Report: Apple avoids paying billions in US taxes

Apple is now one of the biggest and most profitable companies in the world. In the first quarter of 2012, Apple said it generated a net profit of $11.6 billion, nearly twice as much as the $6 billion in profit that it made a year ago. Yet for all of that wealth and success, Apple still tries to get around paying taxes by finding lot of legal loopholes.

That's the subject of an extensive New York Times article which goes over how Apple tries to cut down on its taxes. That includes managing the company's investments via an office in Reno, Nevada rather than its home state of California. The reason? California has a 8.84 percent corporate tax rate while Nevada has none. The article does point out that other companies, including Microsoft, have similar offices in Nevada for avoiding corporate taxes.

In fact, Apple actually invented its own tax loophole that has since been used by many other large companies. The technique is called "Double Irish With a Dutch Sandwich". Apple uses this move to funnel its profits to two offices in Ireland, which then go to the Netherlands and then end up in the Caribbean.

All of these activities and more allowed Apple to pay just $3.3 billion in taxes for its 2011 fiscal year, with a tax rate of just 9.8 percent. An economist in the article estimated that Apple would have paid $2.4 billion more in taxes without these kinds of efforts.

Apple has already sent a response to the New York Times article, where it tries to show how many jobs it has created in the US along with its contributions to many charitable causes. It also said that handles its finances "with the highest of ethical standards, complying with applicable laws and accounting rules." It added:

Apple also pays an enormous amount of taxes which help our local, state and federal governments. In the first half of fiscal year 2012 our U.S. operations have generated almost $5 billion in federal and state income taxes, including income taxes withheld on employee stock gains, making us among the top payers of U.S. income tax.

Avoiding taxes is nothing new, corporations do it all of the time. The New York Times picked on Apple because they are an easy target at this time but in all honesty, you could replace Apple with the name of any large corporation and the story would be the same.

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I know people in many countries read this. This is a big reason many people are frustrated in the US. If you are an accountant, or a team of accountants, you know how to avoid paying as many taxes as possible. How is this fair to your average person? Well, it's the same laws for everyone, so if you don't know the laws thats your problem. However, the amount of loopholes and ways of paying lesser taxes is a full time job. There is always some way of legally avoiding taxes. The US makes taxes very complicated because they want to. If they wanted simple taxes, they would make them simple.

Invizibleyez said,
... The US makes taxes very complicated because they want to. If they wanted simple taxes, they would make them simple.

Depends on who you mean by *They*.

There are a lot of Congressional Reps & Senators that favor a flat tax model. Lots of Americans do too, but I can't say everyone because so many already use the short form, & at that point there's not a lot anyone can do to make it simpler.

The IRS [the agency that collects taxes] OTOH probably doesn't want layoffs & cuts to its budget, & all those accountants you speak of certainly don't want less work. Add in the companies that get favored treatment under current laws, & you've got millions of people with the highest motivation possible to, um, not tell the truth.

You know most of you are so retarded it's not funny, Apple or any other corporation couldn't do this, if the government didn't allow it. So whose fault is it? Yea that's right Obozo, and both parties in Congress. Grow up.

Avoiding taxes is nothing new, corporations do it all of the time. The New York Times picked on Apple because they are an easy target at this time but in all honesty, you could replace Apple with the name of any large corporation and the story would be the same.

ummm... actually, John, that's not true.

Yes, most all companies & people pay the least amount of taxes possible, & some go further than that, 'least until they're caught [e.g. Snipes]. But while Apple pays more than some [favored?] companies that paid no taxes last year at all, the whole point of the NY Times article was that Apple paid less than most -- "Even among tech companies, Apple's rates are low." At the bottom of the 1st page the Times further states: "By comparison, Wal-Mart last year paid worldwide cash taxes of $5.9 billion on its booked profits of $24.4 billion, a tax rate of 24 percent, which is about average for non-tech companies."

And those savings line the pockets of those who make laws and the ability to do this sort of thing LEGALLY. The circle of life!

As bad as this is, and no matter how much I personally disagree with these practices, as the article stated, many other multinationals do similar things. What I annoys me is if the average Joe tries to do something similar the authorities would be onto so fast for tax evasion and/or money laundering.

Also, This has got to be the worst written Neowin article I've ever seen. "Where unprofessional journalism looks better", where this article is concerned, I'm not so sure about the "looks better" part.

More proof of Apple's greed. Knowing that the USA's economy is not the greatest, you would think they wouldnt mind paying taxes in the country they originate from AND make the most money in.

Frank2029 said,
More proof of Apple's greed. Knowing that the USA's economy is not the greatest, you would think they wouldnt mind paying taxes in the country they originate from AND make the most money in.

