On May 22, 2013, Chris O’Brien and Jim Puzzanghera write in the Los Angeles Times:
The hearing illustrated a conundrum for some legislators: They’re critical of Apple’s tax avoidance practices but recognize the company is a job-creating giant that produces some of the world’s most popular gadgets.
“Apple executives want the public to focus on the U.S. taxes the company has paid, but the real issue is the billions in taxes it has not paid, thanks to offshore tax strategies whose purpose is tax avoidance, pure and simple,” subcommittee Chairman Carl Levin (D-Mich.) said during the hearing.
The hearing came one day after the subcommittee released a blistering report that detailed how Apple used an elaborate web of offshore subsidiaries to avoid paying at least $15 billion in U.S. taxes on $44 billion in foreign income from 2009 to 2012.Of Apple’s $145 billion in cash as of April, about $102 billion is overseas. By keeping profits offshore, Apple reduced its effective tax rate to as low as 24.2% in 2011.One of the Irish subsidiaries, Apple Operations International, which has no employees but reported $30 billion in income over the four years, has not filed an income tax return in any country for the last five years, the subcommittee investigation found.“You shifted the economic rights to the most valuable thing you own, your intellectual property,” Levin said of Apple’s transfer of rights for its product sales in Europe, Asia and Africa to subsidiaries in Ireland.Cook delivered remarks aimed at portraying Apple as a company bound by lofty ideals, a strong moral compass and a recognition of its impact on the world.“We don’t depend on tax gimmicks,” Cook said. “Honestly speaking, I don’t see it as unfair. I am not an unfair person. I would not preside over that.”“Every company that has a huge presence, that has a huge number of employees, that pays a lot of taxes, that produces really good products, obviously that has an impact on people’s thinking,” Levin said of himself and his Senate colleagues. “But it’s important that we focus not just on the profits they pay taxes on, but on the greater percentage of profits that they don’t pay taxes on. And how do they avoid it?”
If you look objectively at the operations of Apple Inc. and other large tech companies, one will realize that the number one capital asset their stockowners own is intangible intellectual property––namely patents. As well, an analysis of the ownership of Apple Inc. and others would reveal that a relative few own the bulk of the company, with the exception that those in the highest employed positions receive stock portfolios as part of the compensation package. Then too there are millions of Americans who have invested their savings to purchase second hand Apple stock on the stock exchanges. But the reality is that the majority of this non-inner circle ownership class’ holdings are relatively small in comparison. Also significant, is the fact that the company retains the bulk of the profits and does not pay near the dividend income owed the stockowners.
CEO Tim Cook tries to portray Apple Inc. as a company “bound by lofty ideals, a strong moral compass and a recognition of its impact on the world,” yet the company uses slave-labor workers employed by FoxConn in China to build their products, and the vast employed majority outside manufacturing to sell and service their products, all at relatively low-pay compared to the executive class and the scientists and engineers who are encouraged to work to destroy employment by making the capital owners of the company more productive by increasing the stock value of their holdings. How much employment can be destroyed by substituting machines for people is a measure of their success––always focused on producing at the lowest cost. Only the people who already own productive capital are the beneficiaries of their work, as they systematically concentrate more and more capital ownership in their stationary 1 percent ranks.
If Cook wanted to really have a positive impact on the world he would lead his Board of Directors to finance future growth of Apple Inc. using an Employee Stock Ownership Plan (ESOP) and enable ALL the employees of Apple to become future stock owners and pay for their acquisition out of the tax-free future corporate earnings of the growth investments. Instead the company uses retained earnings financing or debt financing to further concentrate the stock holdings and profits of the existing ownership class, and other measures to “legally” escape paying taxes on the profits generated.
If the United States Congress wanted to shine a spotlight on Apple Inc. as an exemplar of a system that is producing nonsensical results, then there needs to be pressure put on the Senate Finance Committee to write more sensible legislation that avoids the negative tax consequences of encouraging more concentrated ownership of the FUTURE productive capital assets as the purpose of economic growth, and connect EVERY American as an owner so that they can participate in the production of products and services beyond that of declining job opportunities and welfare substance.
Such goals and policies are the subject of my article “The Path To Sustainable Economic Growth” at http://www.huffingtonpost.com/gary-reber/sustainable-economic-growth_b_3141721.html and the article entitled “The Solution To America’s Economic Decline” at http://www.nationofchange.org/solution-america-s-economic-decline-1367588690
