China takes a bite out of Apple privacy claims

What happens when an unstoppable force meets an immovable object? We may be witnessing the answer with Apple, a long-time privacy advocate, acceding to Chinese demands on access to its iCloud services in the country.

Iphone X (Reuters/T. Peter)

China is not big on privacy. The Communist Party government in the People’s Republic is currently in the process of developing a so-called “social credit system” for its citizens, which will use various forms of data, much of it personal and obtained through mass surveillance, to establish a national “reputation” database.

That might sound like something from a dystopian TV drama, but bit by bit, Xi Jinping’s government has been legislating to bring about such a reality. One example is the new cybersecurity law introduced last summer, one of the provisions of which requires companies that hold the data of Chinese citizens to store that data on Chinese servers and effectively make it available to the Chinese government.

Apple, the world’s largest IT company by revenue, is big on privacy. The California-based tech superpower has doggedly refused various FBI and US government requests to extract data from locked iPhones, most notably in 2016 when the FBI wanted to extract data from the iPhone of one of the terrorists from the 2015 San Bernardino attack.

The pioneering company regularly promotes its own privacy and encryption standards — in 2016, CEO Tim Cook sent a public letter talking about the intrinsic importance of privacy to Apple.

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“Here’s the situation,” said Cook, in an interview around the same time. “On your iPhone today, there is likely health information, financial information, there are intimate conversations with family and co-workers and there are probably business secrets and you should have the ability to protect it.”

Except, it seems, in China, where the company earns tens of billions of dollars a year. From today (February 28), Apple is transferring the operation of its iCloud service for Chinese users to a local, state-owned firm called Guizhou-Cloud Big Data (GCBD).

Read more: China’s Xi Jinping urges respect for ‘cyberspace sovereignty’ at internet summit

That means that the Chinese government will now have far easier access to whatever Chinese users store on Apple’s cloud services within the country. Privacy advocates and human rights activists are appalled but Apple claims that not agreeing to the move would have actually led to less privacy and security for its Chinese users.

The Apple of China’s omnipresent eye

The move has been in the offing since last year, when Apple and GCBD announced a partnership agreement. Apple wrote in an email to its users in mainland China that the move “enables us to continue improving the speed and reliability of iCloud and to comply with Chinese regulations.”

Chinese President Xi Jinping, Apple's Tim Cook (Getty Images/S. Ted S. Warren-Pool)Chinese President Xi Jinping meets with Apple CEO Tim Cook

Those Chinese regulations show scant regard for users’ rights to privacy, particularly if Chinese police or government officials argue that “national security” is at stake. For example, if Chinese authorities approach GCBD in the future about accessing the data of a Chinese-based iCloud user for a criminal investigation, the company has a legal obligation to provide access.

Access is provided to iCloud accounts via cryptographic keys and until now, all such keys have been based on US servers, meaning any attempts — by China or anyone else — to access them had to go through the US legal system.

However, Apple’s acquiescence to the Chinese means that for the first time, those keys will be stored on Chinese servers meaning access to them is subject to Chinese legal processes only.

“While we advocated against iCloud being subject to these laws, we were ultimately unsuccessful,” Apple said. It claims it will still maintain control over encryption keys for users, but it is hard to square that claim with the fact that access will now be a mere Chinese legal ruling away for whatever entity in China pursues it.

Likewise, Apple’s claim that there will be no “backdoors” — ways for hackers to access iCloud accounts by copying or learning from how others were accessed — is largely irrelevant, given that users’ accounts will be easily accessed through legal means.

Human rights groups such as Amnesty International and Human Rights Watch have heavily criticized the move by Apple, while Jeremy Daum, an attorney and research fellow at Yale Law School’s Paul Tsai China Center in Beijing, told Reuters that any attempts by Apple to block Chinese access will be easily overcome.

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“Even very early in a criminal investigation, police have broad powers to collect evidence,” he said. “(They are) authorized by internal police procedures rather than independent court review, and the public has an obligation to cooperate.”