The whole point of business is to make a profit, if you class that as greed then all businesses are greedy.

I would rather have companies avoid paying as much taxes and spend it on more R&D, which ultimatley benefits the people, than line the greedy coffers of the government so they can continue to mis-manage public spending. Kudos to Apple et al

Frank2029 said,
More proof of Apple's greed. Knowing that the USA's economy is not the greatest, you would think they wouldnt mind paying taxes in the country they originate from AND make the most money in.

Well, if they are greedy, then what about the other large corps. that do it, and is hinted at, but an not mentioned?

Yazoo said,

The whole point of business is to make a profit, if you class that as greed then all businesses are greedy.

I would rather have companies avoid paying as much taxes and spend it on more R&D, which ultimatley benefits the people, than line the greedy coffers of the government so they can continue to mis-manage public spending. Kudos to Apple et al

Not really... While there are more than a few grains of truth in what you've posted, R&D does not necessarily benefit anyone other than those with a stake in whatever company -- pharmaceutical companies are a prime example, where the higher prices we pay in the US allegedly finances R&D, yet any R&D that takes place in those companies is solely focused on drugs with the highest potential profit margins. As far as the greedy part goes, if making the highest profit possible was all that mattered, why do very large companies that sell so little to the average, individual consumer spent so much on PR campaigns, community outreach, & charity? Why is Apple even concerned about the article in the Times?

Frank2029 said,
More proof of Apple's greed. Knowing that the USA's economy is not the greatest, you would think they wouldnt mind paying taxes in the country they originate from AND make the most money in.

Newsflash: many big companies do that, also Microsoft, Google etc. You should read more about business

Nashy said,
No big deal. This happens across the globe.

Indeed. Here in the UK, Vodafone have managed to avoid paying over £6 billion in taxes last year. And yet no one's batting an eyelid.

MightyJordan said,

Indeed. Here in the UK, Vodafone have managed to avoid paying over £6 billion in taxes last year. And yet no one's batting an eyelid.

It's not illegal to use tax law loop holes, so while it can be done, they're going to keep doing it.

So what, everyone avoids paying taxes.. from the one person freelancer to the large corporation.. who wants to give their hard earned cash away?

Dead'Soul said,
if its legal, why not?

you're paying it wrong

Exactly, The problem is not Apple for routing their money a certain way, It's the governments for either being paid off to leave holes like these or stupid to notice holes like these.

Shaun said,

Exactly, The problem is not Apple for routing their money a certain way, It's the governments for either being paid off to leave holes like these or stupid to notice holes like these.

Yup I'm down with that. Do something based on legality and not integrity. It's a real character builder. But hey, what goes around comes around, right? Just ask Steve Jo.... oh s**t, my bad.

Oh Jesus, how is this not expected? They are a company, their finance dept has a job, manage the finance of the company. This includes finding legal ways to keep money. If California wants to up its rate and get more in taxes fine, if there's a way in which you can avoid it fine, if people don't like it fine. If you worked in that finance dept and didn't do this, you'd be reporting that your dept failed to legally save the company over $2 billion, you wouldn't keep that job too long.

duddit2 said,
If California wants to up its rate and get more in taxes fine
Read the article? It specifically says that Apple avoids paying corporate taxes to California because it's pulling some legal shenanigans and managing investments out of Nevada to avoid taxes (like some other corporations do).

Tim Dawg said,
Read the article? It specifically says that Apple avoids paying corporate taxes to California because it's pulling some legal shenanigans and managing investments out of Nevada to avoid taxes (like some other corporations do).

yes I did, a legal loophole is still legal. If you can process parts of your business in such s way to pay less, then thats

Tim Dawg said,
Read the article? It specifically says that Apple avoids paying corporate taxes to California because it's pulling some legal shenanigans and managing investments out of Nevada to avoid taxes (like some other corporations do).

Legal Shenanigans? It's completely legal, bitch about Apple being the biggest company in the world and how it ruins your day to see a company with great products succeed elsewhere.

duddit2 said,

yes I did, a legal loophole is still legal. If you can process parts of your business in such s way to pay less, then thats
So if I could find a legal loophole allowing me to rape every woman I come across - you'd be fine with that, am I correct? I mean it would a legal loophole and therefor still legal..

Some people. Where did a sense of right and wrong go? Just because something is 'legal' or 'illegal' doesn't mean it's correct. I know of a town in southern Missouri where it's still legal to have lynch mobs and hang blacks (old law never amended). So that makes it right by your thought process.... smh...

