Apple pays non-US income taxes of just 2 per cent

The company is likely awaiting a "repatriation tax holiday".

Apple's annual tax return (pdf), filed with the US Securities and Exchange Commission, reveals that it paid just 2 per cent tax on "foreign" (non-US) earnings in 2012.

The news, highlighted by the Sunday Times' Simon Duke, can be found on page 61 of the document, which reveals that the company owed $1,203m taxes on foreign pretax earnings of $36.8bn, and deferred payment on $490m in order to realise a tax bill of $713m this year. Even if the deferred taxes were paid in full, the company would still be paying an effective rate of just over 3 per cent.

International sales accounted for 61 per cent of Apple's business in the last year, and so many are likely to cry foul at the low proportion of taxes which it pays in the areas in which it carries out the majority of its business.

Apple, like many multinational corporations, employs many strategies to legally lower its tax bill. The company bases its entire Europe, Middle East and Africa division in Cork, Ireland, a low-tax jurisdiction, and also operates its worldwide sales and distribution network from there. In addition, the company is famous for the large amount of non-repatriated cash it sits on.

This is money which it has earned on foreign sales, and wishes to bring back to the US, but has not yet done so. Like many companies, Apple is hoping for a "repatriation tax holiday", where it can move that income back to the US without having to pay income tax on it. The most recent holiday was in 2004, and saw companies that brought back profits taxed at 5 per cent, instead of 35 per cent. Until Apple decides what to do with those cash holdings, the company is likely to continue deferring tax owed on them.

In addition, the company doesn't have to pay any tax on foreign earnings which are reinvested overseas – it has spent over $5bn this way in the 2012 tax year.

While the 2 per cent paid on international profits may harm Apple's reputation outside the US, the company still pays an effective tax rate of over 25 per cent overall, and provides a breakdown of the deductions that reduce this from the 35 per cent baseline corporation tax rate of the US.

Updated with credit to Sunday Times.

Apple's Headquarters in Cupertino, California. Photograph: Joe Ravi, CC-BY-SA 3.0

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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The campaign to keep Britain in Europe must be based on hope, not fear

Together we can show the world a generous, outward-facing Britain we can all be proud of.

Today the Liberal Democrats launched our national campaign to keep Britain in Europe. With the polls showing the outcome of this referendum is on a knife-edge, our party is determined to play a decisive role in this once in a generation fight. This will not be an easy campaign. But it is one we will relish as the UK's most outward-looking and internationalist party. Together in Europe the UK has delivered peace, created the world’s largest free trade area and given the British people the opportunity to live, work and travel freely across the continent. Now is the time to build on these achievements, not throw them all away.

Already we are hearing fear-mongering from both sides in this heated debate. On the one hand, Ukip and the feuding Leave campaigns have shamelessly seized on the events in Cologne at New Year to claim that British women will be at risk if the UK stays in Europe. On the other, David Cameron claims that the refugees he derides as a "bunch of migrants" in Calais will all descend on the other side of the Channel the minute Britain leaves the EU. The British public deserve better than this. Rather than constant mud-slinging and politicising of the world's biggest humanitarian crisis since the Second World War, we need a frank and honest debate about what is really at stake. Most importantly this should be a positive campaign, one that is fought on hope and not on fear. As we have a seen in Scotland, a referendum won through scare tactics alone risks winning the battle but losing the war.

The voice of business and civil society, from scientists and the police to environmental charities, have a crucial role to play in explaining how being in the EU benefits the British economy and enhances people's everyday lives. All those who believe in Britain's EU membership must not be afraid to speak out and make the positive case why being in Europe makes us more prosperous, stable and secure. Because at its heart this debate is not just about facts and figures, it is about what kind of country we want to be.

The Leave campaigns cannot agree what they believe in. Some want the UK to be an offshore, deregulated tax haven, others advocate a protectionist, mean-hearted country that shuts it doors to the world. As with so many populist movements, from Putin to Trump, they are defined not by what they are for but what they are against. Their failure to come up with a credible vision for our country's future is not patriotic, it is irresponsible.

This leaves the field open to put forward a united vision of Britain's place in Europe and the world. Liberal Democrats are clear what we believe in: an open, inclusive and tolerant nation that stands tall in the world and doesn't hide from it. We are not uncritical of the EU's institutions. Indeed as Liberals, we fiercely believe that power must be devolved to the lowest possible level, empowering communities and individuals wherever possible to make decisions for themselves. But we recognise that staying in Europe is the best way to find the solutions to the problems that don't stop at borders, rather than leaving them to our children and grandchildren. We believe Britain must put itself at the heart of our continent's future and shape a more effective and more accountable Europe, focused on responding to major global challenges we face.

Together in Europe we can build a strong and prosperous future, from pioneering research into life-saving new medicines to tackling climate change and fighting international crime. Together we can provide hope for the desperate and spread the peace we now take for granted to the rest of the world. And together we can show the world a generous, outward-facing Britain we can all be proud of. So if you agree then join the Liberal Democrat campaign today, to remain in together, and to stand up for the type of Britain you think we should be.