Profit before privacy?

To be fair to Apple, it has given its Chinese users plenty of notice of the change. It also says it will not switch customers’ accounts to the Chinese data center until they agree to new terms of service — something 99.9 percent of users have already done — and has reminded them that they can opt out of iCloud if not happy with the new arrangements.

As well as that, Apple has until now been seemingly resilient in resisting attempts from the Chinese government to access user data, saying it turned down all 176 requests from the Chinese government from mid-2013 to mid-2017, before the new Chinese cybersecurity laws came into place.

Iphone X (Reuters/T. Peter)Apple has returned to growth in China after a brief period of decline

The softening since towards Chinese surveillance must be seen in the context of Apple’s increasing business presence in the world’s second largest economy. Apple recently returned to growth in China after a period of stagnation, taking in $9.8 billion (€8.02 billion) in revenue in the third quarter of 2017.

China is a huge potential growth market for Apple and the latest bow to Chinese legislation follows last year’s move by the company to remove VPN apps from its app store in China, VPNs being devices used to hide an internet user’s information. Apple has also been criticized for blocking Chinese users’ access to the different news apps, a move reflective of China’s strict censorship culture.

Other large US tech companies, such as Amazon and Microsoft, have made similar concessions to China recently, in an attempt to further access the market there.

Apple often talks of its “values,” privacy high among them. Discarding some of those “values” appears to be the price that must be paid if a large international company wants to maximize its business in Xi Jinping’s China.


Apple downgraded over ‘dramatically’ slowing iPhone X demand

Apple downgraded over ‘dramatically’ slowing iPhone X demand
Wall Street researchers KeyBanc Capital Markets and Bernstein have lowered their ratings for Apple shares due to slowing iPhone sales. This week, the firm reported weaker than expected iPhone sales for December.

“Soft iPhone sell-through suggests a saturated market and the lack of gross margin upside reduces our view of potential profit growth,” KeyBanc Capital Markets analyst Andy Hargreaves wrote in a note to clients, according to CNBC.

“This reduces our view of potential upside in the stock and prompts the downgrade,” he said, adding that the stock’s “fair value” is $178 per share.

Bernstein, which is Wall Street’s premier sell-side research and brokerage firm, has also reduced its rating for Apple shares to market perform from outperform.

“Relative to expectations, the cycle is weak, and total iPhones sold are likely to be flat for the third straight year,” said analyst Toni Sacconaghi. “We fear that unit growth could potentially decline by more than what we have seen over the last two years, largely due to the fact that iPhone X demand, in particular, appeared to slow dramatically since December.”

The analyst reduced his price target for Apple shares to $170 from $195. The company’s shares were up 0.3 percent in Friday’s premarket session, at $168.25.

Apple reported quarterly earnings on Thursday that beat expectations, while revenue which also topped estimates. However, the number of iPhone units sold fell from a year ago, despite expectations of modest growth, to 78 million iPhones.

In an attempt to calm investor fears, Apple shareholder Ross Gerber said the company sold a “perfectly fine” number of phones during the quarter, but earnings were a bit less than he was hoping for.

Apple has set a lower-than-expected revenue forecast for the current quarter of up to $62 billion, below the $65.73 billion that Wall Street was looking for.


Apple facing trillion dollar lawsuit for reducing processing speed of aging iPhones

Apple facing trillion dollar lawsuit for reducing processing speed of aging iPhones
A US woman is suing Apple for nearly one trillion dollars after the company acknowledged it had deliberately slowed down iPhones as they get older. The US tech giant now faces nine suits over the issue.

Violetta Mailyan is reportedly seeking compensation, demanding Apple pay her $999,999,999,000.

At least eight other class action lawsuits have been filed in the US District Courts in California, New York, and Illinois over how Apple handles power management of batteries in older iPhones.

