Thecontrolled foreign corporation refers to the taxation the guidelines,which apply in a bid to limit the artificial differing of taxation.The deferral is done through the utilization of off show low taxorganizations.
TheUS government offsets eth foreign country credits on the UScorporations and applies the US local rates of taxation to charge thetaxation on the US corporations.
Transferpricing is the pricing of commodities of controlled organizations.The entities are usually legally controlled hence the price of alltheir goods and services are set according to the pre-set rules andguidelines (TaxManagement Inc.,2012). The concerns raised by the sub-committee pertains theauthenticity of the format of pricing.
TheSubpart F income refers to the taxable income of a controlledorganization, which does not exceed all the earnings of the firm. TheUS established the subpart F income in order to discourage controlledforeign corporations from reporting low income and evading taxation.
Thecheck-the-box policies led to loopholes for taxation avoidance anddeferral techniques. The regulation led to large-scale evasion andavoidance of tax in the US.
Theforeign personal holding company income includes dividends, net gainsand the net currency gains obtained from minor transactions. Samecountry exception refers to the tax exemption offered to the localfirms in the US.
ForeignBase Company Sales Income refers to the threshold of foreign incomebelow which there is no taxation. Manufacturing exception is thecapital allowance on the manufacturing firms.
8.Apple’s organization structure enables it to pay low tax given thatit has diversified its tax risks. It has established branches invarious countries.
9.The tables provide an overview of the progress of Apple Company forthe three years, 2010, 2011 and 2012.Additionally, the tables providethe tax levied on the various organizations, which helps in the AppleCompany’s benchmarking process (TaxManagement Inc.,2012).
Theeffective tax rates for Apple Company over the last three years are
2010 = 25.2%
2011 = 24.9%
2012 = 25.7%
Theeffective tax rates according to the generally accepted accountingprinciplesare computed by deduction of deductible items andadditional of non-allowable items to the net income of an entity.
Thetax rates appear egregious given that they reflect the current marketconditions.
Theprovision for income taxes of $14, 030 represents the fund set asidefor income tax. The provision caters for any discrepancies in theincome tax reported.
Currenttax refers to the taxation payable in the current financial periodwhile deferred tax refers to tax, which will be payable in future.
Appleprovided a summarized tax entry pertaining to the increase of thetaxation in the current period. The entry revealed the increase intaxation for the three consecutive years.
Thecomputed expected tax of $19517 represents an estimation of tax inthe current period. Its computed as follows:
25.2%of $77450 = $19, 517
Investedof foreign subsidiaries is a subtraction given that the item is notallowable during taxation income determination. The item is also asubtraction because Apple makes its subsidiaries independent.
TheIrish negotiated rate was lower than the local Apple tax rate of25.2%. Ireland wanted to offer the rate because the rate attractsApple’s investment.
Apple’seffective tax rates on the foreign earnings over the three years canbe obtained through the following:
Taxrate (282/13000) x 100 = 21.7%
Taxrate (769/24000)x 100 = 32%
2012 $ 36.8
Therate of tax in 2012
(1203/36800)x 100 = 32.7%
AppleCompany does not provide the same current rates as the provision forthe taxes it makes. The provision for the foreign taxes is relativelyhigher than the current taxes because of the accounting prudenceprinciple.
Therate recorded on Irish records is 25.2% as a percentage of AppleCompany’s foreign pretax earnings.
AppleCompany manages to record its earnings in Ireland through liaisingwith the Irish tax authorities who provide ready tax returns onApple’s subsidiary.
Taxationis computed using the earnings after the deduction of interestcharges .For the Apple Company, the earnings after the interestcharges in:
Thetaxation rate is 25.2%
2010 $ 14,013
Taxfor 201025.2% of$ 14,013 = $3531.276
Taxfor 201125.2% of $ 41,733 = $10516.56
Thetax for 2012 = 25.2% of $ 25,922 = $6532.533
TheUS effective tax rates are high because the disposable income and theincome per capita is high.
Theamount Apple company is not willing to repatriate is $ 5.895.
Thetax rate is (1203/5895) x 100 = 20.4%
Appledoes not have unremitted earnings from its foreign subsidiaries,which it should repatriate.
Apple’soperating companies are performing favorably well despite thedeferred tax valuation allowances.
Uncertaintax position refers to the uncertainty of a tax payer with regard tothe amount of tax amount and the period of payment.
Apple’sdisclosure with regard to the uncertain positions portrayed taxavoidance strategies. The disclosure revealed the loopholes used byentities in tax evasion.
Apple’sresponse to the fact that the managers of its Irish subsidiaries areproductive is great. The state of affairs is a favorable to theparent company, Apple. Therefore, the company is asserts itsindependence.
Thebest effective tax rate would be lower than 25.2% in order to boostthe earnings of Apple Company and its subsidiaries.
Thetaxation strategy of Apple Company in the issuance of debt streamsfrom the fact that debt interest is allowable for tax purpose.
TheApple operations international Apple subsidiary holds its cashreserves in Ireland and the parent company has not repatriated thecash and liquid investments.
AppleCompany responded positively to the enquiries on the investigationson the non-repatriated investments and cash reserves.
Thecomprehensive analysis of Apple’s tax footnote and the testimony ofcongress show that Apple is a good and lucrative corporate entity.The compliance of Apple to the Irish authorities attests to thereliability of the international company, Apple.
AppleCompany’s tax strategies are in sync with the U.S tax regulations.It is in line with the spirit of U.S tax regulation.
Myopinion of Apple’s financial statement tax disclosures is that theyare very helpful. The tax disclosures are comprehensive and theinformation provided is substantive.
TheApple Company’s financial statement tax disclosures are veryadequate to allow the stakeholders to assess the risks and benefitsto its global tax positions.
TaxManagement Inc.(2012).Taxmanagement transfer pricing report.Washington, D.C. : Tax