Apples clever book keeping skills… release the hounds.

News Ramblings

Some news reminiscent of the great Montgomery Burns complaining of getting screwed over $3 in taxes despite all the corporate and financial loop holes his creative accountants have devised, except replace the great man with our beloved producer of world dominating gadgets, the wonderful Apple. While noone can be criticised for trying to keep as much of their hard earned money away from the taxman as possible which is fair enough by all standards, Charles Duhigg of the NY Times has released a report questioning many of the companies latest, albeit completely legal tactics. He describes Apples tax avoiding practices as “spectacularly creative”, resulting in the company having a global tax rate of 9.8%, allowing them to save 2.4 billion dollars, being less than half that of Walmart at 24% and most other major corporations.

According to Duhigg some of the more creative practices employed by Apple include finding ways to allocate up to 70% of its profit margins outside the US, despite the majority of its executives and product designers residing there. The article in the NY times reports Apple using offices in Nevada to house a company named Braeburn Capital to collect cash generated in the US by the company, thus avoiding Californias tax and falling under the zero corporate tax jurisdication of Nevada and its laws. All the while that Apple are claiming low cash flows in California they are collecting tax credits for Research and Development purposes there to the tune of $400 million over the last 15 years.

Internationally, Duhigg says Apple have pioneered an ingenious scheme nicknamed Double Irish with a Dutch Sandwich that many accountants from other major firms have said they learnt from Apples methods. It involves routing money generated from US inventions through subsidiaries in Ireland and the Netherlands and then through to the Caribbean. The extent to which Apple use this method can be explained by the fact that from an accounting perspective, Ireland accounted for 30% of Apples total revenue, which is a little hard to fathom unless Bono is downloading billions of copies of his own music to hear his own voice. All of this is done to take advantage of the exceptionally low rates of tax in many of these regions. Even salespeople working in high tax regions act on behalf of Apples subsidiaries in low tax regions making them eligible for that countries rates. Apple themselves have noted that many iTunes sales occur legally in Luxembourg as they offer tax incentives for any company that processes its transactions there, a simple process when selling a digital product.

While not having to answer to anyone due to the company breaking absolutely no laws, they have responded to the NY times report, which you can read in full here, although it doesnt really address the question asked of the company.




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