C M Y K Nxxx,2012-04-29,A,001,Bs-BK,E3

Late Edition Today, sun with a few lingering clouds, milder, high 63. Tonight, clear, low 40. Tomorrow, sunny, fewer breezes, high 65. Weather map and details are on Page 24.

VOL. CLXI . . No. 55,756 © 2012 The New York Times NEW YORK, SUNDAY, APRIL 29, 2012 $6 beyond the greater New York metropolitan area. $5.00 How Apple Sidesteps IN HOPEFUL SIGN, Billions in Taxes HEALTH SPENDING Funneling Earnings to Low-Tax Regions IS FLATTENING OUT

$35 billion By CHARLES DUHIGG and DAVID KOCIENIEWSKIC M Y K C M Y K Nxxx,2012-04-29,A,001,Bs-BK,E3Nxxx,2012-04-29,A,001,Bs-BK,E3SURPRISING THE EXPERTS RENO, Nev. — Apple, the Income world’s most profitable technol- Nxxx,2012-04-29,A,001,Bs-BK,E3 before taxes, ogy company,C M Y doesn’tK design Recession and Behavior worldwide: iPhones here. It doesn’t run Late Edition Late Edition 2011 Are Cited — Fiscal C M YAppleCareK customer serviceNxxx,2012-04-29,A,001,Bs-BK,E3 Today, sun with a few lingeringToday, sun with a few lingering $34.2 billion from this city. And it doesn’t Strain Could Ease clouds, milder, high 63. Tonightclouds,, milder, high 63. Tonight, manufacture MacBooks or iPads Late Editionclear, low 40. Tomorrow, sunny,clear, low 40. Tomorrow, sunny, anywhere nearby. fewer breezes, high 65. Weather Late Edition Today, sun with a few lingeringfewer breezes, high 65. Weather Yet, with a handful of employ- clouds, milder, high 63. Tonightmap and, details are on Pagemap 24. and details are on Page 24. Today, sun with a few lingering By ANNIE LOWREY ees in a small office here in Reno, clouds, milder, high 63. Tonight, clear, low 40. Tomorrow, sunny, $30 clear, low 40. Tomorrow, sunny, Apple has done something cen- fewer breezes, high 65. Weather WASHINGTON —fewer The breezes,growth high 65. Weather tral to its corporate strategy:VOL. it CLXI . . No. 55,756VOL. CLXI .© . 2012 No. The 55,756 New York Times © 2012 The NEWNewmap York and Times YORK, details are onSUNDAY, Page 24. NEW APRIL YORK, 29, 2012 SUNDAY,of health APRIL spending 29, map2012 has$6 and beyond slowed details the greater are New on York Page metropolitan 24.$6 beyond area. the greater New$5.00 York metropolitan area. $5.00 has avoided millions of dollars in substantially in the last few VOL. CLXItaxes . . No. in 55,756 California and© 2012 The 20 New otherYork Times NEW YORK, SUNDAY, APRIL 29, 2012 $6 beyond the greater New York metropolitan area. $5.00 years, surprising experts and of- VOL. CLXI . . No. 55,756 © 2012 The New York Times NEW YORK, SUNDAY, APRIL 29, 2012 $6 beyond the greater New York metropolitan area. $5.00 states. fering some fuel for optimism Apple’s headquarters are inHow AppleHow Sidesteps Apple SidestepsIN HOPEFUL SIGN, about the federal government’s IN HOPEFUL SIGN,IN HOPEFUL SIGN, HowCupertino, Apple Calif. BySidesteps putting an of- long-term fiscal performance. ficeBillions in Reno, just in 200 Taxes miles away, HEALTH NARAYANSPENDING MAHON FOR THE NEW YORK TIMES Much of the slowdown is be- to collect andHow invest the Apple compa- At aBillionsSidesteps phone bank in Madison, inBillions Taxes Wis., ahead of ain recall Taxes vote. Unions seek to remove the governor. cause of the recession,IN HOPEFUL and thus SIGN,HEALTH SPENDINGHEALTH SPENDING ny’s profits, Apple sidesteps state IS FLATTENING OUT not unexpected, health experts Funnelingincome Earnings taxes ontoBillions Low-Tax some of Regions those in Taxes say. But some of it seemsHEALTH to be at- SPENDINGIS FLATTENING OUTIS FLATTENING OUT $25 $35 billion gains. By CHARLES DUHIGGFunneling EarningsFunneling to Low-Tax Earnings Regions to Low-Tax Regions tributable to changing behavior California’s corporateand DAVID KOCIENIEWSKI tax rate SURPRISING THE EXPERTS by consumers and providers of RENO, Nev. — Apple, the Chinese Activist’s Flight Aided Recall Election is 8.84Income percent. Nevada’s?world’s most profitable Zero.$35 technol- billion $35 billion By CHARLES DUHIGG By CHARLES DUHIGG health care — meaningIS FLATTENING that the OUT beforeFunneling taxes, ogy company, Earnings doesn’tBy design CHARLES to Low-Tax DUHIGG Regions and DAVIDand DAVID KOCIENIEWSKI KOCIENIEWSKI and DAVID KOCIENIEWSKIRecession and Behavior SURPRISING THE EXPERTS Settingworldwide: up aniPhones office here. in Reno It doesn’t is run lower rates of growth might per- SURPRISING THE EXPERTS 2011 AppleCare customer service RENO, Nev. — Apple, theRENO, Nev. — Are Apple, CitedTests the— Fiscal Strategies sist even as the economy picks just one$34.2 billion of many legal methods By a Daring Circle Now at Risk from this city. And it doesn’t ByReno, CHARLES Nev. DUHIGG giants haveIncome taken advantage of tax codesStrain Couldwritten Ease Apple uses$35 billion to reducemanufacture itsMacBooks world- or iPads Income world’s most profitable technol-world’s most profitable technol- up. pple,anywhere the world’snearby. most profitableand DAVIDbefore KOCIENIEWSKI techtaxes, - ogyfor an company, industrialbefore doesn’ttaxes, age design andogy ill company, suited to doesn’t today’s design digital SURPRISING THE EXPERTSRecession and BehaviorRecession and Behavior wide tax bill by billionsYet, with a of handful dollars of employ- Because Medicare and Medic- worldwide: worldwide: iPhones here. It doesn’tBy ANNIE runFor LOWREY November ees in a small office here in Reno, RENO, Nev. — Apple,iPhones the here. It doesn’t run $30 each year.nology As it company, has in Nevada, doesn’t design iPhones economy. Some profits at companies like Apple, aid are two of the largest contrib- Are Cited — Fiscal Apple has doneIncome something cen- world’s most2011 profitable By technol-AppleCare ANDREW 2011 customerJACOBS serviceAppleCare customerWASHINGTON service — The growth Are Cited — Fiscal Apple has createdtral tosubsidiaries its corporate strategy: in it of health spending has slowed utors to the country’s long-term here. It doesn’tbefore run taxes, AppleCareogy company, customer$34.2 billion doesn’t fromGoogle, design this $34.2Amazon, city. billion And it Hewlett- doesn’tfrom thisPackard city. And and it Microsoft doesn’t Recession and Behavior A has avoided millions of dollars in BEIJING — For months, Chen communicate and elude a sur-substantially in the last few Strain Could Ease Strain Could Ease low-tax places like Ireland, the debts, slower growth in health service from taxesthis in Californiacity.worldwide: And and 20 otherit doesn’tiPhones manufac here. It doesn’t- manufacturederive run not MacBooks from physical or iPadsmanufacture goods MacBooksbut years,from surprising or royalties iPads experts and of- Netherlands, Luxembourgstates. and Guangcheng, one of China’sanywhere best- nearby.veillance apparatusanywhere that nearby. is onefering of some fuel forBy optimism JIM RUTENBERG costs could reduce theAre pressure Cited — Fiscal Apple’s headquarters2011 are in AppleCare customer service about the federal government’s ture MacBooksCupertino, or iCalif.P$34.2ads By putting billion anywhere an of- known nearby. dissidents, playedon Yet, a intellectual cat- with athe handful world’s property, of employ-mostYet, pervasive. like with the a handful patentslong-term of employ- fiscal onand performance. soft STEVEN- GREENHOUSE the British Virgin Islands — from this city. And it doesn’t for enormous spending cuts or By ANNIE LOWREY $20 fice in Reno, just 200 miles away, and-mouse game with theees in pha- a small office hereNARAYAN in Reno,ees MAHON in FOR aTHE small NEW YORK TIMESoffice hereMuch ofin theReno, slowdown is be- Strain Could Ease By ANNIE LOWREY to collect and invest the compa- manufactureYet, with MacBooks $30a or iPads By Saturday, three activistscause of the GREEN recession, and BAY,thus Wis. — “Recall tax increases. $30 At a phone bank in Madison, Wis., aheadware of a recallthat vote. makes Unions seek devices to removeApple the haswork. governor. done O somethingther times, cen- the WASHINGTON — The growth ny’s profits, Apple sidesteps state lanxanywhere of guards nearby. encirclingApple his has donewho somethinghad either cen- helped him or hadnot unexpected,Walker” health bumper experts stickers dotted In 2009 and 2010, total nation- WASHINGTON — The growth THE iECONOMY income taxes on some of those home.handfulYet, He with dug of a handful a em tunnel- of employ-totralproducts try to to its corporate themselves strategy: tralare it to digital, its corporate likesay. downloaded strategy:But some of it seems it to be at- of health spending has slowedof health spending has slowed $25 gains. been advocates in the past hadtributablethe to changing workers’ behavior parking lot at the wide health care spendingBy grewANNIE LOWREY substantially in the last few California’s corporate tax rate ees in a small office here inhas Reno, avoided millions of dollarshas in avoided millionsby consumersof dollars and in providers of substantially in the last few Protecting$30 Profits escape,ployeesChinese a friend Activist’sin says,a butFlightsongs. was ItAided is muchRecall easier Electionfor businesses with royal- is 8.84 percent. Nevada’s? Zero. Apple has done somethingtaxes cen- in Californiadisappeared, and 20 otherincludingtaxes in California the wom-health and care 20Georgia — other meaning Pacific that the paper mill on Day less than 4 percent perWASHINGTON year, the — The years,growth surprising experts andyears, of- surprising experts and of- Setting up an office in Reno is foundsmall out. office And hehere sneaked ties out and a digitalan who products drovestates. Mr. to Chen move more lowerprofits ratesStreet of togrowth low-here might per-one recent afternoon, slowest annual pace in more than fering some fuel for optimism tral to its corporate strategy:states. it Tests Strategies sist even as the economy picks of health spending has fering slowed some fuel for optimism just one of many legal methods videoBy that a Daring alerted Circlehis supporters Now at Risk Apple uses to reduce its world- inhas Reno, avoided millionsApple of dollarstaxApple’s incountries headquartersthan 300than miles it are is, Apple’s toin say, Beijing for headquarters grocery andup. a proofstores are in of or their union’s role in the five decades, accordingsubstantially to the lat- in the lastabout few the federal government’sabout the federal government’s some little morewide than tax bill a byletterbox billions of dollars to the smothering confinementCupertino, Calif. By puttingFor anCupertino, of-November Calif. By puttingBecause Medicare an of- and Medic- long-term fiscal performance.long-term fiscal performance. each year. As it has in Nevada, taxes in California and 20 other man who admitted to meeting theaid are twoeffort of the largest to oustcontrib- Gov. Scott Walker est numbers from theyears, Centers surprising for experts and of- hasor an done anonymous something office —central that to its corporateBy ANDREW JACOBSautomakers. A downloaded application, unlike a NARAYAN MAHON FOR THE NEW YORK TIMESNARAYAN MAHON FOR THE NEW YORK TIMES Much of the slowdown is be- Apple has created subsidiaries in he states. said he and his wife enduredfice in Reno,dissident just 200 miles as heaway,fice was in Reno, shuttled just 200 be-utors miles to thefrom away, country’s office long-term early for his legisla- Medicaid and Medicarefering Services. some fuel for optimismMuch of the slowdown is be- help cut the taxeslow-tax it pays places likearound Ireland, the BEIJING — For months, Chen communicateto collect and and elude invest a sur- the compa-to collect and investdebts, the slower compa- growth inAt health a phone bank in Madison, Wis., ahead of a recallabout vote. the Unions federal seek government’s to removecause of the the governor. recession, and cause thus of the recession, and thus strategy: it hasNetherlands, avoided Luxembourg millions and atGuangcheng, theApple’s ofhands dollarsone of headquartersof China’s the best- inmen veillance who arecar, apparatuskept incan bethat issold one of fromBy anywhere.JIM RUTENBERGAt a phonecosts bank couldtion in reduce Madison, limiting the pressure Wis., public ahead employees’ of a recall vote.After Unions years seek of totaking remove up thea grow- governor. tween safeand houses STEVENny’s GREENHOUSEprofits, in the Apple capital. sidesteps state not unexpected, health experts the world. the British Virgin Islands — themknownCupertino, dissidents, virtual Calif. played prisoners By a cat- puttingthe ny’sworld’s in an their of-profits, most pervasive. Apple sidesteps state for enormous spending cuts or long-term fiscal performance.not unexpected, health experts $20 taxes in California and 20 otherand-mouse states. game with the pha- By Saturday,The three Thegrowing activists man’s wifedigital said heeconomy was takentax increases.presentsbargaining a rights. ing share of economic activity, fice in Reno, just 200 milesincome away, taxes on some GREEN of thoseincome BAY, Wis. taxes — “Recall on some of those NARAYAN MAHON FOR THE NEW YORK TIMES Much of the slowdownsay. is be-But some of it seems to besay. at- But some of it seems to be at- Almost every major corpora- rurallanx offarmhouse. guards encircling his who had either helped him or had Walker” bumper stickers dotted In 2009 and 2010, total nation- THE iECONOMY $25 gains. away by the police.gains. But among the largest donors health spending held steady in tributable to changing behaviortributable to changing behavior tion triesApple’s to minimize headquarters its taxes,$25 ofare inhome.to Cupertino, collect He dug a and tunnel invest to Ca try to- thebeen compa-conundrum advocates inAt the a pastphone hadfor thebanklawmakers workers’ in Madison, parking lot overseeing at Wis., the wide ahead health of care corpoa spendingrecall- vote. grew Unions seek to remove the governor. cause of the recession, and thus Protecting Profits escape,Then a friendlast says, Sunday but was night,disappeared, California’s in anincluding the corporate wom- Georgia tax Pacific rateCalifornia’s paper mill on Day corporateless than taxto4 percent Mr. rate per Walker year, the and his cause are 2010, at 17.9 percent of the gross by consumers and providersby of consumers and providers of $15 foundny’s out. profits, And he sneaked Apple outsidesteps a state Friends of Mr. Chen, along with Chinese Activist’s Flight notAided unexpected, healthRecall experts Election lif.course. By putting For Apple, an theoffice savings in Reno,improbable just 200 escape, miles Mr.an whorate Chen, drove taxation: Mr. Chen more althoughStreet hereis one8.84 recent technologypercent.Chinese afternoon, Nevada’s?slowest is annual nowZero.Activist’s pace inone more than Flight Aided Recall Election health care — meaning thathealth the care — meaning that the videoincome that alerted taxes his supporters on somethan ofis 300 those8.84 miles percent. to Beijingpeople Nevada’s? and a inproof the Zero. of their Chinese union’s role in govern- the five decades,the according plant’s to the owners, lat- the billionaire domestic product. say. But some of it seems to be at- are especially some alluring little more because than a letterbox to the smothering confinement man who admitted to meeting the effort to oustSetting Gov. Scott up Walker an officeest numbers in Reno from theis Centers for lower rates of growth might lowerper- rates of growth might per- away, to$25 collector an and anonymous invest office — the that who company’sgains. is blind and prof reportedly- ofSetting weakthe nation’sup an office largest in Reno is and most valuedindustrialists indus- Charles G. and Da- The growth rate mostlytributable slowed to changing behavior he said he and his wife endured dissident as he was shuttledment, be- sayfrom he office is early now for his inside legisla- theMedicaid and Medicare Services. Tests Strategies sist even as the economy picks the company’s help profits cut the taxes are it pays soaround at theCalifornia’s hands of the men corporate who kept taxjust rate one of many legal methodsjust one of many legal methods By a Daring Circle NowTests byat Strategies consumers Risk and providerssist even of as the economy picks from months of mistreatment,tween safe houses in the capital. tion limiting public employees’By aAfter Daring yearsvid of taking H. Koch,up Circlea grow- the latter Now of whom at Riskas millions of Americans lost in- its, Apple sidestepsthe world. state income taxes on some tries, manyChineseAmerican tech companies Embassy Activist’s in Beijing.are among IfFlight the least Aided Recall Election Apple’s high. Wall Street analysts predict them virtual prisoners in their TheApple man’s wife uses said he to was reduce taken bargaining its world-Apple rights. uses to reduceing share its of world- economic activity, up. up. Almost every major corpora- scaledis 8.84 thepercent. wall Nevada’s? that had Zero. been health care — meaning that the rural farmhouse. away by the police. But among the largest donors health spendinghas said held steady of the in recall election to surance coverage along with of those gains.tion tries to minimize its taxes, of Setting up an office in Renowidetaxed, taxis billaccording true,by billions that ofto dollars createswidegovernment tax bill diplomatic by billions and ofcorporate dollars lower rates of growth mightBecause per- Medicare and Medic-Because Medicare and Medic- profits have Apple could earn up to $45.6 bil- builtThen around last Sunday hisnight, inhouse, an Friends slipped of Mr. Chen, along with to Mr. Walker and his cause are 2010, at 17.9 percent of the gross For NovemberFor November $15 be held in June, “If the unions their jobs. Worried about job se- course. For Apple, the savings improbable escape, Mr. Chen, each year. As it has in Nevada,each year. As it hasdomestic in Nevada,product. aid are two of the largest contrib-aid are two of the largest contrib- lion in its current fiscal year — just one of many legalpeople methods in the ChineseByheadaches govern- a Daringthe plant’s for theowners, United the billionaireCircle States Now at Risk TestsBy ANDREW Strategies JACOBS sist even as the economy picks soared … California’sare especiallycorporate alluring because taxpast whorate ishis blind is security and 8.84 reportedly per detail weak- anddata. made Over the last two years, the 71 technologyBy ANDREW JACOBS ment, say he is now inside the industrialistsApple Charles has G. created and Da- subsidiariesThe growthwin rate the inmostly recall, slowed there will be no curity, others may have feared utors to the country’s long-termutors to the country’s long-term the company’s profits are so fromApple months uses of mistreatment, to reduce its Apple world- has createdjust subsidiaries days before in Secretary of up. which would be a record for any American Embassy in Beijing. If vid H. Koch, the latter of whom as millions of Americans lost in- communicate and elude a sur- Apple’s high. Wall Street analysts predict a scaled desperate the wall that sprint had been to apparentlow-tax places like Ireland,low-tax the placesBEIJING like — Ireland, Forstopping months, the ChenunionBEIJING power.”communicate — For months, and eludeChentaking a sur- time off work for doctor’s debts, slower growth in healthdebts, slower growth in health cent. Nevada’s? Zero. wide tax bill by billions true,of dollarscompanies that creates diplomatic in thehas saidStandard of the recall election & P tooor’ssurance 500-stock coverage along with Because Medicare and Medic- Americanprofits have business. Apple could earn up to $45.6 bil- built around his house, slipped State Hillary Rodham Clinton Guangcheng, one of China’sFor best-Novemberveillance apparatusBy JIM that RUTENBERG is one of By JIM RUTENBERG safety in Beijing. The daringheadachesNetherlands, rush for the United Luxembourg States be held inNetherlands, and June, “IfGuangcheng, the unions Luxembourgtheir one jobs. of Worried China’s and about best- job se- veillance apparatus that is one of costs could reduce the pressurecosts could reduce the pressure soared … lion in its current fiscal year — pasteach his security year. detail As and it hasmade in Nevada, The recall vote here has been visits or surgical procedures,aid are two of or the largest contrib- Setting up an office in Reno is just one of just index days before — Secretaryand including other of win American the recall,Apple, thereBy ANDREW officials willGoogle, be no JACOBScurity, ar- Yahoo others may and haveknown feared dissidents, played a cat- the world’sand most STEVEN pervasive. GREENHOUSE and STEVEN GREENHOUSE Apple serves which as awould window be a record onfor any fora desperatefreedom sprint could to apparent not havethe been British Virgin Islandsthe — Britishknown Virgin dissidents, Islands played — a cat- the world’s most pervasive. utors to the country’s long-termfor enormous spending cutsfor or enormous spending cuts or Apple has created subsidiariesState Hillary in Rodham Clinton stopping union power.” taking timebilled off work as for doctor’s a critical test of labor skipped nonurgent care when American business. $20 safety in Beijing. The daring rush$20 rive for annual talks. and-mouse[Page 8.] visits game or surgical with procedures, the and-mouse pha- or game with the pha- By Saturday, three activists tax increases. manyhow technology legal methods giants have Apple tak- useslow-tax to reduce places like its Ireland, and Dell other the American — reported BEIJING officials ar- — The payingFor recall months, vote hereworldwide Chen has been communicate cash taxes and elude a By sur- Saturday, three activists GREENdebts, BAY, slowerWis. — growth “RecallGREEN in tax health increases. BAY, Wis. — “Recall Apple serves as a window on possiblefor freedom withoutcould not have a beensmall network skipped muscle nonurgent care versus when corporate money. money was tight. rive for annual talks. [Page 8.] billed as a critical lanx test of labor of guards encircling lanx his ofwho guards had either encircling helpedBy JIM him hisRUTENBERG orwho had had either helped him or had Walker” bumper stickers dotted In 2009 and 2010, total nation- en advantage of howtax technology codes giantswritten have tak- possibleNetherlands, without a small Luxembourg network and Guangcheng,That themuscle one underground of versus China’s corporate best- money.networkveillancemoney was tight.apparatus that is one of Walker” bumpercosts could stickers reduce dotted the pressureIn 2009 and 2010, total nation- worldwide tax bill by billionsof ofactivists dollars who each risked detentionThatTHEat the a iECONOMY underground rate that, network on average,THE iECONOMY was a third Butless it thanis only a warm-up for a con- Still, the slowdown was sharp- en advantage of tax codes written of activists who risked detention known dissidents,But it is only played a warm-uphome. a for cat- a con- He the dugStill, world’s a the tunnel slowdown most to waspervasive. tryhome. sharp- to Hebeen dug advocates a tunneland STEVEN in to thetry topast GREENHOUSE been had advocatesthe workers’ in the parking past had lot atthe the workers’wide health parking care lot spending at the grewwide health care spending grew for an industrialfor age an industrial and ill age suited and ill suited the British Virgin Islandsof activists — was able of to help activists Mr. was able to help Mr. for enormous spending cuts or $10 $10 $20 toto helphelp him him and who, and supporters who, supporters frontationProtecting that will escape,play Profits out dur- a friender than frontation health says, economists but escape, wasthat ex- will a friendplay out says, dur- but waser thandisappeared, health including economists the wom- ex- less than 4 percent per year, the year. As it hasto today’s in digitalNevada, economy. Some Applewith knowledge has created of the escape ChenProtectingother evade his captorsS.