Like other companies, Apple typically keeps profits on overseas sales in overseas accounts. When someone buys an iPad in Paris or Sydney, for instance, the profit stays outside the United States.
Apple may pay some corporate income taxes on that profit to the country where it sells the iPad, but it minimizes these by using various accounting moves to shift profits to countries with low tax rates. For example the strategy known as "Double Irish With a Dutch Sandwich," routes profits through Irish and Dutch subsidiaries and then to the Caribbean.
When it comes to using creative tax techniques, Apple is no different from other multinational corporations, says Robert Willens, an independent accounting expert.
And just like other corporations, Apple leaves cash overseas. If it brought it home to the U.S., it would have to pay federal income taxes on the money (though it would get a credit for foreign taxes already paid). In Apple's case, those overseas accounts have grown to a staggering $74 billion — equal to the market value of Citigroup Inc.
The money is accumulating overseas because corporations are counting on lower U.S. tax rates in the future. At 35 percent, the U.S. corporate tax rate is among the highest for developed countries. In 2004, Congress enacted a one-year "tax holiday" for overseas earnings, and multinationals are hoping for a repeat of that. Presidential candidate Mitt Romney wants to permanently eliminate federal taxes on overseas profits. President Barack Obama attacked that idea last week, saying it won't create U.S. jobs, like the Romney campaign contends.
Where Apple does differ from other companies is that it sets aside a portion of these overseas profits, marking them as subject to U.S. taxes sometime in the future. Essentially, it's saying "this is money that we'll likely have to pay U.S. federal income taxes on" because we intend to repatriate it, says Willens.
But because Apple doesn't actually bring the profits into U.S. accounts, it doesn't pay the taxes. Instead, it records a tax liability. When Apple reports quarterly results, it subtracts these liabilities from its profits, even though it hasn't actually paid the taxes.
...............
Apple declined to comment on the specifics of its tax strategies or why it records tax liabilities that other multinationals avoid.
"Apple has conducted all of its business with the highest of ethical standards, complying with applicable laws and accounting rules," the Cupertino, Calif., company said in a statement.
Yet Apple has made clear that it has no intention of repatriating its profits from overseas at the current U.S. tax rate. When CEO Tim Cook announced that the company would start paying a dividend this summer, he said the board determined the size of the dividend solely by looking at the amount of cash the company has in U.S. accounts.
"We do not want to incur the tax cost to repatriate the foreign cash at this time," Chief Financial Officer Peter Oppenheimer told investors in March.
http://abcnews.go.com/Technology/wireStory/apples-phantom-taxes-hide-billions-profit-16838828#.UA2bX5KVCy8
What a bunch of greedy libs! Only Lefties Soros and Buffet rise to this level (and beyond) of betrayal.
Actually, the truly greedy libs are the ones who control the Oval Office and the Senate, not realizing (because they know nothing about how wealth is created or economics in general) that they are pricing the US out of the global market in all areas including, besides employment (jobs), taxes, savings, and investments (stuff which creates jobs).