CLBR’s Second Annual Tax Day edition features Pulitizer Prize winning journalist David Cay Johnston to discuss how Apple and others companies are able to avoid millions in tax liability through sham transactions and offshore shelters. Johnston has written extensively about this and economists are starting to tie this abuse to job losses at home.
- Apple is hoarding $121.3 billion in offshore accounts to avoid a $28.5 billion tax liability.
- It paid just 1.9 percent on foreign earnings last year.
Apple is one of many major corporations that keeps its taxes low by stashing cash offshore. In reality, it’s not as simple as just opening a bank account in the Caribbean and sending checks there every month. In order to get its rates down, Apple has actually set up subsidiaries and subsidiaries of subsidiaries in countries with low corporate taxes, and it shuttles funds between them in order to minimize its liabilities. The specific strategy that Apple uses is known as the “Double Irish with a Dutch Sandwich.” This means that Apple directs its profits through two subsidiaries in Ireland — Apple Operations International and Apple Sales International — where corporate tax rates are about 12.5 percent compared to the 35 percent rate in the U.S. Some of the money goes through the Netherlands, due to some of Ireland’s treaties with other European nations, to tax havens in the Caribbean.
In case you were wondering, this does cost the average consumer in the long run. “Apple, like many other multinationals, is using perfectly legal methods to keep a significant portion of their profits out of the hands of the I.R.S., and when America’s most profitable companies pay less, the general public has to pay more,” former Treasury Department economist Martin Sullivan told The New York Times earlier this year. Sullivan added that Apple’s last annual report showed that only 30 percent of the company’s pretax profits came from the U.S. “Given that all of the marketing and products are designed here, and the patents were created in California, that number should probably be at least 50 percent,” he said.
How Apple Avoids Paying Billions in Taxes, Business Insider
David Cay Johnston is the author of Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich–and Cheat Everybody Else
Since the mid-1970s, there has been a dramatic shift in America’s socioeconomic system, one that has gone virtually unnoticed by the general public. Tax policies and their enforcement have become a disaster, and thanks to discreet lobbying by a segment of the top 1 percent, Washington is reluctant or unable to fix them. The corporate income tax, the estate tax, and the gift tax have been largely ignored by the media. But the cumulative results are remarkable: today someone who earns a yearly salary of $60,000 pays a larger percentage of his income in taxes than the four hundred richest Americans.
Pulitzer Prize-winning investigative reporter David Cay Johnston exposes exactly how the middle class is being squeezed to create a widening wealth gap that threatens the stability of the country. By relating the compelling tales of real people across all areas of society, he reveals the truth behind:
- “middle class” tax cuts and exactly whom they benefit
- how workers are being cheated out of their retirement plans while disgraced CEOs walk away with millions
- how some corporations avoid paying any federal income tax
- how a law meant to prevent cheating by the top 2 percent of Americans no longer affects most of them, but has morphed into a stealth tax on single mothers making just $28,000
- why the working poor are seven times more likely to be audited by the IRS than everyone else
- how the IRS became so weak that even when it was handed complete banking records detailing massive cheating by 1,600 people, it prosecuted only 4 percent of them
Johnston has been breaking pieces of this story on the front page of The New York Times for seven years. With Perfectly Legal, he puts the whole shocking narrative together in a way that will stir up media attention and make readers angry about the state of our country.