Apple’s Tax Strategy Aims at Low
Braeburn Capital, an Apple subsidiary in Reno, Nev., manages and invests the company cash. Apple, the world’s most profitable technology company, doesn’t design iPhones here. It doesn’t run AppleCare customer service Canada Goose Jackets from this city. And it doesn’t manufacture MacBooks or iPads anywhere nearby.
Yet, canada goose deals with a handful of employees in a small office here in Reno, Apple has done something central to its corporate strategy: it has avoided millions of dollars in taxes in California and 20 other states.
Apple’s headquarters are in Cupertino, Calif. By putting an office in Reno, just 200 canada goose black friday sale miles away, to collect and invest the company’s profits, Apple sidesteps state income buy canada goose jacket cheap taxes canada goose outlet store locations on some of those gains.
California’s corporate tax rate is 8.84 percent. Nevada’s? Zero.
Setting up an Canada Goose Outlet office in Reno is just one of many legal methods Apple uses to reduce its worldwide tax bill by billions of dollars each year. As it has in Nevada, Apple has created subsidiaries in low tax places like Ireland, the Netherlands, Luxembourg and the British Virgin Islands some little more than a letterbox or an anonymous office that help cut the taxes it pays around the world.
Apple serves as a window on how technology giants have taken advantage of tax codes written for an industrial age and ill suited to today’s digital economy. Some profits at companies like Apple, Google, Amazon, Hewlett Packard and Microsoft derive not from physical goods but from royalties canada goose coats on intellectual property, like the patents on software that canada goose store makes devices work. Other times, the products themselves canada goose outlet toronto factory are digital, like downloaded songs. It is much easier for businesses with royalties and digital products to move profits to low tax countries than it is, say, for grocery stores or automakers. A downloaded application, unlike a car, can be sold from anywhere.
The growing digital economy presents a conundrum for lawmakers overseeing corporate taxation: although technology is now one of the nation’s largest and most valued industries, many tech companies are among the least taxed, according to government and corporate data. Over the last two years, the 71 technology companies in the Standard Poor’s 500 stock index including Apple, Google, Yahoo and Dell reported paying worldwide cash taxes at a rate that, on average, was a third less than other S. P. companies’. (Cash taxes may include payments for multiple years.)
Even among tech companies, Apple’s rates are low. And while the company has remade industries, ignited economic growth and delighted customers, it has also devised corporate strategies that take advantage of gaps in the tax code, according to former executives who helped create those strategies.
Apple, for instance, was among the first tech companies to designate overseas salespeople in high tax countries in a manner that allowed them canada goose to sell on behalf of low tax subsidiaries on other continents, sidestepping income taxes, according to former executives. Apple was a pioneer of an accounting technique known as the “Double Irish With a Dutch Sandwich,” which reduces taxes by routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean. Today, that tactic is used by hundreds of other corporations some of which directly imitated Apple’s methods, say accountants at those companies.
Without such tactics, Apple’s federal tax bill in the United States most likely would have been $2.4 canada goose clearance sale billion higher last year, according to a Canada Goose online recent study by a former Treasury Department economist, Martin A. Sullivan. As it stands, the company paid cash taxes of $3.3 billion around the world on its reported profits of $34.2 billion last year, a tax rate of 9.8 percent. (Apple does not disclose what portion of those payments was in the United States, or what portion is assigned to previous or future years.)Apple’s domestic tax bill has piqued particular curiosity among corporate tax Canada Goose Parka experts because although the company is based in the United States, its profits on paper, at least are largely foreign. While Apple contracts out much of the manufacturing and assembly of its products to other companies overseas, the majority of Apple’s executives, product designers, marketers, employees, research and development, and retail stores are in the United States. Tax experts say it is therefore reasonable to expect that most of Apple’s profits would be American as well. The nation’s tax code is based on the concept that a company “earns” income where value is created, rather than where products are sold.
However, Apple’s accountants have found legal ways to allocate about 70 percent of its profits overseas, where tax rates are often much lower, according to corporate filings.
Neither the government nor corporations make canada goose replica tax returns public, and a company’s taxable income often differs from the profits disclosed in annual reports. Companies report their cash outlays for income taxes in their annual Form 10 K, but it is impossible from those numbers to determine precisely how much, in total, corporations pay to Canada Goose Coats On Sale governments. In Apple’s last annual disclosure, the company listed cheap Canada Goose its worldwide taxes which includes cash taxes paid as well as deferred taxes and other charges at $8.3 billion, an effective tax rate of almost a quarter of 2018 canada goose outlet profits.
However, tax analysts and scholars said that figure most likely overstated how much the company would hand to governments because it included sums that might never be paid. “The information on 10 Ks is fiction for most companies,” said Kimberly Clausing, an economist at Reed College who specializes in multinational taxation. buy canada goose jacket “But for tech companies it goes from fiction to farcical.”
Apple, in a statement, said it “has conducted all of its business with the highest of ethical standards, complying with applicable laws and accounting rules.” canada goose coats on sale It added, “We are incredibly proud of all of Apple’s contributions.”
Apple “pays an enormous amount Canada Goose Online of taxes, which help our local, state and federal governments,” the statement also said. income tax.”
The statement did not specify how it arrived at $5 billion, nor did it address the issue of deferred taxes, which the company may pay in future years or decide to defer indefinitely. The $5 billion figure appears to include taxes ultimately owed by Apple employees.
The sums paid by Apple and other tech corporations is a point of contention in the company’s backyard.
A mile and a half canada goose clearance from Apple’s Cupertino headquarters is De Anza College, a community college that Steve Wozniak, one of Apple’s founders, attended from 1969 to canadian goose jacket 1974. Because of California’s state budget crisis, De Anza has cut more than a thousand courses and 8 percent of its faculty since 2008.
Now, De Anza faces a budget gap so large that it is confronting a “death spiral,” the school’s president, Brian Murphy, wrote to the faculty in January. Apple, of course, is not responsible for the state’s financial shortfall, which has numerous causes. But the company’s tax policies are seen by officials like Mr. Murphy as symptomatic of why the crisis exists.
“I just don’t understand it,” he said in an interview. “I’ll bet every person at Apple has a connection to De Anza. Their kids swim in our pool. Their cousins take classes here. They drive past it every day, for Pete’s sake.
“But then they do everything they can to pay as few taxes as possible.”
Escaping State Taxes
In 2006, as Apple’s bank accounts and stock price were rising, Canada Goose sale company executives came here to Reno and established a subsidiary named Braeburn Capital to manage and invest https://www.topparka.ca the company’s cash. Braeburn is a variety of apple that is simultaneously sweet and canada goose outlet toronto factory tart.
Brian Murphy, center, head of De Anza College in Cupertino, Calif., says the big tech firms are antitax, and it decimating the state.