Woes of the titans: Apple’s tax scheme, Google’s SpyFi

It’s hard out there for Silicon Valley companies in the perpetual spotlight, because sometimes the light shines on their flaws and imperfections. For Apple and Google, developments over the weekend come on the heels of other negative news lately, from a government lawsuit accusing Apple and book publishers of e-book price-fixing to a possible U.S. antitrust action against Google. A Politico piece last week titled “Tech firms behaving badly” included quotes from experts and critics who say tech firms that once considered themselves different and anti-establishment are now engaging in the same type of behavior they once scoffed at.

• A New York Times article Sunday detailed how California-based Apple avoids paying some taxes by strategically placing subsidiaries, such as an office in Reno to manage and invest its money. (Nevada’s corporate tax rate is zero.) Key numbers cited in the piece: The Silicon Valley company sidestepped an estimated $2.4 billion in taxes in the United States last year; its overall tax rate was 9.8 percent, or $3.3 billion on $34.2 billion in global profit. The tax-avoidance tactics aren’t unique, although the article notes that some Silicon Valley tech companies have followed paths paved by Apple. The article points out that tech companies generally enjoy a lower tax rate than other American companies.

A similar conclusion about corporate tax rates was reached recently by the Greenlining Institute, something the Mercury News’ Chris O’Brien blogged about earlier this month. GMSV has asked before whether tech companies should do more when it comes to taxes; O’Brien asks whether we “should be outraged” about the continuing drop in corporate tax contributions to the federal budget. Tech companies, by the way, had spent lots of time and money on pushing for repatriation of foreign profits over the past year. (See The tech push for a tax holiday to ‘win America’.) But a lobbying coalition backed by Apple, Cisco Systems and Microsoft recently disbanded and put its effort on hold, according to Bloomberg.

In a response provided to the NYT, the Cupertino giant points to the jobs it has created in the United States, its philanthropy, and says it has “generated” almost $5 billion in state and federal income taxes in the first half of fiscal year 2012.

It’s yet another critical look by the NYT recently at how Apple has become the world’s most valuable company and amassed a cash hoard that now totals $110 billion. In January, the newspaper looked at the demise of U.S. manufacturing by focusing on the supply chain of Apple’s popular consumer products, including details about the poor working conditions at the Chinese factories the company uses. (See Quoted: on Apple and America.)

Apple recently agreed to an outside — if not exactly independentaudit of labor practices at the factories it uses, and has vowed to be more transparent about labor issues. Wages in China have reportedly begun to rise. Yet worker protests continue at Foxconn, where last week about 200 workers threatened suicide over a wage dispute, Reuters reported.

• When Google Street View vehicles were discovered to be collecting personal data from unencrypted WiFi networks in 2010, Google said it was done inadvertently. The Mountain View company later pinpointed what came to be known as SpyFi to a single engineer. But a recently released Federal Communications Commission report, whose findings were reported Saturday by the Los Angeles Times, shows that the supposedly rogue engineer who wrote the code that allowed for the data collection told at least two others at the company, including a senior manager. The collected data was set aside for future analysis — which Google reportedly says didn’t happen.

The FCC fined Google $25,000, saying it impeded the agency’s investigation — something the company disputes, but also found that Google had not violated wiretapping laws. A slap on the wrist? Perhaps. But here’s what SpyFi has wrought, besides lawsuits: continuing tough scrutiny of Google’s every move related to privacy. Since SpyFi, Google has had other privacy-related missteps. For example, the Federal Trade Commission is investigating it for employing a workaround to Apple’s Safari browser’s cookie-blocking. In addition, the umbrella privacy policy it announced in January was met with hard questions. And SpyFi itself may not be over, says law expert and professor Jeffrey Rosen in an interview with PBS NewsHour. Rosen notes the possibility of a coverup and said the Justice Department could enter the picture.


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  • Let’s just make it simple here, huh? The crooks who ripped off the U.S. for trillions so far are feeling extremely insulted that a bunch of geeks at Apple are sitting on cash that rightfully belongs to the scamsters/banksters. You don’t get it? That’s OK. The raid will commence – be patient.

    The big sin of Apple is bypassing my location services to allow scum and crooks to find me anyway. Only police and feds are supposed to be able to do that. So you can moan and groan about privacy till the cows come home – makes no difference.

  • sd

    Once again, Apple is in the center spotlight for something that many other companies are doing. One wonders if the NYT article was about, say, Cisco, if the article would have had such prominence.

    • Levi Sumagaysay

      Sd, what better way to highlight tax-avoidance strategies than by scrutinizing how one of the world’s most valuable and beloved companies does it? It comes with the territory — which is why protesters know to rail against Apple over overseas manufacturing when so many other American and tech companies do the same thing.