Apple serves its customers well by cutting its costs. Taxes are a cost.
Apple serves its shareholders well by increasing profits. Cutting taxes increases profits.
By setting up divisions in Nevada, where there is no state income tax on corporations, Apple avoids the grasping hand of California, which taxes corporations at 8.8%
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Across the nation, Apple stiffs states that impose income taxes.
When companies sell ideas or digits, they can operate anywhere. They should go where taxes are low. This is what they are doing.
The politicians grind their teeth. “How dare these firms go where we can’t get at their bank accounts?” It’s so easy when you know how.
Apple knows how.
Yet, 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.
It operates divisions in Ireland, Netherlands, and the British Virgin Islands.
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 on intellectual property, like the patents on software that makes devices work. Other times, the products themselves 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.)
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Apple, for instance, was among the first tech companies to designate overseas salespeople in high-tax countries in a manner that allowed them 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.
Apple escaped $2.4 billion in U.S. taxes in 2011.
The welfare state is going bankrupt. The quicker, the better. Apple is speeding up the process.
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To read the agonized cries of politicians, click the link.
Continue Reading on www.nytimes.com
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Written by Gary North on April 30, 2012. The original is here.
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