Apple saves billions in taxes through very creative accounting

But according to a detailed report today by the New York Times, the company is going to extreme lengths to avoid taxes — so much so that it’s pioneered accounting techniques that many others have followed.
For example, Apple has opened a subsidiary in Reno, Nevada — cheekily named Braeburn Capital — to collect the company’s profits, as well as invest them. Nevada offers a corporate tax rate of zero, while California’s is 8.84 percent, so the subsidiary allows Apple to legally able to avoid millions in taxes to California.
Of course, Apple isn’t alone with its tax avoidance methods. But just as with the New York Time’s extensive reports on Apple-related labor abuses in China, the paper seems to be holding up Apple as an example to point out greater business concerns. Apple is a particularly interesting subject as well, given its record-high profits and cash reserves of $110 billion.
“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,” writes the NYT’s Charles Duhigg and David Kocieniewski.  “Today, that tactic is used by hundreds of other corporations — some of which directly imitated Apple’s methods, say accountants at those companies.”
Without its creative accounting, Apple could have owed $2.4 billion more to the U.S. government last year, according to former Treasury Department economist Martin A. Sullivan. Apple paid $3.3 billion in cash taxes last year on profits of $34.2 billion, whereas retailer Walmart paid $5.9 billion on $24.4 billion in profits, the NYT points out.
The NYT report, which mentions plenty of other interesting tax tactics by Apple, is particularly damning against Apple given how much California and its home city of Cupertino are struggling. I suspect we’ll see the usual amount of Apple bashing thanks to this report, but there’s likely little the company will do about the criticism. Apple doesn’t really have much room to improve if its competition continues to take advantage of legal tax loopholes.