The New York Times: How Apple sidesteps billions in global taxes

“Apple, the world’s most profitable technology company, doesn’t design iPhones [in Reno, Nevada]. It doesn’t run AppleCare customer service from this city. And it doesn’t manufacture MacBooks or iPads anywhere nearby,” Charles Duhigg and David Kocieniewski report for The New York Times.

“Yet, with a handful of employees in a small office here in Reno, Apple has done something central to its corporate strategy: it has avoided millions of dollars in taxes in California and 20 other states,” Duhigg and Kocieniewski report. “Apple’s headquarters are in Cupertino, Calif. By putting an office in Reno, just 200 miles away, to collect and invest the company’s profits, Apple sidesteps state income taxes on some of those gains.”

Duhigg and Kocieniewski report, “California’s corporate tax rate is 8.84 percent. Nevada’s? Zero… Setting up an office in Reno is just one of many legal methods Apple uses to reduce its worldwide tax bill by billions of dollars each year. As it has in Nevada, Apple has created subsidiaries in low-tax places like Ireland, the Netherlands, Luxembourg and the British Virgin Islands — some little more than a letterbox or an anonymous office — that help cut the taxes it pays around the world. Almost every major corporation tries to minimize its taxes, of course. For Apple, the savings are especially alluring because the company’s profits are so high.”

“Without such tactics, Apple’s federal tax bill in the United States most likely would have been $2.4 billion higher last year, according to a recent study by a former Treasury Department economist, Martin A. Sullivan,” Duhigg and Kocieniewski report. “As it stands, the company paid cash taxes of $3.3 billion around the world on its reported profits of $34.2 billion last year, a tax rate of 9.8 percent. (Apple does not disclose what portion of those payments was in the United States, or what portion is assigned to previous or future years.)”

Read more in the full article here.

MacDailyNews Take: It’s legal. If you don’t like it, elect people who agree with you and change the laws.

Apple is “especially alluring” to The New York Times because The New York Times‘ circulation continues to drop and they desperately need to attract as many eyeballs as possible. That is why they put “Apple” in their headlines and then bury pesky facts like “every major corporation tries to minimize its taxes, of course” within the bowels of their yellow journalism.

So, to recap: “Every major corporation tries to minimize its taxes, of course.” Maximizing profit is every publicly-traded company’s fiduciary duty to their shareholders. Tax avoidance is not tax evasion. What Apple is doing is perfectly legal. If you don’t like the current tax laws, elect people who agree with you and change the laws.

115 Comments

  1. A similar article a year or so ago in Seattle discussed how Microsoft does the same thing. Nevada laws are specifically written to encourage this “tax dodge” and it is all VERY legal.

    1. Just because it’s legal, doesn’t mean it’s right. In addition, only companies large enough to do this will.

      Another problem with unbridled capitalism… that puts profits over the greater good.

      1. Grow up, “doesn’t mean it’s right”, What are you? Five.

        The Tax laws are clear, every corporation uses these options because they are Legal and available.

        Corporations are not a individual person, they have a set of rules that are to be followed, Accountant’s are employed to work within the LAW to save as much money as they can without costing a corporation excessive lost Revenue.

        Only a fool would believe that bleeding a company’s profits by the billion would be considered the same a single persons charity to give away something that they don’t own, A company no mater who they are is responsible to be as profitable as the can given the LAWS that are set forth by the country they exist in and as long as it is not breaking the LAW it isn’t a story.

        Microsoft, Google, Exxon, etc. All do the same thing, and until the laws are changed putting a conscious to a corporation as if they are a individual is very very naive.

        1. “Grow up, “doesn’t mean it’s right”, What are you? Five.”

          Pathetic comment. The OP is right. Apple is a disgrace. It’s about time the law makers stood up and kicked Apple in the nuts and stopped all their clever tax avoidance. Apple is now just a bunch of greedy self-seving rich bastards.

            1. There’s nothing wrong with avoiding taxes any way legally possible. It’s our/their own Freaking Money and Democrat scum are constantly trying to separate us from it and then flush it down the toilet!!!!!! NO MORE OF THIS CRAP!!!!!!

          1. OK, lets knock off this junk right now.
            Shaun: lets take your idea to its logical conclusion.
            Your basic premise is based upon the idea that if I have one dollar more than you, that somehow I owe you 50 cents of that dollar.
            Based upon what? The word theft springs to mind. I work very hard for my money. I am willing to bet much harder than you.

