With a market capitalization of $570 billion, Cupertino-based Apple is the wealthiest company in the world. And while it makes universally loved products, what the company does with its earnings is raising some pretty prominent eyebrows — most notably, perhaps, those belonging to Nobel Laureate Joseph Stiglitz. In an interview with Bloomberg, the renowned economist spoke harshly about the company's habit of storing a huge chunk of cash overseas — a practice that allows it to avoid a significant amount of US taxes.
“Our current tax system encourages companies to keep their money abroad, opens up a vast loophole through what is called the transfer-pricing system that allows them not only to keep their money abroad but, effectively, to escape taxation,” Stiglitz told the publication.
He continued to say that the fact that roughly $215 billion of Apple’s $232 billion in cash is kept outside the country amounts to fraud. "Here we have the largest corporation in capitalization not only in America, but in the world, bigger than GM was at its peak, and claiming that most of its profits originate from about a few hundred people working in Ireland — that’s a fraud.”
Stiglitz is referring to Apple's Ireland HQ and 5,500 employees operating out of the country. Because the corporate tax rate there is 12.5 percent, as opposed to the United State's top rate of 35 percent, Apple saves billions of dollars in unpaid taxes by claiming earnings come from its Ireland division.
This is not a new issue. In 2012 The New York Times published a piece detailing how "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." According to the Times, this method was so successful in reducing taxes that it is now employed by "hundreds of other corporations."
Bloomberg reports that Apple has denied any illegality, and, indeed, it does appear that Stiglitz is critiquing the company for taking advantage of poorly written tax laws — not for breaking them.
Might these laws be changed under a future presidency of Hillary Clinton? Maybe attendees of Apple CEO Tim Cook's upcoming August 24 Hillary Clinton fundraiser, picked up by CBS 5, can email and let us know if the topic comes up.
Related: Apple Barely Pays Any Taxes