The plaintiffs seek unspecified damages from Apple, in addition to reimbursement for the phone’s purchase with two of the plaintiffs asking the court to ban the company from reducing the speed of devices or, at least to oblige Apple to inform users before it does so.

Last week, the corporation admitted it had slowed down older iPhones. Apple said it has algorithms in place to help keep an iPhone running at optimal performance if there is an older battery inside that can’t keep up with the required power. Apple said it aimed to stop unexpected shutdowns of older iPhone models and keep them running to the best possible standard.

A similar case was filed in an Israeli court on Monday after Los Angeles residents Stefan Bogdanovich and Dakota Speas took Apple to court shortly after the company announcement.

READ MORE: Israelis take Apple to court for slowing iPhones in $125mn lawsuit as number of cases snowball

“If it turns out consumers would have replaced their battery instead of buying new iPhones had they known the true nature of Apple’s upgrades, you might start to have a better case for some sort of misrepresentation or fraud,” said Rory Van Loo, a Boston University professor specializing in consumer technology law, as quoted by Reuters.

Courtesy: RT

Apple sued for deliberately slowing down older iPhones

Apple sued for deliberately slowing down older iPhones
A lawsuit has been filed in California against US technology giant Apple after the company admitted to slowing down older iPhone models to keep them running longer.

According to the plaintiffs, Los Angeles residents Stefan Bogdanovich and Dakota Speas, Apple never requested consent from them to “slow down their iPhones.” The owners of an iPhone 7 and several older iPhone models, both claim they “suffered interferences to their iPhone usage due to the intentional slowdowns.”

The plaintiffs have noticed their “older iPhone models slow down when new models come out.” They are claiming damages from Apple because as they said the company’s actions caused them to suffer “economic damages and other harm for which they are entitled to compensation.”

Bogdanovich and Speas are trying to get the case certified to cover all people in the United States who own Apple models older than the iPhone 8.

On Wednesday, Apple acknowledged it had slowed down older phones. It said it has algorithms in place to help keep an iPhone running at optimal performance if there is an older battery inside that can’t keep up with the required power.

The company said it aimed to stop unexpected shutdowns of older iPhone models and keep them running to the best possible standard.

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It also explained why users could notice some older iPhone models slowing down, saying “Our goal is to deliver the best experience for customers, which includes overall performance and prolonging the life of their devices.”

“Lithium-ion batteries become less capable of supplying peak current demands when in cold conditions, have a low battery charge or as they age over time, which can result in the device unexpectedly shutting down to protect its electronic components,” Apple told CNBC.

For more stories on economy & finance visit RT’s business section

Courtesy: RT

US tax reform breaks global rules, EU says

European finance ministers are worried. They say the US’s big tax reform bill contains measures that would unfairly disadvantage European business and contravene global fair-taxation rules. Are they right?

US Treasury Secretary Steven Mnuchin (Getty Images/A. Wong)

Last week, the finance ministers of Europe’s five biggest economies — Germany, France, the UK, Spain and Italy — wrote an anxious letter to their American colleague, US Treasury Secretary Stephen Mnuchin, and copied it to all senior Republican politicians in the Congress and Senate.

The letter’s thrust: The draft US tax bill, if passed as written a week ago, would represent a break with global fair-taxation rules as applied to corporations, and represent a thinly disguised form of trade war.

“The United States is Europe’s single most important trade and investment partner,” the finance ministers wrote. “It is important that the U.S. government’s rights over domestic tax policy be exercised in a way that adheres with international obligations to which it has signed-up. The inclusion of certain less conventional international tax provisions could contravene the US’s double taxation treaties and may risk having a major distortive impact on international trade.”

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A day later, a similar letter was sent to Mnuchin by the European Commission’s four most senior economic officials and made many of the same points.

Keeping mum

The two letters didn’t get much of an answer — at least not a public one, though quiet edits to the bills taking European concerns into account may be happening behind the scenes.

