Is Apple Risking Its Brand Overseas With Its Tax Gimmicks?

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One of the striking aspects of the Senate Permanent Subcommittee on Investigations hearing on Apple’s aggressive tax-avoidance strategies is the way the Senators bent over backwards to declare Apple love even as they poked and prodded at the tech giant’s various, um, devices. Being an icon of US tech prowess, even if the halo is slipping, will do that.

For those with less Apple lust or otherwise unwilling to cut the Cupertino giant slack just because it has sleek products and cool stores, a new article by tax maven Lee Sheppard at Forbes gives a layperson-friendly overview of how Apple managed to keep $44 billion of revenues out of the hands of the tax men (I’ve spoken to Sheppard, who has also given me copies of her vastly more technical, paywalled articles at the journal Tax Notes on l’affaire Apple).

One of the things that readers might not realize that even with the Senate scrutiny, tax pros still have to engage in a bit of guesswork to figure out precisely how Apple arrived at the miraculous result of having foreign sales, which contribute roughly 60% of Apple’s total profit, taxed nowhere. But certain parts are clear.

Apple has achieved a result that is similar to Google’s parking its intellectual property overseas. The consumer products company has an Irish holding company at the apex of its foreign operations. This company is in Ireland and has no employees or operations. But it is the group finance company. And the money is not in Ireland, but in New York banks and managed by employees in Nevada. So the funds are in the US even though they are domiciled abroad. This company has no residence from a tax perspective and pays taxes nowhere.

Below that is a principal company, again in Ireland. It houses the contracts with Apple’s Chinese manufacturers, owns the inventory they churn out, and manages the supply chain in Europe and Asia. It has 250 employees but like its parent, it claims tax residence nowhere but did pay taxes to Ireland under a special deal where it paid less than 2% of income, well under Ireland’s already bargain-basement 12.5% statutory rate. This company and another company hold the foreign licenses to Apple’s intellectual property. If you listened to the hearings or read some of the commentary, this is where the “cost sharing” agreements come in. Apple first entered into this cost-sharing agreement in 1980, which is astonishingly early for such aggressive tax planning (the company likely had just begun selling abroad). Cost-sharing rules were more permissive then. Apple has amended the agreement twice, but these agreements are evaluated as of when created, so Apple is effectively grandfathered under the old rules. Note that Sheppard wonders whether the amendments were handled carefully enough for them to deserve that treatment; in her wonky article, she uses words like “brazenness” and in Forbes, depicted Apple’s practices as worse than typical multinational “hokey tax schemes”.

Even though Tim Cook tried to defend Ireland as more upstanding than using one of the Caribbean tax havens, Sheppard sets the record straight:

Ireland is a tax haven. The European definition of a tax haven is a country that cuts deals with foreign companies that don’t do any business there.

She also said that tax professionals who work for big corporations were gobsmacked by Apple’s conduct. It’s one thing for a company that sells oil or makes industrial parts to get edgy in its tax structuring. None of its customers care. By contrast, Starbucks, which had gotten bad press for its tax avoidance in the UK, volunteered to make a significant payment to the government to buy itself some goodwill. And bear in mind that voluntary payment is not a tax and hence not deductible from US taxes. One tax professional told Sheppard that his company made sure to pay tax in every jurisdiction in which it did business to avoid reputational damage. Sheppard writes:

Apple is playing fast and loose with consumers’ affection for its highly discretionary products, especially in Europe. It is ill-advised for any consumer products company not to pay tax where it sells products. Equally important, Apple’s tax avoidance is also testing the patience of strapped European governments that are looking for ways to get American multinationals to pay tax.

Americans may still swoon for Apple, but even here, Samsung is making a serious dent in Apple’s lead. Prospective customers in austerity-racked Europe are going to cut a tax evader a lot less slack when social services are being cut and ordinary citizens are being squeezed dry. Will it take a brick thrown into an Apple store in Europe to get Cook and his fellow executives to realize that their strategy needs to be revamped? And this isn’t just a matter of disaffected citizens. The OECD has a “base erosion” project underway, meaning it is looking into how to crack down on corporations and individuals who manage to exclude some or all of their income from their tax base. The Europeans have already made it clear that they are unhappy with Apple-style practices of not paying taxes where sales are made and paying taxes nowhere.