& and-mouseProfits and P move. companies’. game with the (Cash pha- taxesBy Saturday, may in three- activistsdisappeared,GREEN including BAY, the Wis.wom- — “RecallGeorgia Pacifictax increases. paper mill on GeorgiaDay less Pacific than paper 4 percent mill on per Day year, the to today’s digital economy. Some with knowledge of the escape Chen evadeing thehis presidentialcaptors and election, movepected, and a broad, bipartisanfound out. And he sneaked out a … but tax profits at companies like Apple, said, used coded messages to Continued onlanx Page 8 of guardswhich both encircling sides viewfound as the his out.big- who Andrange had he of academics,ing eithersneaked the helped hospital out presidential ad-ahiman or had who d election,rove Mr. Chenpected, morean who andStreet d arove broad, here Mr. one bipartisanChen recent more afternoon,Street hereslowest one annual recent paceafternoon, in more slowestthan annual pace in more than subsidiaries inGoogle, low-tax Amazon, Hewlett-Pack- places like Ireland, the Walker” bumper stickers dotted In 2009 and 2010, total nation- profitspayments at companies like Apple, said,THE usediECONOMY coded messagesclude to paymentsContinuedgest for political multiple on showdown Pagevideo years.) in 8that at alertedministrators his and supporters policy video experts that alerted his supporters … but tax ard and Microsoft derive not home. He dug a tunnel to try to been advocateswhich both in the sides pastthan view had 300 as milesthe the workers’ big- to Beijing range parking andthan of a lot academics,300 proof at miles the of theirtowide hospitalBeijing union’s health and ad- role care a in spendingproof the offive their grew decades, union’s according role in the to thefive lat- decades, according to the lat- Google,have risen Amazon, Hewlett-Pack- some little more than aleast letterbox 30 yearssome between little pro-more and thanhas started a letterbox to wonder if whatto had the smothering confinement Netherlands, fromLuxembourg physical goods but fromand Protectingthe British Profits Vir- Evenescape, among a friendanti-union tech says, forces companies, — butto a labor-man- wasthe smotheringdisappeared,seemed Apple’s impossiblegest confinement ratesincluding politicalmight be hap- the showdownman wom- who admitted in at to meetingministratorsman the whoeffort admitted and to policy oustless to meetingthan Gov. experts 4 Scott percent the Walkereffort per year, toest oust numbersthe Gov. Scott from the Walker Centersest for numbers from the Centers for payments much more royalties on intellectual property, or an anonymous office — that Georgia Pacific paper mill on Day ard and Microsoft derive not or an anonymous officeagement — fight that writ large.he said he pening and his— if wifedoctors enduredand patientshe said he and his wife endured from office early for his legisla- Medicaid and Medicare Services. slowly. like the patents on software that found out. And he sneaked out a an wholeast drove 30 Mr. years Chen betweendissident more asStreet pro- he and washere shuttledonehas recent starteddissident be- afternoon,from to as wonder heoffice wasslowest earlyif shuttled what annual for had his be- pace legisla- in moreMedicaid than and Medicare Services. have risen gin Islands — some little more than a letterbox helpare cutlow. the Andtaxes whileit paysThe around the samehelp company nationalcutat the the groupstaxes hands has haveit ofpays beguntheremade aroundmen to change who in theiratkept- the be- hands of the men who kept After years of taking up a grow- from physical makes goods devices but work. from Other video that alertedflooding thehis streetssupporters and the air- thanhavior 300 in ways miles that bend to Beijingthe so- tween and asafeproof houses of theirin the union’s capital.tween role safetion in thehouses limitingfive in decades, publicthe capital. employees’ accordingtion to limiting Afterthe lat- years public of employees’taking up a grow- much more times, the products themselves the world. the world. anti-unionthem forces virtual — a prisonerslabor-man- in theirseemed impossible might be hap- orroyalties an anonymous on intellectual office property, — that helpsome cutlittle themore tax than- a letterboxdustries,to ignited the smotheringwaves economic in Wisconsin confinementthem —growth the Koch- virtualmancalled and prisonerswho cost delighted curve. admitted in theirto meetingThe theman’seffort wife said to oust he was Gov. takenThe Scott man’s bargaining Walker wife saidest rights. he numbers was taken from thebargaining Centersing rights.for share of economic activity,ing share of economic activity, are digital, like downloaded Almost every majorsupported corpora- groupAlmost Americans every for majorIf so, it corpora- agementwas happening fight just as writ large. pening — if doctors and patients slowly. Cash paid for songs. It is much easier for busi- or an anonymous office — that he said he and his wife enduredrural farmhouse. rural farmhouse. away by theBut police. among the largest donorsBut amonghealth the spending largest held donors steadyhealth in spending held steady in eslike it the incomepays patents taxes, around on software the world. that customers, it hasProsperity also ondevised the right, corporate the dissidentthe new health as stratecare he law was was- com- shuttledaway be- by thefrom police. office early for his legisla- Medicaid and Medicare Services. $5 nesses with royalties and digital tion tries to minimize its taxes,tion of tries to minimize its taxes, of have begun to change their be- worldwide: help cut the taxes it pays around at the hands of the men whoThen kept last Sunday The night, same in anThen national last Sunday groups night, in an to Mr. Walker and his causeto are Mr. Walker2010, at and 17.9 his percent cause of are the gross2010, at 17.9 percent of the gross makes devicesproducts work. to move profits Other$15 to low- $15 Continuedcourse. on Page For 21 Apple,tween theContinued safe savings houses on Page 20in the capital.Friends tionof Mr. limiting Chen, along public with Friends employees’ of Mr. Chen,After alongyears with of taking up a grow- 2011 the world. course. For Apple, the savings improbable escape, Mr. Chen, domestic product. Almost everytax countries major than it is, say,corporation for tries to gies thatthem take virtual advantage prisoners of inimprobable theirgaps inThe the escape, man’s floodingtax wife Mr. code, said Chen, the he streetswaspeople taken and in bargaining the Chineseair- rights.havior govern-people in ways the in plant’s the that Chineseing bendowners, share the govern- the ofso- billionaire economicthe plant’s activity,domestic owners, product. the billionaire times, $3.3 the billion productsgrocery stores themselves or automakers. A are especially alluring becauseare especially alluring because who is blind and reportedly weak Almost every major corpora- rural farmhouse. who is blind and reportedlywaves in weak Wisconsin — theBut Koch- amongcalled the largestment, cost saycurve.industrialists donors he is health now Charles inside spending G. the and heldindustrialists Da- steadyThe in Charlesgrowth rateG. and mostly Da- slowedThe growth rate mostly slowed minimizeare digital, its taxes, likedownloaded downloaded of application, course. unlike Fora Apple, the sav- theaccording company’s to profitsformer are theexecutives so company’sREPORTER’S whoaway profits NOTEBOOK helped by arethe police. so crefrom - monthsment, say of he mistreatment, is now inside the car, can be sold from anywhere. tion tries to minimize its taxes, of Then last Sunday night,from in an months of mistreatment, vid H. Koch,2010, the at latter 17.9 percent of whomvid of H. the Koch,as gross millions the latter of Americans of whom lostas in- millions of Americans lost in- Cash paid for $15 Apple’s high. Wall Street analystsFriendssupported predict of Mr. Chen, group alongAmerican with Americans toEmbassy Mr. for Walker in Beijing. andIf so,American his If it cause was Embassy arehappening in Beijing. just as If ingssongs. are It is especiallymuchThe easier growing alluringfor digital busi- economy becausecourse. ForApple’sthe Apple, com - the savingshigh.ate Wallthose Street strategies. analysts predict scaled the wall that had beenscaled the wall that had been surance coverage along with improbable escape, Mr. Chen, Prosperity on true, the that right,the createsplant’s the owners, diplomaticthe newtrue, the healthbillionaire thathas saidcare creates of domesticlaw the was diplomatic recall product.com- electionhas to saidsurance of the recall coverage election along to with income taxes, presents a conundrum for law- are especiallyprofits have alluring becauseApple couldprofits earn haveup to For $45.6 EdwardsApple bil- couldbuilt earn aroundandpeople up Former histo $45.6 in house, the bil- Aide, slippedChinesebuilt around govern- his house, slipped $5 nesses with roymakersalties overseeing and digital corporate who is blind and reportedly weak industrialists Charles G. andbe heldDa- in June,The growth “If the rate unions bemostly held theirslowed in June, jobs. Worried“If the unions about jobtheir se- jobs. Worried about job se- worldwide: pany’s profits are so high. Wall Streetsoared analysts … lion inApple, its currentsoared for … fiscal instance, yearlion — in itswas current amongment, fiscal say yearthe he — isfirst now insideheadaches the for the United Statesheadaches for the United States products to movetaxation: profits although to technology low- is the company’s profits are so from months of mistreatment,past his security detail andContinued madepast his securityon Page detailvid 21 H. and Koch, made the latterContinued ofwin whom the on recall,Pageas millions 20there of will Americans bewin no the curity, lost recall, in- others there maywill be have no fearedcurity, others may have feared now one of the nation’s largest which would be a record forAnotherwhich any would Story be aAmerican record of a forLost Embassy any Love in Beijing.just daysIf before Secretaryjust of days before Secretary of 2011 predict Apple could Apple’searn up to $45.6high. Wallbillion Street in analysts its predicttech companiesscaled the wall to thatdesignate hada beendesperate overseas sprint tosales apparenta- desperate sprint to apparent stopping unionsurance power.” coveragestopping alongtaking union with time power.” off work for doctor’staking time off work for doctor’s tax countries thanand most it is, valued say, industries, for American business. American business.true, that creates diplomaticState Hillaryhas said Rodham of the ClintonrecallState election Hillary to Rodham Clinton $3.3 billion current fiscalmany year tech companies profits— which haveare among wouldApple be could a recordearn up to $45.6people bil- builtin high-tax around his countries house, safety slipped in in Beijing.a manner The daring that safetyrush in Beijing. Thebe held daring in rush June, “If the unionsThe recalltheir vote jobs. here Worried has been aboutThe recallvisits job se- voteor surgical here has procedures, been visits or or surgical procedures, or grocery stores or automakers. A CHINA AID VIA EUROPEAN PRESSPHOTO AGENCY Apple serves asheadaches a window for on the Unitedand States other American officialsand ar- other American officials ar- ’07 ’11 ’07 ’11 the least taxed,soared according … to gov- lion in its current fiscal yearApple — servespast his as security a window detail on andfor made freedomBy KIM SEVERSON could not have beenfor freedom could not have been billed as a critical test of laborbilled asskipped a critical nonurgent test of labor care whenskipped nonurgent care when ernment and corporate data. An undated photo of Chen Guangcheng with his family. The es- how technology giantsjust days have beforetak- Secretaryrive for ofREPORTER’S annualwin thetalks. recall, [Page NOTEBOOK there 8.]rive willfor annual be no talks.curity, [Page others 8.] may have feared fordownloaded any American application, business. unlike a which would be a record forhowallowed any technology them giants to sell haveGREENSBORO, on tak- behalf N.C.possible — For of without low-taxviolate campaign a small subsid finance network possiblelaws- without a small network muscle versus corporate money. money was tight. Source: company filings THE NEW YORK TIMES Continued on Page 22 cape of the activist, who is blind, was months in thea planning. desperate sprint to apparent stopping union power.” muscle versustaking corporate time off work money. for doctor’smoney was tight. car, can be sold from anywhere. en advantage of tax codeshour afterwrittenen grueling advantage hour, Andrew of taxStateduring codes Mr. Hillary writtenEdwards’s Rodham runof for activiststhe ClintonThat who the risked underground detention networkThat the underground network Apple serves as a window on Americanhow technology business. iaries onsafety other in Beijing. continents, The daringof sidestepping rushactivists who risked income detention The recall vote here hasBut been it is onlyvisits a warm-up or surgical for a procedures,Butcon- it is onlyStill, ora warm-upthe slowdown for a con-was sharp-Still, the slowdown was sharp- for an industrial age andYoung ill sat suitedfor on the an witness industrial stand in a ageand2008 and presidential other ill suited American nomination.to help officials ofhim activists ar-and who, was supporters able to helpof Mr. activists was able to help Mr. The growing digital economy$10 Apple serves as $10 a window on for freedom smallcould federal not courtroom haveto beenherehelp last him andBut the who, trial also supporters tells a painful frontation skippedthat will nonurgentplay out frontationdur- career when that than will health play economistsout dur- er ex- than health economists ex- to today’s digital economy. Someto today’s digital riveeconomy. for annual Some talks. [PageChen 8.] evadebilled his captors as a critical and moveChen test evade of labor his captors and move presents a conundrum for law- how technology giants have tak- possible withoutweek and a smallstared straight networkwith ahead, knowledgestory of family of and the love escape andwith bro- knowledge muscle of the versus escape corporate ing money. the money presidential was tight. election, ing thepected, presidential and a broad, election, bipartisanpected, and a broad, bipartisan Brain Drain Feared as German Jobsen advantage Lure ofSouthern tax codes writtenprofits Europeans at companies likenever once Apple,profits facing the said,at man companies he had used kenThat coded relationships. like theFor Apple, messages underground Edwardssaid, to usednetwork codedContinued messages and on Page to 8FormerContinued onAide, Page 8 makers overseeing corporate … but tax of… activists but tax whoonce looked risked upon detentionas a father. Mr. Young, 46, became enam- But it is only a warm-up forwhich a con- both sidesStill, viewthe slowdown as thewhich big- was bothrange sharp- sides of academics,view as the hospitalbig- range ad- of academics, hospital ad- postcard-perfect town and many tofor make an aindustrial new elevator age part and illTheGoogle, suited free movement Amazon, of labor Hewlett-Pack-Google, Amazon,of ored Hewlett-Pack- activists with Mr. Edwards was able when he to help Mr. $10 payments topayments help him andJohn who, Edwards, supporters the former frontation that will play outgest dur- politicaler than showdown health economists ingest at politicalministrators ex- showdown and policy in at expertsministrators and policy experts taxation: althoughothers technologylike it, a migration of is high- mesh with older components. was one of the founding princi- Democraticard senator and who Microsoftis facing and his derive wife, Cheri, not heard him By SUZANNE DALEY to today’s digital economy.ard Some and Microsoft derive not Chen evade his captors and move least 30 years between pro- and has started to wonder if what had ly qualified young job-seekers Her Germanhave is spotty. risen But the ples of the Europeanwithhave Union, knowledgerisen a 30 years ofin prison, the leaned escape for- speak at a resort during Mr. Ed- ing the presidential election,least 30 yearspected, between and a pro- broad, and bipartisanhas started to wonder if what had and NICHOLASnow one KULISH of the nation’s largest profits at companies like from Apple, physical goods but fromfrom physical goods but fromAnother Story of a Lost Love that could … set but back tax Europe’s company, Ziehl-Abegg,much more assigned central part of the said,effortmuch to usedcreate more ward coded and watched. messages Much of tohis wards’sContinued 1998 campaign onfor the Page 8 which both sides view as theanti-union big- range forces of — academics, a labor-man-anti-union hospitalseemed forces ad- impossible — a labor-man- might be seemedhap- impossible might be hap- SCHWÄBISCHand HALL, most Germa- valuedstragglers even industries, more, while giv- herGoogle, a mentor who Amazon, made sure Hewlett-Pack-she a single,royalties unified on market. intellectual But in defense property, restsroyalties on proving on that intellectual Mr. Senate. property, agement fight writ large. pening — if doctors and patients payments slowly. more prosperous slowly. times, few gest political showdownagement in at fightministrators writ large. and policy expertspening — if doctors and patients ny — While much of southern Eu- ing Germany a further leg up. hadard someone and to sit Microsoft with at lunch. derivelike notthe patents on softwareYoung, thelike that man the who hadpatents held his on software“He was really that on that day,” rope is strugglingmany withtech soaring companiesOne of those are helping among forge the And if she needed help finding a workers outside of Eastern Eu- deepest secret, is a liar. testified Mr. Young, who recalled least 30 years between pro-The and same national groupsThe have same begun national to change groups theirhave be- begun to change their be- have risen makes devices work. Othermakes devices work. Other has started to wonder if what had unemploymentthe least rates, ataxed, robust newaccording era is Cristina to gov- Fernández- doctorfrom or going physical to the supermar- goods rope but felt from compelled CHINA to leave AID VIAThe EUROPEAN charges in PRESSPHOTO this trial, which AGENCYsitting in the back of the room in anti-union forces — a labor-man-flooding theseemed streets impossible and theflooding might air- behavior the hap- streets in ways and that the bend air- thehavior so- in ways that bend the so- ’07 ’11 ’07 ’11 Aparicio Ruiz,much 36, a newly more arrived ket, the company was ready to home. times, the productsbeach themselves clothes. Mr. Edwards By KIM SEVERSON Germany is desperate for educat- royalties on intellectual property,times, the products themselvesis expected to stretch well into waves in Wisconsin — the Koch-waves incalled Wisconsin cost curve. — the Koch- called cost curve. ed workers,ernment and it has begun and to engineer corporate fromslowly. Spain, data. where un- Anhelp undated with that, too. photo of ChenThat is Guangcheng changing under the withMay, concern hisare whether family. digital, nearly The a like es-walked downloaded by and touched his left agement fight writ large. pening — if doctors and patients look south for the solution. employment just hit a depres- like“They the are verypatents nice here,” on said softwarepressuresare that of digital, the euro crisis like and a downloaded shoulder. “He looked at me like supported group Americans for If so, it was happening just as Source: company filings Cash paid for Cash paid formillion dollars that Mr. Edwards GREENSBORO, N.C. — ForThe sameviolate national campaign supported groups financehave group begunlaws Americans to change for theirIf be-so, it was happening just as THE NEW YORK TIMESIn the last 18 months,Continued it has re- sion-level on Page 24.4 22 percent. She is capeMs.makes Fernández-Aparicio,of the devices activist, from work. whoharshsongs. is Other recession, blind, It is and muchwas employers, monthseasierand for Mr. inYoungbusi-songs. the secretly planning.It is solicited much easierhe’d known for me busi- forever.” Prosperity on the right, the the new health care law was com- income taxes, governments and theincome migrants taxes, A law schoolhour graduate after who grueling was hour, Andrewflooding the streetsduring andMr. theEdwards’sProsperity air- havior run on infor the ways the right, that thebend thethe newso- health care law was com- cruited thousands of the Conti- working at an industrial $5 compa- Madrid.times, “And the at products the moment$5 themselvesnesses with royalties andfrom two digital nesseswealthy donors with to helproyalties and digital nent’s best and brightest to this ny near here, trying to find a way there are no jobs inworldwide: Spain.” Continued on Pageworldwide: 12 hide an affair was a conspiracy to Continued on Page 4 waves in Wisconsin — the Koch-Continuedcalled coston Page curve. 