Draft federal legislation in the US always exists in at least two separate versions: one drafted in the Senate, and the other in the House of Congress. The “conference process” is the negotiation that reconciles the differing House and Senate versions of a draft bill. It’s due to come to a close this week.

Read more: Ireland to finally start reclaiming Apple back taxes

Three specific measures were brought up in the European letters.

Excise tax

First, the House bill proposed a new “excise tax” of 20 percent, levied on payments made when an American company buys goods or services from a foreign subsidiary or “affiliate” — unless the subsidiary elects to treat the payments as income in the US.

The European finance ministers argued that this measure would break WTO rules because it levies a tax only on foreign goods and services, not on the equivalent domestically produced goods and services. They said it also amounts to “double taxation,” because it would effectively tax the profits of non-US-resident companies — after they already paid taxes on those same profits in their home countries.

Read moreParadise Papers: Apple shifted billions offshore to avoid tax

“Bearing in mind that almost half of transatlantic trade is intra-company trade, this risks seriously hampering genuine trade and investment flows between our two economies,” they wrote.

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EU ministers tackle tax havens

Base erosion tax

Second, the Senate bill featured a “base erosion and anti-abuse tax” (BEAT) provision. “Base erosion,” or more properly “base erosion and profit shifting” (BEPS), is a technical term referring to various accounting schemes corporations use to legally shift profits from where they’re earned, to ultra-low tax jurisdictions.

To take a common example: Multi-national corporations often establish their formal headquarters in a tax haven, assign their intellectual property to that headquarters, and then establish contracts requiring all the company’s foreign subsidiaries to pay an exorbitant “licensing fee” for the use of the corporate logo or other corporate intellectual property.

The licensing fee is set at a rate that cancels out the net revenues of the subsidiary corporations, leaving them paying no taxes in the countries where they actually produce or sell goods or services. The net effect of this “profit shifting” scheme is the erosion of the tax base of these countries — hence “base erosion.”

Base erosion  or protectionism?

The EU finance ministers said that: “Preventing base erosion is an important goal,” but “the provision appears to have the potential of being extremely harmful for the international banking and insurance business, as cross-border intra-group financial transactions would be treated as non-deductible and subject to a 10 percent tax. This may … harmfully distort international financial markets.”

The finance ministers concluded that “some of the proposed measures could constitute unfair trade practice and may discourage non-US financial institutions from operating in the US.”

Lower taxes on income from intangibles

Finally, the Europeans criticized a proposal in the Senate bill for a preferential tax regime for “foreign-derived intangible income.”

Read more: US broadside leaves WTO meeting in tatters

In essence, when US companies earn income outside the US via licensing fees, those fees would be taxed at a reduced corporate tax rate of 12.5 percent (compared to a proposed 21 percent federal tax rate for other corporate profits).

The Europeans wrote that this would subsidize exports compared with domestic consumption, and could face challenges as an illegal export subsidy under WTO rules.

Moreover, “the design of the [proposed] regime is notably different from accepted IP [intellectual property] regimes by providing a deduction for income derived from intangible assets other than patents and copyright software, such as branding, market power, and market-related intangibles.”

Legitimate concerns

Are the criticisms from Europe justified? In a word: Yes, according to the experts DW consulted.

Apple (dapd)In the future US corporate taxes would be about 25 percent. As a result, companies may decide to invest more in the US instead of Germany or France

Clemens Fuest, the president of the Ifo Institute for Economic Research in Munich, said: “The European Commission’s criticism of the US tax plans is justified. The proposed measures would disrupt international trade and lead to double taxation.”

Tobias Hentze, an economist at the German Economic Institute in Cologne, told DW that he was worried the tax reforms could be the spark for the next round of a “race-to-the-bottom” of jurisdictions competing to offer corporations ever-lower tax rates.