Sheppard debunks the idea that the US should tolerate these practices because what is good for Apple must be good for America:

Sen. Paul demanded that the subcommittee apologize to Apple for hassling it about taxes because it is a job creator. His argument is that if big companies are indulged on tax, regulation and other matters they will provide jobs and growth….

This syllogism no longer holds. Technology has replaced semi-skilled blue collar jobs with robots and semi-skilled pink collar jobs with computers. Globalization sent unskilled manufacturing jobs to low-cost countries like China.

Apple will never become a mass employer on the order of the old GM. Apple employs a mere 52,000 people in the United States. That is roughly the same number that Ford employed at one large plant, River Rouge, 70 years ago. Apple’s employees are educated and well paid. Ford’s union workers were semi-skilled and well paid.

Ford’s new plant on the Rouge site can be visited by the public. It has relatively few workers and a lot of Japanese robots doing final assembly on pickup trucks. The manufacturing jobs that required sheer brawn and no brains have gone to countries where wages are fraction of U.S. wages. The supposed U.S. manufacturing revival will never create enough jobs to replace the lost and offshored jobs.

And don’t kid yourself that if Apple and its tax-avoiding tech confreres got their sought-after tax holiday, they’d do the right thing and invest. Sheppard again:

Even if Congress naively were to believe that tax-free repatriation of untaxed foreign profits were a good idea, we’ve been there, done that, and got bike oil on the T-shirt. In 2004, Congress granted a tax holiday, and companies with big stashes of offshore profits attributable to valuable intangibles—that’d be pharma and tech—repatriated billions of dollars in the form of dividends and executive bonuses.

The PSI hearings are pretty much certain not to tighten up on Apple’s pet loopholes. But at least the harsh scrutiny should keep the tech companies’ pleadings for more tax gimmies in the form of a tax holiday at bay. And as we noted on the Melissa Harris-Perry, the days of this sort of wildly favorable multinational tax treatment may be coming to an end. If the OECD’s base erosion project does not produce meaningful enough reforms, the UK, France, and Germany have vowed to act unilaterally, and they would provide air cover for smaller countries to follow suit. So this debate may is moving beyond where the US can continue to make the world a safe hunting ground for its multinationals. Given the need to rein in unaccountable international companies, that should be seen as a welcome development.

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  1. oblivia

    “Americans may still swoon for Apple, but even here, Samsung is making a serious dent in Apple’s lead.”

    Ha! Have you looked at Samsung’s corporate structure?!?! The entire group is controlled by an unlisted Korean theme park.

    1. skippy

      Tis fun watching multinational corporations sell their own dags between hives… I made a profit this quarter!!!

      Skippy… apple is a portal to getting your financial face ripped off… anything requiring a CC to access is grooming the victim.

    2. Yves Smith Post author

      So what does that have to do with the statement?

      Samsung is offering phones that a lot of reviewers deem to be better than Apple’s and has launched a successful marketing campaign laying claim to superior coolness.

      Apple is not the only game in town. And the issue re the structure is tax avoidance on a large scale. Samsung has been accused of domestic corruption, but that does not appear to have spilled into lucrative foreign markets.

      1. washunate

        Yves, are you advocating a boycott of Apple? That other major companies are substantively better? That Samsung is good for America?

        The website has doubleclick for advertising (Google). Visa for payments. ECONned is sold on Amazon, and the copyright page says all rights reserved. Are you saying these are model corporations and uses of Intellectual Property frameworks?

        What about the really bad actors, like the realtors and US Chamber and hospitals and pharmaceutical companies and telecommunications and defense and media…

        1. jrs

          It’s a weird reason to boycott too, it’s like this is everything everyone hates about liberals day: boycott Apple for tax avoidance rather than the fact it employs near slave labor in other countries that threaten to KILL THEMSELVES over their horrible job conditions. First world problems much? Maybe it’s some kind of rorschach political test: which offends you more: tribute not being paid to the empire, or the exploitation of labor in the most brutal sense.

