A view of the main entrance to Apple Inc. in Cupertino, California on March 11, 2011.
If they take a moment to think about it, most iPod, iPad, or iPhone consumers probably imagine that the money they pay Apple is eventually collected in its Cupertino, California headquarters.
Since 2006, however, Apple has deposited most of its domestic profits into accounts linked to the company’s subsidiary in Reno, Nevada through tax loopholes with nicknames like the “Double Irish With A Dutch Sandwich.” By doing so, they’ve avoided paying California’s 8.84 percent corporate income tax rate and enjoyed Nevada’s zero percent corporate tax rate.
It’s arguably cost the country billions—and California millions—in lost tax revenue. Apple has declined to comment on its Nevada operations, but has stated it “has conducted all of its business with the highest of ethical standards, complying with applicable laws and accounting rules.”
Tax experts agree, what Apple is doing is perfectly legal, but does it make for sound U.S. tax policy? And even though it’s perfectly legal, does Apple have any responsibility to go against financial incentives and pay a heftier corporate tax rate?
Edward Kleinbard, former chief of staff, Congressional Joint Committee on Taxation; professor of law, USC Gould School of Law
Janet Novack, DC Bureau Chief, Forbes