21 ContinuedContinued on Page on 21 Page 20 Continued on Page 20 are digital, like downloadedproducts to move profits to products low- to move profitsYoung to low- sat on the witness stand in a 2008 presidential nomination. 2011 supported group Americans for If so, it was happening just as Cash paid for songs. It is much2011 easier fortax busi- countries than it is, say,tax for countries than it is, small say, for federal courtroom here last But the trial also tells a painful INTERNATIONAL 6-17 income taxes, NATIONAL$3.3 billion 18-25 SPORTSSUNDAY$3.3 billion OPINION IN SUNDAY REVIEW Prosperity on the right, the the new health care law was com- $5 nesses with royalties andgrocery digital stores or automakers.grocery A stores or automakers.week andA stared straight ahead, story of family and love and bro- worldwide: REPORTER’S NOTEBOOK REPORTER’S NOTEBOOK Brain Drain FearedEndorsement in Egypt as Race GermanIn Israel, Dim View Jobsof Leadersproducts NewLure to move Details profits in GoogleSouthern downloaded to Inquiry low- application,Knicks Lose; Europeans Rangersunlikedownloaded aWin application,Thomas L. Friedmanunlikenever aoncePAGE facing 1 the man he hadContinuedken on relationships. Page 21 Continued on Page 20 The most conservative Islamist group in In a growing chorus2011 of criticism,tax the for- countriesThe full thanversion itof a is,regulatory say,car, canreport for be soldThe from Knicks anywhere. were routedcar, by Miami can in be sold from anywhere. Egypt endorsed a liberal Islamist for mer chief of Israel’s internal security suggests supervisors at Google knew their playoff opener, but the Rangers once looked upon as a father. Mr. Young, 46, became enam- $3.3 billion grocery stores or automakers.The A growing digital economyThe growing digital economy president,postcard-perfect a move aimed at the Muslim townagency and expressed many “no faith”to in leaders make about a new the collection elevator of personal data part beatThe Washington free in the movement first game of of laborU(D5E71D)x+=!:!_!#!$John Edwards, the former ored with Mr. Edwards when he Brotherhood. PAGE 16 to handle Iran’s nuclear threat. downloadedPAGE 17 from application,unsuspecting households. unlikepresents PAGE a 22 a conundrumtheir second-round for series. presents law- PAGE a 1 conundrum for law- REPORTER’SFor Edwards NOTEBOOK Forand Edwards Former Aide, and Former Aide, others like it, a migration of high- mesh with older components. was one of themakers founding overseeing princi- corporateDemocratic senator who is facing and his wife, Cheri, heard him By SUZANNE DALEY car, can be sold from anywhere.makers overseeing corporate ly qualified young job-seekers HerThe German growing is digital spotty. economy taxation:But the althoughples of technology the Europeantaxation: is although Union, technology a 30 years is in prison, leaned for- speak at a resort during Mr. Ed- and NICHOLAS KULISH that could set back Europe’s company,presents Ziehl-Abegg, a conundrum forassignednow law- one of central the nation’s part largestofnow the effort one of to the create nation’s ward largest and watched. Much of his wards’s 1998 campaignAnother for the StoryAnother of a Lost Story Love of a Lost Love and most valued industries, For Edwards and Former Aide, SCHWÄBISCH HALL, Germa- stragglers even more, while giv- hermakers a mentor overseeing who made corporate sureand she most a valued single, industries, unified market. But in defense rests on proving that Mr. Senate. taxation: although technologymany istech companies are amongmany tech companies are among ing Germany a further leg up. more prosperous times, few “HeCHINA was AID really VIA EUROPEAN on that PRESSPHOTO day,” AGENCY ny — While much of southern Eu- had someone to sit with atthe lunch. least taxed, according to thegov- least taxed, accordingYoung, to gov- the man whoCHINA AIDhad VIA held EUROPEAN his PRESSPHOTO AGENCY ’07 now’11 one’07 of the nation’s’11’07 largest’11 ’07workers’11 outside of Eastern Eu- Anothertestified Mr. Story Young, who of recalled a LostBy KIM LoveSEVERSON By KIM SEVERSON rope is struggling with soaring One of those helping forge the Andand if she most needed valued help industries, findingernment a and corporate data.ernment An andundated corporate photodeepest of data. Chen secret,An Guangcheng undated is a liar. photo with ofhis Chen family. Guangcheng The es- with his family. The es- rope felt compelled to leave sitting in the backGREENSBORO, of the room N.C. in — For GREENSBORO,violate campaign N.C. — financeFor lawsviolate campaign finance laws unemployment rates, a robust new era is Cristina Fernández-Source: companydoctormany filings or tech goingTHE companies NEW YORKto Source:the TIMES aresupermar- company among filingsContinuedTHE NEW on YORK Page TIMES 22 Continuedcape of the on Pageactivist, 22 The who charges is capeblind, of in was the this monthsactivist, trial, which in who the is planning. blind, was months in the planning. hour after grueling hour, Andrew during Mr. Edwards’s run for the Germany is desperate for educat- Aparicio Ruiz, 36, a newly arrived ket,the the least company taxed, according was ready to gov- to home. CHINA AID isVIA expected EUROPEAN PRESSPHOTO to stretch AGENCY well into beach clothes.hour Mr. after Edwards grueling hour, Andrew during Mr. Edwards’s run for the ’07 ’11 ’07 ’11 By KIM SEVERSON Young sat on the witness stand in a 2008 presidential nomination. ed workers, and it has begun to engineer from Spain, where un- helpernment with that, and too. corporate data. An undatedThat is photo changing of Chen under Guangcheng the May,with his concern family. whether The es- nearly a walked by andYoung touched sat on the his witness left stand in a 2008 presidential nomination. GREENSBORO, N.C. — Forsmall federalviolate courtroom campaign here finance lastsmall federal lawsBut courtroom the trial also here tells last a painfulBut the trial also tells a painful Source: company filings THE NEW YORK TIMES Continued on Page 22 capepressures of the activist, of the whoeuro is crisis blind, and was a months in the planning. shoulder. “He looked at me like look south for the solution. employment just hit a depres- “They are very nice here,” said million dollars that Mr. Edwards week andstory stared of family straight and ahead, love and bro-story of family and love and bro- harsh recession, and employers, hour after gruelinghe’d hour,known Andrewweek me forever.”and staredduring straight Mr. Edwards’s ahead, run for the In the last 18 months, it has re- sion-level 24.4 percent. SheBrain is Ms. Fernández-Aparicio,Drain FearedBrain from Drain as German Feared Jobs as German Lureand Mr.Southern YoungJobs secretly Lure solicitedEuropeansYoung Southern sat on the witness standnever Europeans in aonce2008 facing presidential the man he nomination. hadnever onceken facing relationships. the man he had ken relationships. cruited thousands of the Conti- working at an industrial compa- Madrid. “And at the moment governments and the migrants from two wealthy donorssmall to help federal courtroomA law school hereonce last graduatelooked uponBut who the as atrial wasfather. also oncetells lookeda painfulMr. upon Young, as a 46,father. became enam-Mr. Young, 46, became enam- nent’s best and brightest to this ny near here, trying to find a way there are no jobs in Spain.”postcard-perfect townContinued and manypostcard-perfect on Pageto make 12 town a new and hide elevator many an affair to part make was Thea a conspiracy new freeweek elevator movement and to stared part of straight laborTheContinued ahead, freeJohn movement on Edwards, storyPage of 4 ofthefamily laborformer and loveJohn and oredEdwards, bro- with Mr.the Edwardsformer when oredhe with Mr. Edwards when he others like it, a migration of high-others likemesh it, witha migration older components. of high- mesh withwas older one components. ofnever the once founding facing princi-thewas man one heDemocratic had of the foundingken senator relationships. princi-who is facingDemocraticand his senator wife, whoCheri, is heardfacing himand his wife, Cheri, heard him Brain Drain FearedBy SUZANNE as DALEY GermanBy SUZANNE Jobs DALEY Lure Southern Europeans ly qualified young job-seekersly qualifiedHer youngGerman job-seekers is spotty. But theHer Germanples of is theonce spotty. European looked But upon the Union, asples a father. a of 30 the years European in prison,Mr. Young, Union, leaned 46, a for- became30 years enam-speak in prison, at a resort leaned during for- Mr. Ed-speak at a resort during Mr. Ed- and NICHOLAS KULISH and NICHOLAS KULISH postcard-perfect town andthat many couldto set make back a new Europe’s that elevator couldcompany, part set backZiehl-Abegg,The Europe’s free movement assignedcompany, ofcentral labor Ziehl-Abegg, part Johnof the assignedEdwards, effort to createthecentral former wardpart of and the watched.ored effort with to Much createMr. Edwards of hisward when andwards’s watched. he 1998 Much campaign of his for thewards’s 1998 campaign for the INTERNATIONAL 6-17 NATIONAL 18-25 SPORTSSUNDAY OPINION IN SUNDAY REVIEW SCHWÄBISCHothers like HALL, it, a migrationGerma-SCHWÄBISCH ofstragglers high- mesh HALL, even with more, Germa- older while components. stragglers giv- her evena mentor more,was who one while made of giv- the sure foundingher she a mentor a princi- single, who unifiedDemocratic made sure market. senatorshe Buta who single, in isdefense facing unified rests and market. on his proving wife, But Cheri, in thatdefense Mr.heard himSenate. rests on proving that Mr. Senate. By SUZANNE DALEY ny — Whilely much qualified of southern youngny Eu- — job-seekers Whileing Germany much ofHer southern a further German Eu-leg isup. spotty.ing Germany Buthad thesomeone a furtherples to ofleg sit theup. with European at lunch.had someone Union,more ato prosperous sit30 withyears at in lunch. prison, times, leanedmore few for-Young, prosperous thespeak man times, whoat a resorthad few held duringYoung, his Mr. the Ed-“He man was who really had onheld that his day,” “He was really on that day,” and NICHOLAS KULISH PAGE 1 Endorsement in Egypt Race In Israel, Dim Viewrope of isLeaders strugglingthat could with set New soaring backrope Details Europe’sis strugglingOne inof thosecompany,Google with helping soaring Ziehl-Abegg,Inquiry forge theOne assigned ofAnd thoseKnicks if she helpingcentral needed Lose; forge part help Rangersofthe findingthe effortAnd a if toWin sheworkers create needed outsideward help and Thomasfinding of watched. Eastern a workersL.Much Eu- Friedman ofdeepest his outside secret, wards’s of Eastern is a 1998 liar. Eu-campaigndeepest for testifiedthe secret, is Mr. a liar. Young, who recalledtestified Mr. Young, who recalled The most conservative Islamist group in InSCHWÄBISCH a growing chorus HALL, of Germa-criticism,unemploymentstragglers the for- rates, even aThe more,robustunemployment full whileversionnew giv- era of a rates, isher regulatory Cristina a mentor a robust Fernández- reportwho madenew erasuredoctor isThe she Cristina orKnicks goinga single, Fernández- wereto the unified routed supermar- market.doctor by Miami orrope But going in in felt to defense the compelled supermar- rests on to proving leaverope that feltThe Mr. compelled chargesSenate. in tothis leave trial, whichThe chargessitting in in the this back trial, of which the roomsitting in in the back of the room in home. beach clothes. Mr. Edwards Egypt endorsed a liberal Islamist for nymer — Whilechief ofmuch Israel’s of southern internalGermany Eu- security ising desperate Germany for asuggests further educat-Germany leg supervisors Aparicioup. is desperate Ruiz,had at someone 36, forGoogle a educat- newly toknew arrivedsitAparicio with atket, lunch.Ruiz,their the 36, playoff companymore a newly opener, prosperous arrived was ready butket, the times,to theRangershome. company few Young, was readythe man to who had heldis expected his to“He stretch was reallywell into onis that expected day,”beach to clothes.stretch wellMr. Edwardsinto ed workers, and it has begun to engineer from Spain,workers where outside un- ofhelp Eastern with Thatthat, Eu- too. is changing under theThat is changing under the May, concernwalked whether by and touchednearly a his leftwalked by and touched his left president, a move aimed at the Muslim ropeagency is strugglingexpressed with “no faith” soaringed workers, in leaders One and of it those has begunabout helping tothe forge collectionengineer the fromAnd of personal if Spain, she needed where data help un- findinghelpbeat with a Washington that, too. in the first game of deepest secret, is a liar. May, concerntestified whether Mr. Young,nearly awho recalled unemployment rates, a look robust southnew for the era solution. is Cristinalook Fernández- southemployment for the doctorsolution. just or hitgoing a depres-to employmentthe supermar-“They just arerope hit very a felt nice depres- compelled here,” said“They to pressures are leave very ofniceThe the here,” chargeseuro crisissaid in thisandpressures trial, a million which of the dollars eurositting crisisthat in Mr.the and backEdwards a ofmillion the room dollarsshoulder. in that “He Mr. looked Edwards at me likeshoulder. “He looked at me like U(D5E71D)x+=!:!_!#!$ he’d known me forever.” Brotherhood. PAGE 16 Germanyto handle is Iran’s desperate nuclear for educat- threat.In the lastAparicioPAGE 18 months, 17 Ruiz, it 36,from has a newly re-unsuspectingIn the arrivedsion-level last 18 months, ket,households. 24.4 the percent.it has company re- PAGE She sion-level was 22 is readyMs. their 24.4 to Fernández-Aparicio, second-round percent.home. She isseries. fromMs. Fernández-Aparicio,harshPAGE recession,is 1 expected and fromto employers, stretchharsh well recession, andinto Mr. Young beach and employers,secretly clothes. solicited Mr. Edwardsand Mr.he’d Young known secretly me forever.” solicited ed workers, and it has beguncruited to thousandsengineer fromof the Spain, Conti-cruited whereworking thousands un- athelp an of with industrialthe that, Conti- too. compa-workingMadrid. at an industrial “AndThat at iscompa- the changing momentMadrid. undergovernments “And the atMay, the andconcern moment the whether migrantsgovernments nearly from a two and wealthywalked the migrants bydonors and touchedto helpfrom his two left wealthyA law school donors graduate to help who wasA law school graduate who was look south for the solution.nent’s bestemployment and brightest just to nent’s hit this a bestdepres-ny near and here, brightest“They trying are to to thisveryfind a nice nyway near here,”there here, said are trying nopressures jobs to find in Spain.” aof way the eurothere crisis are andno jobs aContinued inmillion Spain.” on dollars Page that 12 Mr. EdwardsContinuedhide an affair onshoulder. Page was 12a “Heconspiracy lookedhide toat anme affair like wasContinued a conspiracy on Page to 4 Continued on Page 4 In the last 18 months, it has re- sion-level 24.4 percent. She is Ms. Fernández-Aparicio, from harsh recession, and employers, and Mr. Young secretly solicited he’d known me forever.” cruited thousands of the Conti- working at an industrial compa- Madrid. “And at the moment governments and the migrants from two wealthy donors to help A law school graduate who was nent’s best and brightest INTERNATIONAL to this ny near here, 6-17 tryingINTERNATIONAL to find a way there 6-17 are no jobs in Spain.” NATIONALContinued on 18-25 Page 12 NATIONALhide an affair 18-25SPORTSSUNDAY was a conspiracy to SPORTSSUNDAYContinued on PageOPINION 4 IN SUNDAY REVIEWOPINION IN SUNDAY REVIEW

Endorsement in Egypt RaceEndorsementIn in Israel, Egypt Dim Race View of LeadersIn Israel, DimNew View Details of Leaders in Google InquiryNew DetailsKnicks in Google Lose; Inquiry Rangers WinKnicks Lose;Thomas Rangers L. Win Friedman ThomasPAGE 1 L. Friedman PAGE 1 INTERNATIONAL 6-17 The most conservative IslamistThe group most in conservativeIn a growing Islamist chorus groupNATIONAL of criticism,in In 18-25 athe growing for- chorusThe full of criticism, version of the SPORTSSUNDAYa regulatory for- The report full versionThe of a Knicksregulatory were report routedOPINION by Miami INThe SUNDAY Knicksin REVIEW were routed by Miami in Egypt endorsed a liberal IslamistEgypt for endorsedmer a liberal chief Islamistof Israel’s for internal securitymer chief of Israel’ssuggests internal supervisors security at Googlesuggests knew supervisorstheir playoff at Google opener, knew but the Rangerstheir playoff opener, but the Rangers Endorsement in Egyptpresident, Race a move aimedIn Israel, at the president,Dim Muslim View a move ofagency Leaders aimed expressed at the Muslim New“no faith” Details inagency leaders in expressedGoogleabout Inquiry “no the faith” collection in leadersKnicks of personal Lose;about data Rangersthe collectionbeat Win ofWashington personal data inThomas the first game L.beat Friedman ofWashington in thePAGE first 1game of The most conservative IslamistBrotherhood. group in In a growingBrotherhood. chorusPAGE 16of criticism, to handle the for-Iran’s nuclearPAGEThe full 16 threat. versionto handlePAGE of a regulatory 17 Iran’s from nuclear report unsuspecting threat. PAGEThe households. Knicks 17 fromwere PAGE unsuspectingrouted 22 by theirMiami households. second-round in PAGE series. 22 theirPAGE second-round 1 U(D5E71D)x+=!:!_!#!$ series. PAGE 1 U(D5E71D)x+=!:!_!#!$ Egypt endorsed a liberal Islamist for mer chief of Israel’s internal security suggests supervisors at Google knew their playoff opener, but the Rangers president, a move aimed at the Muslim agency expressed “no faith” in leaders about the collection of personal data beat Washington in the first game of Brotherhood. PAGE 16 to handle Iran’s nuclear threat. PAGE 17 from unsuspecting households. PAGE 22 their second-round series. PAGE 1 U(D5E71D)x+=!:!_!#!$ C M Y K Nxxx,2012-04-29,A,001,Bs-BK,E3

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VOL. CLXI . . No. 55,756 © 2012 The New York Times NEW YORK, SUNDAY, APRIL 29, 2012 $6 beyond the greater New York metropolitan area. $5.00 How Apple Sidesteps IN HOPEFUL SIGN, Billions in Taxes HEALTH SPENDING Funneling Earnings to Low-Tax Regions IS FLATTENING OUT

$35 billion By CHARLES DUHIGG taxes, according to former execu- and DAVIDHowever, KOCIENIEWSKI Apple’s accountants SURPRISING THE EXPERTS tives. Apple was a pioneer of an ac- haveRENO, found Nev. — legal Apple, ways the to allocate Income world’s most profitable technol- counting technique known as the before taxes, ogyabout company, 70 percent doesn’t designof its profits over- Recession and Behavior worldwide: “Double Irish With a Dutch Sand- iPhonesseas, where here. It tax doesn’t rates run are often much Are Cited — Fiscal wich,” which reduces taxes by rout- 2011 AppleCarelower, according customer serviceto corporate filings. $34.2 billion from this city. And it doesn’t Strain Could Ease ing profits through Irish subsidiar- manufactureNeither MacBooks the or iPadsgovernment nor anywhere nearby. ies and the Netherlands and then to corporationsYet, with a handful make of employ- tax returns pub- ees in a small office here in Reno, By ANNIE LOWREY $30 the Caribbean. Today, that tactic is Applelic, and has done a company’s something cen- taxable income WASHINGTON — The growth used by hundreds of other corpora- traloften to its differs corporate strategy:from the it profits dis- of health spending has slowed has avoided millions of dollars in substantially in the last few tions — some of which directly imi- taxesclosed in California in annual and 20 reports. other Companies years, surprising experts and of- tated Apple’s methods, say accoun- states.report their cash outlays for income fering some fuel for optimism Apple’s headquarters are in about the federal government’s tants at those companies. Cupertino,taxes in Calif. their By putting annual an of- Form 10-K, but long-term fiscal performance. Without such tactics, Apple’s ficeit inis Reno, impossible just 200 miles from away, those numbers NARAYAN MAHON FOR THE NEW YORK TIMES Much of the slowdown is be- to collect and invest the compa- At a phone bank in Madison, Wis., ahead of a recall vote. Unions seek to remove the governor. cause of the recession, and thus federal tax bill in the United States ny’sto profits,determine Apple sidesteps precisely state how much, not unexpected, health experts most likely would have been $2.4 bil- income taxes on some of those say. But some of it seems to be at- $25 gains.in total, corporations pay to govern- tributable to changing behavior lion higher last year, according to a ments.California’s In corporate Apple’s tax last rate annual disclo- Recall Election by consumers and providers of is 8.84 percent. Nevada’s? Zero. Chinese Activist’s Flight Aided health care — meaning that the recent study by a former Treasury sure,Setting theup an companyoffice in Reno listedis its world- lower rates of growth might per- Department economist, Martin A. justwide one oftaxes many legal— which methods includesBy a cashDaring Circle Now at Risk Tests Strategies sist even as the economy picks Apple uses to reduce its world- up. Sullivan. As it stands, the company widetaxes tax bill paid by billions as well of dollars as deferred taxes For November Because Medicare and Medic- each year. As it has in Nevada, aid are two of the largest contrib- paid cash taxes of $3.3 billion around Appleand has other created charges subsidiaries — in at $8.3 billion, By ANDREW JACOBS utors to the country’s long-term the world on its reported profits of low-taxan effective places like Ireland,tax rate the ofBEIJING almost — Fora months, Chen communicate and elude a sur- debts, slower growth in health Netherlands, Luxembourg and Guangcheng, one of China’s best- veillance apparatus that is one of By JIM RUTENBERG costs could reduce the pressure $34.2 billion last year, a tax rate of thequarter British of Virgin profits. Islands — known dissidents, played a cat- the world’s most pervasive. and STEVEN GREENHOUSE for enormous spending cuts or 9.8 percent. (Apple does not disclose $20 However, tax analystsand-mouse