Apple uses subsidiaries in Ireland to sidestep huge US tax bills
Apple uses subsidiaries in Ireland, the Netherlands and other low-tax nations as part of a strategy that enables the technology giant to cut its global-tax bill by billions of dollars every year, a report by 'The New York Times' has claimed.
The paper outlined legal methods used by Cupertino, California-based Apple to avoid paying billions of dollars in US federal and state taxes.
One approach highlighted in the report said that even though the company is based in California, Apple has set up a small office in Reno, Nevada, to collect and invest its profits. The corporate-tax rate in Nevada is zero. In California, it's 8.84pc.
While many major corporations try to reduce their tax bills, technology companies such as Apple, Google and Microsoft have more options to do so.
That's because some of their revenue comes from digital products or royalties on patents, which makes it easier for them to move profits to tax-friendly states or countries, the paper said. In contrast, it's tougher to shift the collection of profits from the sale of a physical product -- like groceries or a car -- to a tax-friendly haven.
The 71 technology companies in the S&P 500, including Apple, Google, Yahoo and Dell, reported paying global-cash taxes over the past two years at a rate that's, on average, one-third less than other S&P 500 companies, the 'Times' said.
Apple has legally allocated about 70pc of its profits overseas, where tax rates are often much lower than in the US, according to company filings.
'The Times' cites a study by former Treasury Department economist Martin A Sullivan that estimates Apple's federal- tax bill would have been $2.4bn (€1.8bn) higher last year without such tactics.
The newspaper says Apple paid $3.3bn in cash taxes globally on $34.2bn in profits last year. That's a tax rate of 9.8pc.
In a statement, Apple said complied with all laws.