Apple Inc. (NASDAQ:AAPL) has made a statement defending itself against allegations of avoiding tax in the United States. The statement comes after an article in the New York Times last Saturday which detailed the firm’s tax payments in the last year. The article suggested a policy of avoiding tax at the firm using low tax states inside and outside the US to stream its revenue through in order to payer a lower effective tax rate.
Apple’s response, published in the same issue of the Times, outlined the benefits the United State’s economy resulting from the practices of the corporation. Apple pointed to the firm’s employment record in response to the allegations. According to the statement the firm employs 47,000 people in the United States and says 500,000 jobs have been created by Apple’s innovation and creation of new industries. The short statement was an effective one.
The New York Time’s article enumerated Apple’s total tax payments for last year at $3.3 billion on international sales of $34.2 billion. That adds up to an effective tax rate of 9.8%. Just 30% of the firm’s sales are accounted for in the United States while the remaining is brought in from international sales.
In the United States Apple funnels its revenue through Nevada in order to avoid the 8.84% tax rate in California. Nevada has a corporate tax rate of 0%. Internationally the firm uses other countries with low corporate tax rates to the same effect. Ireland, Luxembourg, the Netherlands, and some smaller Caribbean bases.
The accusations leveled against Apple, though seemingly accurate, will not shake up the firm’s strategy on tax. The company’s obligation is to its shareholders and the tax strategies being followed by the company will only embolden them. Apple creates wealth for the economies it operates in by providing new industries in which to create employment.
The explosion in the consumer electronics industry in the last ten to fifteen years has largely come from Cupertino, first from the iPod then the iPhone and now the iPad. Apple will continue to drive innovation and continue to drive economic and technological progress. The firm’s products have driven huge advances in multiple sectors of the economy resulting in greater productivity and utility for consumers and enterprise alike.
Apple’s tax rate is not a an accurate evaluation of the firm’s benefit to society though in an era when cries of “pay your fair share” drown out all others in the media what is to be expected?