Apple's Tax Strategy Cuts Its Tax Bill By Billions A Year: Report

NEW YORK — A published report says Apple Inc. uses subsidiaries in Ireland, the Netherlands and other low-tax nations as part of a strategy that enables the technology giant to cut its global tax bill by billions of dollars every year.

The New York Times on Sunday outlined legal methods used by Cupertino, Calif.-based Apple to avoid paying billions of dollars in federal and state taxes.

One approach highlighted in the report: Even though the company is based in California, Apple has set up a small office in Reno, Nev. to collect and invest its profits. The corporate tax rate in Nevada is zero. In California, it's 8.84 percent.

While many major corporations try to reduce their tax bills, technology companies like Apple, Google Inc., Microsoft Corp. and others have more options to do so.

That's because some of their revenue comes from digital products or royalties on patents, which makes it easier for them to move profits to tax-friendly states or countries, the Times said.

In contrast, it's tougher to shift the collection of profits from the sale of a physical product – like groceries or a car – to a tax-friendly haven.

The 71 technology companies in the S&P 500, including Apple, Google, Yahoo Inc. and Dell Inc., reported paying global cash taxes over the past two years at a rate that's, on average, one-third less than other S&P 500 companies, the Times said.

Apple has legally allocated about 70 percent of its profits overseas, where tax rates are often much lower than in the U.S., according to company filings.

The Times cites a study by former Treasury Department economist Martin A. Sullivan that estimates Apple's federal tax bill would have been $2.4 billion higher last year without such tactics.

The newspaper says Apple paid $3.3 billion in cash taxes globally on $34.2 billion in profits last year. That's a tax rate of 9.8 percent.

In a statement, Apple told the Times that it has complied with all laws and accounting rules, and says that its U.S. operations generated nearly $5 billion in federal and state income taxes in the first half of fiscal 2012.

Wall Street analysts predict Apple could earn up to $46.9 billion in its current fiscal year, according to FactSet.

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Comments

[Hunter3203]

12:58 AM on 05/01/2012

Apple, a company revered by many on the left, pays a 9.8% tax rate. Wal-Mart, a company reviled by many on the left, pays a 24% tax rate. So who's the better corporate citizen now?

[BillClay]

07:49 PM on 04/30/2012

Remember, Republicans tell us that we have to lower taxes on corporations because they are "job creators". We all should thank Apple for using those Billions of dollars they saved on their taxes and using that money to create jobs - IN CHINA!

[Grouchy Larry]

06:10 PM on 04/30/2012

Tax the movement of money, regardless of classification. A million dollar transfer should pay at the same rate as any other, maybe one penny per hundred dollars. Fair and affordable.

universalexchangetax.com

[dopamineboy]

04:37 PM on 04/30/2012

One more example of corruption in our nation. I pay a higher tax % of my wages than Apple. It's sick. And GE paid no taxes last year and Bank of America paid no taxes. Basically it's regular folks getting shafted with a tax burden to run this country while the weasels use their accountants and clever tax strategies to con their way out of avoiding social responsibility.

[gmb007]

03:06 PM on 04/30/2012

"How Apple Sidesteps Billions In Taxes"

TRANSLATION:

Cheats.

It's why they and Wall Street are filthy, obscenely rich and the rest of us will never, ever be - or even remotely close.

Before anyone howls that it's all legal - at one time, so were slavery, wife beating, animal abuse and child labor.

Those at the top always ensure that what they want to do is "legal".

It's why they literally own Congress - they write the laws the best money can buy.

[Not That Far Left]

01:47 PM on 04/30/2012

Oh yes, lets all pick on Apple because they are so big but only pay 10% tax. Not like GE who paid nothing. Not like Exxon Mobil who not only paid $16 billion in taxes in one quarter, but paid absolutely none of it to America. Not like Google who jumps through a lot more loopholes to manage a 4% tax rate.

I'm not saying Apple shouldn't pay more taxes. I'm saying they're not the worst at exploiting loopholes and taking subsidies.

[tgwrh]

01:36 PM on 04/30/2012

Wait a second... What laws did Apple Corp break?

[gmb007]

03:08 PM on 04/30/2012

Those who mean to abuse their power always buy the laws they hide behind.