gameand with the pha- By Saturday, three activists GREEN BAY, Wis. — “Recall tax increases. lanx of guards encircling his who had either helped him or had Walker” bumper stickers dotted In 2009 and 2010, total nation- what portion of those payments was THEscholars iECONOMY said that figurehome. most He likely dug a tunnel to try to been advocates in the past had the workers’ parking lot at the wide health care spending grew in the United States, or what portion Protecting Profits escape, a friend says, but was disappeared, including the wom- Georgia Pacific paper mill on Day less than 4 percent per year, the overstated how much thefound company out. And he sneaked out a an who drove Mr. Chen more Street here one recent afternoon, slowest annual pace in more than is assigned to previous or future would hand to governmentsvideo that alerted be- his supporters than 300 miles to Beijing and a proof of their union’s role in the five decades, according to the lat- some little more than a letterbox to the smothering confinement man who admitted to meeting the effort to oust Gov. Scott Walker est numbers from the Centers for or an anonymous office — that years.) cause it included sumshe that said hemight and his wife endured dissident as he was shuttled be- from office early for his legisla- Medicaid and Medicare Services. help cut the taxes it pays around at the hands of the men who kept tween safe houses in the capital. tion limiting public employees’ After years of taking up a grow- By comparison, Wal-Mart last thenever world. be paid. “The information on them virtual prisoners in their The man’s wife said he was taken bargaining rights. ing share of economic activity, Almost every major corpora- year paid worldwide cash taxes of 10-Ks is fiction for most ruralcompanies,” farmhouse. away by the police. But among the largest donors health spending held steady in tion tries to minimize its taxes, of Then last Sunday night, in an to Mr. Walker and his cause are 2010, at 17.9 percent of the gross $5.9 billion on its booked profits of $15 said Kimberly Clausing, an econo- Friends of Mr. Chen, along with course. For Apple, the savings improbable escape, Mr. Chen, the plant’s owners, the billionaire domestic product. are especially alluring because people in the Chinese govern- $24.4 billion, a tax rate of 24 percent, mist at Reed College whowho is blindspecial and reportedly- weak ment, say he is now inside the industrialists Charles G. and Da- The growth rate mostly slowed the company’s profits are so from months of mistreatment, American Embassy in Beijing. If vid H. Koch, the latter of whom as millions of Americans lost in- which is about average for non-tech Apple’s high.izes Wall in Street multinational analysts predict taxation.scaled the “But wall that had been true, that creates diplomatic has said of the recall election to surance coverage along with profits have Apple could earn up to $45.6 bil- built around his house, slipped companies. for tech companies it goes from fic- headaches for the United States be held in June, “If the unions their jobs. Worried about job se- soared … lion in its current fiscal year — past his security detail and made just days before Secretary of win the recall, there will be no curity, others may have feared Apple’s domestic tax bill has whichtion would to farcical.” be a record for any a desperate sprint to apparent State Hillary Rodham Clinton stopping union power.” taking time off work for doctor’s American business. safety in Beijing. The daring rush visits or surgical procedures, or piqued particular curiosity among Apple, in a statement, said it and other American officials ar- The recall vote here has been Apple serves as a window on for freedom could not have been skipped nonurgent care when rive for annual talks. [Page 8.] billed as a critical test of labor corporate tax experts because al- how“has technology conducted giants have all tak- of possibleits business without a small network muscle versus corporate money. money was tight. That the underground network en advantage of tax codes written of activists who risked detention But it is only a warm-up for a con- Still, the slowdown was sharp- for an industrial age and ill suited of activists was able to help Mr. though the company is based in the $10 with the highest of ethicalto helpstandards, him and who, supporters frontation that will play out dur- er than health economists ex- United States, its profits — on pa- tocomplying today’s digital economy.with applicable Some with laws knowledge and of the escape Chen evade his captors and move ing the presidential election, pected, and a broad, bipartisan … but tax profits at companies like Apple, said, used coded messages to Continued on Page 8 which both sides view as the big- range of academics, hospital ad- Google, Amazon, Hewlett-Pack- per, at least — are largely foreign. payments accounting rules.” It added, “We are gest political showdown in at ministrators and policy experts ard and Microsoft derive not While Apple contracts out much of have risen incredibly proud of all of Apple’s least 30 years between pro- and has started to wonder if what had from physical goods but from anti-union forces — a labor-man- seemed impossible might be hap- much more royalties on intellectual property, the manufacturing and assembly slowly. contributions.” agement fight writ large. pening — if doctors and patients like the patents on software that The same national groups have begun to change their be- of its products to other companies makes Apple devices work.“pays Other an enormous flooding the streets and the air- havior in ways that bend the so- overseas, the majority of Apple’s times,amount the products of taxes, themselves which help our lo- waves in Wisconsin — the Koch- called cost curve. are digital, like downloaded supported group Americans for If so, it was happening just as executives, product designers, mar- Cash paid for songs.cal, Itstate is much and easier federal for busi- governments,” income taxes, Prosperity on the right, the the new health care law was com- $5 nesses with royalties and digital keters, employees, research and de- worldwide: productsthe statement to move profits also to low-said. “In the first Continued on Page 21 Continued on Page 20 velopment, and retail stores are in 2011 taxhalf countries of fiscal than ityear is, say, 2012, for our U.S. op- $3.3 billion grocery stores or automakers. A the United States. Tax experts say downloadederations application, have generated unlike a almost $5 REPORTER’S NOTEBOOK it is therefore reasonable to expect car,billion can be soldin fromfederal anywhere. and state income The growing digital economy that most of Apple’s profits would be presentstaxes, a including conundrum forincome law- taxes with- For Edwards and Former Aide, makers overseeing corporate American as well. The nation’s tax taxation:held on although employee technology stock is gains, mak- code is based on the concept that a nowing one us of among the nation’s the largest top payers of U.S. Another Story of a Lost Love and most valued industries, company “earns” income where manyincome tech companies tax.” are among CHINA AID VIA EUROPEAN PRESSPHOTO AGENCY value is created, rather than where ’07 ’11 ’07 ’11 the leastThe taxed, statement according to gov- did not specify By KIM SEVERSON ernment and corporate data. An undated photo of Chen Guangcheng with his family. The es- GREENSBORO, N.C. — For violate campaign finance laws products are sold. Source: company filings THE NEW YORK TIMES howContinued it arrived on Page at 22 $5 billion,cape of nor the activist, did who is blind, was months in the planning. hour after grueling hour, Andrew during Mr. Edwards’s run for the Young sat on the witness stand in a 2008 presidential nomination. small federal courtroom here last But the trial also tells a painful week and stared straight ahead, story of family and love and bro- Brain Drain Feared as German Jobs Lure Southern Europeans never once facing the man he had ken relationships. once looked upon as a father. Mr. Young, 46, became enam- postcard-perfect town and many to make a new elevator part The free movement of labor John Edwards, the former ored with Mr. Edwards when he others like it, a migration of high- mesh with older components. was one of the founding princi- Democratic senator who is facing and his wife, Cheri, heard him By SUZANNE DALEY ly qualified young job-seekers Her German is spotty. But the ples of the European Union, a 30 years in prison, leaned for- speak at a resort during Mr. Ed- and NICHOLAS KULISH that could set back Europe’s company, Ziehl-Abegg, assigned central part of the effort to create ward and watched. Much of his wards’s 1998 campaign for the SCHWÄBISCH HALL, Germa- stragglers even more, while giv- her a mentor who made sure she a single, unified market. But in defense rests on proving that Mr. Senate. ny — While much of southern Eu- ing Germany a further leg up. had someone to sit with at lunch. more prosperous times, few Young, the man who had held his “He was really on that day,” rope is struggling with soaring One of those helping forge the And if she needed help finding a workers outside of Eastern Eu- deepest secret, is a liar. testified Mr. Young, who recalled unemployment rates, a robust new era is Cristina Fernández- doctor or going to the supermar- rope felt compelled to leave The charges in this trial, which sitting in the back of the room in Germany is desperate for educat- Aparicio Ruiz, 36, a newly arrived ket, the company was ready to home. is expected to stretch well into beach clothes. Mr. Edwards ed workers, and it has begun to engineer from Spain, where un- help with that, too. That is changing under the May, concern whether nearly a walked by and touched his left look south for the solution. employment just hit a depres- “They are very nice here,” said pressures of the euro crisis and a million dollars that Mr. Edwards shoulder. “He looked at me like In the last 18 months, it has re- sion-level 24.4 percent. She is Ms. Fernández-Aparicio, from harsh recession, and employers, and Mr. Young secretly solicited he’d known me forever.” cruited thousands of the Conti- working at an industrial compa- Madrid. “And at the moment governments and the migrants from two wealthy donors to help A law school graduate who was nent’s best and brightest to this ny near here, trying to find a way there are no jobs in Spain.” Continued on Page 12 hide an affair was a conspiracy to Continued on Page 4

INTERNATIONAL 6-17 NATIONAL 18-25 SPORTSSUNDAY OPINION IN SUNDAY REVIEW

Endorsement in Egypt Race In Israel, Dim View of Leaders New Details in Google Inquiry Knicks Lose; Rangers Win Thomas L. Friedman PAGE 1 The most conservative Islamist group in In a growing chorus of criticism, the for- The full version of a regulatory report The Knicks were routed by Miami in Egypt endorsed a liberal Islamist for mer chief of Israel’s internal security suggests supervisors at Google knew their playoff opener, but the Rangers president, a move aimed at the Muslim agency expressed “no faith” in leaders about the collection of personal data beat Washington in the first game of Brotherhood. PAGE 16 to handle Iran’s nuclear threat. PAGE 17 from unsuspecting households. PAGE 22 their second-round series. PAGE 1 U(D5E71D)x+=!:!_!#!$ C M Y K C M Y K Nxxx,2012-04-29,A,022,Bs-4C,E2C M Y K Nxxx,2012-04-29,A,022,Bs-4C,E2Nxxx,2012-04-29,A,022,Bs-4C,E2 C M Y K C M Y KNxxx,2012-04-29,A,022,Bs-4C,E2Nxxx,2012-04-29,A,022,Bs-4C,E2

22 Ø N 22 Ø N 22THE NEW YORKØ N TIMES NATIONALTHE NEWSUNDAY, YORK TIMES APRIL NATIONAL 29, 2012 SUNDAY,THE NEW APRIL YORK 29, TIMES 2012 NATIONAL SUNDAY, APRIL 29, 2012 22 Ø N 22 Ø N THEC M NEWY YORKK TIMES NATIONAL SUNDAY,THE APRILNEWNxxx,2012-04-29,A,022,Bs-4C,E2 YORK 29, 2012 TIMES NATIONAL SUNDAY, APRIL 29, 2012

How Apple SidestepsHowHow22 Apple AppleBillionsØ N HowSidesteps Sidesteps in Apple Taxes Billions Sidesteps THEBillionsHow Across NEW YORK TIMES Applein NATIONAL theinTaxes Billions SUNDAY,Taxes GlobeSidesteps APRIL Across 29, 2012 Across in Taxes theBillions the Globe Across Globe in Taxes the Globe Across the Globe Their kids swim in our pool. TheirTheir cous- kids swim in our pool. Their cous- Their kids swim in our pool. Their cous- From Page 1 From Page 1 From Page 1 Their kids swim in our pool. Their cous- Their kidsins takeswim classes in our here.pool. TheirThey drivecous-ins past take it classes here. They drive past it ins take classes here. They drive past it From Page 1 Over theFrom last Page two 1years, the 71Over technol- Howthe last two years, Apple the 71 technol- SidestepsOver the last two years, theBillions 71 technol- inins take Taxes classes here. They Across drive past it theins takeevery classes Globe day, here. for Pete’s They sake.drive pastevery it day, for Pete’s sake. every day, for Pete’s sake. Over the last two years, the 71 technol- Over theogy last companies two years, in thethe Standard71 technol- ogy& Poor’s companies in the Standard & Poor’s ogy companies in the Standard & Poor’s every day, for Pete’s sake. every day,“But for Pete’s then sake. they do everything“But they then they do everything they “But then they do everything they ogy companies in the Standard & Poor’s ogy companies500-stock in index the Standard — including & Poor’s Apple,500-stock Goo- index — including Apple, Goo- 500-stock index — including Apple, Goo- “But then they do everything they “ButTheircan then to kids pay they swim as dofew in our everything taxes pool. as Their possible.” they cous-can to pay as few taxes as possible.” can to pay as few taxes as possible.” From Page 1 500-stock index — including Apple, Goo- 500-stockgle, index Yahoo — andincluding Dell — Apple, reported Goo-gle, paying Yahoo and Dell — reported paying gle, Yahoo and Dell — reported paying can to pay as few taxes as possible.” can to inspay take as fewclasses taxes here. as They possible.” drive past it gle, Yahoo and Dell — reported paying gle, Yahooworldwide and Dell cash — taxesreported Overat apaying therate lastworldwide that, two on years, cash the taxes71 technol- at a rate that, on worldwide cash taxes at a rate that, on everyEscaping day, for Pete’s State sake. Taxes Escaping State Taxes Escaping State Taxes worldwide cash taxes at a rate that, on average, was a thirdogy less companies thanaverage, other in the wasStandard a third & Poor’s less than other average, was a third less than other “But then they do everything they worldwide cash taxes at a rate that, on Escaping State Taxes EscapingcanIn to 2006, payState as as few Apple’sTaxes taxes as bank possible.” accountsIn 2006,and as Apple’s bank accounts and In 2006, as Apple’s bank accounts and average, was a third less than other average,S.& was P. companies’. a third less (Cash than500-stock taxes other indexS.& may P. — in-companies’. including Apple, (Cash Goo- taxes may in- S.& P. companies’. (Cash taxes may in- gle, Yahoo and Dell — reported paying stock price were rising, companystock execu- price were rising, company execu- stock price were rising, company execu- S.& P. companies’. (Cash taxes may in- S.& P. companies’.clude payments (Cash for taxesmultiple may years.) in-clude payments for multiple years.) clude payments for multiple years.) In 2006, as Apple’s bank accounts and In 2006, as Apple’s bank accounts and worldwide cash taxes at a rate that, on Escapingtives came State here to Taxes Reno and establishedtives came here to Reno and established tives came here to Reno and established clude payments for multiple years.) clude paymentsEven among for multiple tech companies, years.) Apple’sEven among tech companies, Apple’s Even among tech companies, Apple’s stock price were rising, company execu- stock price were rising, company execu- average, was a third less than other a subsidiary named Braeburn Capitala subsidiary to named Braeburn Capital to a subsidiary named Braeburn Capital to Even among tech companies, Apple’s rates are low. And while the companyrates are low. And while the company rates are low. And while the company tives came here to Reno and established tives cameIn 2006, here as to Apple’s Reno andbank established accounts and Even among tech companies,S.& Apple’s P. companies’. (Cash taxes may in- manage and invest the company’smanage cash. and invest the company’s cash. manage and invest the company’s cash. rates are low. And while the company rates arehas low.remade And industries, while theclude ignited company paymentshas econom- remade for multiple industries, years.) ignited econom- has remade industries, ignited econom- a subsidiary named Braeburn Capital to a subsidiarystock price named were Braeburn rising, company Capital execu- to tivesBraeburn came here is a to variety Reno and of establishedapple thatBraeburn is si- is a variety of apple that is si- Braeburn is a variety of apple that is si- has remade industries, ignited econom- ic growth and delightedEven customers, amongic growth tech it companies, and delighted Apple’s customers, it ic growth and delighted customers, it manage and invest the company’s cash. manage and invest the company’s cash. has remade industries, ignited econom- amultaneously subsidiary named sweet Braeburn and tart. Capitalmultaneously to sweet and tart. multaneously sweet and tart. ic growth and delighted customers, it ic growthhas and also delighted devised corporate customers,rates are strategies has low. it And also while devised the company corporate strategies has also devised corporate strategies Braeburn is a variety of apple that is si- Braeburn is a variety of apple that is si- has remade industries, ignited econom- manageToday, and Braeburn’s invest the company’s offices are cash. downToday, a Braeburn’s offices are down a Today, Braeburn’s offices are down a has also devised corporate strategies has alsothat devised take advantage corporate of strategies gaps inthat the take tax advantage of gaps in the tax that take advantage of gaps in the tax multaneously sweet and tart. multaneously sweet and tart. ic growth and delighted customers, it Braeburnnarrow hallwayis a variety inside of apple a bland that isnarrow buildingsi- hallway inside a bland building narrow hallway inside a bland building that take advantage of gaps in the tax that takecode, advantage according of gaps to former in the executives taxcode, according to former executives code, according to former executives Today, Braeburn’s offices are down a Today,multaneously Braeburn’s sweet offices and tart. are down a has also devised corporate strategies that sits across from an abandonedthat sitsres- across from an abandoned res- that sits across from an abandoned res- code, according to former executives code, accordingwho helped to create former those executives strategies.who helped create those strategies. who helped create those strategies. narrow hallway inside a bland building narrow hallwayToday, Braeburn’s inside a officesbland arebuilding down a that take advantage of gaps in the tax taurant. Inside, there are posterstaurant. of can- Inside, there are posters of can- taurant. Inside, there are posters of can- who helped create those strategies. who helpedApple, create for those instance, strategies.code, was according amongApple, the to formerfor instance, executives was among the Apple, for instance, was among the that sits across from an abandoned res- that sitsnarrow across hallway from insidean abandoned a bland building res- dy-colored iPods and a large Appledy-colored in- iPods and a large Apple in- dy-colored iPods and a large Apple in- Apple, for instance, was among the Apple,first for tech instance, companies was to amongwho designate helped thefirst create over- tech those companies strategies. to designate over- first tech companies to designate over- taurant. Inside, there are posters of can- taurant.that Inside, sits across there from are an posters abandoned of can- res- taurant.signia, Inside,as well there as a are handful posters of of desks can-signia, and as well as a handful of desks and signia, as well as a handful of desks and first tech companies to designate over- first techseas companies salespeople to designate in high-taxApple, over- countriesforseas instance, salespeople was among in high-tax the countries seas salespeople in high-tax countries dy-colored iPods and a large Apple in- dy-colored iPods and a large Apple in- dy-coloredcomputer iPodsterminals. and a large Applecomputer in- terminals. computer terminals. seas salespeople in high-tax countries seas salespeoplein a manner in that high-tax allowedfirst countries them tech companiesinto asell manner on to designatethat allowed over- them to sell on in a manner that allowed them to sell on signia, as well as a handful of desks and signia, as well as a handful of desks and seas salespeople in high-tax countries computer terminals. signia,When as well someone as a handful in the of desks United and When States someone in the United States When someone in the United States in a manner that allowed them to sell on in a mannerbehalf that of low-taxallowed subsidiariesthem to sell onbehalf on other of low-tax subsidiaries on other behalf of low-tax subsidiaries on other computercomputer terminals. terminals. in a manner that allowed them to sell on buys an iPhone, iPad or otherbuys Apple an iPhone, iPad or other Apple buys an iPhone, iPad or other Apple behalf of low-tax subsidiaries on other behalf continents, of low-tax subsidiaries sidestepping on income othercontinents, taxes, sidestepping income taxes, continents, sidestepping income taxes, When someone in the United States When When someone someone in the in the United United States States behalf of low-tax subsidiaries on other product, a portion of the profitsproduct, from a portion of the profits from product, a portion of the profits from continents, sidestepping income taxes, continents,according sidestepping to former income executives. taxes,according Apple to former executives. Apple according to former executives. Apple buys an iPhone, iPad or other Apple buys anbuys iPhone, an iPhone, iPad iPad or orother other Apple Apple continents, sidestepping income taxes, that sale is often deposited that into sale ac- is often deposited into