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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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