From The Week Article
“How much does Apple sidestep in taxes?
Corporations don’t publicly release tax returns, but The Times estimates that Apple avoided paying $2.4 billion in federal taxes last year, citing the work of former Treasury Department economist Martin A. Sullivan. Apple did report paying $3.3 billion in taxes globally on $34.2 billion in profits, giving it a 9.8 percent tax rate. …
How does it manage this accounting feat?
Essentially, Apple routes a sizable portion of its profits through countries and states that allow it to pay low tax rates. For example, the Cupertino, Calif.-based company has a tiny subsidiary in Reno called Braeburn Capital that manages and invests much of Apple’s enormous cash reserve — California has an 8.84 percent corporate tax rate; Nevada’s is zero, and the state has no capital gains tax.
That’s all it takes to save $2.4 billion?
Not quite. Apple is also a pioneer of a tasty-sounding accounting move called the “Double Irish With a Dutch Sandwich,” which involves routing profits through subsidiaries in Ireland and in the Netherlands, before sending it on to the British Virgin Islands or another Caribbean tax haven. In all, about 70 percent of Apple’s profits are housed overseas.
And this is all legal?
Yes. … Much of their revenue comes from sources like patents and digital downloads, intangible things you can easily “sell” from anywhere in the world, particularly places that offer good tax arrangements. When people in Africa, Europe, and the Middle East buy songs and movies from iTunes, for example, the sale is recorded in a nondescript office in Luxembourg, a notorious tax haven. …
Is this ethical? ….”