Article is misleading, that's all of apples profits combined and all international operations income, much of it not taxed in the US because it was taxed overseas in the country the product was sold in, Apples real tax rate for its American profits (the number their using to compare against all apple profits) is probably in line with what it should be. Infact the entire article is a lie. ALL apple profits combined made that much, but thats how much the us taxed them. If I make 400,000 dollars and 300,000 dollars of it was made in international sales and products, and 100,000 was made in America and my US taxed amount was 30,000 dollars, do I have a 30% tax rate or a 8% tax rate? Think about that.

sidroc said,
Article is misleading, that's all of apples profits combined and all international operations income, much of it not taxed in the US because it was taxed overseas in the country the product was sold in, Apples real tax rate for its American profits (the number their using to compare against all apple profits) is probably in line with what it should be. Infact the entire article is a lie. ALL apple profits combined made that much, but thats how much the us taxed them. If I make 400,000 dollars and 300,000 dollars of it was made in international sales and products, and 100,000 was made in America and my US taxed amount was 30,000 dollars, do I have a 30% tax rate or a 8% tax rate? Think about that.

Purely FWIW, you [& Callaham] might not want to assume Neowin readers are too lazy &/or stupid to click through & read the NY Times article this is based on. Or perhaps you didn't read it yourselves?

Like much of its labor force, Apple's profits are moved &/or kept off-shore to minimize costs. They outsource jobs because wages are cheaper, there are fewer regs, & despite the nagging attention focused on Foxconn, the worker drones are more easily controlled. They outsource their banking & other money mgmt. for much the same reasons -- lower costs as in less taxes, less regs for example reporting, & perhaps more compliant bankers, authorities etc. that are easier to manage & control.

You of course can decide for yourself if you feel moving money &/or jobs out of the country is a good or a bad thing. As the Times points out, Apple does both.

Athlonite said,
maybe if the US had the same laws for everything in all states this wouldn't happen

Why should they? Some states are fiscally responsible and do not need to collect corporate taxes. Texas and a few others do not waste billions in spending on completely asinine programs, and get the money back by other means. Nevada gets their money through taxes collected through gambling. Companies move to these states, pay less in taxes, the state's economy does better, more people are employed. Meanwhile, California becomes a nanny state wanting to pay for everything, and they are constantly on the verge of going under. Why punish a state for being wise with their money, and having to pay for another state's folly?

Also, it is in our constitution that the feds do not have the power to regulate the taxes of individual states.

nohone said,

Why should they? Some states are fiscally responsible and do not need to collect corporate taxes. Texas and a few others do not waste billions in spending on completely asinine programs, and get the money back by other means. Nevada gets their money through taxes collected through gambling. Companies move to these states, pay less in taxes, the state's economy does better, more people are employed. Meanwhile, California becomes a nanny state wanting to pay for everything, and they are constantly on the verge of going under. Why punish a state for being wise with their money, and having to pay for another state's folly?

Also, it is in our constitution that the feds do not have the power to regulate the taxes of individual states.

Lol, Texas doesn't have ANY programs, and it shows with their populations stupidity.

Athlonite said,
maybe if the US had the same laws for everything in all states this wouldn't happen

That's true, but if every state was the same, having 50 states would be pointless -- just have different regions that the feds manage. Problem with that is the same as if every car was identical, if everyone wore the exact same clothes, if every meal was identical & so on... The less choice you have, the less innovation, advancement etc. you'll have as well -- competition is Not an evil thing. After all, if Nevada couldn't write it's own rules to some extent, would it even exist? Definitely not as we know it today -- for most of its history, like S. Florida, physically speaking it was not a nice place to live.

Article said
where it tries to show how many jobs it has created in the US along with its contributions to many charitable causes.

Apple? Charitable causes? Could someone enlighten me?

FarCry3r said,

Apple? Charitable causes? Could someone enlighten me?

ProjectRED.

May not be much, but it's still more than what you and I do combined.

omgben said,

ProjectRED.

May not be much, but it's still more than what you and I do combined.


Thanks for the info, didn't know about that

Hell-In-A-Handbasket said,
A company finding legal tax loopholes, that's a new one.
People also try to find loopholes in the tax system, over half of Americans don't pay taxes
Really? Half!?! Where do you get that info? Please provide a link. I'd like to see that.

Tim Dawg said,
Really? Half!?! Where do you get that info? Please provide a link. I'd like to see that.

Hey man, there's this thing called Google. The kids think it's cool.


It's a provocative fact about the tax code: Nearly half of U.S. households end up owing no federal income tax.

http://money.cnn.com/2012/04/2.../income-tax/?source=cnn_bin

but those Americans that don't pay federal income taxes do pay taxes.

