Apple Inc. (AAPL), Its Taxes, And The Timing And Confusion Of It All

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Apple Inc. (AAPL), Its Taxes, And The Timing And Confusion Of It All
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Apple Inc. (NASDAQ:AAPL) has been in the hot seat (in the U.S. most recently and also in other nations around the globe) for its corporate tax practices. Of course there’s been plenty of finger pointing going on here, with some blaming Apple Inc. (NASDAQ:AAPL) and others even blaming lawmakers for allowing the loopholes that supposedly allow all of this questionable behavior to go on.

Apple Inc. (AAPL), Its Taxes, And The Timing And Confusion Of It All

So who’s to blame? And is there really anything to point fingers about? Forbes contributor Tim Worstall brought up some very interesting points about this whole matter.

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What Bloomberg Said About Apple’s Taxes

Worstall based his post on an article Bloomberg published regarding Apple Inc. (NASDAQ:AAPL) and its taxes. According to him, Apple doesn’t move profits out of the U.S. It simply doesn’t bring its foreign profits into the U.S.

Bloomberg called for greater transparency regarding corporate taxes, but Worstall says the transparency is there. We just need to understand how to read the numbers.

How Timing May Play A Role In Apple’s Tax Fiasco

Worstall points out the varying numbers that we have to contend with when examining Apple’s tax liabilities. The company does disclose that its liability for 2011 was $8.2 billion, including state, federal and foreign taxes. The problem seems to lie in breaking down that number.

Apple Inc. (NASDAQ:AAPL) also said that it paid $2.5 billion in U.S. federal taxes that year, but Worstall says it’s important to consider the timing that’s involved when reading corporate tax numbers like the ones provided by Apple Inc. (NASDAQ:AAPL). In other words, large corporations like Apple Inc. (NASDAQ:AAPL) must make estimated tax payments throughout the year, but those estimations are done based on the previous year’s income.

So if a company is doing things right and increasing its income year over year, then it will still have taxes left to pay the following year for the current tax year. Those estimated payments made during 2011 shouldn’t be enough to cover the tax bill in full because Apple Inc. (NASDAQ:AAPL) made more in that year than it did in 2010, which is the year the 2011 estimations were based upon.

This means that the difference between what Apple Inc. (NASDAQ:AAPL) owed in taxes for 2011 and what it paid in 2011 will be listed in a different part of the books—in a section with other items that are owed but that haven’t yet been paid because they aren’t due yet. This means that the simple timing of tax payments could be throwing all of these numbers off.

No Shortcuts Allowed

In short, there does seem to be a lot of confusion going on about what all of these tax numbers mean. We all want a shortcut explanation of what Apple is paying and to which country and based on how much income in that country. But on something like this, let’s face it. There is no shortcut.

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Michelle Jones is editor-in-chief for ValueWalk.com and has been with the site since 2012. Previously, she was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Email her at [email protected]
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