          Oh I don’t own any Apple products anyway (nor Apple stock for that matter).

          1. washunate

            Yeah, that’s what is confusing. If the real issue is human rights abuses overseas, rather than tax policy here in the US, then we need to change US foreign policy, from trade pacts to drone usage.

            I don’t see anyone producing evidence that Apple is stopping such a change.

        2. NotTimothyGeithner

          I think the point of the post is to provide a lesson for rampant greed and the need for consistent and rigorous regulation as opposed to regulation based on swings of public sentiment/perception. Apple is facing a two-fold problem. One its now facing competition because technology is easy to replicate once its been done, and two, Apple’s status as big dog while not being a huge employer such as a car company or a large defense contractor means grandstanding politicians will target that kind of company.

          Apple is facing attacks on its revenue stream from competition and taxation because of its rampant greed. Despite its hideous profits, the company doesn’t pay taxes. They aren’t the only company who are devouring their own golden goose, so its an important lesson to people to understand, especially for the companies which might be targets of politicians who will gladly kill a tech/info company such as Apple on the alter of GE, Lockheed, and so forth in an effort to con the masses.

          Bear with me, what if the EU puts a hold on Apple’s business model? In many ways, Apple has sold every Apple product they can sell in the U.S. Have you seen my phone? Its crazy! I have a Samsung, but lets pretend, I had an IPhone. What would be the result of the EU demanding back taxes? The U.S. can’t cut Apple taxes because they don’t pay any here. Apple’s stock plummets even more, a continent is demanding taxes to be paid, its chief spokesperson is now played by Ashton Kutcher, and its facing competition for the first time in 8 years or so. The guy running Apple until 2 years ??? ago was dying. Who knows what bets he was making because he wouldn’t have to deal with him?

  2. YankeeFrank

    How a company can “have no residence from a tax perspective” is beyond me. Either it resides somewhere or it doesn’t exist. It just shows how completely ridiculous these “hokey tax schemes” have gotten. I remember working for a white shoe law firm back in the 90s where they had pioneered this tax avoidance scheme involving the purchase/sale of airplanes with complicated leases etc., all for companies that weren’t even in the airplane business to avoid taxes. The lawyer explaining it to me was so proud of this work. He was a craven weasel who ran down the halls when his masters shouted for him. This is the apex of corporate America people. Cherish it.

    1. diptherio

      That’s easy: file incorporation papers in Éire (so it’s Irish from the American perspective) while having the company controlled from the US (so it’s American, from the Irish perspective), and presto-change-o, your tax footprint entirely vanishes.

      1. Nathanael

        (1) US states are not required to allow the Irish-incorporated corporation to operate in their jurisdictions. It is a matter of discretion on the part of the state government.

        (2) So, threaten Apple with removal of its operating authority if it keeps evading taxes.

        It’s easy to do if you have a state government with any guts.

  3. vlade

    Said it before, will say it again.
    Zero corporate rates, but tax the dividends (and stock buybacks) at source at the highest marginal rate (reclaimable), and tax liquid assets (cash, cash equivalents, negotiable securities etc.) wherever in the world they are.

    Doubt anyone would implement it though.

    1. washunate

      But that would require the really bad corporate citizens in finance and healthcare and media and telecommunications and oil and agribusiness and defense and…to give up their specially purchased tax loopholes.

      Much easier to just shake Apple down for a few million in bribes and Move On.

  4. Hayek's Heelbiter

    I know of one major Big Pharma company that repatriated several hundred million dollars during the last repatriation holiday.

    How many jobs did they create as a result?

    -25,000, (25,000), negative 25,000.

    Or however you would like to phrase it.

    Instead of holding their feet to the fire, they were given air-conditioned hobnailed boots.

  5. kjboro

    More accurate Rand Paul: Subcommittee must apologize to Apple about hassling it about taxes because Apple creates and fosters wage slaves everywhere who, importantly, are free wage slaves.

