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iEconomy, part 3: The Corporate Tax Dodge

Posted By Barry Ritholtz On April 29, 2012 @ 10:00 am In Financial Press,Taxes and Policy,Technology | Comments Disabled

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The third installment in the very insightful and popular NYT iEconomy [2] series is front page of the Sunday NYT.

Part 1: An Empire Built Abroad: How the U.S. Lost Out on iPhone Work [3]

Part 2: A Punishing System: In China, Human Costs Are Built Into an iPad [4]

Part 3: Protecting Profits: How Apple Sidesteps Billions in Global Taxes [4]

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’
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Shrinking Corporate Tax Rates
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Source:
How Apple Sidesteps Billions in Taxes [7]
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


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2012/04/ieconomy-part-3-the-corporate-tax-dodge/

URLs in this post:

[1] Image: http://www.ritholtz.com/blog/wp-content/uploads/2012/04/29appletax-hp-graphic-popup-v2.png

[2] NYT iEconomy: http://www.nytimes.com/interactive/business/ieconomy.html?

[3] An Empire Built Abroad: How the U.S. Lost Out on iPhone Work: http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html

[4] A Punishing System: In China, Human Costs Are Built Into an iPad: http://www.nytimes.com/2012/01/26/business/ieconomy-apples-ipad-and-the-human-costs-for-workers-in-china.html

[5] Image: http://www.nytimes.com/interactive/2012/04/28/business/Double-Irish-With-A-Dutch-Sandwich.html

[6] Image: http://www.nytimes.com/interactive/2012/04/28/business/Shrinking-Corporate-Tax-Rates.html

[7] How Apple Sidesteps Billions in Taxes: http://www.nytimes.com/2012/04/29/business/apples-tax-strategy-aims-at-low-tax-states-and-nations.html?emc=eta1&pagewanted=all

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