Apple’s $2 Billion a Year Tax Avoidance Strategy
Thursday, May 03, 2012
Apple is a leader not only in technology but also tax dodging.
The world’s most profitable tech company has developed over the years creative legal ways (that other companies have followed) to minimize its tax hit with the U.S. government.
Last year, Apple avoided paying $2.4 billion in taxes. Worldwide, it paid a total of $3.3 billion in taxes on profits totaling $34.2 billion, which amounts to a 9.8% tax rate.
To compare, Wal-Mart, the world’s largest retail chain, paid $5.9 billion in taxes worldwide on profits of $24.4 billion, a tax rate of 24%.
How does Apple get away with avoiding billions in taxes? For starters, it sets up small offices in states like Nevada, which doesn’t have a corporate tax rate. This move helps the company avoid paying the 8.84% corporate tax rate in California, where Apple has its headquarters in Cupertino.
It also has created subsidiaries in low-tax places like Ireland, the Netherlands, Luxembourg and the British Virgin Islands that allow the company to store 70% of its profits overseas and avoid giving more to the Internal Revenue Service. It also allows Apple to develop patents in California, but send the royalties to Ireland.
According to an analysis by Martin A. Sullivan, 54% of Apple’s long-lived assets are in the United States, as are 69% of its retail stores and 39% of its sales. However, by using its foreign subsidiaries, the company reports only 30% of its profits in the U.S.
To Learn More:
How Apple Sidesteps Billions in Taxes (by Charles Duhigg and David Kocieniewski, New York Times)
Behind the Lobbying Effort That Helps Save Apple $2.4 Billion in Taxes a Year (by Suzanne Merkelson, Republic Report)
Apple Reports High Rate But Saves Billions on Taxes (by Martin A. Sullivan)
Apple the Jobs Creator…Outside the U.S. (by Matt Bewig and David Wallechinsky, AllGov)
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