  6. John

    Tarnished it’s reputation overseas?

    How about shot a bullet through it’s brand right here at home.

    PAY YOUR TAXES you tax-dodging/uber-national/treasonous/ criminal elite.

  7. TheCatSaid

    In Ireland, the Taoiseach (Prime Minister) has been saying “no deal was done with any company on the corporation tax rate”. Technically accurate.

    BUT what he’s NOT saying is is that a deal WAS done to guarantee an extremely low “tax base”, guaranteeing that Apple’s final tax bill would be 2% or less–which has been the case since the 1990 agreement. In 2011 its effective tax rate was only 0.5%.

    Rather than by offering a special corporation tax rate per se, they did it by agreeing a unique way of determining Apple’s “tax base”. They negotiated an agreement whereby certain profits would be classified as Intellectual Property, and thus not taxable. Most profits must have been reclassified to end up with such low tax rates since this agreement.

    Details were reported on the front page of the most recent Sunday Business Post by Cliff Taylor & Ian Kehoe (paywall article “Apple got tax deal in 1990”). Ian Kehoe was interviewed on national radio station Newtalk this Sunday 26 May, , starting at 41:20.

    This was a precursor to the “double Irish” which involved using multiple Irish subsidiaries in various locations to enable multinational companies to dramatically reduce their *effective* corporation tax, while leaving the 12.5% corporation tax rate unchanged.

    The political doublespeak is appalling.

    1. C

      Yes, and this may be coming back to bite them. As the initial article notes European governments are strapped for cash and “American” multinationals do look to have it. One British Parlimentarian even took time during his invited address to “Google Day” in London to criticize their unwillingness to pay tax there. And European friends of mine have trouble hiding their disdain for Ireland’s willingness to support this kind of crap. One of them even viewed Ireland as “owing” the rest of the EU.

      Sad to say but our immediate hope may be something like the G20 which is composed of ministers who don’t particularly like being bankrupt. But then again we in the U.S. can’t even stop Apple from inshoring their profits from one state to another. So I’m not that hopeful.

  8. RueTheDay

    IMO, it’s time to go scorched earth on this BS.

    1) If a company wants to transfer all of its IP to a tax haven like Bermuda and then have subsidiaries around the world shift profit to Bermuda through royalties, fine. But change the law such that any IP infringement claims in the US now have to be tried in Bermuda (and make it clear that whatever the ruling is, the US government won’t lift a finger to help the company enforce its claims). Have fun writing the value of all of your IP down to $0 overnight.

    2) Eliminate the deferral on pre-repatriation foreign income. Keep the worldwide system and the foreign tax credit. While arguably unfair to US companies that actually do business (e.g., have manufacturing facilities or real customers) in foreign countries, this would stop 99% of the transfer pricing games overnight. Does anyone really believe that Apple earns a third of its worldwide profit in Ireland, that GE makes no actual profit in the US or that Google does $10 billion worth of business in Bermuda?

    3) Related to #1, let companies play the thin capitalization game, but change the law such that the parent entity is no longer responsible for bad debt (and conversely, any contract in which a parent entity is assigned responsibility automatically shifts the debt and associated interest income to the parent entity). Let’s see who wants to lend money to some shell entity on the Isle of Man when that shell entity is solely responsible for repayment.

    1. Nathanael

      “Let’s see who wants to lend money to some shell entity on the Isle of Man when that shell entity is solely responsible for repayment.”

      I could be wrong about this, but I believe the parent company is ALREADY not responsible for the debts of the subsidiaries.

      In short, people who lend money to these companies with crazy capitalization schemes are suckers. The investment bankers who set up the capitalization schemes know this, of course. There’s one born every minute.

  9. Ignacio

    The strategy of corporations with taxes is similar to the strategy with workers and unions and can be summarized in “divide et vincere” (divide and rule?). Governments, particularly in small countries, play the tax game for a handfull of job positions, and billions are lost in tax revenues all around the world. Nevertheless, very profitable for corporate managers that surely have strong economic incentives in tax avoidance.

