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Apple Corporation is a Primer for How US Business Avoids Taxes
How does Apple and others like it reap billions? Avoid paying millions in taxes legally. Apple for instance, avoids millions in Calif. taxes by having a small 12 person office in Reno, Nevada, under the name Braeburn Capital. It does not manufacture any products in the state. Although based in Cupertino, CA, near San Jose, its dinky Reno office collects and invests the company's profits and thereby avoids California income tax on some of its gains. With a corporate tax of almost 9%, Nevada is a bargain at 0%.
Apple, like others, creates subsidiaries in low tax countries such as Ireland (Medtronics is also there), the Netherlands, British Virgin Islands. all help cut taxes. Many of these offices are tiny. If you buy any Apple product in the USA, part of the profits go into accounts controlled by Braeburn, which is then invested in stocks or other and profits from them are exempt from Calif. taxes because of the Nevada address. Since 2006, Apple has earned $2.5 billion in interest alone from cash reserves and investments.
Apple avoids taxes owed to the US government by having small offices around the globe in friendly low tax countries. Whenever anyone downloads an Apple anything in Europe, Africa or Mideast, the sale is recorded in a 24 person office located in Luxembourg called iTunes S.ar.l. By doing so, the country gives a low tax rate. How much? According to 2011 documents, this small office reaped $1 billion, which represents 20% of iTunes sales. Downloading anything is the least taxed. Apple, like others, are masters at tax loopholes, such as their "double Irish with Dutch sandwich".
This reduces Apple's taxes by routing profits through two Irish firms called, Apple Operations International and Apple Sales International, then through the Netherlands and finally through an office in the Caribbean. Ireland, although is only five million people, reaps 33% of Apple's revenues.
Had Apple not exploited the loopholes, it would have had to pay a total of $2.4 billion in taxes to the US government. Apple accountants have found ways to attribute that 70% of its profits are outside the USA, although tax experts believe that is all smoke and believe that most of Apple's sales are in the US.
I think the corporate tax code needs to be updated to the 21st century.