            Ok, though, lets carry your idea to its logical conclusion. Lets “equalize”, lets “redistribute wealth”.

            So here is what we do. You give me your address, I will travel to your location wherever it is. If I have more wealth than you, I will give you half of what I have. If you have more wealth than I do, you give me half of what you have.

            Are you that brave? Do you actually think that is fair? I may have worked my tail off for 4 decades and might be a multi-millionaire.

            Or not. You don’t know do you?

            Shaun, No One believes that taxes should not be paid. But when the waste of tax money has never been higher, with money being distributed who knows where to whom, that argument is a straw man, so don’t even bother to bring it out.
            You probably will, redistributionists keep trotting it out there even though it does not work.

            But exactly where do you get off thinking that you are owed a portion of what I make beyond what is legally required by the tax code?

            Unless you are prepared to answer that question without deflecting it off into nowhere, don’t waste the electrons needed to send a reply.

            But other than that, have a nice day.

          2. A self-serving for profit commercial enterprise (that also happens to deliver some of the best products ever seen). The nerve of them.

            How dare a corporation desire to be profitable. And how dare anyone want to get rich.

            #occupystupidity

          3. shaun, the microsoft licensing offices are at #100 6100 Neil Road REEEEENO, NEVVVVADA. they were there before braeburn, which has existed for just 7 years. they are 3 miles from braeburn capital. it’s in a nice area, tho. i drive by on my way to whole foods, sierra trading post, and guitar center in the same general vicinity.

            are they there because there is so much licensing business in reno? did they get a tax break from uncle reid?

            the rest of you: stop disgracing all the intelligent 5 year olds out there!

      2. Correct. The right thing to do would be to pay more than they have to and pay more than they are legally required to pay…

        Hmm. No scratch that. I think you’re wrong. This is a law question, not a heart question. (OT, not NT).

      3. You do realize that any overly complex system, a tax code, for example, is designed to confuse it’s participants, and enable selective enforcement for it’s designers.

        So technology companies, and other sophiscated corporations have figured out how to game the system, or beat the house. Good for them, complexity is double edged!

        If you really want fairness, you want simple systems, where it is not necessary for companies, or individuals to have to hire accountants, lawyers and lobbyists. A flat tax system, with no loopholes would allow companies to refocus on product and their business, rather than on dealing with the governments system.

        Then you would see more innovation, R&D, increased productivity and employment.

        This will not happen, as the current government will not wish to relinquish any of it’s precieved control over it’s subjects.

        1. You really think all those CPAs they hire are gonna go into software/hardware design once the taxes are easier? I don’t disagree about the flat tax but I doubt it would have any impact on how fast or well Apple innovated.

            1. You are obviously not a programmer. You can’t just throw more money at that kind of thing and make it happen faster. Only so many people can be working on one part of a project, innovation takes its own time.

            2. Additionally, Apple, in particular, does more than software, or programming. They design hardware, plan production systems, have retail systems, real estate, etc. All the money, time and talent that are diverted to playing the tax shell game, could be going to other, better purposes.

      4. Please… Lets get moral…your moral is the right one?? right??

        Laws are make to make an even playing field. Don’t like it? Get the law changed. Whining is just a kids ploy.

    2. I think it’s interesting that the estimated additional tax is 2.4 billion dollars. That wouldn’t even pay one day’s interest on our national debt. 2.4 billion would be a drop in the bucket, or better still a flash in the pan as far as California’s drunken spend fest is concerned. I’d much rather see the 2.4 billion stay in Apple’s hands.

    3. Everyone is free to draw their own moral conclusions about taking the best advantage of an uneven and complicated tax system. Companies will do all they can to lighten their tax load. What’s outrageous here is tagging the report to Apple, cynically exploiting the public fascination with the company and its magical products, then implying something evil.

      1. Spot on. Similar to Reuter’s report yesterday…

        “Workers at a Chinese factory owned by Foxconn, Apple Inc’s main manufacturer, threatened to jump off the roof of a building…”

        This factory makes Microsoft Xbox 360 consoles. This issue has nothing to do with Apple and yet there Apple’s name prominently displayed.

        I’m not surprised by the number of reader’s denigrating Apple when commenting on the article. Ignoramuses.