    In my particular case, Apple became “verboten” after I read an article at “El País” (spanish newspaper) two months ago on how little the company pays in taxes. I also insist with my friends on the tax avoidance issue and try to undermine the credibility of the company. I strongly recommend NOT to buy Apple stuff. Based on my behaviour, I assume that, yes, Apple is risking its brand overseas. You can imagine that these days, here in Spain, people feel very sensitive about this issues. In Spain we love smartphones more than in other european countries. In general, the penetration of smartphones is higher in Spain or Italy that in northern european countries. This reflects a cultural feature, not spendthrift behaviour. Spanish and italians should know better what apple does to avoid paying taxes

  10. washunate

    As a long time Apple fan, it has been interesting seeing how Apple gets singled out for not playing ball in a variety of ways over the decades. Apple isn’t the problem; relatively speaking, they are one of the best corporate citizens. Or if you prefer, one of the least bad.

    That’s what is so remarkable about the pressure being applied to Apple here. Instead of this hearing shining a light on how brazenly corrupt our system of government is, people are actually thinking that Apple is the problem.

    “Apple has achieved a result that is similar to Google’s”

    That pretty much sums it up. This has nothing to do with Apple lobbying for bad legislation. Liberal pressure calling out Apple doesn’t make it more likely to pay more taxes. It makes it more likely that Apple will have to scale up its lobbying to avoid being dragged through the mud by Congress.

    Do people really not understand that Apple isn’t mainstream corporate America? Apple is the black sheep, showing it’s possible to make money by making good products that consumers want rather than preying on your customers and spending huge amounts of money buying off Congress.

    I highly encourage anyone skeptical to look through in detail.

    1. hunkerdown

      A company that made good products would not need to declare thermonuclear war on their competitors. They would not try to rewrite already slanted IP and contract law with (to be kind) envelope-pushing law firms or create a cult of smug partisans to anthropomorphize the corporation as a good citizen because their conduct would speak for itself.

      They would STFU, STFD and make stuff, full stop.

      1. washunate

        It’s funny, it used to be that people wanted Apple to stop being a sore loser that their precious Macintosh isn’t protected by IP law from Microsoft.

        Now Apple has moved on, and it’s once again in trouble…for being too successful!

        But in all seriousness, Apple is a marginal player in this, not the central driver of terrible IP law. The US has largely shaped industrialized world views on IP, and the views in the US have largely been shaped by the recording and movie studios, the book publishers, the biotech firms, the pharmaceutical companies, and so forth. The system is a complete disaster, and it has been a disaster since before the iPhone and iPad even existed as commercial products.

        To the extent that tech benefited with the extension to software, Microsoft was the big early winner, and Google is the newest entrant to this club. Just try accessing the proprietary parts of Search or YouTube or getting a straight answer on whether APIs should be subject to copyright.

        1. readerOfTeaLeaves

          The system is a complete disaster, and it has been a disaster since before the iPhone and iPad even existed as commercial products.

          Yup. The fact that Apple is getting bashed, when every oil company, pharma, and other corporations have been abusing the tax laws for over a generation, is maddening.

          This is a larger problem about multinationals, tax laws, corrupt governance, secrecy jurisdictions, and politicians so desperate for ‘jobs’ that they’ll sell their mothers to get companies to move to their jurisdictions.

          The politicians need to take some responsibility and make the global system more functional.

  11. YY

    Apple’s success is too much attributed to technological magic whereas the greatest reason comes from being lucky enough to not have to deal with historically inherited marketing/distribution structure which makes it impossible for a typical electronics manufacturer to match. Apple’s competitors come from a world and time where anti-trust laws used to be a threat to retail price control. There also used to be transfer price constraints, as side effect of anti-dumping regulations (when there used to be manufacturing in local US/Euro markets). Apple’s success arrives at a time where cheap factory services are available in China and where value added can be moved to any part of the world as trade constraints are either no longer existent or enforced.
    Because electronics business is fundamentally that of getting more technology for less money, in the long run Apple is doomed as their business structure assumes a hugely unjustified profit margin based on low cost production and rip off pricing.

