Apple’s Phantom Taxes Hide Billions in Profits

By PETER SVENSSON | AP | JULY 23, 2012

On Tuesday, Apple is set to report financial results for the second quarter. Analysts are expecting net income of $9.8 billion. But whatever figure Apple reports won’t reflect its true profit, because the company hides some of it with an unusual tax maneuver.

Apple Inc., already the world’s most valuable company, understates its profits compared with other multinationals. It’s building up an overlooked asset in the form of billions of dollars, tucked away for tax bills it may never pay.

Tax experts say the company could easily eliminate these phantom tax obligations. That would boost Apple’s profits for the past three years by as much $10.5 billion, according to calculations by The Associated Press.

While investors might rejoice if Apple suddenly added $10.5 billion to its profits, unilaterally erasing a massive U.S. tax obligation could tarnish its reputation as a relatively responsible payer of U.S. taxes. Instead, the company is lobbying to change U.S. law so that it can erase its liabilities in a less conspicuous fashion. The issue has become part of the presidential campaign.

Like other companies, Apple typically keeps profits on overseas sales in overseas accounts. When someone buys an iPad in Paris or Sydney, for instance, the profit stays outside the United States.

Apple may pay some corporate income taxes on that profit to the country where it sells the iPad, but it minimizes these by using various accounting moves to shift profits to countries with low tax rates. For example the strategy known as “Double Irish With a Dutch Sandwich,” routes profits through Irish and Dutch subsidiaries and then to the Caribbean.

When it comes to using creative tax techniques, Apple is no different from other multinational corporations, says Robert Willens, an independent accounting expert.

And just like other corporations, Apple leaves cash overseas. If it brought it home to the U.S., it would have to pay federal income taxes on the money (though it would get a credit for foreign taxes already paid). In Apple’s case, those overseas accounts have grown to a staggering $74 billion — equal to the market value of Citigroup Inc.

The money is accumulating overseas because corporations are counting on lower U.S. tax rates in the future. At 35 percent, the U.S. corporate tax rate is among the highest for developed countries. In 2004, Congress enacted a one-year “tax holiday” for overseas earnings, and multinationals are hoping for a repeat of that. Presidential candidate Mitt Romney wants to permanently eliminate federal taxes on overseas profits. President Barack Obama attacked that idea last week, saying it won’t create U.S. jobs, like the Romney campaign contends.

Where Apple does differ from other companies is that it sets aside a portion of these overseas profits, marking them as subject to U.S. taxes sometime in the future. Essentially, it’s saying “this is money that we’ll likely have to pay U.S. federal income taxes on” because we intend to repatriate it, says Willens.

But because Apple doesn’t actually bring the profits into U.S. accounts, it doesn’t pay the taxes. Instead, it records a tax liability. When Apple reports quarterly results, it subtracts these liabilities from its profits, even though it hasn’t actually paid the taxes.

The liabilities accumulate, and as Apple’s profits grow, they’re piling up faster and faster.

“When you capitalize that into the future, it might be tens of billions of dollars,” said Martin Sullivan, an economist with Tax Analysts, a nonprofit publisher.

The company had a net $6 billion of tax liabilities at the end of September, the last reported figure. It’s had two blow-out quarters since then and is expected to report another one Tuesday. Based on reported and expected profits for the last three quarters, the liabilities can be estimated at around $10.5 billion.

Apple declined to comment on the specifics of its tax strategies or why it records tax liabilities that other multinationals avoid.

“Apple has conducted all of its business with the highest of ethical standards, complying with applicable laws and accounting rules,” the Cupertino, Calif., company said in a statement.

Yet Apple has made clear that it has no intention of repatriating its profits from overseas at the current U.S. tax rate. When CEO Tim Cook announced that the company would start paying a dividend this summer, he said the board determined the size of the dividend solely by looking at the amount of cash the company has in U.S. accounts.

“We do not want to incur the tax cost to repatriate the foreign cash at this time,” Chief Financial Officer Peter Oppenheimer told investors in March.

Apple’s net tax liabilities started building three years ago, when its sales started rocketing because of the iPhone. In that time, the company has reported a total of $69 billion in net income. If it had applied the same accounting practices as other multinational technology companies, and not marked some overseas profits as subject to U.S. taxes, its profits would have been about $78 billion, or 13 percent higher.

The boost to net income could mean a boost to the stock, since companies are usually valued on their earnings. If investors were to value Apple based on the last 12 months of earnings, with the tax liabilities added to earnings, the stock might be 13 percent higher.

