years we’ve paid $1.5 billion in tax.” They insisted that these changes did not change the amount paid to the US. This controversy still exists however, since the companies have not actually provided any paper.

Why the Apple employees don't wear Louboutins? Photo by Elena

Apple also made the statement that the debate shouldn’t be about how much they owe. It should be important to discuss where it goes instead. They stated that they have paid over $35 billion in corporate income taxes and had billions of added taxes in property tax, payroll tax, sales tax and VAT as well and are very proud of the economic contributions they have made to the communities that surround them.

“Under the current international tax system, profits are taxed based on where the value is created. The taxes Apple pays to countries around the world are based on that principle. The vast majority of the value in our products is indisputably created in the United States - where we do our design, development, engineering work and much more - so the majority of our taxes are owed to the US.”

Apple understands some people want the tax so multinationals’ taxes are spread differently across the countries where they operate, however, despite different opinions, Apple continues to follow the laws and complies when the laws are changed. They state,  “We strongly support efforts from the global community toward comprehensive international tax reform and a far simpler system, and we will continue to advocate for that.”

Because Apple has a dedication to designing new products and establishing new industries, it has led to the creation of revolutionary products and services that have profoundly improved people’s lives. Not only that, but it has created millions of jobs around the world.

Taxes alone can be complex, but they become even more complex when they are for multinational companies. There is; however, a principle rule that the taxes are to be based on wherever the value is created. The Organisation for Economic Co-operation and Development, Ireland, the United States and others all agree on this principle.

When a customer buys an Apple product outside the United States, the profit is first taxed in the country where the sale takes place. Then Apple pays taxes to Ireland, where Apple sales and distribution activity is executed by some of the 6,000 employees working there. Additional tax is then also due in the US when the earnings are repatriated.

The vast majority of the value in Apple products is created in the United States, where design, development, engineering work and more are accomplished. So, under the current international tax system, the majority of Apple taxes are owed to the US.

Back in 2016, the US Treasury published a white paper, expressing concern over European regulators’ attempts to tax money that is owed to the US. They claimed that the amount of foreign taxes imposed should not have been attributable to the relevant Member State and claimed that it would effectively constitute a transfer of revenue to the EU from the US government and its taxpayers.

Apple sells the majority of its products overseas so, naturally, they have cash overseas as well. Under the current tax system, post-tax earnings from foreign sales are subject to US tax. In addition to the $35 billion the company paid in corporate income taxes over the past three years, Apple earmarked more than $36 billion to cover US deferred taxes.

Apple has been a strong advocate for simplification of the tax code. They support a reform that will allow a free flow of capital claiming that it will accelerate economic growth and support job creation. A coordinated legislative effort internationally will remove the current tug of war between countries over tax payments, and ensure certainty of law for taxpayers.

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