Economist Martin Sullivan says Apple is no better than other multinationals that have been "painted as corporate tax dodgers by major media outlets." This would seem to contradict a Nov. 3 report in which Citizens for Tax Justice estimated that Apple paid an average effective U.S. tax rate of 31% between 2008 and 2010.
That's close to the ostensible corporate income tax rate of 35%, notes the "San Francisco Chronicle" (http://macte.ch/coRY2). Out of 280 companies in the study, only 49 had a higher effective tax rate than Apple.
However, Sullivan says "despite outward appearances, Apple enjoys enormous foreign tax benefits, just as GE and Google do. By taking advantage of lax U.S. and foreign tax laws, Apple has been able to book a large share of its foreign profits in low-tax jurisdictions and greatly reduce its tax liability in the United States and other major countries where it conducts most of its real business activity." He estimates that by shifting profits overseas, Apple is costing the U.S. government more than US$1 billion a year.
Sullivan says that most of Apple's intellectual property is created in the United States and if most of Apple's product development takes place here, the company ought to book a lot more than 30% of its profits and pay tax on it here. However, Apple books most of its overseas profits in countries with zero or near-zero corporate tax rates, he adds.
None of this, by the way, is illegal. So naturally most big companies do it. But with the US's economy in the toilet, perhaps it's time to revisit policies in which companies can shift a disproportionate share of their profits overseas.
And what of moving more of its manufacturing back to the US? Alas, that's not going to happen as long as most tech companies keep prices down by working with factories in China and elsewhere. In all fairness, it has to be mentioned that Apple does create lots of jobs here in the US of A.
A study by researchers at UC Irvine found that the iPod was responsible for creating nearly 14,000 jobs in the U.S. and another 27,000 abroad, Bill Snyder of "InfoWorld" recently wrote. Of course, those numbers are a few years old.
"Sure, the iPod, iPad, and iPhone are assembled in Asia. But the real value in those products was added in Cupertino, Calif. -- part of Silicon Valley -- where they were invented, and in the offices and cubicles of developers around the country who crank out the apps that make the iPad and the iPhone so useful," Snyder writes. "The offshore jobs are mostly in low-wage manufacturing, while the jobs in the states are more evenly divided between high-wage engineers and managers and lower-wage retail and nonprofessional workers. As a result of this and of cross-country wage differences, U.S. workers earned a total of $753 million, while workers outside the country earned $318 million, the researchers found."
But is it possible that Apple could and should do more? Donald L. Bartlett and James B. Steele -- contributing editors at "Vanity Fair" -- think so in an op-ed piece for "The Philadelphia Inquirer" (http://macte.ch/8SfhA).
"After only one generation, all the Apple manufacturing jobs in America disappeared, as the work of building and assembling the machines was turned over to laborers in sweatshops in China and other countries," they write. "Jobs that should have provided employment for Americans for decades to come were terminated."
So should Apple pay more taxes? Should the company provide more manufacturing jobs in the US? Could it remain profitable if it did?
If I had the answers, I'd be a highly paid economic advisor. Still, with so many people without work in the US, it would be great to see companies like Apple making efforts to jumpstart the American economy and increase the number of jobs for US citizens.
I'd pay a few more bucks for an Apple product to make this happen? Would you?
-- Dennis Sellers