Willens and Sullivan say that Apple could erase its liabilities by considering the profits “permanently reinvested” overseas, acknowledging that they will never be brought home. That would erase the tax liability, but it could make Apple look like a less responsible corporate citizen.

“I doubt they’re going to do that on their own, because they don’t want to be set up for criticism,” said Willens.

Groups such as Citizens for Tax Justice compile lists of the tax rates corporations report. Apple looks like a relatively good taxpayer on such lists, with a 24 percent rate. But Apple doesn’t actually pay the 24 percent, since it isn’t repatriating its overseas profits. The actual taxes Apple pays are 13 percent of profits, as computed by Sullivan. That’s a relatively low rate compared with other multinationals.

But keeping the money overseas limits what Apple can do with it. It means, for instance, that Apple can’t use it to buy another U.S. company, or give it to shareholders.

To get the money home without paying full U.S. taxes on it, the company advocates a change in U.S. tax law. It’s a member of Working to Invest Now in America, or WinAmerica. The coalition is lobbying for two congressional bills that would temporarily reduce the tax rate on such earnings to 5.25 percent. That would encourage the repatriation of some of the $1.4 trillion in cash that U.S. companies have sitting in overseas accounts, the group says.

The temporary tax amnesty enacted in 2004, resulted in hundreds of billions being brought home to the U.S. But according to the Congressional Research Service, it didn’t create jobs or stimulate the economy, as had been hoped.

Google Inc., Oracle Corp., Microsoft Corp. and Cisco Systems Inc. are also members of WinAmerica, but none of them stand to gain as much as Apple from a tax amnesty, because they have less cash overseas.

Google and Apple Partner to Bring Spy Aircraft

Software giants will use military-grade cameras to take powerful satellite images

By VANESSA ALLEN | MAIL ONLINE | JUNE 10, 2012

Spy planes able to photograph sunbathers in their back gardens are being deployed by Google and Apple.

The U.S. technology giants are racing to produce aerial maps so detailed they can show up objects just four inches wide.

But campaigners say the technology is a sinister development that brings the surveillance society a step closer.

Google admits it has already sent planes over cities while Apple has acquired a firm using spy-in-the-sky technology that has been tested on at least 20 locations, including London.

Apple’s military-grade cameras are understood to be so powerful they could potentially see into homes through skylights and windows. The technology is similar to that used by intelligence agencies in identifying terrorist targets in Afghanistan.

Google will use its spy planes to help create 3D maps with much more detail than its satellite-derived Google Earth images.

Nick Pickles, director of Big Brother Watch, warned that privacy risked being sacrificed in a commercial ‘race to the bottom’.

‘The next generation of maps is taking us over the garden fence,’ he warned. ‘You won’t be able to sunbathe in your garden without worrying about an Apple or Google plane buzzing overhead taking pictures.’

He said householders should be asked for their consent before images of their homes go online. Apple is expected to unveil its new mapping applications for its iPhone and other devices today – along with privacy safeguards. Its 3D maps will reportedly show for the first time the sides of tall buildings, such as the Big Ben clock tower.

Google expects by the end of the year to have 3D coverage of towns and cities with a combined population of 300million. It has not revealed any locations so far.

Current 3D mapping technology relies on aerial images taken at a much lower resolution than the technology Apple is thought to be using. This means that when users ‘zoom in’, details tend to be lost because of the poor image quality.

Google ran into trouble when it emerged that its Street View cars, which gathered ground-level panoramic photographs for Google Maps, had also harvested personal data from household wifi networks.

Read Full Article →

Buy Apple, Support Slavery

By LUIS R. MIRANDA | THE REAL AGENDA | MARCH 30, 2012

Unless you’ve been sleeping under a rock for the past decade or so, it may come as a surprise to learn that large technology corporations such as Apple use and abuse workers in third world nations where governments do not provide any protection for their labor force. A new chapter in the modern slavery book is being written this week as more proof of Apple’s slavery scheme is uncovered.

According to AFP, a recent audit conducted in the company’s factories reveals serious workplace abuses in China, where Apple products are built. Previous to this audit, Apple contractors have been accused of abusing factory workers in the Asian country. Apple officials have even confessed to knowing about the abuses for a long time, but did nothing about it. In the specific case of Foxconn, the largest manufacturer of electronics an computer components in the world, the long working dates combined with low wages caused many workers to threaten to commit suicide; many went through with the threat and jumped off the factory roof. Foxconn is the producer of components for Mac mini, iPod, iPad, and iPhone, as well as electronics for companies like Dell, HP, Playstation 2 and 3, Wii, Xbox, Motorola, Nokia, and the Amazon Kindle.

