Apple earned $36.8bn in 2012, paid only 1.9 percent overseas tax

Apple earned $36.8bn in 2012, paid only 1.9 percent overseas tax

Summary: Despite generating more than $36 billion in overseas profit in 2012, the iPhone and iPad maker paid less than 2 percent tax on that figure, adding Apple firmly to the burgeoning list of companies employing tax avoidance schemes.


Apple has paid only 1.9 percent tax on its overseas profits during 2012, according to the firm's latest 10-K filing with the U.S. Securities and Exchange Commission (SEC).

On non-U.S. profits of $36.87 billion (£23.1bn) for the 2012 fiscal year ending September, Apple paid only $713 million (£445m) in overseas tax, or about 1.9 percent in total.

That figure is only a fraction of what the company paid compared to corporation tax of 25 percent in the U.K., and around 35 percent in the United States.

Stateside, where the California-based technology giant is based, Apple paid $12.3 billion (£7.7bn) in federal taxes on profit generated in the U.S., and just under $1.1 billion (£689m) in state taxes.

First reported by The Times of London (paywalled), while Apple has not broken any laws by using morally bankrupt techniques in order to appease its shareholders and investors at the expense of ordinary taxpaying citizens around the world -- many of which are Apple customers that pay a premium in order to own the array glorified shiny rectangles -- it's likely to spark up the debate over firms unfairly using such schemes to avoid paying into their host nation's coffers, particularly at a time when the global economy teeters once again on the brink of collapse.

Apple, like other companies, tend to leave their profit-generated cash overseas because the repatriation costs would result in 35 percent taxes applied once the money is brought back to the United States.

Google, Amazon, and Starbucks have all been accused of using tax havens, such as Ireland, Switzerland and Luxembourg, in order to lower their overall tax bills where corporation tax is significantly lower than other countries, such as the U.K. and the United States. 

In the U.K., while its parliamentary committees investigate a string of mostly technology companies, the government continues to do nothing on fixing the tax loopholes that allow these major companies to get away with paying so little into the U.K. Treasury's kitty.

A few weeks ago, ZDNet reported that the main U.K. subsidiaries of the major technology companies are using legal albeit morally void schemes to avoid paying the corporation tax.

While Amazon, Apple, IBM, Facebook, Google, and Microsoft -- which made a collective 2011 U.K. revenue of £5.32 billion ($8.49bn), the six companies each paid only a fraction of the U.K. corporation tax they should have done -- as much as Apple's 7.8 percent in 2011, compared to Amazon's 0.4 percent. 

A U.K. parliamentary committee will grill Google, Amazon and Starbucks later today, reports The Guardian. "We want to ask them for an opportunity to explain why they don't pay proper levels of tax in the U.K.," said Margaret Hodge MP, chair of the parliamentary committee on public accounts.

Apparently Google U.K.'s managing director Matt Brittin -- which according to ZDNet research only paid 1.8 percent in corporation tax in the U.K. in 2011 -- was "too busy" to attend the committee, the London-based newspaper reported.

Topics: Apple, iPhone, iPad, Legal, EU, United Kingdom, Tech Industry

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  • Good

    I hope this upsets the Fandroids and Apple haters because I love to see their crazy comments. Obviously people that are obsessed with hating Apple become insane to a certain degree!
    • I'm no Apple fan but I cheer for their low tax

      You earn it, you keep it.

      You wanna be as successful then get off your butt to work instead of sitting there, waiting Govt to redistribute someone else' hard earned money to you.
      • It is also important to note that both Google and Microsoft have the *same*

        ... 2% overseas tax.
        • Nothing wrong with this.....

          If these countries are complaining that Apple, Microsoft, Google, etc... are not paying enough taxes, then they should change their tax policies. As long as they are legally following the exiting tax laws, then there is nothing to complain about.
          linux for me
          • You're joking, right?

            Change tax policies? Do you how difficult that is when the powerful, influential, and wealthy control the politicians? The only thing regular folks have to fight against this situation is their vote, and we all know that the US has one of the consistently lowest voter participation of any industrialized country. That's not a coincidence, btw. It's by design.

            The average citizen has very little real power to do anything in this country when it comes to corporate tax policy.

            Just imagine if everyone paid 2% in federal taxes. We'd be one step away from being a banana republic.

            You realize that by companies like Apple paying just 2% federal taxes, the rest us are subsidizing the difference in what they really should be paying for things like education and infrastructure. Things that companies like Apple benefit from tremendously.

            Shame on all these companies who fall into this category. They should all be paying at least 25%.
          • My post was about US Federal tax rates, not overseas tax rate, but still...

            Effective corporate tax rate is too low for many companies including the top ten who only paid an average of around 9%.

            "According to the financial site NerdWallet, the 10 most profitable U.S. companies paid an average federal tax rate of just 9 percent last year. The group includes heavyweights Exxon Mobil, Apple, Microsoft, JPMorgan Chase and General Electric. (Hat tip: Barry Ritholtz.)"
  • Get ready...

    For all the Apple bashers to skip right past the blog and pile on even though the maker of their platform of choice is likely called out in the blog for doing the exactly the same thing. Just like the criticism of Apple using Chinese manufacturing.

    I don't say this in any defense of Apple's tax avoidance practices, but merely point it out because of the tendency to take any available opportunity to criticize Apple.

    And guess what? It's far from limited to the tech industry, or even companies for that matter. Individuals use similar tactics to reduce their tax rates. Like the blog touches upon, it's not illegal if you do it right, and it's obviously profitable for these companies and individuals to employ some highly skilled tax accountants and attorneys in order to walk that line.
  • And the point is?

    I didn't read that Apple broke the law. Simply that they paid 1.9% tax overseas. Did they pay the full taxes expected in those countries? $12 billion in US taxes sounds like enough that people would stop asking for more. No, I don't own Apple products.
    Scott Yeager
    • And who's fault is that?

      I agree they didn't break any laws. In fact, it's the tax laws that the UK laid out that's letting companies do this.

      Don't blame Apple, or any company from taking advantage of the laws that are offered to them.

      We do the same thing ourselves at tax time.
      William Farrel
      • Avoidance or Evasion

        This is the issue being debated here in the UK. Is Apple and others using 'efficient' tax planning or have they gone over the edge and are in illegal territory?

        Many, and me included, certainly think they have broken the spirit of our Corporation Tax laws.

        Unified EU tax laws will soon follow
  • Interesting article

    Interesting on a couple of levels-
    Firstly we have open evidence of the anti-social corruption on a large scale of one of these massive US public companies, likely others do it too but we don't have any evidence of them doing it reported here.
    Secondly, the two pre-emptive defensive comments in favour of Apple- they remind me very strongly of the pro-Israel defensive comments you get when there are any stories a bit negative about Israel , exactly the same behaviour.
    • correction

      -Not trying to imply anything about religion or ethnicity by saying that! It's just that the level or ferver of that type of support is very similar.
  • avoid unetical companies like Apple

    and embrace Android and FOSS!
    LlNUX Geek
    • You should read the article...

      before commenting.
    • You should read the article...

      before commenting.

      You know, the creator of Android. Get some education Linux Geek!
    • And support Google of doing the same exact thing.

      To bad you did not get reading down before commenting down.
      • google should not be taxed because

        it uses FOSS.
        LlNUX Geek
        • huh?

          So if Apple uses some open source software, they are all in the clear for you then?
  • Funniest thing

    All the large corporations do this - Microsoft, Google, Cisco, and the list goes on and on and on and on....