Image: Max Cherney
Amid the self-congratulatory pomp and circumstance we’ve come to expect at Apple’s Worldwide Developers Conference, a small but loud group of protesters yesterday gave attendees a sober reminder of the company’s less than stellar record when it comes to corporate citizenry.
The message was clear: Apple needs to pay its fair share of taxes.
A handful of activists, many from the nonprofit Tech Can Do Better, a sort of watchdog for Silicon Valley, stood outside San Francisco’s Moscone center holding a banner that read, "We built this. Apple depends on taxpayers. Can taxpayers depend on Apple?”
Before the keynote started, protesters tried to deliver an oversized $5 billion check for Apple CEO Tim Cook to sign. The check was made out to “Bay Area Communities” for "estimated un-taxed income held in Nevada." The stunt was stopped by police. Photojournalist Steve Rhodes snapped some shots of the scene.
The protesters have a good point. Apple has pioneered some revolutionary hardware and software, some of which we’re seeing for the first time at WWDC this week. But it’s also proven to be quite innovative when it comes to dodging Uncle Sam.
The firm introduced an accounting method known as “Double Irish With a Dutch Sandwich” to the corporate playbook, the New York Times first reported in 2012. It’s a technique whereby profits are routed through Irish subsidiaries, then the Netherlands, finally ending up in the Caribbean. The goal: to reduce the total amount of tax paid to the US government.
Another technique Apple pioneered is to “designate overseas salespeople in high-tax countries in a manner that allowed them to sell on behalf of low-tax subsidiaries on other continents, sidestepping income taxes,” reported the Times.
Apple’s tax-avoidance savvy goes further than that. The Cupertino-based company has, over the years, established an intricate web of subsidiary businesses in the US and abroad—to shield the approximately $40.4 billion held in offshore accounts from paying taxes in the US, the Center for Investigative Reporting discovered.
As of last year, about 70 percent of the company’s profits are allocated overseas overseas where tax rates are much lower, money which critics say should be being invested here in the US. Apple paid one of the lowest effective tax rates among the tech titans that CIR investigated—12.6 percent. The top tier federal corporate tax rate in the US should be 35 percent.
And even within the US, Apple has managed to reduce its tax burden by establishing a corporate office in Reno, Nevada, which has no corporate tax, to avoid paying taxes in California, where it’s headquartered some 200 miles away.
In a seemingly penultimate moment of corporate tax ‘disruption' it was discovered that the US government is actually paying Apple (as well as Cisco, Google and Microsoft) vast sums of interest on government debt that it holds. Those four companies bought about $163 billion of the national debt, mostly Treasury Bills, with money from offshore accounts that was likely never taxed. America.
It’s all technically legal—but as the Times points out, it’s pretty clear that Apple and other tech giants are taking advantage of loopholes in tax codes that were written before humanity had even conceived of the concept of a digital world.
Apple’s far from the only company using every possible legal loophole to reduce its tax bill; most large transnational enterprises do. But as company executives stand on stage in San Francisco this week patting each other on the back and revealing the latest profit-grabbing products to flood the consumer market, it’s a good time for a reminder that it’s one of the worst, and wealthiest, offenders.