Report: Apple legally sidesteps billions in taxes

A published report says Apple Inc. 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. One approach highlighted in a report published in The New York Times: Even though the company is based in California, Apple has set up a small office in Reno, Nev., to collect and invest its profits. The corporate tax rate in Nevada is zero; in California, it’s 8.84%. While many major corporations try to reduce their tax bills, technology companies like Apple, Google, Microsoft and others 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. 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. Apple has legally allocated about 70% of its profits overseas, where tax rates are often much lower than in the United States, according to company filings. A study by a former Treasury Department economist estimates Apple’s federal tax bill would have been $2.4 billion higher last year without such tactics. The newspaper says Apple paid $3.3 billion in cash taxes globally on $34.2 billion in profits last year. That’s a tax rate of 9.8%. In a statement, Apple tells the Times it has complied with all laws and accounting rules, and says that its U.S. operations generated nearly $5 billion in federal and state income taxes in the first half of fiscal 2012.