ac- that sale is often deposited into ac- according to former executives. Apple accordingwas to a former pioneer executives. of an according accounting Apple was to former tech- a pioneer executives. of an Apple accounting tech- was a pioneer of an accounting tech- product, a portion of the profits from product,product, a portion a portion of the of the profits profits from from thatcounts sale controlled is often deposited by Braeburn, into counts ac- and controlled by Braeburn, and counts controlled by Braeburn, and was a pioneer of an accounting tech- was a nique pioneer known of an as accountingthe “Doublewas a tech- pioneerIrishnique With of known an accounting as the “Double tech- Irish With nique known as the “Double Irish With that sale is often deposited into ac- that sale is often deposited into ac- countsthen invested controlled in bystocks, Braeburn, bonds andthenor other invested in stocks, bonds or other then invested in stocks, bonds or other nique known as the “Double Irish With nique knowna Dutch as Sandwich,” the “Double which niqueIrish reduces knownWitha Dutch as tax- the Sandwich,”“Double Irish which With reduces tax- a Dutch Sandwich,” which reduces tax- counts controlled by Braeburn, and counts controlled by Braeburn, and a Dutch Sandwich,” which reduces tax- thenfinancial invested instruments, in stocks, bonds say companyor otherfinancial ex- instruments, say company ex- financial instruments, say company ex- a Dutch Sandwich,” which reduces tax- a Dutches Sandwich,” by routing whichprofits reduces through tax- Irishes by sub- routing profits through Irish sub- es by routing profits through Irish sub- then invested in stocks, bonds or other then invested in stocks, bonds or other es by routing profits through Irish sub- financialecutives. instruments, Then, when say those company investments ecutives.ex- Then, when those investments ecutives. Then, when those investments es by routing profits through Irish sub- es by routingsidiaries profits and the through Netherlands Irish sub- andsidiaries then and the Netherlands and then sidiaries and the Netherlands and then financial instruments, say company ex- financialecutives. instruments, Then, when say those company investments ex- sidiaries and the Netherlands and then turn a profit, some of it is shieldedturn from a profit, some of it is shielded from turn a profit, some of it is shielded from sidiaries and the Netherlands and then sidiariesto and the the Caribbean. Netherlands Today, and that then to tactic the Caribbean.is Today, that tactic is to the Caribbean. Today, that tactic is ecutives. Then, when those investments ecutives.turn Then, a profit, when some those of it isinvestments shielded from to the Caribbean. Today, that tactic is tax authorities in California by taxvirtue authorities of in California by virtue of tax authorities in California by virtue of to the Caribbean. Today, that tactic is to the used Caribbean. by hundreds Today, of that otherused tactic bycorporations hundreds used is by of hundreds other corporations of other corporations used by hundreds of other corporations turn a profit, some of it is shielded from turn a taxprofit, authorities some ofin Californiait is shielded by virtue from of Braeburn’s Nevada address. Braeburn’s Nevada address. Braeburn’s Nevada address. used by hundreds of other corporations used by— hundreds some of whichof other directly corporations— some imitated of— which some Ap- directly of which imitated directly Ap- imitated Ap- — some of which directly imitated Ap- tax authorities in California by virtue of tax authoritiesBraeburn’s in Nevada California address. by virtue of — some of which directly imitated Ap- — someple’s of whichmethods, directly say accountants imitatedple’s methods, Ap-ple’s at those say methods, accountants say ataccountants those at those ple’s methods, say accountants at those Braeburn’s Nevada address. Braeburn’sSinceSince Nevada founding founding address. Braeburn, Braeburn, Apple Apple hasSince has founding Braeburn, Apple has Since founding Braeburn, Apple has earned more than $2.5 billion in interest ple’s methods, say accountants at those ple’s methods,companies. say accountantscompanies. at thosecompanies. companies. Since founding Braeburn,DAVIDDAVID CALVERT CALVERT Apple FOR FOR THE THE hasNEW NEW YORK YORK TIMES TIMESSinceDAVIDearned founding CALVERT more FOR Braeburn,THE than NEW $2.5YORK ApplebillionTIMES hasinearned interest moreDAVID thanCALVERT $2.5 FOR billionTHE NEW inYORK interest TIMES earned more than $2.5 billion in interest Without such tactics, Apple’s federal Braeburn Capital, an Apple subsidiary in Reno, Nev., manages andearned invests more the company’sthan $2.5 billion cash. Nevada in interest has a corpo- andand dividend dividend income income on its on cash its and cash re- dividend re- income on its cash re- and dividend income on its cash re- companies. companies.Without such tactics, Apple’s federalWithout suchBraeburn tactics, Capital, Apple’s an federal Apple subsidiaryBraeburnWithout such Capital, in DAVIDReno, tactics, CALVERT an Nev., Apple’sApple FOR manages THE subsidiary federalNEW YORK and TIMESBraeburn ininvests Reno, the Nev., Capital, company’s managesDAVID an CALVERT Apple cash. and FOR subsidiary Nevadainvests THE NEW YORK the has inTIMES company’s a Reno, corpo-earned Nev., cash.serves managesmore Nevada than and and investments$2.5 has investsbillion a corpo- in around the interest company’s the cash. Nevada has a corpo- tax bill in the United States most likely rate tax rate of zero, as opposed to the 8.84 percent levied in California,and dividend where Apple income has its on headquarters. its cash re- and dividendserves incomeand investments on its cash around re-serves the and investments around the serves and investments around the Without such tactics, Apple’s federal BraeburnWithouttax Capital, bill such in tactics,the an UnitedApple Apple’s subsidiaryStateswould federal havemosttax been in likelybill Reno,Braeburn $2.4 in thebillion Nev.,rate United higherCapital, tax manages rateStates last anof most zero, andApple invests likelyas subsidiary opposedtax therate billcompany’s to taxin inthe Reno, ratethe 8.84 United of cash.Nev., percentzero, StatesNevadamanages as leviedopposed most has and in likely a California,to corpo-invests the 8.84rate the taxwherepercent company’s rate Apple oflevied zero, cash. has in as California,its Nevada opposed headquarters. has to where thea corpo- 8.84 Apple percent has its leviedglobe. headquarters. in If BraeburnCalifornia, were where located Apple in Cu- has its headquarters. tax bill in the United States most likely tax billwould in the have United been States $2.4 mostbillion likely higherwould last have been $2.4 billion higher last would have been $2.4 billion higher last serves and investments around the servespertino, globe. and Ifinvestments where Braeburn Apple’s were aroundtop executives located theglobe. in Cu- If Braeburn were located in Cu- globe. If Braeburn were located in Cu- rate tax rate of zero, as opposedyear, to according the 8.84 torate percent a recenttax rate levied study of byzero, in a California, as opposed where to the Apple 8.84 haspercent its headquarters. levied in California, where Apple has its headquarters. pertino, where Apple’s top executivespertino, where Apple’s top executives pertino, where Apple’s top executives would have been $2.4 billion higher last would haveyear, been according $2.4 billion to a recenthigherformer studylast Treasuryyear, by according a Department to a econo- recent study by a year, according to a recent study by a globe. If Braeburn were located in Cu- globe. work, If Braeburn a portion wereof the locateddomestic in income Cu- year, according to a recent study by a year, accordingformer Treasury to a recent Department studymist, Martin byformer a econo- A. Sullivan. Treasury As it Department stands, proud econo- of all of Apple’sformer contributions.” Treasury Departmentcompany econo-may pay in futurepertino, years or de- wherepercent Apple’s of its top faculty executives since 2008. pertino,wouldwork, where be a taxedportion Apple’s at California’sof topthe executivesdomestic 8.84 per-work, income a portion of the domestic income work, a portion of the domestic income former Treasury Department econo- mist, Martin A. Sullivan.the company As itmist, stands, paid Martin cash taxesproud A. Sullivan.of of$3.3 all bil- of Apple’s As itApple stands, contributions.” “paysmist, anproud enormous Martin of all amountof A.company Apple’s Sullivan. of contributions.”maycide As pay to it defer stands,in future indefinitely. yearsproudcompany The orwork, of de- $5 all billion mayofa portionApple’spercent pay in Now, ofcontributions.” of future the its De facultydomestic Anzayears facessince or incomede- a 2008. budgetcompanypercent gapwork, so mayof its centa would payfaculty portion corporate in befuture since oftaxed theincome 2008.years domesticat California’stax or rate.de- incomepercent would8.84 per- ofbe its taxed faculty at California’ssince 2008. 8.84 per- would be taxed at California’s 8.84 per- former Treasury Department econo- But in Nevada there is no state corpo- mist, Martin A. Sullivan. As it stands, proud of allthe of company Apple’s contributions.” paid cashlion taxes around ofthe $3.3 the company bil-proud world of on maypaid allApple its of pay reportedcash Apple’s “pays in taxesit future address contributions.”an taxes,of enormous years$3.3 which bil-the or de- helpissuetheamount companyApple ourpercent of company local,of deferred “pays of statepaidcide its anmay cash andfacultyto enormoustaxes, deferpay taxesfigure sincein indefinitely. whichfuture of amount appears2008.$3.3 years the bil- of to The or include de- a$5cideApple connection billionwould to taxespercent “paysdefer be ulti- indefinitely.taxedanofNow, its toenormouslarge faculty atDeDe California’sthat AnzaAnza. The sinceit amount is facesconfronting$5 2008.Their billion 8.84 aof budget per- kids acide “death Now,gap toswim spi-woulddefer so De in Anza indefinitely.becent taxed corporatefaces at a The California’sbudget income $5 billion gap tax 8.84so rate. per-centNow, corporate De Anza income faces a tax budget rate. gap so cent corporate income tax rate. mist, Martin A. Sullivan. 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(AppleApple por- “In employees. thedoes ed first the almostnot half statementdis- $5 of billion ratefiscalalso ofinral,” yearsaid. federal9.8mately thepercent. “In andschool’s owedtheThe state first(Apple by sums president, Applehalftion does paid ofin employees. thefiscal not byBrian company’s dis- year Apple Mur- also andbackyard.The said. otherrateral,” sums income “In the the phy, paid school’s taxfirst wrotestate’s byand half Apple president, tonofinancial of the capital fiscal andfaculty shortfall, yeargainsBrian other in tax. January.whichMur-phy,The has wrote Ap- sumsratenu- income to paidcluding theWhat’s faculty bytax Florida, Appleand more, in no NewJanuary. and capitalBraeburn Jersey other gainsAp- andallows tax. phy, NewWhat’s wroteApple tomore, the faculty Braeburn in January. allows Apple Ap- What’s more, Braeburn allows Apple rate of 9.8 percent. (Apple does not dis- alsorate said. of close9.8 “In percent. the what first portion(Apple half of doesfiscal oftion those not year is assigneddis- paymentsclose alsoThe what to previous said. sums portion2012, “In paid orour the offuture U.S. by thosefirstto Apple operations includehalf income payments of and fiscal taxes, taxes otherhave year close including 2012, generat-ultimately phy, whatour The incomewrote U.S. portion tech sums operations toowed taxes the corporations of paid faculty thoseby by AhaveApple mile paymentsinApple January. generat- isand em a aand pointhalf- Ap- otherfrom 2012, oftech conten-Apple’s our“But corporationsphy,What’s U.S. Cuper- wrotethen ple,operations more, tooftheymerous isthecourse, Braeburn a faculty pointdohave causes. iseverything ofnotgenerat- inallows But conten- January.responsible the Apple company’s techAp-theyple, for corporationsof canthe taxcourse,What’s toMexicoto is lowermore, not is — a responsible itspoint becauseBraeburn taxes of many conten- in allowsfor other ofthe those Apple statesple,to ju- of lower — course, in- its taxesis not inresponsible other states for —the in- to lower its taxes in other states — in- close what portion of those payments 2012,close our what wasU.S. in portionoperations the United of thosehave States, years.)generat- payments or whatwastech inpor-2012, the corporations our Uniteded U.S.almost States,operations is$5 ployees. a billion or point withheld what have in of federal por- conten- ongenerat- employeewas anded almost inple,state stocktech the of Unitedgains,course,$5 corporationstion billion mak- in States,is the innot federalcompany’stino responsible is or aheadquarters what point and por-backyard. state of for conten- isthe Deedpaytion Anzaalmostto inas ple,College, lowerthe few $5 ofcompany’s billion course,state’staxes its a taxespolicies in financial asis federal backyard. in notpossible.” other are responsible andshortfall, seen states state by officials — whichfor in- tionthestate’s has like in thenu-to Mr. financial lowercompany’srisdictionscluding its shortfall, taxes backyard. Florida, use in which formulas other New has states Jersey thatnu- — reducestate’s in-andcluding New financial Florida, shortfall, New Jersey which andhas nu- New cluding Florida, New Jersey and New was in the United States, or what por- edwas almost in tion the$5 billion Unitedis assigned in States, federal to or previousand whatBy state comparison, por- ortion futuretion ised assignedin Wal-Martalmost theincome company’s $5 tolast billion previous taxes, year backyard. in includingfederaling or us future among and income state thetionincome top is taxesstate’s payerstion assigned taxes, in financial of the U.S. A including tocompany’s mile in- previous shortfall, andcommunity incomea backyard. half orwhich futurefrom college taxes has Apple’s nu-thatincome Steve Cuper-Acluding mile state’s Wozniak, taxes, and Florida, merous financial a including halfMurphy from Newcauses. shortfall, income Apple’sas Jersey symptomatic But which taxesCuper- the and company’s has New of whynu-merousA themile taxcludingcri- and causes. awhatMexico half Florida, Butis from owed the— New Apple’s becausewhen company’s Jersey a Cuper-company’s many and tax of Newfinan-merous thoseMexico ju- causes. — because But the many company’s of those tax ju- Mexico — because many of those ju- comeThe tax.”sums paid by Apple and other tech cor- sis exists. cial management occurs elsewhere. Ap- tion is assigned to previous or future incometion is taxes,years.) assigned including to previous incomepaid or taxes worldwide futureyears.) cashincomeA mile taxes withheldand taxes,of $5.9a half billion includingon from employee Apple’s income stock Cuper- taxesgains,years.)withheld merousmak-A on mile causes.employeetino and headquarters a But half stockone the from of gains, company’s Apple’s Apple’sis De mak- founders,Anza Cuper- taxwithheld College,tino attendedMexico headquartersmerous on a fromemployee —policies causes. because is stockDe are But Anza many seen gains, the College, company’s of by mak- those officials a ju- tino tax policies like headquarters Mr.Mexico are risdictions seen — is because byDe officialsAnza use many College, formulas like of Mr.those a thatpolicies ju-risdictions reduce are seen use formulas by officials that like reduce Mr. risdictions use formulas that reduce on its booked profits of $24.4 billion, porations a The statement is a point did not of specifycontention how it in1969 the to compa 1974. Because- Escaping of California’s State“I Taxes just don’t understand it,” he said in plewhat does is notowed disclose when whata company’s portionwhat of finan- is owed when a company’s finan- what is owed when a company’s finan- years.) withheldyears.) onBy employee comparison, stock gains, Wal-Mart mak- lastBy tino year withheld comparison, headquartersing on us employee among Wal-Mart is De the Anzastock lasttop College, gains, payers year mak- aofingBy U.S. policiesus comparison, tino in-among headquarters arecommunity the seen Wal-Marttop payers by iscollege officialsDe last ofAnza that U.S. year likeCollege, Stevein- Mr.ing Wozniak,community a usrisdictions amongpolicies college Murphythe are use top seenthat formulaspayersas symptomaticSteve by of officials Wozniak,U.S. that in- reduce likeof why community Mr.Murphy the cri-risdictions as college symptomaticcash taxes usethat is Steve formulas paid of towhy Wozniak, states, the that butcri- reducetheMurphy com- as symptomatic of why the cri- tax rate of 24 percent, which is about av- arrived at $5 billion, nor did it address state budget crisis, De Anza has cut an interview. “I’ll bet every person at cial management occurs elsewhere.cial management Ap- occurs elsewhere. Ap- cial management occurs elsewhere. Ap- By comparison, Wal-Mart last year ing usBy among comparison,paid worldwidethe top Wal-Martpayers cash taxesoferage U.S. last of for in- year $5.9 non-techpaid billioncommunity worldwideing companies. us comeamong collegecash tax.” the taxes that topny’s of Stevepayers the$5.9 backyard. issue billion Wozniak, of ofU.S. deferredpaid in-come worldwideMurphy taxes,tax.”community which asone cash symptomatic of thecollege taxesApple’smore ofthat $5.9founders, of than Steve why billion a thousandtheWozniak, attended cri-comeone courses what fromIntax.”ofMurphy Apple’s2006, andis owed sis 8 as asfounders, exists. symptomaticApple’sApplewhen hasa attendedcompany’s bank a connectionof whyaccounts from finan- the to onecri- sis De and ofexists. Anza. Apple’swhat stock ispany founders,owed reported when attended that a company’s it owed from $762 finan- millionsis exists. ple does not disclose what portionple does of not disclose what portion of ple does not disclose what portion of paid worldwide cash taxes of $5.9 billion comepaid tax.” worldwideon its booked cash taxes profits of of$5.9Apple’s $24.4 billion on billion, domestic itsonecome booked aof tax Apple’s tax.” bill profitsThe has founders, statement piqued of $24.4 attendedA did billion, mile not specify afromandon a itsThe howhalfsis bookedone exists.statementit from of 1969Apple’s profits Apple’s did to offounders,not 1974. $24.4 specify Cupertino Because billion, attended how a ofit from California’sprice1969Thecial statement tosiswere management exists. 1974. rising,“I Becausedid just not occursdon’t company specify of understand California’selsewhere. how executivesit it,”Ap-1969 he “Isaid tojust cial camein 1974. don’t management in Because stateunderstand income ofoccurs California’sit,” taxes heelsewhere. nationwidesaid in Ap- last“I just don’t understand it,” he said in cash taxes is paid to states, but cashthe com- taxes is paid to states, but the com- cash taxes is paid to states, but the com- on its booked profits of $24.4 billion, a onThe its statement bookedtax rate profitsofdid 24 not percent, of specify $24.4 whichparticular billion,how is it about tax a curiosity 1969rate av- Theof to among24 arrivedstatement 1974.percent, corporate Because at which did$5headquarters billion, not is of about specify California’s nor av- didhow taxisit arrivedit address rateDe 1969“I ofAnza atjust 24 $5 topercent, statedon’t billion,College, 1974. understand budget which Becausenor dida is crisis, commu about it it,” of address he DeCalifornia’s av- said - Anza inarrivedhere state hasple cut budgettoat does“I $5 justReno billion, an not crisis,don’t interview. discloseand nor understand De didestablished Anza “I’llwhat it address bethasit,” portion everyhe cut said a ofstate person aninsubsidiary interview. budgetple at does year. crisis, “I’ll not That bet Dedisclose effective every Anza what person has state cut portion tax at ratean of isinterview. “I’ll bet every person at tax rate of 24 percent, which is about av- arrivedtax rate aterage of$5 24 billion, forpercent, non-tech nor which did companies. it istax address about experts av- erage becausestate arrivedfor non-tech budgetalthoughthe at $5issue crisis,thecompanies. billion, com- of De deferred nor Anza did taxes,it has address cut erage whichthe an issuefor thestate interview. non-tech of budget more deferred companies. “I’ll than crisis, taxes,bet a everythousand De which Anza person the courseshas atthe cutmore issue andcash an than 8 oftaxes interview. deferred aApple thousandis paid has “I’ll taxes,to states, a coursesbet connection which every but and the person com- 8 to more DeApple at Anza. thancash has a taxes ahigherpany thousand connection is reportedthan paid the coursesto ratestates, to that Deof andmanyit but Anza.owed the 8other $762com-Apple techpany million hasreported a connection that it owed to $762 De Anza.million pany reported that it owed $762 million ‘Double Irish With companies, but as Ms. Clausing and oth- erage for non-tech companies. theerage issue for of Apple’snon-tech deferred domestic companies. taxes, tax whichpany bill is the has based piquedApple’smore inthe the issuethan Uniteddomestic a of States, thousand deferred tax itsnity bill taxes,hascourses college piqued which and that 8theApple’s SteveApplemore domesticWozniak, has than a a connection tax thousandone bill of has Apple’s to courses piqued De Anza. andnamed 8 panyApple Braeburn reported has athat connectionCapital it owed to $762 to manage Demillion Anza. and panyinvest reportedin state that income it owed taxes $762 nationwide millionin state last income taxes nationwide last in state income taxes nationwide last profits — on paper, at least — are large- er tax analysts have noted, such figures Apple’s domestic tax bill has piqued Apple’sparticular domestic curiosity tax bill hasamong piqued corporateparticular curiosity amongfounders, A corporate Dutch attended Sandwich’particular from curiosity 1969 to 1974. among Because corporate of the incompany’s state income cash. taxes Braeburn nationwide is last a varietyin state ofyear. income That taxes effective nationwide state tax lastyear. rate That is effective state tax rate is year. That effective state tax rate is ly foreign. While Apple