Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Last September, when we exposed the heretofore unknown entity actively managing Apple's $100 billion+ in offshore held cash (and thus untaxed in the US), we made the following "bold" prediction: "with the topic of finding effective tax loopholes which are perfectly legal, yet which apparently are unfair, serving as the basis of the entire presidential race to date, what Apple can be absolutely certain of is that once the farce culminating on November 6 is over, the government's eye will finally turn to minimizing "externalities" among such companies which have been able to pass through corporate tax savings to end consumers by abiding within the legal system that countless other muppet congressmen, senators and presidents have developed over the ages. Because while AAPL may have built the iPhone, very soon it will be only fair that it share its profits acquired over the years, and thus its cash balance…with the general public." Or in other words, in September we predicted the Apple "tax witchhunt" would take place shortly after Obama won his reelection. Today, it has officially begun.
For those confused, Congress has just announced it is shocked, SHOCKED to learn it has over the past several decades passed legislation making tax shelter loopholes – such as those used by AAPL, GOOG and every other multinational company – perfectly legal, and which will now be turned against those very companies in a kangaroo court of law, seeking nothing more or less than to extract all those pounds of flesh that the government so generously let slip between its fingers for so many years. Which is expected: when the entire world is broke, the government has no choice but to call in every favor accumulated over the years, because all is fair in, well, the fairness doctrine and in a world about to unleash global trade, and tax, war.
Of course, we have covered the background of this topic extensively in the past knowing quite well what direction the wealth redistributor-in-chief was heading. From Apple And Taxes:
As we have shown in the past, perhaps the one thing Tim Cook's company has loathed more than anything in the past, is to pay taxes, which is why it has some of the most convoluted legal tax shelters imaginable. Indeed, in the current quarter, according to the company's cash flow statement, a tiny $2.4 billion was paid in cash taxes. Putting this number in perspective, the company had an operating profit of $12.4 billion.
Or, cumulatively, since December 2008, AAPL has generated a grand total of $149 billion in operating profit, while paying just $21 billion in total taxes.
Which brings us to today. From Bloomberg:
Apple Inc. (AAPL) has created a web of offshore entities to avoid paying billions of dollars in U.S. taxes, including three foreign subsidiaries the company says have no home country for tax purposes, congressional investigators say.
The world’s most valuable technology company has $102 billion in offshore accounts and shifted billions in profits out of the U.S. into affiliates based in Ireland where it negotiated a tax rate of less than 2 percent, according to a report by the Senate Permanent Subcommittee on Investigations.
The offshore entities of the Cupertino, California-based company have paid little or no tax in recent years, the probe found.
One Apple affiliate — Apple Operations International — generated net income of $30 billion between 2009 and 2012, and declined to declare a tax residence, filed no corporate tax return and payed no income taxes to any nation, the report said. AOI is Apple’s principal offshore holding company.
“Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven,” Democratic Senator Carl Levin of Michigan, the chairman of the panel, said at a news conference. “Apple sought the Holy Grail of tax avoidance. It has created offshore entities holding tens of billions of dollars, while claiming to be tax resident nowhere.
Of course, in AAPL's defense, what it has done is not illegal at all, and is in perfect compliance with both US and international laws. But that would mean Congress would have to read the laws it has passed over the ages: something which everyone knows never happens. One also knows that Congress is unparalleled when it comes to the hypocrisy of accusing others for following the rules it itself has enacted.
In prepared testimony to Congress posted on its website today, Apple defended its practices, saying it paid $6 billion in U.S. taxes last year and is one of the largest taxpayers in the country.
Apple’s cash is largely held in U.S. banks in U.S. dollar-denominated assets, segregated into a portion that can be used for domestic operations and a portion that can be used only for international investments, the company said. The company doesn’t use foreign subsidiaries or gimmicks to avoid U.S. taxes, said the testimony.
The company also said the Irish subsidiaries, which are cost-sharing arrangements, have helped to fund Apple’s research and development activities and taken on risks, leading to bigger profits and higher-paying jobs in the U.S.
None of this matters, however, in the abovementioned kangaroo court, in which…
Lawmakers in both parties are seeking a bipartisan agreement on how to tax income that U.S.-based corporations earn outside the country. Democrats and Republicans on the panel say Apple’s tax maneuverings, while not illegal, will help frame the debate about how to make the corporate tax system more fair.
Senator John McCain of Arizona, the panel’s top Republican, said he and Levin are seeking to craft a bipartisan proposal that would end some of the tax benefits, although the timing of an agreement isn’t clear. He said both parties in Congress should seek to address the matter, even if it isn’t in the context of a broad rewrite of the tax code.
“When you see egregious behavior like this, why wait?” McCain said.
And there it is again: "all in the name of fairness."
What is left unsaid is that Apple is merely the first Guniea pig in what is sure to be a long trail of wealth "redistribution" of evil companies (to benefit the Federal and State governments) who have used every legal loophole affored to them by the US tax code, in order to pad the government's soaring spending habits, and to assist in making it even bigger.
Sadly, for AAPL, and for many others like it, this means that the excess profits they generate are now known, in financial parliance, as "negative externalities" and Fair Uncle Sam is coming for his fair share.
Sadder for AAPL, and all those like it, it means that the company is now truly a utility in the eyes of the government, and one can stick a fork in any hopes that the growth company created by Steve Jobs ever has a chance of coming back.