    1. washunate

      Apple is DOOOOMED…

      Sorry, couldn’t resist. Are you aware of the history of computing? Attacking Apple has been a cottage industry of commentary since the prior millennium.

      The reason for Apple’s success is that they create value for their customers. Frequently in doing so, they actually disrupt attempts by other corporate actors to wield market power. They have no monopolies protected by the government; no defense subsidiaries or oil exploration divisions or Medicare wings or wireless spectrum or banking licenses, and on intellectual property, they are most famous for losing one of the early cases (where Microsoft won an unlimited license to incorporate Macintosh OS system features into future versions of Windows, rather than a limited license that Apple claimed only applied to the current version of Windows). Apple didn’t engage in bundling or dumping or other anti-competitive practices.

      Apple is not concerned with people who don’t value what they offer; they focus on the people who do value what they offer. This focus is very confusing to much of the analyst world who think companies should prey on their customers rather than partner with them. And even people who don’t buy Apple products have benefited from the competition and innovation and general push against digital rights management, from better distribution of music to keeping Microsoft honest in the OS space to better cell phones to friendlier terms for content creators (like independent developers selling directly to consumers in mobile application stores and book authors selling on Amazon with higher royalties once Amazon encountered competition from sources like Apple and Barnes and Noble). Even environmental moves, like less packaging in the computer industry, have been driven by Apple, and Apple has generally been more privacy-minded than other firms, particularly Google in the tech space. And more broadly still, the tech industry generally is much better governed than other major industries in the US.

      If you desire specific rules about human rights or environmental protection or worker compensation or intellectual property or whatever, talk to the President and Congress. Apple is not a major lobbyist, they don’t oppose liberal legislation, they’re not a systemic threat to bring down the industrialized world, and they follow the laws on the books.

      The US Chamber of Commerce, the National Association of Realtors, the American Hospital Association, the National Cable and Telecommunications Association, Pharmaceutical Researchers and Manufacturers of America, the American Medical Association, Blue Cross, GE, AT&T, Northrup Grumman, and so forth, are far worse than Apple specifically, and tech generally (particularly tech ex. Google).

      1. vlade

        Fewer and fewer people value what Apple has to offer. Frankly, I find iTunes on PC one of the worst music management SW I had to use, lots of iPad interfaces are bad if you want to do anything but the simples stuff and I could go on and on (and I write this from MacBook Pro – running Win 7, even as I dislike MS Windows, I find OS X harder to use in some respects).
        Apple isn’t the “best- or least worst – corporate citizen” (as you write elsewhere). Apple is a GS equivalent of consumer electronics – smart (or at least perceived so), but too smart for its own good. Sure, the lines it created were great (but NOT revolutionary, Apple took old ideas and improved on them – not that anything’s wrong it it), but they are now outdone. And, arguably, in some ideas (value of platform instead of HW) they are being outthought by people like Amazon.

        1. Lambert Strether

          What I really like about the iPad is how easy it is to have two windows open; I use this in language study, so I can have the dictionary open in one window, and the text in the other.

          Oh, the trick? Just buy two iPads, and put one next to the other.

        2. washunate

          That’s the beauty of actual competition. Choice.

          Use Apple products, don’t use Apple products. Do what works best for you.

        3. YY

          I-tunes, aside from the irritation of leading to a captive storefront is a slow cumbersome piece of to be avoided. I’m happy to have been able to use gen-2 shuffle and now, at last, gen-4 shuffle without relying on i-tunes. So some of their products I think are brilliant. Their business methods, clever but not worthy of high praise, despite success.

          Companies will do what is allowed by governments, but what the customers will eventually do is vote with their wallets.

      2. Nathanael

        washanuate: Apple does have monopolies protected by the government: please read Groklaw and look at its patent cases.

        Apple has, probably inadvertently, started the “mutual assured destruction” phase of the software patent wars.

        (Software patents are illegal but were issued in very large numbers. They’re going to have to be rejected by the courts sooner or later. Meanwhile, Apple is abusing them massively.)

