Apple has responded to a New York Times report that criticised its tax practices, claiming that it uses offices in states other than California, where it’s headquartered, and countries outside the US to help minimize its overall tax burden. Apple claimed that it is “among the top payers of US income tax” and also that it is among the top creators of American jobs.
The report claimed that Apple employs “a handful of employees” at a small office in Reno, Nevada, where the tax rate is zero, to avoid paying California’s 8.84 per cent corporate tax rate. By doing so, claimed the report, “it has avoided millions of dollars in taxes in California and 20 other states”.
The report also pointed to Apple’s subsidiaries in Luxembourg, Ireland and the British Virgin Islands, and claimed that some are “some little more than a letterbox or an anonymous office – that help cut the taxes it pays around the world.”
The New York Times quoted ‘former executives’ that claimed Apple had designated 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. “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,” claimed the report, a practice that it claims is now imitated by a number of companies.
The newspaper quoted former Treasury Department economist Martin Sullivan who estimated that if it hadn’t implemented these measures, Apple’s tax bill in the United States would have been $2.4 billion higher last year.
In response to the report, Apple claimed: “Over the past several years, we have created an incredible number of jobs in the United States. The vast majority of our global work force remains in the US, with more than 47,000 full-time employees in all 50 states. By focusing on innovation, we’ve created entirely new products and industries, and more than 500,000 jobs for US workers – from the people who create components for our products to the people who deliver them to our customers. Apple’s international growth is creating jobs domestically since we oversee most of our operations from California. We manufacture parts in the US and export them around the world, and US developers create apps that we sell in over 100 countries. As a result, Apple has been among the top creators of American jobs in the past few years.
“Apple also pays an enormous amount of taxes which help our local, state and federal governments. In the first half of fiscal year 2012 our US operations have generated almost $5 billion in federal and state income taxes, including income taxes withheld on employee stock gains, making us among the top payers of US income tax.
“We have contributed to many charitable causes but have never sought publicity for doing so. Our focus has been on doing the right thing, not getting credit for it. In 2011, we dramatically expanded the number of deserving organizations we support by initiating a matching gift program for our employees.
“Apple has conducted all of its business with the highest of ethical standards, complying with applicable laws and accounting rules. We are incredibly proud of all of Apple’s contributions.”
Author: Karen Haslam, Editor
Macworld editor since 2008, Karen has worked on both sides of the Apple divide, clocking up a number of years at Apple's PR agency prior to joining Macworld almost two decades ago.
Karen's career highlights include interviewing Apple's Steve Wozniak and discussing Steve Jobs’ legacy on the BBC. Her focus is Mac, but she lives and breathes Apple.