5/28/2013 @ 7:46PM 94,313 views
How Does Apple Avoid Taxes?
Apple’s brand halo is slipping. Silicon Valley’s well-known vanity and contempt for government are amply displayed in Apple’s tax figures. Apple, a consumer products company that sells beautifully designed gadgets, pays very little tax anywhere in the world, including the United States.
Apple AAPL +2.94% is playing fast and loose with consumers’ affection for its highly discretionary products, especially in Europe. It is ill-advised for any consumer products company not to pay tax where it sells products. Equally important, Apple’s tax avoidance is also testing the patience of strapped European governments that are looking for ways to get American multinationals to pay tax.
The Senate Homeland Security Permanent Subcommittee on Investigations laid out Apple’s tax planning in a May 20 report. The report concluded that Apple’s tax arrangements have nothing to do with its business. Even for a jaded tax lawyer used to hokey schemes to avoid taxation, Apple’s arrangements were surprising.
Apple set up some Irish subsidiaries a mere four years after it was founded. Foreign sales, which account for 60% of Apple’s profits, are routed through these Irish subsidiaries and taxed nowhere. How is this possible, when the intellectual property that supports the value of Apple’s products is in the United States?
Apple has an Irish holding company with no operations or employees at the top of its foreign operations. This company also serves as a group finance company. Apple Inc., the U.S. parent of the whole group, pays U.S. tax on the investment earnings of this company. Otherwise, the holding company pays no tax to any government, and has not paid tax for five years. It claims tax residence nowhere.
Beneath the holding company is an Irish principal company that holds the contracts with Apple’s Chinese contract manufacturers and owns the inventory they produce. It also claims tax residence nowhere, despite having paid some tax to Ireland in recent years, but at rate far below the statutory rate. It and another Apple operating affiliate share the foreign rights to Apple’s U.S. based technology.
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http://www.forbes.com/sites/leesheppard/2013/05/28/how-does-apple-avoid-taxes/
Ah, but is the arrangement illegal?
And Apple's CEO voluntarily appeared before that committee under oath and SHOT that idiotic report down with the evidence that Apple paid the taxes on its income where it was earned.
Video of Tim's Cook's full testimony before Congress.
That report claimed, according to one US Senator, that Apple paid no US Income taxes because of the shenanigans with the Irish government. In actual fact, contrary to that report, Apple paid MORE US income taxes than any other corporation in 2012, accounting for one dollar of every forty dollars of business income taxes collected in 2012! So much for the accuracy of that incompetent report. Apple presented its audited US TAX RETURNS in evidence which proved the report false. Apple's effective tax rate in 2012 was approximately 27% of earnings.