iEconomy, part 3: The Corporate Tax Dodge

The third installment in the very insightful and popular NYT iEconomy series is front page of the Sunday NYT.

Part 1: An Empire Built Abroad: How the U.S. Lost Out on iPhone Work

Part 2: A Punishing System: In China, Human Costs Are Built Into an iPad

Part 3: Protecting Profits: How Apple Sidesteps Billions in Global Taxes

Some of the details of Apple’s corporate tax-avoidance maneuvers according to the NYT are:

• Apple’s federal tax bill was $3.3 billion on reported profits of $34.2 billion last year, a tax rate of 9.8%;

• Apple allocates 70% of its profits outside the U.S. note that the value is created in the US, but the low end manufacturing is overseas.

A Nevada shell company let’s Apple’s U.S. business sidestep California state taxes. California corporate tax rate = 8.84%, while Nevada = 0%.

California gives tax credits to Apple for conducting R&D in the state worht more  $400 million since 1996;

•  The “Double Irish With A Dutch Sandwich” routes royalties and profits through Ireland and the Netherlands and the Caribbean. On paper, Ireland “generated” one-third of Apple’s revenue last year.

•  Salespeople working in high-tax countries are employed by subsidiaries in low-tax countries.

• iTunes sales “happen” in Luxembourg –– a tax dodge with local incentives. In 2011, iTunes S.à r.l.’s revenue exceeded $1 billion

The full series is Pulitzer bait, and deservedly so.

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Click thru for giant graphics

‘Double Irish With a Dutch Sandwich’

Shrinking Corporate Tax Rates

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Source:
How Apple Sidesteps Billions in Taxes
CHARLES DUHIGG and DAVID KOCIENIEWSKI
NYT, April 28, 2012
http://www.nytimes.com/2012/04/29/business/apples-tax-strategy-aims-at-low-tax-states-and-nations.html

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