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Apple paid only 2% corporation tax outside the US

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Apple has become the latest company to come under the spotlight over how much tax it pays, after it was revealed that the iPhone maker's tax bill was less than 2% of its profits outside of the US.

Filings with US regulators have revealed that Apple paid $713m (£445m) in the year to September 29, 2012, on foreign pre-tax profits of $36.8bn, a rate of 1.9%. This was down from 2.5% tax paid overseas in the previous year.

Apple CEO Tim Cook speaks during an event to announce new products in San Jose

© PA Images / Marcio Jose Sanchez/AP

Apple store

© PA Images / Eugene Hoshiko/AP



This follows similar scrutiny over the practices of Starbucks, Facebook, eBay and Google to cut their foreign tax bills.

None of these tax avoidance schemes are illegal, but there have been questions over the moral legitimacy.

It should be noted, however, that all of the companies pay other taxes in the UK, such as National insurance, and also raise money for the government through VAT.

In April a report accused Apple of using subsidiaries in Ireland, the Netherlands and US states with low tax in a strategy to slash its global tax bill.

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.

Apple staff giving the customers a welcome outside the Apple Store in Covent Garden

© PA Images / Lewis Whyld/PA Wire



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.

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 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 also noted 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.

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