Tech companies use a variety of techniques in order to drive their tax rates down into the single digits, even as they post billions in profits. Case in point, Apple paid just 1.9 percent tax rate on its overseas profits last year, according to the Associated Press:
Apple Inc. paid an income tax rate of only 1.9 percent on its earnings outside the U.S. in its latest fiscal year, a regulatory filing by the company shows.
The world’s most valuable company paid $713 million in tax on foreign earnings of $36.8 billion in the fiscal year ended Sept. 29, according to the financial statement filed on Oct. 31. […]
Apple may pay some income taxes on its profit to the country in which it sells its products, but it minimizes them by using various accounting moves to shift profits to countries with low tax rates. For example the strategy known as “Double Irish With a Dutch Sandwich,” routes profits through Irish and Dutch subsidiaries and then to the Caribbean.
Apple is actually getting better at reducing taxes on its overseas money, as it paid a 2.5 percent rate on those earnings last year. The fact that these foreign earnings are not being taxed by any country, as Citizens for Tax Justice explained, likely means that “instead of being earned by real, economically productive operations in developed countries, [these] are actually U.S. profits that have been shifted overseas to offshore tax havens such as Bermuda and the Cayman Islands.”
If Apple actually paid the U.S. corporate tax rate on that money, “the resulting $17 billion tax payment would be more than double the $8.3 billion in federal taxes that Apple has paid on its $83 billion in worldwide profits over the last 11 years.” Of course, Apple is hardly alone in using legal techniques to avoid billions of dollars in tax payments to the U.S.