Back in January, The New York Times published an article regarding the abuses committed in China against factory workers who in addition to working endless hours everyday, had to put up with unsafe working conditions. An explosion in one factory caused the death of 2 workers with dozens suffering serious injuries. “… the 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,” reported the NYT.

“We’ve known about labor abuses in some factories for four years, and they’re still going on. Why? Because the system works for us. Suppliers would change everything tomorrow if Apple told them they didn’t have another choice,” said an Apple executive back in January. Former Apple CEO, Steve Jobs, preaches this kind of philosophy in his book, which has been read by millions of people around the world. He himself would squeeze every drop of sweat from many of his workers, which was one of the reasons why Jobs left apple before returning to take the company from the technological shadow to one of the richest in the world. But that success, as we have learned, is based on the abuse of hundreds of laborers who live, work and die in factories where Apple products are made. In several factories, workers usually accumulate between 76 and 80 hours before taking a rest. This is the limit established by Chinese labor laws. In other cases, people worked for a week in a row, before having a 24 hour break.

“The Fair Labor Association gave Apple’s largest supplier the equivalent of a full-body scan through 3,000 staff hours investigating three of its factories and surveying more than 35,000 workers,” revealed FLA president Auret van Heerden. “Apple and its supplier Foxconn have agreed to our prescriptions, and we will verify progress and report publicly.” Aside from this audit, Apple and its partners seem to have the lack of laws and working rights as its best allies to force workers into modern slavery camps. According to the report presented by the FLA, the abuses do not stop at long working periods. The audit also revealed dangerous working conditions which directly threaten the health and well being of the laborers.

For the most part, Apple and its contractors have operated off the hook, with no monitoring that ensures fair conditions and wages for workers or basic safety conditions. Up until last January, Foxconn had ignored requests to improve working conditions at its factory in China. According to FLA’s van Heerden, if Foxconn respected its commitments, at least 1.2 million employees’ lives would be improved as the company would establish a new set of standards for factories in China. Any protection for the workers have been limited to rhetoric, as in the case of China’s future Premier, who simply suggested that Chinese workers should be treated more humanly, as supposed to requesting immediate action to end modern slavery practices.

In the past, Li Keqiang has said that corporations “should pay more attention to caring for workers.” The Vice Premier’s passivity resembles how little China cares for its people, who are often treated by the governing Communist Party as a little less than animals, especially when it comes to individual and labor rights. While middle-class and wealthy consumers enjoy the benefits and perks of owning Apple products around the world, slave workers continue to be overworked and underpaid by Apple and Foxconn.

The Fair Labor Association also conducted and overview of Apple contracted factories in Taiwan, where companies like Quanta and Pegatron also produce Apple products. While he was Apple’s CEO, Steve Jobs defended the current working conditions at factories in China. “You go in this place and it’s a factory but, my gosh, they’ve got restaurants and movie theatres and hospitals and swimming pools. For a factory, it’s pretty nice,” he said during an interview. “It’s not a sweatshop.”

“The work at Foxconn’s Shenzhen plant can be repetitive, exhausting, and alienating—like manufacturing jobs anywhere in the world,” reported Tony Law for Wired Magazine in February 2011. His in-depth report told “the wonders” of Foxconn’s labor camps, where workers had everything from counseling to dormitories. According to Low’s report, a Chinese newspaper reporter saw first hand what working for Foxconn is all about. ” … tales of hopelessness and voluntary overtime affidavits.” Up until April 2011, at least 17 workers had committed suicide at that factory alone. While people in the United States and Europe talk and worry about the dangers of finger strains that teenagers face in light of the heavy use of iPads and iPods, in Asia factory workers die or are worked to death to provide Americans and Europeans with the opportunity to screw up their articulations.

After FLA released its report about the lousy working conditions and long working days people who make Apple products deal with in Asia, the company’s stock price only suffered a minor loss and stayed at $608.18 per share. Most likely, Apple customers were too busy feeling trendy and straining their fingers to notice that their loyalty to Apple directly sustains modern slavery in the world.

Why is it that technological advancement must always have these sort of strings attached? It has been the same for decades.