Edited by benthebear, Apr 30 2012, 12:45pm :

Hell-In-A-Handbasket said,
A company finding legal tax loopholes, that's a new one.
People also try to find loopholes in the tax system, over half of Americans don't pay taxes
Just because the government owes me at the end of the year doesn't mean I don't pay taxes. As a general rule the government owes the people more than it pays out - they just make it way too difficult to obtain that extra payout. Itemizing just isn't worth the headache to most people.

So please inform me of how I'm not paying taxes when my $2,500 every two weeks becomes $1,800 (estimate).. wait for it... AFTER TAXES.

I just hope those "occupy" idiots & hipsters remember this while they're posting about how they're the 99% using their iProducts.

PeterTHX said,
I just hope those "occupy" idiots & hipsters remember this while they're posting about how they're the 99% using their iProducts.

Your point? Everyone knows and has known that Apple is a huge company, stop being jealous.

BumbleBritches57 said,

Your point? Everyone knows and has known that Apple is a huge company, stop being jealous.

Stop getting offended when someone says something about apple, steve is not going to give you *******!

BumbleBritches57 said,

Your point? Everyone knows and has known that Apple is a huge company, stop being jealous.

Well don't get butt hurt but don't all of you iFans rave about Apple being an 'American' company (though most jobs are overseas).

If they're so 'American' wouldn't you think they'd want to help out their own country an not circumvent the law (See: Steve Jobs) in every way possible? I digress though, it's more American to avoid America and not help out your neighbor and locality.

A tax rate of 9.8%!!! I wish I had that tax rate! I seem to remember a bunch of politicians ranting and raving about how the U.S. has crazy high corporate tax rates. I know it's higher than some countries but 9.8% is not bad.

Apple also pays an enormous amount of taxes which help our local, state and federal governments.
I guess that doesn't include California now does it? I'm sure they pay property tax, medicare, unemployment, FICA, etc. but since they don't have to pay corporate tax they're saving a bundle and hardly helping out California, a state that desperately needs the help.

Tim Dawg said,
A tax rate of 9.8%!!! I wish I had that tax rate! I seem to remember a bunch of politicians ranting and raving about how the U.S. has crazy high corporate tax rates. I know it's higher than some countries but 9.8% is not bad....

The debate centers on what the *effective* corp rate is compared to elsewhere -- per the NY Times Apple's effective rate was ~9.8 %, Walmart was closer to average at ~24 %. Everyone except tax lawyers agrees the US tax code is a terrible mess, with all sorts of loopholes, special exemptions etc... The 2 main ideas AFAIK are close the loopholes so every company pays the same, & 2, reduce the tax rate so more companies will come to or stay in the US, at least as far as their money's concerned. If you close the loopholes it levels the playing field, so you'd in theory get the same government revenue at lower tax rates -- using 2 of the companies the Times wrote about, Apple would pay more while Walmart would pay less, but the combined total paid would be the same [some say more]. It sounds & is pretty simple, but you'd expect a Lot of disinformation & such from companies like Apple that do well under the current rules, & of course there's always the multibillion dollar industry devoted to helping you pay the least taxes possible. If everything about taxes made sense, there's an awful lot of people & bureaucrats who'd have to find a new career.

"but in all honesty, you could replace Apple with the name of any large corporation and the story would be the same."

But nobody will.

BumbleBritches57 said,

Good, Microsoft's so ****ty, they don't deserve a good reputation.

Yea after all that charitable programs, they sure dont deserve reputation.

Stetson said,
"but in all honesty, you could replace Apple with the name of any large corporation and the story would be the same."

But nobody will.

For a VERY good reason.

The point of Neowin's condensed news is to reflect the news from other sources -- in this case the source was reinterpreted, almost reversed. The Times singled out Apple not because they don't like Apple products, but because Apple stood out from the crowd, paying a lower rate than most other companies.

Nobody is plugging in all these other corporate names because in most cases that would be a lie.

Apple does not only innovate in technology, but they also innovate in how to route money to avoid taxes. To such an extent that other corporations imitate them in this too. The should patent this.

sexypepperoni said,
Apple does not only innovate in technology, but they also innovate in how to route money to avoid taxes. To such an extent that other corporations imitate them in this too. The should patent this.

best reply ever!!

sexypepperoni said,
Apple does not only innovate in technology, but they also innovate in how to route money to avoid taxes. To such an extent that other corporations imitate them in this too. The should patent this.

Watch them start sueing other companys for evading taxes the same way

sexypepperoni said,
Apple does not only innovate in technology, but they also innovate in how to route money to avoid taxes. To such an extent that other corporations imitate them in this too. The should patent this.

Patents are pure evil and only slow innovation.