  2. This is SOP for many (if not all) American business that are big enough to support offices in Nevada.

    Nothing to see here folks, move along.

    BTW when did people start thinking that giving more than you have to, to the American Mafai, err Government was un American?

    That is like telling a family of 4 that buying a $2 gallon of milk (I made this number up, I don’t buy milk so I don’t know how much it costs) is un American, they should pay $6 a gallon and like it. Sheesh!

  3. Humm, I wonder if the NEW YORK TIMES is doing everything it can do to pay as MUCH as it can with THEIR TAXES and not taking any federal or state tax deductions for new equipment, office supplies, charitable donations, etc. ?

    1. 0% taxes for NY Times… Freedom of the Press means no tax. Ever pay tax for a newspaper. Nope. That was part of the Boston Tea Party. I do agree NY Slimes should pay taxes because the certainly don’t report the news.

    2. NYT is business, too; and I wonder how they treat their international income.

      Also, Google and other companies do the same, and yet they are not mentioned in the title of the article.

  4. Apple’s Response on Its Tax Practices
    Published: April 28, 2012
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    In response to requests for comment on the company’s tax practices, Apple provided this statement to The New York Times:

    Over the past several years, we have created an incredible number of jobs in the United States. The vast majority of our global work force remains in the U.S., with more than 47,000 full-time employees in all 50 states. By focusing on innovation, we’ve created entirely new products and industries, and more than 500,000 jobs for U.S. workers — from the people who create components for our products to the people who deliver them to our customers. Apple’s international growth is creating jobs domestically since we oversee most of our operations from California. We manufacture parts in the U.S. and export them around the world, and U.S. developers create apps that we sell in over 100 countries. As a result, Apple has been among the top creators of American jobs in the past few years.

    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.

    We have contributed to many charitable causes but have never sought publicity for doing so. Our focus has been on doing the right thing, not getting credit for it. In 2011, we dramatically expanded the number of deserving organizations we support by initiating a matching gift program for our employees.

    Apple has conducted all of its business with the highest of ethical standards, complying with applicable laws and accounting rules. We are incredibly proud of all of Apple’s contributions.

  5. The NYSlimes is at it again. One could read that article and come away thinking Apple is solely responsible for the California fiscal train wreck.

    If only Apple paid more taxes! Why, Washington and Sacramento would use that money to responsibly get their houses in order, they would. They wouldn’t dare take those added billions and create an even bigger mess. They’ve learned their lesson; they’re good now. Feed them! Feed the government your money, Apple, so they can create jobs and give us everything else we want and desire.

  6. “Apple sidesteps state income taxes on some of those gains.””

    “Some” is the operative word.

    Apple’s reported net tax rate is between 24 and 25%. How do you square that with the 9.8%? Some of those taxes are paid, and some of those are deferred, pending repatriation of profits. Either way, those taxes will be paid, when due.

    Other studies have shown that Apple pays about 31% in the US on US income, and that implies a rate of 21% on foreign income, but as I noted, much of that is deferred until repatriated. Nevertheless, Apple accounts for those deferred taxes. If it didn’t, Apple’s earnings would be far, far higher.

  7. God home us all. MDN nailed it with the difference between “avoidance” and “evasion”! I started a business 10 years ago and , because I had very savvy tax counsel, I paid NO taxes for 7 years. But I retained the money otherwise meant for the free spending government and was a le to expand. All things come to an end and I now pay taxes. Oh, my 100 employees have been paying taxes for 10 years!

    God help us

    1. I am happy you were able to have a few years to defer your taxes while it expanded then finally kick in, however, the part about your employees paying taxes has NOTHING to do with taxes your company profits on.

      If Legal is not right then what is right?

    1. NO, how about to expose the massive crime and fraud being committed by Democrats and Unions every waking second of the day!!!!! Start there you EFFING AHOLE!!!!!

      1. Dear troll Linda.
        Democrats and Unions??? You sound so much like a Republication Nat. con advertisement that it just hurts.

        OF course republicans NEVER do any thing wrong, like cheat on wires, steal money, use power in corrupt fashion… Of course not….

        sheeeze

  8. Apple is smart and should continue to find every way to make profit and make people happy with their exceptional products. That is the way smart business’ are run. Who pays more taxes than they have to? Not to mention the ridiculous waste of the taxes.

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