        Apple’s reputation is going straight into the trash, and the reason is fairly obvious. Apple had one very valuable thing going for it: Steve Jobs, a brilliant marketer who knew how to find excellent designers. But he’s dead. Without him, Apple really has nothing. Its other smart people left long ago.

        1. washunate

          Apple has generally not been a patent troll, not abused standards essential patents, and has generally been clear where it asserts rights and where it supports actual open source software efforts. It doesn’t pretend to set a higher standard (like Google) and then fail to meet that standard when you look at the details (Search, Android, YouTube, etc.). And it doesn’t make shady partnerships that compromise its users’ interests, like Google’s cooperation with Verizon undermining net neutrality and basically getting in bed with the corporate interests warping IP law.

          Furthermore, Apple is on the losing end of the IP wars; generally, the critique of Apple is the opposite: stop yer whinin’ about Microsoft copying the Mac! What’s funny is that now that Apple has done precisely that, come back with a new wave of successful computing products, that line of playground bullying just isn’t carrying the same punch. It’s quite aggravating for the Apple haters.

          Finally, and most importantly, Apple hasn’t created the IP landscape – that’s what Congress has done (and the courts, by the way) in stretching the original concept of intellectual property legislation grotesquely beyond what is was meant to do.

          Within the tech industry, some of the biggest problems are patent trolls that don’t make anything and Google (it’s Google that has been involved in litigation with just about every other player, from Microsoft to Oracle, not Apple – Apple has largely licensed things and moved on. In fact, I would challenge you to name a major piece of litigation in which Apple is involved with a litigant other than a Google subsidiary/partner). But the biggest IP problem is outside of the individual tech firms. It’s the record labels and Hollywood studios and book publishers and agribusiness and pharmaceuticals and so forth that have so twisted IP and pose the major existential questions about where this is going in the future.

          Whatever you think of the iPad, it’s not the reason that life saving medications sell for more than their marginal cost of production or that the song Happy Birthday has been stolen from the public domain or that biotech firms want to copyright and patent the very code of life itself.
          To highlight Apple in the context of copyright and patent problems is to fundamentally misread the playing field. Apple is largely a footnote that would be happy with just about any clear set of rules laid down to all players – and to the extent Apple has been involved, they have been pushing for less restrictive systems, not more. Less DRM on downloaded content. Less intrusive copy protection on the OS. Fair terms for licensing intellectual property. Etc.

  12. David Mills

    The issue is straightforward. Tax corporations as a percentage of revenue with no deferrals. GAAP accounting has always been a ridiculous game. Four months for remittance of overseas tax liabilities would suffice and make the directors and “c” level officers personally liable for non-payment. (I have a mean streak)

  13. EricT

    Apple started manufacturing Apple 2 models in Ireland as a way to promote redevelopment after the IRA signed an agreement with England and Apple got a lot of money to build a factory there. At the time, they were using Motorolla microprocessors that were also being manufactured in Ireland. Eventually, when the Mac arrived they started manufacturing those in Cupertino due to multi layered mother board technology. It didn’t start out as a strategy to avoid taxes, but that’s what it became.

  14. traveler

    Unconscionable to defend Apple on any grounds. Buy their products or don’t buy them. Unfortunately there are no ethical choices for some of this tech stuff.

    1. jrs

      Exactly. They are all made by abused slave labor and their often aren’t any ethical choices.

      1. readerOfTeaLeaves

        For crying out loud.
        Apple has provided me the best customer service experiences that I’ve encountered. They employee some really smart, clever people in my area. Their computers have been widely used in education and other fields.

        They have to compete in a global environment awash in tax havens, tax dodging, and secrecy jurisdictions. That doesn’t make them evil. It simply means the rules are very screwed up, and I’m pretty certain that I heard Tim Cook make precisely that point (politely) in the sections of that Senate hearing that I was able to follow — on a Mac.

        1. jrs

          I wasn’t refering to Apple’s U.S. employees as slave labor, and going on an over the top on a wage slavery rant. I was referring to actual horrible conditions of Apple workers overseas, where worker suicide is common:

          Doesn’t everyone know our electronics and the companies that profit so much from them, depend on the inhuman working conditions of the rest of the world?