contracts out START HERE arehigher often than not reliable the rate guides of many to what otherhigher is tech than the rate of many other tech higher than the rate of many other tech particular curiosity among corporate particulartax experts curiosity because among although corporate taxthe expertscom- because although the com- tax experts because although the com- year. That effective state tax rate is year. actually That effective paid. state tax rate is much of the manufacturing‘Double and assem-California’s IrishNumerous With state companies‘Double budget take crisis, Irish De WithAnza has cut ‘Doubleapple that isIrish simultaneously With sweet and tart. companies, but as Ms. Clausingcompanies, and oth- but as Ms. Clausing and oth- companies, but as Ms. Clausing and oth- tax experts because although the com- tax expertspany because is based although in the Unitedbly the of com- its States, pany products is its based to other in companies the United States, its pany is based in the United States, its higher than the rate of many other tech higher thanDozens the of rate other of companies, many other including tech ‘Double Irish With more than a thousand courses and 8 percent of U.S. consumerToday, Braeburn’sPRODUCT offices are down a nar- pany is based in the United States, its pany isprofits based — in on the paper, United at leastoverseas, States, — are itsprofitsthe large-majority‘Double — on of A paper,Apple’s Dutch at Irishexecu- least Sandwich’ —Withadvantage are large- ofprofits loopholesA Dutch — on in paper, Sandwich’ at least — are large- A Dutchcompanies, Sandwich’ but as Ms. Clausing and oth- companies,Cisco,er tax but Harley-Davidson analysts as Ms. have Clausing noted, and and Microsoft, such oth-er figures tax analysts have noted, such figures er tax analysts have noted, such figures haveare often also setnot up reliable Nevada guides subsidiaries toare what often is not reliable guides to what is are often not reliable guides to what is profits — on paper, at least — are large- profits ly— on foreign. paper, While at least Apple —tives, are contracts large- productly foreign. out designers, While marketers, Appleits contracts facultyinternational outsincely laws 2008. foreign. to move While profits Apple contractsSTART If outthe profits HERErow fromer hallwaythe tax sale analysts of inside haveSTART noted,a blandHERE such building figures thater taxsits analysts START have HERE noted, such figures A Dutch Sandwich’ A Dutch Sandwich’ thatactually bypass paid. taxes in other states. Hun-actually paid. actually paid. ly foreign. While Apple contracts out ly foreign.much While of the Applemanufacturing contractsemployees, and outmuch researchassem- of the and Numerousmanufacturing development,START companies andN HEREow, assem- De take AnzamuchNumerous facesof the manufacturinga companies budget gap takeand so assem- largea product Numerous stayacross inare the oftenUnitedfrom companies not an reliable abandoned take guides torestaurant. what is Inside,are often not reliable guides to what is and retail stores are in the United around the world, avoiding taxes. START HERE dreds of other corporations reap similar much of the manufacturing and assem- much ofbly the of manufacturing its products to and other assem- companiesbly of its products to other companies bly of its products to other companiesStates, they wouldactually be subject paid. actually paid.Dozens of other companies, includingDozens of other companies, including Dozens of other companies, including Numerous companies takeStates. Tax expertsNumerous say it is thereforecompaniesthat it istake confronting a “death spiral,” the school’sU.S. consumer there are postersPRODUCTU.S. of consumer candy-colored iPPRODUCTods andsavings U.S. by locatingconsumer offices in Delaware.PRODUCT overseas, the majority of Apple’soverseas, execu- theadvantage majority of Apple’sof loopholesMany execu- of these inoverseas, advantagetechniques the relymajority of loopholes on of Apple’s in execu-to a federaladvantage tax of 35Dozens percent. of ofloopholes other companies, in including Cisco, Harley-Davidson and Microsoft,Cisco, Harley-Davidson and Microsoft, Cisco, Harley-Davidson and Microsoft, bly of its products to other companies bly of its products to other reasonable companies to expect that most of Ap- DozensBut of someother in companies, California are including unhappy advantage of loopholes in U.S.president, consumer Brian Murphy,PRODUCT wrote to theU.S. faculty consumerBut in if moneya islarge paid toPRODUCT Apple an insignia, as well as a handful ofhave also set up Nevada subsidiarieshave also set up Nevada subsidiaries have also set up Nevada subsidiaries overseas, the majority of Apple’s execu- overseas,tives, the majority product of designers, Apple’sple’s execu-profits marketers,tives, would advantage productbe Americaninternational designers, of as loopholeswell. laws marketers,transferring in to move tives,profitsinternational profits producton patent designers, laws to moveIf the marketers, profits profits from internationalthe saleCisco, of Harley-DavidsonIf thelaws profits to move from andthe profits sale Microsoft, of Cisco,If thatthe Harley-Davidson profits Apple andfrom other the andsale California-based Microsoft,of tives, product designers, marketers, employees, research and development,employees, research andJanuary. development, Apple,employees, of course, research is not andresponsible development,Irish for subsidiary desks ashave royalties and also computer on set up Nevada terminals. subsidiaries have alsothat setbypass up Nevadataxes in subsidiariesother states.that Hun- bypass taxes in other states. Hun- that bypass taxes in other states. Hun- internationaltives, product laws designers, to move marketers,Theprofits nation’s taxinternational code isaround basedIf the on profitsthelaws the world, tofromroyalties move the avoiding sale profits to placesof around taxes. like theIreland. world, HereIf the avoiding profitsa product from taxes. staythe salein thearound of United the world,a product avoiding stay in the taxes. United a companiesproduct stay have in movedthe United financial opera- employees, research and development, employees,and researchretail stores and development, areconcept in the thatand Uniteda company retail stores“earns” income are in the United and retail stores are in the Unitedpatents the companythat bypassowns, it taxes in other states. Hun- that bypasstionsdreds to taxesof tax-free other in corporationsother states states. — particularly reapHun-dreds similar of other corporations reap similar dreds of other corporations reap similar a productthe stay state’sis in one the techniqueUnited financial typical shortfall, of what which a product States,has stay numer theyin canthe would ultimately -United be subjectbeWhen taxed at States,someonefar they wouldin the be Unitedsubject States buysStates, they would be subject and retail stores are in the United aroundand retail theStates. world, stores Tax avoiding experts are in say thewhere taxes. it United is value thereforeStates. is around created, Tax expertsMany the rather world, of say than these it avoiding is techniques therefore taxes.States. relyMany on Tax of these experts techniques say it is therefore rely on Manydreds of these of other techniques corporations rely reap on similar dreds ofsincesavings other lawmakers corporations by locating have offeredoffices reap similar themin Delaware. savingstax by locating offices in Delaware. savings by locating offices in Delaware. States, theyous would causes. be subject But the company’sStates, tax policies tothey a federal would lowerare betax rates. subjectof 35an percent. iPhone, to i Paad federal or othertax of 35 Apple percent. product, a porto -a federal tax of 35 percent. States. Tax experts say it is therefore ManyStates. of reasonable Taxthese experts techniques to say expect it isrely where that therefore on mostproducts reasonable of are Ap- sold. to expect that mostApple of and Ap- othersreasonable pioneered. to expect that most of Ap- savings by locating offices in Delaware. savingsbreaks byBut locating to some keep themoffices in California in thein Delaware. state. are unhappyBut some in California are unhappy But some in California are unhappy Many transferringof tothese a federal techniques taxprofits of 35 relyonpercent. patent ontransferring profitsto a federal onBut patent if tax money of 35 is percent. paidtransferring to an But profits if money on ispatent paid to an But Inif money 1996, 1999 is paid and to 2000, an for instance, reasonable to expect that most of Ap- reasonableple’s toprofits expect would that be most AmericanHowever, of Ap-ple’s as Apple’s well. profits accountants would be haveAmericanseen by as officialswell. ple’s like profits Mr. would Murphy be American as symptom as well.- tion ofBut the some profits in California from that are sale unhappyManufacturing is often deposBut somethat- Apple in California and other are California-based unhappythat Apple and other California-based that Apple and other California-based found legal ways to allocateBut about if money 70 is paid to an But if moneyIrish subsidiary is paid to asan royalties on Irish subsidiary as royalties on Irishthe subsidiaryCalifornia Legislature as royalties increased on the ple’s profits would be American as well. transferringple’s profitsThe nation’swould profits be tax onAmerican codepatent is as based well.The on nation’s thetransferringroyalties tax code profits isto basedplaces on patent on like the Ireland. Theroyalties nation’s Here to tax places code like is based Ireland. on the Hereroyalties that Appleto places and like other Ireland. California-based Heresubsidiary that Applecompanies and other have California-basedmoved financialcompanies opera- have moved financial opera- companies have moved financial opera- percent of its profits overseas,Irish subsidiary whereatic of as why royalties the on crisis exists. patents the companyited owns, into it accountspatents the controlled company owns, by itBraeburn, andpatentsstate’s the research company and owns, development it tax The nation’s tax code is based on the royaltiesThe nation’sconcept to places tax that code alike company is Ireland. based “earns” on Here theconcept income royalties that a company to places “earns” like incomeIreland.concept Here that a companyIrish subsidiary“earns” income as royalties on companies have moved financial opera- companiestions have to tax-free moved financial states — opera- particularlytions to tax-free states — particularly tions to tax-free states — particularly tax rates are often muchis one patents lower, technique ac-the company“I typicaljust owns, don’t of it iswhat understandone technique it,” typical hecan said of ultimately what in an be taxedisthen one at investedtechnique far can ultimatelyin typical stocks, beof bonds taxedwhat at or far otherAt one time, financial a cancredit, ultimately permitting be taxed hundreds at far of compa- concept that a company “earns” income conceptwhere that a company value is “earns” created,cording income rather towhere corporate than value filings. is created, rather thanOverseaswhere value is created,patents the rather company than owns, it tions to tax-free states — particularly tions tonies,since tax-free including lawmakers states Apple, have —to avoid particularly offered billions themsince in taxlawmakers have offered them tax since lawmakers have offered them tax PRODUCT company is one techniquewhere products typical are of sold. what whereis products one Appletechnique canare sold.ultimatelyand interview.otherstypical be taxedpioneered. of what“I’ll atconsumer farwhere Applebet everyproducts and othersperson are cansold. pioneered. ultimatelyatlower Apple rates. be hastaxed atApple instruments,far and otherslower say rates. pioneered. company executives. Then,lowerstatebreaks rates. taxes, to keepaccording them to inlegislative the state. ana-breaks to keep them in the state. breaks to keep them in the state. where value is created, rather than where value is created, ratherNeither than the government nor corpora- since lawmakers have offered them wouldtax actuallysince lawmakers have offered them tax tions make tax returns public,lower and rates. a lower rates. lysts. Apple has reported tax savings of where products are sold. Applewhere and productsHowever, others are pioneered. sold. Apple’s accountantsHowever, haveApple Apple’sand others accountants pioneered. have However, Apple’s accountants have breaks to keep them in the state.Manufacturing manufacturebreaks toIn keep 1996, themManufacturing 1999 in the and state. 2000, for instance,In 1996, 1999 and Manufacturing 2000, for instance, In 1996, 1999 and 2000, for instance, company’s taxable income often differs $412 million from research and develop- However, Apple’s accountants have However,found Apple’s legal ways accountants to allocate have found about legal70 ways to allocate aboutWhen 70 the foundsame product legal is ways to allocate about 70 In 1996, 1999 and 2000, for instance,products in In 1996,the California 1999 and 2000,Legislature for instance, increasedthe California the Legislature increased the the California Legislature increased the from the profits disclosed in annual re- Manufacturing Manufacturingsubsidiary ment creditssubsidiary of all sorts since 1996. subsidiary found legal ways to allocate about 70 percent of its profits overseas,percent where of its profits overseas, wheresold overseas,percent money of from its profits overseas, where the California Legislature increasedIreland. But the today, it’sthe Californiastate’s Legislature research and increased development thestate’s tax research and development tax state’s research and development tax found legal ways to allocateports. about Companies 70 report their cash out- subsidiary subsidiary Then, in 2009, after an intense lobby- tax rates are often much lower,tax rates ac- are often much lower,the ac-sale istax sent ratesto a second are often much lower, ac- credit, permitting hundreds ofcredit, compa- permitting hundreds of compa- credit, permitting hundreds of compa- percent of its profits overseas, where percent of its profits overseas,lays forwhere income taxes in their annual state’s research and developmentmore likelyAt taxone to usetime, state’s a ing research campaign and ledAt oneby development Apple, time, Cisco,a taxOra- At one time, a tax rates are often much lower, ac- cording to corporate filings. cording to corporate filings.Overseas Irish subsidiary.cording to corporateOverseas filings. credit, Overseas permitting hundreds factories of compa- in China, nies, including Apple, to avoid billionsnies, including in Apple, to avoid billions in nies, including Apple, to avoid billions in tax rates are often much Form lower, 10-K, ac- but it is impossible from PRODUCT At one time, aIrish PRODUCT At one time,companyPRODUCT a credit,cle, permitting Intel and other hundredscompany companies, of compa- the Cali- company cording to corporate filings. cording toNeitherOverseas corporate the filings.government those nor numbers corpora-Neither to determine the government Overseas preciselyconsumer nor corpora- Neither theconsumer government nor corpora- nies, includingconsumer Apple, to avoidBrazil billions or India in that shipnies, includingforniastate taxes, Legislature Apple, according to reducedavoid to billions legislative taxes statein for ana- taxes, according to legislative ana- state taxes, according to legislative ana- PRODUCT PRODUCT company subsidiary companywould actually would actually would actually Neither the government nor corpora- Neithertionsconsumer the make government tax returns norhow corpora- public,much,tions in and total, make a corporations tax returnsconsumer pay to public, and a tions make tax returns public, and a state taxes, according to legislativedirectly toana- consumers.state taxes,corporationslysts. according Apple based has to reportedin legislative California tax but ana- savings lysts.op- Apple of has reported tax savings of lysts. Apple has reported tax savings of wouldBecause actually of a quirk in Irish would actuallymanufacture manufacture manufacture tions make tax returns public, and a tions makecompany’s tax returns taxable public,incomegovernments. andoften company’s a differs In Apple’s taxable last annual income dis- often differs company’s taxable income often differs lysts. Apple has reported tax savings of lysts. Appleerating$412 million has in other reported from states research taxor nations. savings and Legis- $412ofdevelop- million from research and develop- $412 million from research and develop- When the same product is When the same product manufactureis law, if the Irish subsidiaryWhen the is same product is manufactureproducts in products in products in company’s taxable income often differs company’sfrom taxable the profits income disclosed oftenclosure, differsin annual thefrom company there- profits listed disclosed its world- in annual re- from the profits disclosed in annual re- $412 million from research and develop- $412 millionlativement analysts fromcredits research say of all the sorts change and since develop- will even-1996.ment credits of all sorts since 1996. ment credits of all sorts since 1996. When the same product is wide taxes — which includesWhen cashthesold sametaxes overseas, product money is from sold overseas, money fromproducts controlled in by managerssold overseas, money from Ireland.products But in today, it’s tuallyIreland. cost the But state today, government it’s about Ireland. But today, it’s from the profits disclosed in annual re- from theports. profits Companies disclosed report in annual their re-cashports. out- Companies report their cash out- ports. Companies report their cash out- ment credits of all sorts since 1996. ment creditsThen, of allin 2009,sorts aftersince an1996. intense Then,lobby- in 2009, after an intense lobby- Then, in 2009, after an intense lobby- sold overseas, money from paid as well as deferredsold taxes overseas, andthe othersale money is sent fromto a second the sale is sent toIreland. a second But today,elsewhere, it’s like the Caribbean,sale is sent to a secondmore likely to use $1.5 billionmore a likely year. to use more likely to use ports. Companies report their cash out- ports. Companieslays for income report taxestheir cash in their out-lays annual for income taxes in their annual lays for income taxes in their annual Then, in 2009, afterIreland. an intense But today, lobby- it’s Then,ing in campaign2009, after led an byintense Apple, lobby- Cisco,ing campaignOra- led by Apple, Cisco, Ora- ing campaign led by Apple, Cisco, Ora- the sale is sent to a secondcharges — at $8.3 billion,the sale an Irish effectiveis sent subsidiary. to a second Irish subsidiary. more likely to thenuse the profits Irishcan skip subsidiary. more likelyfactories to use in China, Suchfactories lost revenue in China, is one reason Cali- factories in China, lays for income taxes in their annual lays forForm income 10-K, taxes but in it istheir tax impossible rate annual ofForm almost from a 10-K, quarter but of profits. it is impossible from Form 10-K, but it is impossible fromacrossIrish the worlding tax-free. campaign led Irishby Apple, Cisco, Ora- ing campaignforniacle, Intel now Irishled andfaces by other aApple, budget companies, Cisco, crisis, Ora-with cle,the a IntelCali- and other companies, the Cali- cle, Intel and other companies, the Cali- Irish subsidiary. Irish subsidiary. factories in China, Brazil or India that ship Brazil or India that ship Brazil or India that ship Form 10-K, but it is impossible from Form 10-K,those but numbers it is impossibleto determineHowever, from preciselythose tax analysts numbers and to scholars determineIrish precisely those numbers to determineIrish preciselysubsidiary cle, Intel and othersubsidiaryfactories companies, in China, the Cali- cle, Intelshortfallfornia and otherofsubsidiary Legislature more companies, than $9.2 reduced billion the Cali- in taxes forniathe for Legislature reduced taxes for fornia Legislature reduced taxes for Brazil or India that ship Brazil ordirectly India that to consumers. ship directly to consumers. directly to consumers. those numbers to determine precisely those numbershow much, to in determine total, corporationssaid precisely that how figure pay much, most to likelyin total, overstated corporationssubsidiary pay to Secondhow much, in total, corporationssubsidiary pay to fornia Legislature reduced Caribbean taxes for or fornia comingcorporations Legislature fiscal year based reduced alone. in TheCalifornia taxes state for corporationshas but op- based in California but op- corporations based in California but op- how much the company would hand to directlyBecause to consumers. of a quirk in Irish Because of a quirk in Irish Becausecut some of health a quirk care in Irish programs, signif- how much, in total, corporations pay to how much,governments. in total, corporations In Apple’s last pay annual governments.to dis- In Apple’s last annual dis- Irishgovernments. In Apple’s last annual dis- corporations baseddirectly in California to otherconsumers. but tax op- haven corporationserating based in other in Californiastates or nations. but op-erating Legis- in other states or nations. Legis- erating in other states or nations. Legis- governments. In Apple’s last annual dis- governments.closure, In the Apple’s company last annualgovernments listed dis- itsclosure, world- because the it companyincludedBecause sums listed of a quirk its world- in Irish subsidiaryclosure, the companyBecause listedlaw, of its ifa thequirk world- Irish in Irishsubsidiary erating is inlaw, other if the states Irish orsubsidiary nations. isLegis- eratinglaw,icantlylative in if otherthe analysts raised Irish states subsidiary tuition say or nations. atthe state ischange universi-Legis- willlative even- analysts say the change will even- lative analysts say the change will even- that might never be paid. “The informa- ties, cut services to the disabled and closure, the company listed its world- closure,wide the taxes company — which listed includes its world- cashwide taxes taxes — whichlaw, ifincludes the Irish cash subsidiary