Sales of iPhones, iPads, and iPods have made Apple the world’s most profitable technology company — its stock price is hovering around $600 a share, and it is now larger than the rest of the American retail market by itself. Apple often boasts about the number of jobs it has created in the United States; according to its own estimates, the company is responsible for a half-million American jobs.
What Apple hasn’t told Americans, though, is that an intricate financial set up utilizing low-tax states in the U.S. and offshore tax havens has allowed it to skirt billions of dollars in American taxes over the last decade. By setting up financial offices in states like Nevada — which has no income tax — and routing other profits through Ireland, Luxembourg, and nations in the Caribbean, Apple avoided an estimated $2.4 billion in American taxes in 2011 alone, the New York Times reports:
Apple’s headquarters are in Cupertino, Calif. By putting an office in Reno, just 200 miles away, to collect and invest the company’s profits, Apple sidesteps state income taxes on some of those gains.
California’s corporate tax rate is 8.84 percent. Nevada’s? Zero. [...]
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. [...]
Without such tactics, Apple’s federal tax bill in the United States most likely would have been $2.4 billion higher last year, according to a recent study by a former Treasury Department economist, Martin A. Sullivan.
Apple’s American tax rate was 9.8 percent in 2011, according to Sullivan. Its global tax rate, however, was just 3.2 percent and has been in the single digits for the last decade. Its profits are skyrocketing. The amount it pays in taxes, however, has barely budged:
While dodging American taxes, Apple has lobbied both state and federal governments for large tax breaks. The California state legislature has passed four tax breaks aimed at tech companies since the mid-1990s — the most recent, which Apple lobbied for itself, will cost the already-crunched state government $1.5 billion a year. The company is part of a coalition called Win America that has lobbied Congress to temporarily lower the tax rate on overseas profits that are returned to the United States — even as it admits to routing profits overseas to avoid American taxes in the first place.
Corporations like Apple have argued for lower corporate tax rates in the United States, insisting that the current 35 percent tax rate is hurting growth. But while that is the highest marginal rate in the world, companies rarely pay it. The U.S. is actually near the bottom in corporate tax revenues collected; in 2009, only Iceland collected a smaller share of its GDP in taxes. That has an adverse effect on all taxpayers, who foot the bill for the $60 billion lost to corporate tax dodging each year. In 2009, offshore tax havens cost the average individual taxpayer $434; in 2010, making up the lost revenue would have required an extra $2,116 from each American small business.