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Advocacy Group Targets Apple as a Tax 'cheater'

A new liberal advocacy group has targeted Apple as a tax "cheater" for its leadership in a coalition calling for Congress to allow U.S. companies to return foreign earnings to the country at a greatly reduced tax rate.

Apple already doesn't pay its full share of U.S. taxes, said US Uncut, a decentralized liberal group formed earlier this year. The company is also a leading voice in the WinAmerica campaign, an effort to return US$1 trillion in earnings by U.S. companies back to the U.S. at a 5 percent tax rate, instead of the normal 35 percent for repatriated earnings.

US Uncut has targeted several U.S. companies for its scorn. "Our rallying cry is, 'we all pay our taxes, and why don't they?'" said Ryan Clayton, a co-founder of US Uncut. "At the same time as we're firing firefighters, teachers and cops, it's just really irresponsible for them to not be paying their fair share of the public burden."

In its fiscal year 2010, ending in September, Apple reported income of $18.5 billion and paid $2.7 billion in income taxes, or about 15 percent.

Apple is not alone. Many U.S. companies report a large percentage of their income as earned overseas, and take advantage of other tax breaks, to reduce their tax rate from the full 35 percent in the U.S., said Mike Lunardoni, tax director with WTP Advisors, a tax advisory firm in White Plains, New York.

US Uncut is focusing recently on Apple, with protests planned outside the vendor's stores Saturday, because of its leadership in WinAmerica, Clayton said. "If [Apple] is going to be the tip of the sword for tax cheaters, then they're going to be the first on our target list," he said. "Engaging in this deceitful, shameful campaign is really sad, because most the time, Apple is a great company that operates in a socially responsible manner."

The "tax cheat" coalition is taking money from the U.S. government, Clayton said. "The middle class has to make that up, either through cuts, or through higher middle-class taxes," he said.

As of Friday afternoon, US Uncut members had Saturday protests planned at about 20 Apple locations, including Chicago, San Francisco, Seattle, Boston, and Washington, D.C.

Three Apple representatives didn't return e-mails and one didn't return a phone message seeking comment on the US Uncut protests. WinAmerica also did not return an e-mail.

Although US Uncut accused Apple of dodging billions of dollars in taxes, the company's tax payments are in line with several other tech companies. In 2010, Apple recorded an effective tax rate of 24 percent of its income, a larger percentage than recorded by several other large tech companies, including Google, Hewlett-Packard, Yahoo and eBay. The effective tax rate includes current and future worldwide income taxes a company expects to pay, Lunardoni said.

WinAmerica members argue that repatriation of foreign earnings at a low tax rate would stimulate the slow U.S. economy. Members of the WinAmerica coalition include Microsoft, Cisco Systems, Google, Oracle and Adobe Systems.

"We strongly support the need for corporate tax reform, but we should move now to allow businesses the power to bring this money home and invest it into our still fragile economy," WinAmerica said on its website. "We have an opportunity right now to strengthen our economy, reduce our deficit, put people back to work, and invest up to $1 trillion in America."

A tax repatriation bill in Congress, called the Freedom to Invest Act, has bipartisan support, WinAmerica said. The bill, awaiting action in the House of Representatives Ways and Means Committee, "would boost investment in America's economy at little to no cost to U.S. taxpayers, and has already garnered bipartisan support in the House and united folks with different political and ideological beliefs," WinAmerica said.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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