iPhone 5 Release Date Nears: Apple Stock Soaring While Company Avoids Paying Billions in Taxes

In this time of increased scrutiny over the taxation of individuals and corporations, if there are any discrepancies to what the public sees as “the fair share of taxes” the public will be sure to question it. One of the most recent examples of this is Apple Computers. While Apple follows the law in regards to paying taxes, they also seek to minimize the amount paid annually. 

According to a New York Times article, Apple has been able to successfully minimize taxes in California and 20 other states. They have a financial subsidiary, Braeburn Capital, located in Reno, Nevada. By having this corporation in Nevada, they are able to minimize their taxable liability in other states.  

Apple creatively implements strategies such as these worldwide; they have subsidiaries in Ireland, the Netherlands, Luxembourg and the British Virgin Islands. Sometimes, these offices are just a letterbox or an anonymous office. By minimizing the taxes Apple pays, it increases the amount of profits it makes.

This trend of minimizing taxation has gone on for some time now. Specifically, technology companies in general are known to pay a minimal amount of taxes. However, in regards to Apple, they have been pioneers. Apple was one of the first companies to take sales people in high tax countries and have them sell products for low tax subsidiaries, which allowed the corporation to avoid paying income taxes. By not initiating such tactics, Apple’s global tax bill would be substantially higher.

One of the main issues in relation to taxation that is starting to arise is how Apple and other technology companies are skirting taxes in California. The state itself is hurting and while most companies are located in Silicon Valley they are getting around paying taxes to the state. They are able to avoid these taxes through international subsidiaries. When money circulates through foreign subsidiaries, it cannot be brought back into the United States without incurring taxes, so whatever money is generated through these subsidiaries tends to stay overseas. 

Finally, when a state official raised the concern of Apple avoiding taxes in California, an Apple representative told the official that the company pays millions of dollars in property and other forms of taxes and if it was too much of an issue, they could relocate to another state. The official quickly withdrew the argument, acknowledging that while Apple may skirt taxes, they need every tax dollar they can get from the company and need for them along with the other technology companies to remain in California. So while Apple does not cheat the tax system, they will continue to raise questions on whether the company’s tax payments are truly “fair” to society.

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Amir Townsend

I have a B.S. in Economics with a minor in Global Studies. I am pursuing my PhD in Political Science at the University of Kentucky. I am passionate about economics, international relations and public policy.

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