[Caesar Czo]

04:52 PM on 04/30/2012

Apple hating aside it's a very smart company and losing money through taxes would be a stupid move when it means saving the company billions. It's a company why wouldn't they?

I think we should look at governments and at lowering the corporate tax rate especially in our global world. If we had a lower/fairer tax rate we would increase our revenue.

Corporations have an army of accountants and laywers maximizing their finances. Government has stupid politicians.

[David Engage America]

01:05 PM on 04/30/2012

Whether you believe that the corporate tax code is problematic because its rates are too high or you think its problematic because some businesses pay low effective rates doesn’t matter. What matters is that our corporate tax code is woefully out-of-date and must be overhauled.

With Bowles-Simpson type reform, the U.S. would move to a territorial tax system and Congress can simplify the tax code, improve corporate competitiveness, and spur economic growth. http://bit.ly/noTDPF

[31Blue]

12:49 PM on 04/30/2012

It makes you wonder why bother paying taxes at all. These big corporations get everything for free and all advantages while little guy gets the bill. It is outrageous.

[trojoe]

10:45 AM on 04/30/2012

In my administration, if you start a company in the US and American Consumers make your company successful and you repay them by moving your profit bearing accounts and production lines overseas, the penalty will be a ban on your product.
If you want to use the social services and distinct attributes of American society to further your product and then abandon us after you find success, your product has no place on American soil.

[kwyang]

01:25 PM on 04/30/2012

Haha, good luck getting that law past Congress. The President is the chief executive, not the a god-king with dictatorial powers. This nationalistic jingoism has no place in reality anyway, it's not like Americans don't benefit from outsourcing. Plenty of us get rich based on global trade and pay less for products we want as a result. An iPad would be twice as expensive without cheaper Chinese labor.

[ColoradoPete]

09:49 AM on 04/30/2012

We have become a global economy since WWII, with the result being that lot's of US companies have successfully expanded their businesses overseas. This is only going to become a greater influence on businesses, and the tax code ought to be modified to meet the new reality.

For those who want to tax the h-e-l-l out of American companies, be careful what you wish for. Tech companies will move to a more tax friendly domicile in a heartbeat if we tax them too stiffly. If I read this article correctly, only 30% of Apple's profits are coming from US business; 70% from overseas sales. Their products are ubiquitous and I don't see why a profit made in Argentina should be taxed by the US govt. or the state of California.

[redonthehead]

09:44 AM on 04/30/2012

Okay, Apple makes a product overseas, markets said product overseas, sells said product overseas, and pays taxes on said product overseas.

In a liberals mind, every cent Apple makes belongs to the government so that it can then be used to buy votes.

[whitcombc]

09:41 AM on 04/30/2012

Apple is really good at this. But 26 Fortune 500 Companies with huge profits over the last 4 years have paid ZERO taxes using the same tax laws and loopholes. GE had an effective tax rate of NEGATIVE 18% (they got money back essentially) according to "The International Business Times". So, with a number of Tech Companies doing so much better at avoiding BILLIONS in taxes, I just have to wonder why Apple is always the lead in for this kind of story. Actually Microsoft has more overseas, as do many other companies. And Apple is not even the biggest company (counting overseas assets) trying to get this "holiday" to happen. You really need to get some different headline people and not just re-feed NYT junk without checking the bias there.

[3cg]

09:24 AM on 04/30/2012

although I love my iPad I have become disillusioned with the way Apple does business. Taxes, deplorable working conditions and overall greed. we purchased an iPad knowing that we would be moving out of the US after we were assured that the warranty was 'worldwide'. now 8 months later they will not honor the warranty because we are not in the US - but the service person still tried to hard-sell me an extended 12 month warranty. fool me once....

and I really do prefer my Samsung phone over my old iPhone.

[TC21123]

09:00 AM on 04/30/2012

Although I do not agree with the fact that while I pay almost 30% of my income to the government they should pay less than 10%, I do have to agree that they are only doing what anyone else would if they could. We need to change our tax laws completely. We need to throw away the 30,000 + page book and bring it all down to a few simple rules. If you operate a business in the United States you must pay a flat tax on ALL of you income to both the state of registration and the federal government, no exceptions no loopholes.

[maui1107]

10:05 AM on 04/30/2012

If you are paying 30% of your wages in taxes, you are doing more than OK.