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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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...

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.

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

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.

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

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.

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!

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."

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.

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.

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