Operating Profit Margin 18.6 Times Lower Than Global Average
More Than 20 Times Difference Compared to Greater China and Japan
Yang Jeongsuk's Office: "Reducing Operating Profit to Evade Taxes"
[Asia Economy Reporter Minyoung Cha] Last year, Apple recorded sales of over 7 trillion won in South Korea, while the gap in corporate tax rates between the global headquarters and the Korean branch was found to be 4.3 times. It has been pointed out that multinational corporations are following tax avoidance methods by deliberately lowering operating profit margins to reduce corporate tax rates.
On the 2nd, Yang Jeong-sook, a member of the National Assembly's Science, Technology, Information and Broadcasting Committee, analyzed Apple's report submitted to the U.S. Securities Exchange in 2021 and Apple Korea's audit report, revealing that Apple's global operating profit margin was 29.8%, which was 18.6 times higher than Korea's operating profit margin of 1.6% against total sales.
As Apple Korea's operating profit margin was low, the corporate tax paid also showed a difference. In Korea, out of total sales of 7.0971 trillion won, 6.28 billion won, or 0.9%, was paid as corporate tax, whereas Apple as a whole paid 14.527 billion dollars, or 4.0%, out of total sales of 365.817 billion dollars, showing a 4.3 times difference.
The reason Apple Korea's operating profit margin is significantly low is that Korea imports major products through its Singaporean subsidiary, 'Apple South Asia,' paying most of the sales amount as import costs. In 2021, out of 7.0971 trillion won in sales within Korea, 6.7233 trillion won, or 95%, was paid.
Apple Korea's operating profit margin is also low compared to other regions. Before adjusting for accounting standards differences by country (such as R&D expenses and other costs), the operating profit margins were 34.8% in the Americas, 36.4% in Europe, 41.7% in Greater China, 44.9% in Japan, and 37.2% in other Asia-Pacific regions, which were 21.7 to 28 times higher than Korea's.
Lowering operating profit margins to avoid taxes is widespread among global companies. Last year, during a national audit, Representative Yang Jeong-sook revealed that Netflix also transferred 77% of its 415 billion won sales in Korea to its headquarters, lowering its operating profit margin to 2.1%. This was about one-ninth of the headquarters' 18.3%, and the tax paid in Korea was only 2.1 billion won.
Representative Yang's office plans to urge Apple and policy authorities to promptly prepare countermeasures. Yang said, “As global companies' sales in Korea increase significantly, they should increase investment, employment, and social contributions, but instead, reducing operating profits to avoid taxes is inappropriate. They should adjust operating profit margins to levels similar to China, Japan, and other Asia-Pacific regions and pay proper taxes.”
Apple Korea, which disclosed its audit report for the first time in 12 years last month, recorded sales of 7.097197 trillion won for the 2021 fiscal year. This is an increase of 24.2% compared to the previous year. Operating profit during the same period was 111.495 billion won, a decrease of 13.3% from the previous year. Net income was 124.277 billion won. The operating profit margin was only 1.57%. Nearly 1 trillion won in retained earnings carried over was also sent to the headquarters last year through dividends.
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