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Apple’s legal council: We ‘must have’ comprehensive user data

Guidelines for user spying are written under United States Telecommunications Act of 1996.

International Business Times
April 25, 2011

Security researchers unveiled this week that Apple’s iPhonewas actively logging the whereabouts of users, storing location data into an easily assessable file on the device.

But it’s not just iPhones that are keeping track of their users.

Apple’s iPhone 3G, iPhone 3GS, the iPhone 4, and iPad models are also keeping track of consumers whereabouts. Mac computers running Snow Leopard and even Windows computers running Safari 5 are being watched.

The question is why?

The company has remained silent after researchers Alasdair Allan and Pete Warden revealed this Wednesday that the iPhone was storing logs of users’ geographic coordinates in a hidden file.

“We’re not sure why Apple is gathering this data, but it’s clearly intentional, as the database is being restored across backups, and even device migrations,” the security experts wrote in their blogs.

While Apple has since remained tight-lipped on the matter, not responding to any media-inquires, another privacy snafu last year gives insight into what the company is doing with the information.

In June 2010, Congressmen Edward J. Markey, D-Mass., and Joe Barton, R-Texas wrote a letter to Apple CEO Steve Jobs inquiring about Apple’s privacy policy and location-based services.

Read Full Article…

Iphone Espia e Registra dados de localização do Usuário

O aparelho da Apple grava em tempo real o paradeiro das pessoas

Adaptação de Luis R. Miranda
The Guardian
23 de abril de 2011

Pesquisadores de segurança descobriram que o iPhone da Apple mantém um registro de onde os usuários vão e têm a capacidade de estabelecer com alto grau de precisão o local onde o usuário está a qualquer momento. Uma vez detectados os dados, o iPhone armazena a informação em um arquivo secreto no dispositivo que é copiado para o computador do proprietário quando os dois estão sincronizados.

O arquivo contém a latitude e a longitude junto com as coordenadas e um carimbo do tempo, o que significa que se alguém rouba o telefone ou o computador poderá descobrir todos os detalhes sobre os movimentos do proprietário através de um programa simples.

Em alguns telefones, pode ser quase um ano de dados armazenados, porque o registo dos dados parece ter começado com a quarta atualização do sistema operacional do telefone da Apple (IOS 4), lançado em junho de 2010.

“Apple tem feito o possível para quase qualquer um – um marido ciumento, um detective privado – com acesso a telefone ou do computador obter informações detalhadas sobre onde você está”, disse Pete Warden, um dos pesquisadores.

Somente o iPhone registra a localização do usuário desta forma, diz Alasdair Allan, um dos cientistas que descobriram o arquivo de dados e apresentaram suas conclusões na conferência Where 2.0 em San Francisco na quarta-feira. “Alasdair tem procurado códigos similares de monitoramento [Google] Android, mas segundo ele não foram encontrados”, disse Warden. “Nós não encontramos nenhum caso de outros fabricantes de celulares a fazer isso.” Embora o resto dos telefones não registram as informações do usuário do mesmo jeito que o iPhone, qualquer telefone fabricado depois de 2000 tem a capacidade de emitir a localização do usuário a traves das redes sem fio, Wi-fi e GPS. Com o uso de satélites, o paradeiro de qualquer usuário de celular pode ser encontrado tão facilmente como digitando o seu nome completo ou numero de seguro social e o sinal do seu celular é rapidamente localizado.

Simon Davies, diretor da Privacy International, disse: “Esta é uma descoberta perturbadora. A localização é um dos aspectos mais sensíveis na vida de todos – basta pensar onde as pessoas vão à noite. A existência de dados cria uma verdadeira ameaça à privacidade. A falta de aviso aos usuários ou qualquer outra opção para o controle desta tecnologia só pode vir de uma falta de consciência da privacidade na fase de projeto. ”

Warden e Allan observam que o arquivo é movido para novos dispositivos, ao substituir um velho: “A Apple poderia estar pensando sobre os desenvolvimentos futuros que requerem uma história da localização dos usuários, mas essa é a nossa especulação. O fato de que [o arquivo] é transferido através de [para um novo iPhone ou IPAD], é prova de que a coleta de dados não é acidental. “Mas eles disseram que não pareciam ser transmitidos para a própria Apple. Isto faz sentido com os requerimentos da lei aprovada em 1996 nos Estados Unidos, onde claramente o governo americano e o principal destinatário das informações coletadas pelas empresas que oferecem serviços de telefone celular,

E então um fato que as redes móveis registram a localização de telefones, e que esses dados estavam disponíveis para a polícia, um fato não muito positivo, e outras organizações reconhecidas e que estas podem accesa-las com uma ordem judicial ao abrigo de regulamentos ou leis. No entanto, sabemos que nem sempre os governos guiam suas ações com as leis. Em muitos casos as leis são criadas apenas para os cidadãos.