taxes iswide taxes — whichlaw, includes if thecontrolled cashIrish subsidiarytaxes by managers is lative analystscontrolled say by the managers changeThe will profits even- can land lativein controlled analyststually cost bysay managersthe the statechange government will even-tually about cost the state government about tually cost the state government about tion on 10-Ks is fiction for most compa- elsewhere, like the Caribbean, elsewhere, like the Caribbean,an overseas tax haven elsewhere,proposed like a $4.8 the billionCaribbean, reduction in wide taxes — which includes cash taxes wide taxespaid —as which well as includes deferrednies,” cash taxes saidtaxes andpaid Kimberly other as well Clausing, as deferredcontrolled an econo- taxes by managers and other paid as well as deferredcontrolled taxes byand managers other tually cost the state government about tually spendingcost$1.5 billionthe state on a kindergartenyear. government and about other$1.5 billion a year. $1.5 billion a year. charges — at $8.3 billion, an charges effective — at $8.3elsewhere, billion, like an the effective Caribbean,charges — at $8.3 billion,then an effectivethe profits can skip then the profits can skipwhere they are stored, then Suchthe profits lost revenue can skip is one reasonSuch Cali- lost revenue is one reason Cali- Such lost revenue is one reason Cali- paid as well as deferred taxes and other paid as well as deferred taxesmist and at other Reed College who specializes in elsewhere, like the Caribbean, $1.5 billion a year. invisible to authorities,$1.5 billiongrades. a year. charges — at $8.3 billion, an effective chargestax — rate at of $8.3 almost billion, a quarter anmultinational effective of profits.tax rate taxation. of almost “Butthen a for quarter the tech profits of profits. can skip tax rate of almost a quarterthen theacross of profits profits. the can world skip tax-free. Such lostacross revenue the world is one tax-free. reasonfor years. Cali- Suchacrossfornia lostApple therevenue nowdeclined world faces tax-free. isto onecommenta budget reason on crisis, itsCali- forniaNe- with now a faces a budget crisis, with a fornia now faces a budget crisis, with a tax rate of almost a quarter of profits. tax rate ofHowever, almost a quarter tax analysts ofcompanies profits. and scholarsitHowever, goes from taxfictionacross analysts to farci- the world and scholarstax-free. However, tax analystsacross the and world scholars tax-free. fornia now faces a budget crisis, with a fornia vadanowshortfall operations.faces of a more budget Privately, than crisis, $9.2 some withbillion execu-shortfall a in the of more than $9.2 billion in the shortfall of more than $9.2 billion in the cal.” tives said it was unfair to criticize the However, tax analysts and scholars However,said that tax figure analysts most and likely scholars overstatedsaid that figure most likelySecond overstated said that figureSecond most likely overstated shortfallSecond of more than $9.2Caribbean billion in the or shortfallcoming of Caribbeanmore fiscal than year or$9.2 alone. billion The in the statecoming has fiscal yearCaribbean alone. The or state has coming fiscal year alone. The state has said that figure most likely overstated how much the companyApple, would inhow hand a statement,much to the saidcompany it “has would hand to how much the company would hand to companycut some for health reducing care its programs,tax bill whencut signif- some health care programs, signif- cut some health care programs, signif- said that figureSecond most likely conducted overstated all of its business withSecond theIrish Irish coming Irishfiscal year alone. otherThe state tax hashaven coming fiscalother year tax alone. haven The state has other tax haven governments because it includedgovernments sums because it included sums governments becauseCaribbean it included or sums Caribbean or thousandsicantly raised of other tuition companies at state acted icantly universi- raised tuition at state universi- icantly raised tuition at state universi- how much the company would hand to how much Irishthe company wouldhighest hand of toethical standards, complyingIrish subsidiary subsidiary cut somesubsidiary health care programs, signif- cut somesimilarly. health If care Apple programs, volunteered signif- to pay that might never be paid. “The thatinforma- might never be paid. “The informa- that might never be paid.other “The tax informa- haven other tax haven governments because it included sums governmentssubsidiary because it includedwith applicable sums laws and accountingsubsidiary icantly raised tuition at stateThe profits universi- can land inicantly more ties, raised The in cut taxes, tuitionprofits services it can atwould state toland put the in universi- itself disabled atties, a andcut servicesThe toprofits the can disabled land in and ties, cut services to the disabled and that might never be paid. “The informa- that mighttion neveron 10-Ks be paid.is fiction “Therules.” for informa- most It tion added,compa- on 10-Ks “We areis fiction incredibly for most compa- tion on 10-Ks is NetherlandsfictionThe for profitsmost compa-can land in ties, cut services The to the profits an disabled overseas canNO-TAX land and tax in haventies, cutcompetitiveproposed servicesan overseas disadvantage,a to $4.8 the tax billion disabledhaven they reductionargued, andproposed in a $4.8an overseas billion reductiontax haven in proposed a $4.8 billion reduction in nies,” said Kimberly Clausing, annies,” econo- said Kimberly Clausing, an econo- nies,” said Kimberly Clausing, an econo- COUNTRY andspending do a disservice on kindergarten to its shareholders. andspending other on kindergarten and other spending on kindergarten and other tion on 10-Ks is fiction for most compa- tion on 10-Ks is fiction for most compa- And because ofan Irish overseas treaties taxthat haven proposed a $4.8an billion overseas where reduction tax 0%they haven are in stored,proposed awhere $4.8 they billion are stored, reduction in where they are stored, mist at Reed College who specializesmist at inReed College who specializes in mist at Reed College who specializes in Indeed, Apple’s decisions have yield- nies,” said Kimberly Clausing, an econo- nies,” said Kimberly Clausing,Additional an econo- reporting was contributed by make some inter-Europeanwhere they are stored, ... andspending then back to on the kindergartenfirst where theyinvisible and are stored,to other authorities, spending grades. oninvisible kindergarten to authorities, and othergrades. invisible to authorities, grades. mist at Reed College who specializes in mist atmultinational Reed College who taxation. specializesKeith “But Bradsher multinationalin for tech in Hong taxation. Kong, Siem “But for tech multinationaltransfers taxation. tax-free, “Butthe company for tech Irish subsidiary,grades. which sends grades.ed benefits.Apple declined After announcing to comment one of on the Appleits Ne- declined to comment on its Ne- Apple declined to comment on its Ne- invisible to authorities, invisiblefor to years. authorities, best quartersfor years. in its history last week, for years. multinational taxation. “But for tech multinationalcompanies taxation. it goes “ButfromEikelenboom forfiction techcompanies to infarci- Amsterdam, it goes Dean from Gree- fiction to farci- companiescan it goesavoid taxesfrom by fiction routing to the farci- the profits to the overseas vada operations. Privately, somevada execu- operations. Privately, some execu- vada operations. Privately, some execu- naway in the British Virgin Islands, for years. Apple declined tofor comment years. on its Ne- Applethe declined company to said comment it had net on profitsits Ne- of cal.” cal.” cal.” profits through the Netherlands … tax haven. companies it goes from fiction to farci- companies it goes from fictionScott to Sayarefarci- in Luxembourg and Jason vada operations. Privately, some execu- vada operations.$24.7tives billion said onPrivately, it revenues was unfair some of $85.5 to execu- criticize billiontives saidthe it was unfair to criticize the tives said it was unfair to criticize the cal.” cal.” Apple, in a statement,Woodard said in Singapore. itApple, “has in a statement, said it “has Apple, in a statement, said it “has tives said it was unfair to criticize THE the NEW YORK TIMEStives saidincompany the it first was for half unfair reducing of the to fiscal criticize its year,tax the bill andcompany when for reducing its tax bill when company for reducing its tax bill when Apple, in a statement, said it “has Apple,conducted in a statement, all of its said business it “has conducted with the all of its business with the conducted all of its business with the company for reducing its tax bill when companythousands for reducing of other its tax companies bill whenthousands acted of other companies acted thousands of other companies acted conducted all of its business with the conductedhighest all of ethical its business standards, with complying thehighest of ethical standards, complying highest of ethical standards, complying thousands of other companies acted thousandssimilarly. of other If Apple companies volunteered actedsimilarly. to pay If Apple volunteered to pay similarly. If Apple volunteered to pay highest of ethical standards, complying highestwith of ethical applicable standards, laws complying and accountingwith applicable laws and accounting with applicable laws and accounting similarly. If Apple volunteered to pay similarly.more If Applein taxes, volunteered it would put to pay itselfmore at in a taxes, it would put itself at a more in taxes, it would put itself at a with applicable laws and accounting with applicablerules.” It laws added, and “We accounting are incrediblyrules.” It added, “We are incredibly rules.”Netherlands It added, “We are incrediblyNetherlands more in taxes, it would putNO-TAXNetherlands itself at a competitiveNO-TAX disadvantage, theycompetitive argued, disadvantage,NO-TAX they argued, competitive disadvantage, they argued, Google Engineer Told Others of Data Collection, Full VersionCOUNTRY of F.C.C.more in Report taxes,COUNTRY it would Reveals put itself at a COUNTRY rules.” It added, “We are incredibly rules.” It added, “We are incrediblyNetherlands Netherlands NO-TAX competitive disadvantage,NO-TAX they argued, competitiveand do disadvantage, a disservice to they its shareholders.argued,and do a disservice to its shareholders. and do a disservice to its shareholders. And because of Irish treatiesCOUNTRY thatAnd because of Irish treaties that And because0% of Irish treaties that 0% 0% Additional reporting was contributedAdditional by reporting was contributed by Additional reporting was contributed by and do a disservice toCOUNTRY its shareholders. and do a disserviceIndeed, Apple’s to its shareholders. decisions haveIndeed, yield- Apple’s decisions have yield- Indeed, Apple’s decisions have yield- And becauseBy DAVID of Irish STREITFELD treaties that and Web searchesAnd because make of potentially someof Irish inter-European treatiesrelease thatof the full0% report,make some“we... canand inter-European then back to the first ... andmake0% thenphotographing some back inter-European to the streetsfirst and did fic ... along and withthen sufficientback to the data first to Keith Bradsher in Hong Kong,Keith Siem Bradsher in Hong Kong, Siem Keith Bradsher in Hong Kong, Siem ed benefits. After announcing oneed benefits.of the After announcing one of the ed benefits. After announcing one of the Additional reporting was contributed by Additional reporting wasmake contributed someSAN FRANCISCOinter-European by — Google’s hundreds... and ofthenmake millions back sometransfers of to people inter-Europeanthe tax-free,first as now the put company this matter transfers... behind and thenus.”Irish tax-free, subsidiary,back theto the company Indeed,which first sends Apple’s Irish decisionstransfers subsidiary,not have disclose tax-free, which yield- that thesends it companywas collectingIndeed, Apple’spreciselyIrish decisionssubsidiary, triangulate have which their yield- sends posi- Keith Bradsher in Hong Kong, Siem Eikelenboom in Amsterdam, DeanEikelenboom Gree- in Amsterdam,part of Dean his orGree- her unscheduledEikelenboom inEver Amsterdam, since information Dean Gree- about An inquiryed benefits. suggests After announcing a Internet one of communications the calledbest tion quarters at a given in time, its history along with lastbest in- week, quarters in its history last week, best quarters in its history last week, Keith Bradsher in Hongtransfers Kong,harvesting tax-free, Siem of e-mails, the company passwords Irish subsidiary,transferscan which tax-free, avoid sends taxes the company by routing the canIrish avoid subsidiary,the taxes profits bywhich torouting the sends overseas the the canprofits avoid to thetaxes overseas by routing ed the benefits. Afterthe announcingprofits to the oneoverseas of the Eikelenboom in Amsterdam, Dean Gree- naway in the Britishand Virgin other naway sensitiveIslands, in personal the British in- work Virgin time, Islands, and wherenaway privacy in thethe secret British data Virgin collection Islands, first be- best quarters in its historypayload last week, data, transmittedbest quarters overthe companyformation in its saidhistory about it what had last they net week, were profitsthe company of said it had net profits of the company said it had net profits of Eikelenboom in Amsterdam,can Deanavoid taxesGree- by routing the the profitscan to avoid theprofits overseastaxes through by routing the Netherlandsthe …profitsthe profits throughtax tohaven. the theplan overseas Netherlands wasn’t …the worktax profitshaven. through the Netherlands … tax haven. naway in the British Virgin Islands, naway Scott in the Sayare British in Luxembourg Virginformation Islands, and Scott fromJason Sayare unsuspecting in Luxembourgconcerns and are JasonshruggedScott off. Sayaregan in Luxembourg to emerge two and years Jason ago, the company said it had Wi-Fi net profits networks, of until the May company 2010,$24.7doing.” billion said on it hadrevenues net profits of $85.5 $24.7 of billion billion on revenues of $85.5 billion $24.7 billion on revenues of $85.5 billion profits through the Netherlands … tax haven. when it was confronted by Ger- Scott Sayare in Luxembourg and Jason Woodard in Singapore.householdsWoodard in the United in Singapore. States The so-calledprofits payload throughWoodard data the was Netherlands in Singapore.Google has … portrayedtax haven. it as the of a $24.7rogue billion employee. on revenues of $85.5 billionTHE NEW YORK TIMES in the Attending first halfTHE NEWto of paperwork YORK the TIMES fiscal did year,in not the and first half of the fiscalTHE NEW year,YORK TIMES and in the first half of the fiscal year, and Scott Sayare in Luxembourg and Jason secretly collected between 2007 mistakes of an unauthorized engi- man regulators. $24.7 billion seemon revenues to be a high of priority,$85.5 billion howev- Woodard in Singapore. Woodard in Singapore. and around the world was neither THE NEW YORK TIMES in the first half of the fiscalTHE year, NEW YORK and TIMES in the first half of the fiscal year, and a mistake nor the work of a rogue and 2010 as part of Street View, a neer operating on his own and Eventually, it was forced to re- er. Managers of the Street View project to photograph street- stressed that the data was never veal that the information it had project told F.C.C. investigators engineer, as the company long says, Street View engineers had scapes over much of the civilized used in any Google product. collected could include the full that they never read the engi- maintained, but a program that “wide access” to the plan to col- world. When the program was supervisors knew about, accord- The report, quoting the engi- lect payload data. Five engineers text of e-mails, sites visited and neer’s proposal, called a design Google EngineerGoogle Told Engineerbeing Others designed, the report Google ofTold says,Data Others Engineer Collection, of Data Told Full Collection, Others Version ofother DataFullof data. F.C.C. Version Collection, Reportdocument. of F.C.C. A senior RevealsFull manager Version Report of Revealsof F.C.C. Report Reveals ing to new details from the full neer’s original proposal, gives a tested the Street View code, a Google Engineer ToldGoogle Others Engineer oftext ofData a regulatory Told report. Collection, Othersit included the of following Full Data “to do”Versionsomewhat Collection, different of impression. F.C.C. Fullsixth reviewed Report Version it line by line, Reveals and ofEven F.C.C. if a user was not Report working Street ViewReveals said he “pre- By DAVID STREITFELDThe report, preparedByand DAVID Web by STREITFELD searches the item: of potentially“Discuss andprivacy Webrelease consider- searchesBy of DAVID theThe full of STREITFELD potentiallydata,report, the “we engineer canrelease wrote,and of the Weba full seventh searches report, also “we of worked potentially can on it, thephotographingreleaseon a computer of the full streetsat report,the moment and “we the didcanphotographingapprovefic alongd” the with streetsdocument sufficient and before did datait fic to alongphotographing with sufficient streets data and to did fic along with sufficient data to ations with Product Counsel.” would “be analyzed offline for use Street View car slowly passed, if was written. By DAVID STREITFELD and Web searchesBy DAVIDSAN of potentially FRANCISCOSTREITFELDrelease —Federal Google’s of and the Communications SAN full Webhundreds report, FRANCISCO searches “we of Com- millions ofcan potentially — Google’s of peoplerelease hundredsas now ofSAN the putof full millions FRANCISCOthis report, matter of “wepeople photographingbehind —can Google’sas us.”now put streetshundreds this matterreport and of millions says. didbehind fic ofus.” along people photographing with as sufficientnotnow disclose put this streetsdata that matter to it and was behind didcollecting us.”ficnot along discloseprecisely with that sufficient triangulate it was collecting data their to posi-preciselynot disclose triangulate that theirit was posi- collecting precisely triangulate their posi- hundreds of millions of people as nowmission put this after matter apart 17-month behind of his investi- us.” or her“That unscheduled never partoccurred,” of Ever his the orre- since herin information other unschedulednot initiatives.” disclose about Google thatEverAn partit says was since inquiry of collecting his informationPrivacy or hersuggestsadvocatesprecisely unscheduled about said a triangulate Anthe full inquiryInternetEverthe their device since communications suggests posi- was information on and a the called about net-InternettionAnMore at communications inquiry thana given a dozen time, suggests countriesalong called with a tionin- atInternet a given time, communications along with in- called tion at a given time, along with in- SAN FRANCISCO — Google’s SANharvesting FRANCISCO of e-mails, — Google’s passwordshundredsharvesting of millionsof e-mails, of peopleportpasswords says. as now putharvesting this matter of thisbehind e-mails, was neverus.” passwords done. not disclosework that was it was unencrypted, collecting all sortspreciselybegan triangulate investigations their of posi- Street part of his or her unscheduled gation of Google’swork Street time, View and whereAn inquiry privacywork thesuggests time, secret and data wherea collection Internet privacy first An communications be-the inquirysecretwork data time,report suggestscollection called andput Google wheretion first a inat be- a privacya bad given light. time,payloadthe along secret data,with data in- transmittedcollection first over payloadbe- formation data, transmitted about what they over wereformationpayload about data, what transmitted they were over formation about what they were harvesting of e-mails, passwords harvestingand of other e-mails, sensitive passwords personalEverproject, since partwas and in- released, informationof other his heavily orsensitive her about re- unscheduled personalGoogle in-says theEver data and sincecollection other information sensitiveThe report, about personal which in- wasplan first wasn’t the workInternetplan wasn’t communicationsof information the aboutwork called what tion the atView aplan given in 2010. time, wasn’t In the along United the with States, workin- work time, and where privacy concerns are shrugged off. concernsgan are to shrugged emerge twooff.payload years data, ago,gan transmitted toconcerns emerge “Google’sare two over shrugged years rogueformation off.ago, engineer about sce-Wi-Fi gan what to networks, they emerge were until two years May 2010, ago,Wi-Fidoing.” networks, until May 2010, doing.”Wi-Fi networks, until May 2010, doing.” and other sensitive personal in- and otherformation sensitive from personal the unsuspectingdacted, secret in- twowork dataformation weeks collection time, ago. and Although from first where be- unsuspecting was privacy legal. Butthe when secret formation regulators data collection published from first unsuspecting in be- its unredacted form nario collapses in light ofpayload the fact data,user had transmitted been doing over could formation be the Justice about Department, what they the were Fed- The so-called payloadplan data wasn’t wasTheGoogle so-calledthe work has payload portrayed data was it as plan theGoogle wasn’t The has so-called portrayed the workpayload it as data the was whenGoogle it washas portrayedconfronted it by as Ger- when the itAttending was confronted to paperwork by Ger- did notAttendingwhen itto waspaperwork confronted did not by Ger- Attending to paperwork did not formation from unsuspecting concerns areformation shruggedhouseholds from off. in unsuspecting the Unitedganit found to States emerge concernsthathouseholds Google two are had yearsshrugged in not the vio- ago, United off.asked States to see gan what tohad households emerge been col- two by in yearsThe the Wi-Fi LosUnited ago, Angeles networks, States Times,of until also a rogue Maythat 2010, others employee. weredoing.” aware Wi-Fi of of thea networks, roguescooped employee. untilup, data May experts 2010, say. doing.”eral of Trade a rogue Commission, employee. state at- secretly collectedlected, between Google 2007 refused,secretlymistakes the collected report of anstates betweenunauthorized that the 2007 engineer, engi-mistakes whosecretly be- of an unauthorized collected between engi- 2007 manmistakes regulators.“So how of an did unauthorized this happen? 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C M Y K Nxxx,2012-04-29,A,022,Bs-4C,E2