If the reforms go through, Hentze said, the US will go from being a high-tax to a low-tax country. Until now, the tax burden on companies has been significantly higher in the US, with a tax rate of 39 percent, compared to 30 in Germany or 34 in France.

America First, again

The US also proposes to play unfairly by taxing profits that have already been taxed in Europe, Hentze said, concluding: “The underlying message to multinational companies is: If you produce here in the US, you will be spared the double taxation.”

Read more: Opinion: Donald Trump’s policies have fed China’s rise as world power

The reform package provides further incentives for companies, too. With the creation of a so-called patent box, US legislators want to incentivize companies like Apple to register their patents and trademarks in the US, by means of a preferential tax rate on profits generated (12.5 percent). A fair tax regime, in Hentze’s view, should not offer tax rebates for certain types of profits.

“However, countries like Ireland or the Netherlands already do that too,” Hentze pointed out. “Therefore, the indignation of EU finance ministers is not very credible on this particular point.”


Paradise Papers: Apple shifted billions offshore to avoid tax

New relevations about Apple’s tax avoidance strategy are making headlines as the Paradise Papers scandal unfolds further. EU finance ministers are due to discuss the issue during talks in Brussels on Tuesday.

Apple iPhone X

Apple has denied accusations in the Paradise Papers investigation that it moved its operations from Ireland to an offshore center to avoid tax.

Documents cited by German newspaper Süddeutsche Zeitung on Monday suggested that offshore law firm Appleby, which is based in multiple tax havens, helped the iPhone maker move billions of dollars in revenues collected in Ireland to the Channel Islands to head off increased European Union scrutiny of its tax affairs in Dublin.

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The revelations, which were also published by the BBC and New York Times, suggested that Apple had transferred funds to the island of Jersey, near the coast of Normandy, which is largely exempt from European Union tax regulations and where no corporate income tax is levied.

The Paradise Papers are the result of a year-long investigation by the International Consortium of Investigative Journalists, which studied some 13.4 million leaked documents revealing the scale of offshore tax avoidance schemes employed by large multinationals and the rich and famous.

Read more:U2 frontman Bono named in Paradise Papers tax evasion leak

The iPhone maker insisted the new report contained several “inaccuracies” and said it made changes to its corporate structure in 2015, which were designed to preserve tax payments to the US, not to reduce taxes elsewhere.

Apple said in a statement that it pays taxes at the statutory US rate of 35 percent on investment income from its overseas cash. It added that it follows the law in each country where it operates. The EU and US were informed of the reorganization at the time, it added.

Irland Apple Campus in Cork (Getty Images/AFP/P. Faith)Apple’s European headquarters are in an unlikely location, on a hill overlooking the Irish city of Cork

The Cupertino, California-based company said it was the largest taxpayer in the world, paying $35 billion (€30 billion) in corporate income tax over the last three years, including $1.5 billion in Ireland.

Both the US and EU have been scrutinizing Apple for its use of tax avoidance schemes using offshore finance centers. In 2013, a US Senate subcommittee found the tech giant had eluded tens of billions of dollars and that some $128 billion in profits had not been taxed by US authorities.

The company is also facing an EU demand for about $14.5 billion in taxes based on a ruling that its tax structure in Ireland amounted to illegal state aid.

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This week’s revelations could see Brussels step up efforts to force EU member states to close tax loopholes. France has recommended taxing multinationals on revenues generated in EU countries rather than profits, as they are more difficult to hide.

Read more: Offshore: The legal and the not so legal

EU competition commissioner Margrethe Vestager on Monday singled out Apple, Google and Facebook for censure in response to the Paradise Papers revelations.

She said “greed” and “power” were a very “poisonous cocktail” used by big multinationals to drive out competition.

Speaking at the Web Summit in Lisbon, Vestager also highlighted the difference in policy between the EU and US over free markets.

