A report last week accused Apple of 'tax dodging' in Britain, and now the Greenlining Institute has a report out claiming that Apple is avoiding paying tax in the United States.
The Greenlining report claims that Apple’s tax rate in the 2011 financial year was just 9.8 per cent. However, Forbes reporter Tim Worstall claims that this claim is: “Entirely Mind Gargling Nonsense.” Worstall writes that: “The actual explanation is that the Greenlining Institute doesn’t know how to read a set of accounts. They are comparing the tax paid on the previous year’s profits with the profits made in this year.”
According to the Forbes report: “Their end result is thus not that Apple has paid a very low tax rate, rather that Apple’s profits are increasing very quickly, something that we actually already knew.”
It’s not only Apple that comes under fire in the Greenlining report. The report, titled: “Tax Avoidance in Silicon Valley, and How America’s Richest Company Pays a Lower Tax Rate than You Do” notes that: the amount of cash held overseas by high-tech companies, including Apple, shot up by 21 per cent from 2010 to 2011, to just under $430 billion. “Apple and Microsoft had the biggest increases in cash held offshore,” claims the report. “$23 billion for Apple and $15 billion for Microsoft.”
The report claims: “The tax rate paid by Apple, the world’s most valuable company with a stock valuation that passed $500 billion in March 2012, has dropped even more dramatically. With profits soaring past $34 billion last year, the company’s tax rate fell from 24.8 per cent in 2009 to 14.7 per cent in 2010 and 9.8 per cent in 2011.”
Worstall points to Apple’s 10K filing where the company revealed that their tax rate was: “24.2 per cent, 24.4 per cent and 31.8 per cent for 2011, 2010 and 2009, respectively”, and: “The Company’s effective rates for these periods differ from the statutory federal income tax rate of 35 per cent due primarily to certain undistributed foreign earnings for which no US taxes are provided because such earnings are intended to be indefinitely reinvested outside the US.”
Wostall concludes that the Greenlining Institute has got its maths wrong: “What they have done is divide the $3.3 billion paid in 2011 into the $34 billion profit in 2011 to get their 9.8 per cent tax rate. However, what should in fact be done is to divide the $3.3 billion paid in 2011 by the profit in 2010 of $18 billion odd to give us a tax rate of 18 per cent. And the previous year’s $2.7 billion paid into the $12 billion made to give us a 22.5 per cent rate, not the 14.7 per cent rate that is reported.”
Last week’s Telegraph report revealed that in the tax year ending 25 September 2010, Apple paid just £10.3 million in corporation tax in the UK, according to Apple’s accounts for its three main British subsidiaries. The Telegraph reported that Apple dodged paying higher tax by using foreign subsidiaries, such as Ireland and the British Virgin Islands.