  15. skippy

    Apple iPhone customers are potentially being overcharged by hundreds – possibly thousands – of dollars because a software bug is leading to excessive data being drained from mobile phones.

    And telecommunications companies appear to be cashing in on the glitch, with only one of the major telcos admitting to taking proactive steps to alert customers to the problem.
    An Apple spokesman refused to acknowledge there was a problem when questioned by Fairfax Media despite details of the glitch, and how to rectify it, being covered on Apple’s website. Online support forums dedicated to data drain among other issues have also attracted more than 250,000 hits on the digital media giant’s website.

    The iOS 6.0 operating system, released by Apple in September, contained a bug understood to have caused connection problems that led to devices switching to the 3G and 4G network when customers were connected to Wi-Fi.

    Read more:

    I received a $50 prepaid for Christmas, which I used to download some new from Apple for use on my . A few days later, when I tried to download new versions of Apps, I was told that I owed Apple $38. I did not see how that is possible, since I did not buy any Apps except with the . I was very busy, and a few months went past before I decided to look into it.

    My iPhone no longer works properly. It does not shut down. And I am unable to download the newest updates to my Apps because I am told that I must pay $38 that I owe before being able to download updates to the Apps that I have both bought and received for FREE. Doing this may resolve the issue of my iPhone not shutting down. As a result my iPhone battery does not last more than 2 hours, and it is constantly shutting down because it has no at the most inopportune times.

    I finally had a week off and decided to take the time to look into this. After finding the appropriate way to make a complaint (only via email, Apple does not allow a consumer to speak to customer service for this issue on the telephone) I sent them a letter.

    The final outcome is that I still owe Apple $38. The wrote: “iTunes Store terms and conditions state to not use pre-paid credit cards as they do not process correctly. We have not received the payment for this order hence its showing as bad credit on your account.”

    I don’t know how many people read all the “terms and conditions” – I think very few. So Apple is using technically poor software to process orders, since it is unable to handle the prepaid credit cards as they are meant to be used. And then it is able to charge the customer for purchases which the when the credit card limit has gone over the prepaid amount.

    I am being charged for Apple’s and technically poor software.

    Apple Inc. Sued For iTunes Overbilling and No Refund Policy

    By Jim Brown on May 3, 2012
    A California consumer has filed a class action against Apple Inc. for alleged double-billing of purchases made through iTunes, the App Store, and the iBookstore. The complaint also claims Apple refused to refund the overcharges by instituting an illegal “no refund” policy, in violation of the state’s statutory law and common law.

    The complaint states that in December of 2010 Apple billed the plaintiff twice for one of 22 songs that he downloaded from iTunes. When he brought the overcharge to Apple’s attention, Apple sent an email refusing to refund the overcharge based on its purported no-refund policy.

    The email said:

    “Your request for a refund…was carefully considered; however, according to the iTunes Store Terms of Sale, all purchases made on the iTunes Store are ineligible for refund. This policy matches Apple’s refund policies and provides protection for copyrighted materials.”

    According to the lawsuit, however, the agreement governing the “use of” the Apple Stores says no such thing.

    “Under the Agreement, as with any consumer transaction, Apple may bill customers only once for each product or service that is purchased. With troubling regularity, however, Apple has ‘double billed’ customers for purchases made through the Apple Stores. In those cases, when a customer purchases a song, movie or book, Apple bills that customer twice for the same download. Apple, however, has effectuated a policy and practice of refusing to refund the extra charge to customers whom it has overbilled,” the class action lawsuit states.

    Seriously… Hand held devises and user net sites (itubes – X-brick) are just billing portals which then are subject to bend-over terms and conditions or billing software that goes oopsie here and there ie see terms and conditions. FFS… any thing that requires a CC or other form of debt card in advance to set up an account thingy~ They all do it!!!

    skippy… its like the old herder joke… when the second is asked if want some… they proceed with wellingtons on to stick their – own head – in the fence.

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