“We want free markets, but we understand the paradox of free markets, which is that sometimes we have to intervene. We have to believe that it’s not the law of the jungle, but the law of democracy that works.”

mm/aos (AFP, AP, Reuters)

Courtesy: DW

Apple unveils new iPhone 8, iPhone X

Apple unveiled several new products today, including the iPhone 8 and the heavily-anticipated iPhone X.

“Apple has always believed that technology infused with humanity can change the world,” CEO Tim Cook said, while introducing the new iPhone 8 and 8 Plus. It comes in silver, space grey and a new gold finish, made from aluminum and glass in an all-new design.

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Apple senior vice president of marketing Phil Schiller added that the new phones will have a new Retina HD display, highlighting the color display on the screen.

The new iPhone 8 and 8 Plus will use the new 64-bit A11 Bionic chip, Schiller added.


The new iPhones are getting big camera upgrades as well. The iPhone 8 and 8 Plus will have a 12 MP camera, with deeper pixels and a new color filter. Schiller said the iPhone 8 is the first smartphone designed for augmented reality, highlighted by new chips inside the phone, including the A11 Bionic and ARKit, Apple’s AR platform.

The iPhone 8 will also have wireless charging, something that consumers have cried for for years. It will utilize Qi wireless charging standard, the leading open wireless charging standard.

The new iPhone 8 starts at $699, while the 8 Plus starts at $799, a price bump from the iPhone 7 and 7 Plus. Pre-orders start on Sept. 15, with the devices available Sept. 22.

Apple also introduced its long-awaited iPhone X at the event. Cook described the device as “a product that will set the path for technology for the next decade.”


The iPhone X is slated to go on pre-sale on Oct. 27, shipping on Nov. 3. It will start at $999. There was significant speculation that the high-end iPhone X would start at a cost of $1,000 or more.

Despite its high cost, analysts expect the iPhone X to sell well, considering all of its new design and new features.

“That’s going to be the object of desire for many users and the challenge for Apple will be whether they’re done enough to make the iPhone 8 range compelling for the majority who won’t be wiling or able to spend the additional money to get the iPhone X,” Jackdaw Research chief analyst Jan Dawson said.

Dawson added that Apple’s financial guidance “suggests that it’s very confident both in strong demand for the iPhone 8 and 8 Plus and its ability to produce considerably more in the first couple of weeks on sale than it did last year.”


It will have a 5.8-inch super retina display and Face ID facial recognition technology, which can be used to unlock the phone and for Apple Pay.

“Face ID learns your face. It learns who you are,” said Schiller, who noted the the system will account for changes in users’ appearances such as facial hair.

Along with the new iPhone, Apple updated its apple Watch lineup with with the Apple Watch Series 3.

The Apple Watch Series 3 has cellular capabilities built in, allowing you to take and place calls directly from your wrist. Though initially seen as a fad, consumers have continued to adopt the product, Cook said. “I’m thrilled to tell you today Apple Watch is the number one watch in the world,” Cook noted during the presentation.


Apple COO Jeff Williams said the Apple Watch will get better heart rate app with data on the watch face and new metrics. Apple Watch Series 3 will have the availability to stream Apple Music on your wrist, Williams said.

New watch bands were also announced, including a sport loop, new Nike+ colors and some updates to the Hermes partnership. A grey ceramic finish was added to last year’s white ceramic finish.

Apple Watch Series 3 will start at $329, without cellular and with cellular will cost $399. Apple Watch Series 2 received a price drop to $249. The new version of the operating system, WatchOS 4, will be available on Sept. 19.

Apple TV also received an update, getting 4K resolution to the new set-top box, known as Apple TV 4K. “This will bring cinematic quality to virtually everything that you watch,” Cook said.

The new Apple TV is powered by the A10X Fusion chip, the same chip that powers the iPad Pro, said Eddy Cue, Apple’s senior vice president of Internet Software and Services.

The new Apple TV 4K starts at $179 and pre-orders start Sept. 15, with the product shipping on Sept. 22.

Courtesy, Fox News

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