The New York Times on Sunday published yet another damning investigation on the business practices of Apple.
Among the key findings:
Apple has exploited the tax code, both here and aboard.
According to The Times:
Apple’s headquarters are in Cupertino, Calif. By putting an office in Reno, just 200 miles away, to collect and invest the company’s profits, Apple sidesteps state income taxes on some of those gains.
California’s corporate tax rate is 8.84 percent. Nevada’s? Zero.
Setting up an office in Reno is just one of many legal methods Apple uses to reduce its worldwide tax bill by billions of dollars each year. As it has in Nevada, Apple has created subsidiaries in low-tax places like Ireland, the Netherlands, Luxembourg and the British Virgin Islands — some little more than a letterbox or an anonymous office — that help cut the taxes it pays around the world.
Martin Sullivan, a former Treasury Department economist who has studied Apple’s tactics, told The Times: “Apple, like many other multinationals, is using perfectly legal methods to keep a significant portion of their profits out of the hands of the I.R.S. And when America’s most profitable companies pay less, the general public has to pay more.”
Apple’s effective tax rate is much lower than most companies despite its soaring profits.
The Times reported:
Although technology is now one of the nation’s largest and most valued industries, many tech companies are among the least taxed, according to government and corporate data. Over the last two years, the 71 technology companies in the Standard & Poor’s 500-stock index — including Apple, Google, Yahoo and Dell — reported paying worldwide cash taxes at a rate that, on average, was a third less than other S.& P. companies’. (Cash taxes may include payments for multiple years.) Even among tech companies, Apple’s rates are low.
How low? Try 9.8 percent. Mitt Romney is jealous.
How much does this save Apple? An estimated $2.4 billion in the United States alone, according to Sullivan’s study.
Other companies have piggy backed on Apple’s tactics, costing governments here and aboard much more than what Apple has saved.
For example, The Times reported:
Apple was a pioneer of an accounting technique known as the “Double Irish With a Dutch Sandwich,” which reduces taxes by routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean. Today, that tactic is used by hundreds of other corporations — some of which directly imitated Apple’s methods, say accountants at those companies.
Apple isn’t beneath bullying to keep keep its tax bill low.
Steve Jobs, in one of his last public appearances before his death, addressed the city council in Cupertino last June seeking approval for new corporate headquarters there. One member of the council, Kris Wang, asked Jobs how the new HQ would help the city and suggested that perhaps Apple could provide free wi-fi to city residents.
According to The Times:
He suggested that, if the City Council were unhappy, perhaps Apple could move. The company is Cupertino’s largest taxpayer, with more than $8 million in property taxes assessed by local officials last year.
Ms. Wang dropped her suggestion.
Brian Murphy, president of De Anza College, an Apple neighbor that educated Apple co-founder Steve Wozniak, said,“When it comes time for all these companies — Google and Apple and Facebook and the rest — to pay their fair share, there’s a knee-jerk resistance. They’re philosophically antitax, and it’s decimating the state.”
The Times story follows an investigation published in January that detailed how Apple continues to contract with manufacturers in China that have hideous business practices.
The Times found:
Workers assembling iPhones, iPads and other devices often labor in harsh conditions, according to employees inside those plants, worker advocates and documents published by companies themselves. Problems are as varied as onerous work environments and serious — sometimes deadly — safety problems.
Employees work excessive overtime, in some cases seven days a week, and live in crowded dorms. Some say they stand so long that their legs swell until they can hardly walk. Under-age workers have helped build Apple’s products, and the company’s suppliers have improperly disposed of hazardous waste and falsified records, according to company reports and advocacy groups that, within China, are often considered reliable, independent monitors.
More troubling, the groups say, is some suppliers’ disregard for workers’ health. Two years ago, 137 workers at an Apple supplier in eastern China were injured after they were ordered to use a poisonous chemical to clean iPhone screens. Within seven months last year, two explosions at iPad factories, including in Chengdu, killed four people and injured 77. Before those blasts, Apple had been alerted to hazardous conditions inside the Chengdu plant, according to a Chinese group that published that warning.
It’s little wonder that a March 12 essay in Newsweek included the crew at Apple among the “Ruthless Overlords of Silcon Valley,” likening them to robber barons of an earlier era.
Wrote Rob Cox:
Though Silicon Valley’s newest billionaires may anoint themselves the saints of American capitalism, they’re beginning to resemble something else entirely: robber barons.
Behind the hoodies and flip-flops lurk businesspeople as rapacious as the black-suited and top-hatted industrialists of the late-19th century. Like their predecessors in railroads, steel, banking, and oil a century ago, Silicon Valley’s new entrepreneurs are harnessing technology to make the world more efficient.
But along the way, that process is bringing great economic and labor dislocation, as well as an unequal share of the spoils. Just last week, the Justice Department warned Apple that it planned to sue the company along with several U.S. publishers for colluding to raise the price of electronic books—monopolistic behavior that would have made John D. Rockefeller proud.
That suit was subsequently filed.
Steve Jobs has been portrayed as some sort of saint since his death, but, as The Times has documented, there is a very dark side to the company he lead to unparallelled heights.