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Apple’s tax strategies: ‘Double Irish With a Dutch Sandwich’

By
Philip Elmer-DeWitt
Philip Elmer-DeWitt
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By
Philip Elmer-DeWitt
Philip Elmer-DeWitt
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April 29, 2012, 6:39 AM ET


The Reno office that manages Apple's cash. Photo: David Calvert for the New York Times

FORTUNE — Apple (AAPL), like every other company in America, from Amazon (AMZN) to Google (GOOG), uses every loophole it can find — and at least one it apparently invented — to avoid paying a penny more than it has to in corporate taxes.

According to a front-page story in Sunday’s New York Times, this includes:

  • Managing its investments through an office in Reno, Nevada, to get around California’s 8.84% corporate tax rate.
  • Funneling iTunes sales in Europe, Africa and the Middle East through an office in Luxembourg to take advantage of the grand duchy’s lower tax rates.
  • Routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean, an accounting technique known as the “Double Irish With a Dutch Sandwich” that, according to the Times, Apple invented and has since been adopted by hundreds of other corporations.

It’s a fascinating look at the holes lawmakers have written into corporate tax codes that allow a company like Apple to pay taxes of $3.3 billion on profits of $34.2 billion in fiscal 2011, a tax rate of 9.8%.

You can read Apple’s response here.

The Times could have used almost any major high-tech corporation to make its case, but not every company makes the kind of profits or holds the kind of fascination for readers that Apple does.

This is the third time the paper has used Apple as a lens to examine the inner workings of what it calls the iEconomy. The first dealt with the exportation of manufacturing jobs from the U.S. to Asia. The second focused on working conditions in the Chinese factories that assemble most of the world’s electronic devices. You can read the series here.

About the Author
By Philip Elmer-DeWitt
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