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Apple side-steps billions in taxes every year, says report

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Apple acolytes amass outside the Apple store in Santa Monica, California.

© PA Images / Jae C. Hong/AP

Apple uses subsidiaries in Ireland, the Netherlands and US states with low tax in a strategy to slash its global tax bill by billions every year, a new report has claimed.

In a lengthy article published this weekend, The New York Times detailed legal methods utilised by the iPhone maker to avoid paying billions of dollars in US taxes.

According to the paper, Apple is officially based in Cupertino, California, but the firm has set up a small office in Reno, Nevada to collect and invest its profits.

It was noted that the corporate tax rate is zero in Nevada, compared with 8.84% in California. Alongside California, the report said that Apple has "avoided millions of dollars in taxes" in 20 other states.

The world's biggest technology firm has set up subsidiaries in various low-tax havens, such as Ireland, the Netherlands, Luxembourg and the British Virgin Islands. The report said that some of these bases are "little more than a letterbox or an anonymous office".

The New York Times said that technology companies such as Apple and Google are better placed to reduce their tax bills because their income primarily comes from digital products or royalties on patents, both of which can be easily shifted to tax friendly states or countries.

In contrast, it is much harder to shift the collection of profits from the sales of physical products, such as a car, to a tax-haven area.

Apple has legally allocated around 70% of its profits overseas, mostly to countries where the tax rate is considerably lower than in the US, according to the company's own filings.

The New York Times points to a study by former US Treasury Department economist Martin Sullivan, which estimated that Apple's federal tax bill would have been $2.4bn (£1.47bn) higher last year without such a strategy.

The newspaper says that Apple paid $3.3bn in cash taxes worldwide on $34.2bn in profits last year, representing a tax rate of just 9.8%.

In comparison, retail giant Wal-Mart paid worldwide cash taxes of $5.9 billion on profits of $24.4 billion, a tax rate of 24%.

Apple told the paper that it complied with all laws and regulations around tax, and claimed that its US operations have already generated almost $5bn in federal and state income taxes so far in 2012.

Earlier this month, Amazon was in the spotlight over its tax strategy after it emerged that the online retailer earned £7.6 billion in Britain over the past three years yet paid no corporate tax.

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