Congressistas de vários países em 2009, criticaram o gigantesco sistema “Latitude”, de Google que permite que as pessoas a darem os detalhes de localização para contatos confiáveis. Na época os deputados disseram que Latitude “substancialmente poderia comprometer a privacidade dos usuários, mas o Google disse que os usuários tinham que escolher especificamente para disponibilizar seus dados. O sistema do iPhone, pelo contrário, parece registrar os dados sem que o usuário concorde. A Apple não quis comentar por que o arquivo foi criado ou se você pode desativa-lo.

Warden e Allan criaram um site que responde as perguntas sobre o arquivo, e criaram um simples aplicativo para download para os usuários da Apple ver se os dados de localização de telefone são registrados. O Guardian de Londres confirmou que os aparelhos com capacidade 3G incluindo o IPAD também conservar os dados copiados para o computador do usuário.

Se alguém rouba um iPhone, têm acesso direto aos seus arquivos, e poderia extrair os dados de localização diretamente. Por outro lado, qualquer pessoa com acesso direto ao computador de um usuário pode executar o aplicativo e ver uma exposição de seus movimentos. A criptografia de dados em seu computador é uma forma de proteger contra isso, no entanto, ainda deixa os arquivos desprotegidos no telefone.

Graham Cluley, consultor sênior de tecnologia da empresa de segurança Sophos, disse: “Se os dados não são precisos para nada, então você não deve armazena-los. Não é necessário manter um arquivo no telefone com detalhes de onde você foi.” Ele sugere que a Apple poderia estar esperando para fornecer dados para a publicidade móvel no futuro e acrescentou: “Eu não acho que a Apple está realmente tentando monitorar os usuários. ” Ao mesmo tempo, Cluley não conseguiu dar outra razão para este arquivo estar no telefone.

A localização do arquivo veio à tona quando Ward e Allan estavam procurando uma fonte de dados móveis. “Estávamos discutindo fazer uma exposição de tranferencia de dados, e quando Alasdair estava pesquisando sobre o que estava disponível, encontrou este arquivo. No início, não tinha certeza da quantidade de dados que estavam ali, mas depois ele cavou mais e viu os dados coletados. Então ficou claro que havia uma quantidade assustadora que descrevia o pormenor no nosso paradeiro”, disse Warden.

Eles têm escrito sobre isto no seu blog O’Reilly Radar, dizendo: “Por que essa informação é armazenada e como a Apple pretende utilizá-lo? São questões importantes que precisam ser exploradas “.

A dupla de cientistas de dados têm colaborado em uma série de visualizações de dados, incluindo um mapa de níveis de radiação no Japão para o The Guardian. Eles estão desenvolvendo um kit de ferramentas de dados para lidar com este sistema de registro de dados.

Davies disse que a descoberta do arquivo indica que a Apple não tomar a sério a privacidade do usuário.

Um ponto importante sobre isso é que a Apple pode legitimamente afirmar que tem permissão para coletar os dados. Perto do final do termo de uso do programa Itunes, composto de 15.200 palavras, o documento diz que os aparelhos da Apple são sincronizados com o Itunes e que esta sincronização e feita para ajudar os seus “serviços baseados em localização”.

O parágrafo estabelece que “A Apple e os nossos parceiros e licenciados podem coletar, usar e compartilhar dados de localização exata, inclusive em tempo real a localização geográfica de seu computador ou dispositivo Apple. Estes dados são coletados de forma anônima e sem identificação pessoal e são usados pela Apple e seus parceiros e licenciados para prestar e melhorar os produtos baseados em localização. Por exemplo, nós compartilhamos a localização geográfica dos fornecedores de aplicações ao selecionar serviços de localização. ” Isto não somente confirma que a Apple espia aos seus usuários, mas que de fato, os dados são enviados para a Apple e não somente guardados no arquivo do iPhone, Ipad e iPod. A descrição também confirma que Apple da ou vende as informações coletadas com seus aparelhos a empresas parceiras e que as regras de privacidade que a Apple diz ter não aplicam uma dez que a informação e enviada o vendida a esses parceiros ou contratantes.