Apple is in hot water once again. But this time its not over its China sweat shops – it the tax havens allowing it to dodge billion dollar tax bill from the US government and others.
Click to enlarge
Just last week, the iPhone king announced yet another record breaking profit, which rose to an astonishing 94% to US$11.6 billion. Its massive cash reserve has also risen to $104 bn, Peter Oppenheimer, Apple’s CFO declared last week.
So the question is how?
The wild state of Nevada just a few hundred miles east of California, which has a zero tax rate, is how.
Oh and other well known tax havens including Ireland, British Virgin Islands and Holland where Cupertino, along with many other tech giants including Google, Facebook and LinkedIn, pay as little as 2.5% tax rate, compared to California’s rate of 8.84%.
These questionable tax practices, known as ‘Double Irish’ and ‘Dutch Sandwich,’ are methods Apple pioneered, according to New York Times report. The companies channel their billion dollar profits through foreign subsidiaries allowing it to pay minimum tax.
Read: Cheers Ireland: Why Google Oz Send Revenue To Greener Pastures
70% of all Apple tax is paid outside the US despite the fact a large proportion of its business is still conducted within its home country.
It seems these creative accounting methods have allowed the iPhone maker to dodge more than $2.4bn in tax over the past number of years, a US Treasury economist believes.
Setting up an Apple base in Reno, Nevada and elsewhere has allowed Apple to dodge millions in tax it would otherwise have to pay to the state of California, where its Cupertino HQ is located, and 20 other states according to The Times.
And in many cases, the tech giant plonks “little more than a letterbox or an anonymous office” in some far flung state, whose authorities are delighted to have a stalwart like Apple locate a base there.
This is not the first time the tech giants suspiciously low tax bills have come under the spotlight.
And here’s another startling fact – all 71 technology giants on of Standard and Poor (S&P) 500 index reported paying 30% less tax than all the other companies.
But the question is shouldn’t the Cupertino based giant really being paying tax in its own state, even on a moral argument, since it has its base and the vast majority of employees located there, including CEO Tim Cook and Steve Jobs’ family home.
This issue is especially pertinent since the US government is struggling to avoid another recession and could use the tax revenue.
Apple insist its practices are all above board, saying it “has conducted all of its business with the highest of ethical standards, complying with applicable laws and accounting rules.”
It also insists it is one of the top payers of tax in the US and its operations generated $5bn in tax for the Government between income tax and other taxes.
The reality is Apple is the now the world’s most valuable company, but at what price?