Big corporations have often been accused of doing everything they can to lower their tax bills. Apple (News - Alert) is one such company, with a report this week claiming that the firm partakes in some complicated routing to avoid paying billions in taxes through entirely legal processes.
The company’s procedure of wiring cash through Ireland, the Netherlands and other low-tax nations helps it drastically reduce its tax bills, reported The New York Times. Apple did not deny the allegations when asked for a comment by the newspaper, but just how it avoids higher taxes makes for a compelling story.
For instance, the company has set up a subsidiary in Nevada, which has a corporate tax rate of zero, compared with the 8.84 percent in Apple’s California home base. The subsidiary is responsible for collecting and investing Apple’s profits.
Since a significant amount of technology companies’ profits stem from digital products and patent royalties, they have more options to move that money through tax-friendly states and countries.
The Times said that the 71 technology companies listed in the S&P 500 have paid global taxes over the last two years at a rate that’s a third less than other S&P 500 firms, on average.
Apple in particular has routed around 70 percent of its profits outside of the U.S. through legal methods. If it hadn’t done so, it’s estimated that Apple’s tax bill would have been around $2.4 billion higher for 2011.
Apple paid $3.3 billion in global taxes on $34.2 billion in profits last year, giving the company an overall tax rate of 9.8 percent, said the newspaper.
The firm claimed in its statement that it had complied with all laws and accounting standards, and reported that its U.S. operations garnered almost $5 billion in federal and state income taxes in the first half of its current fiscal year.
The company’s second fiscal quarter results, published last week, revealed that Apple generated revenue of $39.2 billion and net profit of $11.6 billion for the three months to March 31.
Edited by Brooke Neuman