22 Ø N THE NEW YORK TIMES NATIONAL SUNDAY, APRIL 29, 2012 How Apple Sidesteps Billions in Taxes Across the Globe Their kids swim in our pool. Their cous- From Page 1 ins take classes here. They drive past it Over the last two years, the 71 technol- every day, for Pete’s sake. ogy companies in the Standard & Poor’s “But then they do everything they 500-stock index — including Apple, Goo- can to pay as few taxes as possible.” gle, Yahoo and Dell — reported paying worldwide cash taxes at a rate that, on Escaping State Taxes average, was a third less than other S.& P. companies’. (Cash taxes may in- In 2006, as Apple’s bank accounts and clude payments for multiple years.) stock price were rising, company execu- Even among tech companies, Apple’s tives came here to Reno and established rates are low. And while the company a subsidiary named Braeburn Capital to has remade industries, ignited econom- manage and invest the company’s cash. ic growth and delighted customers, it Braeburn is a variety of apple that is si- has also devised corporate strategies multaneously sweet and tart. that take advantage of gaps in the tax Today, Braeburn’s offices are down a code, according to former executives narrow hallway inside a bland building who helped create those strategies. that sits across from an abandoned res- Apple, for instance, was among the taurant. Inside, there are posters of can- first tech companies to designate over- dy-colored iPods and a large Apple in- seas salespeople in high-tax countries signia, as well as a handful of desks and in a manner that allowed them to sell on computer terminals. behalf of low-tax subsidiaries on other When someone in the United States continents, sidestepping income taxes, buys an iPhone, iPad or other Apple according to former executives. Apple product, a portion of the profits from was a pioneer of an accounting tech- that sale is often deposited into ac- nique known as the “Double Irish With counts controlled by Braeburn, and a Dutch Sandwich,” which reduces tax- then invested in stocks, bonds or other es by routing profits through Irish sub- financial instruments, say company ex- sidiaries and the Netherlands and then ecutives. Then, when those investments to the Caribbean. Today, that tactic is turn a profit, some of it is shielded from used by hundreds of other corporations tax authorities in California by virtue of — some of which directly imitated Ap- Braeburn’s Nevada address. ple’s methods, say accountants at those Since founding Braeburn, Apple has companies. DAVID CALVERT FOR THE NEW YORK TIMES earned more than $2.5 billion in interest Without such tactics, Apple’s federal Braeburn Capital, an Apple subsidiary in Reno, Nev., manages and invests the company’s cash. Nevada has a corpo- and dividend income on its cash re- tax bill in the United States most likely rate tax rate of zero, as opposed to the 8.84 percent levied in California, where Apple has its headquarters. serves and investments around the would have been $2.4 billion higher last globe. If Braeburn were located in Cu- year, according to a recent study by a pertino, where Apple’s top executives former Treasury Department econo- work, a portion of the domestic income mist, Martin A. Sullivan. As it stands, proud of all of Apple’s contributions.” company may pay in future years or de- percent of its faculty since 2008. would be taxed at California’s 8.84 per- the company paid cash taxes of $3.3 bil- Apple “pays an enormous amount of cide to defer indefinitely. The $5 billion Now, De Anza faces a budget gap so cent corporate income tax rate. lion around the world on its reported taxes, which help our local, state and figure appears to include taxes ulti- large that it is confronting a “death spi- But in Nevada there is no state corpo- profits of $34.2 billion last year, a tax federal governments,” the statement mately owed by Apple employees. ral,” the school’s president, Brian Mur- rate income tax and no capital gains tax. rate of 9.8 percent. (Apple does not dis- also said. “In the first half of fiscal year The sums paid by Apple and other phy, wrote to the faculty in January. Ap- What’s more, Braeburn allows Apple close what portion of those payments 2012, our U.S. operations have generat- tech corporations is a point of conten- ple, of course, is not responsible for the to lower its taxes in other states — in- was in the United States, or what por- ed almost $5 billion in federal and state tion in the company’s backyard. state’s financial shortfall, which has nu- cluding Florida, New Jersey and New tion is assigned to previous or future income taxes, including income taxes A mile and a half from Apple’s Cuper- merous causes. But the company’s tax Mexico — because many of those ju- years.) withheld on employee stock gains, mak- tino headquarters is De Anza College, a policies are seen by officials like Mr. risdictions use formulas that reduce By comparison, Wal-Mart last year ing us among the top payers of U.S. in- community college that Steve Wozniak, Murphy as symptomatic of why the cri- what is owed when a company’s finan- paid worldwide cash taxes of $5.9 billion come tax.” one of Apple’s founders, attended from sis exists. cial management occurs elsewhere. Ap- on its booked profits of $24.4 billion, a The statement did not specify how it 1969 to 1974. Because of California’s “I just don’t understand it,” he said in ple does not disclose what portion of tax rate of 24 percent, which is about av- arrived at $5 billion, nor did it address state budget crisis, De Anza has cut an interview. “I’ll bet every person at cash taxes is paid to states, but the com- erage for non-tech companies. the issue of deferred taxes, which the more than a thousand courses and 8 Apple has a connection to De Anza. pany reported that it owed $762 million Apple’s domestic tax bill has piqued in state income taxes nationwide last particular curiosity among corporate year. That effective state tax rate is tax experts because although the com- higher than the rate of many other tech pany is based in the United States, its ‘Double Irish With companies, but as Ms. Clausing and oth- profits — on paper, at least — are large- A Dutch Sandwich’ er tax analysts have noted, such figures ly foreign. While Apple contracts out START HERE are often not reliable guides to what is much of the manufacturing and assem- Numerous companies take actually paid. bly of its products to other companies Dozens of other companies, including overseas, the majority of Apple’s execu- advantage of loopholes in U.S. consumer PRODUCT Cisco, Harley-Davidson and Microsoft, have also set up Nevada subsidiaries tives, product designers, marketers, international laws to move profits If the profits from the sale of that bypass taxes in other states. Hun- employees, research and development, a product stay in the United and retail stores are in the United around the world, avoiding taxes. dreds of other corporations reap similar States, they would be subject States. Tax experts say it is therefore savings by locating offices in Delaware. Many of these techniques rely on to a federal tax of 35 percent. reasonable to expect that most of Ap- But some in California are unhappy ple’s profits would be American as well. transferring profits on patent But if money is paid to an that Apple and other California-based The nation’s tax code is based on the royalties to places like Ireland. Here Irish subsidiary as royalties on companies have moved financial opera- patents the company owns, it concept that a company “earns” income is one technique typical of what tions to tax-free states — particularly where value is created, rather than can ultimately be taxed at far since lawmakers have offered them tax where products are sold. Apple and others pioneered. lower rates. breaks to keep them in the state. However, Apple’s accountants have Manufacturing In 1996, 1999 and 2000, for instance, found legal ways to allocate about 70 subsidiary the California Legislature increased the percent of its profits overseas, where state’s research and development tax tax rates are often much lower, ac- At one time, a credit, permitting hundreds of compa- cording to corporate filings. Overseas nies, including Apple, to avoid billions in PRODUCT company consumer state taxes, according to legislative ana- Neither the government nor corpora- would actually tions make tax returns public, and a lysts. Apple has reported tax savings of manufacture company’s taxable income often differs $412 million from research and develop- When the same product is products in from the profits disclosed in annual re- ment credits of all sorts since 1996. sold overseas, money from ports. Companies report their cash out- Ireland. But today, it’s Then, in 2009, after an intense lobby- the sale is sent to a second lays for income taxes in their annual more likely to use ing campaign led by Apple, Cisco, Ora- Irish subsidiary. Form 10-K, but it is impossible from Irish factories in China, cle, Intel and other companies, the Cali- Brazil or India that ship those numbers to determine precisely subsidiary fornia Legislature reduced taxes for how much, in total, corporations pay to directly to consumers. corporations based in California but op- governments. In Apple’s last annual dis- Because of a quirk in Irish erating in other states or nations. Legis- closure, the company listed its world- law, if the Irish subsidiary is lative analysts say the change will even- wide taxes — which includes cash taxes controlled by managers tually cost the state government about paid as well as deferred taxes and other elsewhere, like the Caribbean, $1.5 billion a year. charges — at $8.3 billion, an effective then the profits can skip Such lost revenue is one reason Cali- tax rate of almost a quarter of profits. across the world tax-free. fornia now faces a budget crisis, with a However, tax analysts and scholars shortfall of more than $9.2 billion in the said that figure most likely overstated Second Caribbean or coming fiscal year alone. The state has how much the company would hand to cut some health care programs, signif- Irish other tax haven governments because it included sums subsidiary icantly raised tuition at state universi- that might never be paid. “The informa- The profits can land in ties, cut services to the disabled and tion on 10-Ks is fiction for most compa- an overseas tax haven proposed a $4.8 billion reduction in nies,” said Kimberly Clausing, an econo- where they are stored, spending on kindergarten and other mist at Reed College who specializes in invisible to authorities, grades. multinational taxation. “But for tech for years. Apple declined to comment on its Ne- companies it goes from fiction to farci- vada operations. Privately, some execu- cal.” tives said it was unfair to criticize the Apple, in a statement, said it “has company for reducing its tax bill when conducted all of its business with the thousands of other companies acted highest of ethical standards, complying similarly. If Apple volunteered to pay with applicable laws and accounting more in taxes, it would put itself at a rules.” It added, “We are incredibly Netherlands NO-TAX competitive disadvantage, they argued, COUNTRY and do a disservice to its shareholders. And because of Irish treaties that 0% Additional reporting was contributed by make some inter-European ... and then back to the first Indeed, Apple’s decisions have yield- Keith Bradsher in Hong Kong, Siem transfers tax-free, the company Irish subsidiary, which sends ed benefits. After announcing one of the best quarters in its history last week, Eikelenboom in Amsterdam, Dean Gree- can avoid taxes by routing the the profits to the overseas naway in the British Virgin Islands, the company said it had net profits of profits through the Netherlands … tax haven. Scott Sayare in Luxembourg and Jason $24.7 billion on revenues of $85.5 billion Woodard in Singapore. THE NEW YORK TIMES in the first half of the fiscal year, and

when those investments turn a profit, some of it income tax and no capital gains tax. Google Engineeris shielded Told from Others tax authorities of Data in California Collection, by What’s Full more, Version Braeburn allowsof F.C.C. Apple to Report Reveals virtue of Braeburn’s Nevada address. lower its taxes in other states — including Flor- By DAVID STREITFELD and Web searches of potentially release of the full report, “we can photographing streets and did fic along with sufficient data to Since founding Braeburn, Apple has earned ida, New Jersey and New Mexico — because SAN FRANCISCO — Google’s hundreds of millions of people as now put this matter behind us.” An inquiry suggests a not disclose that it was collecting precisely triangulate their posi- harvesting of e-mails, passwords partmore of his than or her$2.5 unscheduled billion in interestEver since and information dividend aboutin- many of those jurisdictionsInternet use communications formulas that called tion at a given time, along with in- work time, and where privacy the secret data collection first be- payload data, transmitted over formation about what they were and other sensitive personal in- come on its cash reserves and investments around planreduce wasn’t what the is owedwork when a company’s finan- formation from unsuspecting concerns are shrugged off. gan to emerge two years ago, Wi-Fi networks, until May 2010, doing.” households in the United States theThe so-calledglobe. payloadIf Braeburn data was wereGoogle located has portrayed in Cupertino, it as the ofcial a roguemanagement employee. occurs elsewhere.when it was confronted Apple does by Ger- Attending to paperwork did not and around the world was neither secretlywhere collected Apple’s between top executives 2007 mistakes work, of an unauthorized a portion engi- of not disclose what portionman of regulators.cash taxes is paid seem to be a high priority, howev- a mistake nor the work of a rogue and 2010 as part of Street View, a neer operating on his own and Eventually, it was forced to re- er. Managers of the Street View project to photograph street- stressed that the data was never veal that the information it had project told F.C.C. investigators engineer, as the company long the domestic income would be taxed at Califor- says,to states, Street View but engineersthe company had reported that it owed scapes over much of the civilized used in any Google product. collected could include the full that they never read the engi- maintained, but a program that “wide access” to the plan to col- world.nia’s When 8.84 thepercent program corporate was income tax rate. $762 million in state income taxes nationwide supervisors knew about, accord- The report, quoting the engi- lect payload data. Five engineers text of e-mails, sites visited and neer’s proposal, called a design ing to new details from the full being designed,But in theN evada report says, thereneer’s is no original state proposal, corporate gives a testedlast year. the Street That View effective code, a stateother data. tax rate is higher document. A senior manager of text of a regulatory report. it included the following “to do” somewhat different impression. sixth reviewed it line by line, and Even if a user was not working Street View said he “pre- The report, prepared by the item: “Discuss privacy consider- The data, the engineer wrote, a seventh also worked on it, the on a computer at the moment the approved” the document before it Federal Communications Com- ations with Product Counsel.” would “be analyzed offline for use report says. Street View car slowly passed, if was written. mission after a 17-month investi- “That never occurred,” the re- in other initiatives.” Google says Privacy advocates said the full the device was on and the net- More than a dozen countries gation of Google’s Street View port says. this was never done. report put Google in a bad light. work was unencrypted, all sorts began investigations of Street project, was released, heavily re- Google says the data collection The report, which was first “Google’s rogue engineer sce- of information about what the View in 2010. In the United States, dacted, two weeks ago. Although was legal. But when regulators published in its unredacted form nario collapses in light of the fact user had been doing could be the Justice Department, the Fed- it found that Google had not vio- asked to see what had been col- by The Los Angeles Times, also that others were aware of the scooped up, data experts say. eral Trade Commission, state at- lated any laws, the agency said lected, Google refused, the report states that the engineer, who be- project and did not object,” said “So how did this happen? Quite torneys general and the F.C.C. Google had obstructed the inqui- says, saying it might break pri- gan the project as part of his “20 Marc Rotenberg, executive direc- simply, it was a mistake,” a Goo- looked into the matter. ry and fined the company $25,000. vacy and wiretapping laws if it percent” time that Google gives tor of the Electronic Privacy In- gle executive wrote on a compa- The engineer at the center of On Saturday, Google released a shared the material. employees to do work on their formation Center. “This is what ny blog in 2010. “The project lead- the project cited the Fifth Amend- version of the report with only A Google spokeswoman said own initiative, “specifically told happens in the absence of en- ers did not want, and had no in- ment protection against self-in- employees’ names redacted. Saturday that the company had two engineers working on the forcement and the absence of tention of using, payload data.” crimination. Because F.C.C. in- The full version draws a por- much stricter privacy controls project, including a senior man- regulation.” But according to the report, the vestigators could not interview trait of a company where an engi- than it used to, in part because of ager, about collecting payload The Street View program used engineer suggested in his pro- him, they said there were still un- neer can easily embark on a the Street View controversy. She data.” special cars outfitted with cam- posal that it was entirely inten- resolved questions about the project to gather personal e-mails expressed the hope that with the As early as 2007, the report eras. Google first said it was just tional: “We are logging user traf- case. C M Y K Nxxx,2012-04-29,A,023,Bs-BK,E3

THE NEW YORK TIMES NATIONAL SUNDAY, APRIL 29, 2012 ØØN 23 more than $110 billion in the bank, ac- Shrinking Corporate Tax Rates cording to company filings. Corporate profits are far bigger now than ... and corporate tax rates have fallen. A Global Tax Strategy they were in 1977, the year Apple was incorporated ... Every second of every hour, millions of times each day, in living rooms and at Total United States The reported effective cash registers, consumers click the corporate profits corporate tax rate “Buy” button on iTunes or hand over payment for an Apple product. And with that, an international finan- $2.0 trillion $1.8 50% cial engine kicks into gear, moving trillion money across continents in the blink of 40 an eye. While Apple’s Reno office helps 1.5 the company avoid state taxes, its in- ternational subsidiaries — particularly 30 23% the company’s assignment of sales and 1.0 patent royalties to other nations — help Reported Adjusted for 20 reduce taxes owed to the American and inflation corporate other governments. taxes 0.5 For instance, one of Apple’s subsid- 10 iaries in Luxembourg, named iTunes S.à r.l., has just a few dozen employees, according to corporate documents filed in that nation and a current executive. ’77 ’80 ’85 ’90 ’95 ’00 ’05 ’10 ’77 ’80 ’85 ’90 ’95 ’00 ’05 ’10 The only indication of the subsidiary’s presence outside is a letterbox with a CITY OF CUPERTINO, VIA ASSOCIATED PRESS lopsided slip of paper reading “ITUNES Some tax experts say that Apple moves more profits offshore than appears justified by SARL.” its operations, which are largely in the United States. And overseas, technology Luxembourg has just half a million companies pay particularly low taxes. residents. But when customers across Europe, Africa or the Middle East — Apple vs. Apple What American industries pay in taxes abroad and potentially elsewhere — download 2011 domestic foreign Mining 32.0% a song, television show or app, the sale Share of employees is recorded in this small country, ac- Textiles 24.4 72% 28% cording to current and former execu- Food manufacturing 23.4 tives. In 2011, iTunes S.à r.l.’s revenue Retail trade 22.5 Number of retail stores exceeded $1 billion, according to an Ap- Construction 21.5 ple executive, representing roughly 20 68% 32% Printing and related 18.4 percent of iTunes’s worldwide sales. Utilities 17.2 Long-term assets The advantages of Luxembourg are Real estate 16.8 simple, say Apple executives. The coun- 54% 46% Wood products 16.7 try has promised to tax the payments Overall 15.6 collected by Apple and numerous other Sales Apparel 14.6 tech corporations at low rates if they 39% 61% Chemical mfg. 13.1 route transactions through Luxem- Agriculture 12.2 bourg. Taxes that would have otherwise Apple’s allocation of profits Services 11.7 2006 Finance 11.3 gone to the governments of Britain, 30% 70% APPLE, VIA ASSOCIATED PRESS Computer and France, the United States and dozens of 8.7 Last June, Steven P. Jobs, then the chief of Apple, top, introduced plans for a electronic product other nations go to Luxembourg in- manufacturing stead, at discounted rates. new corporate campus, above, to the City Council of Cupertino, Calif. Resi- “We set up in Luxembourg because of dents disagree on whether the company pays its fair share. Sources: Bureau of Economic Analysis; company reports; American Tax Policy Institute THE NEW YORK TIMES the favorable taxes,” said Robert Hatta, who helped oversee Apple’s iTunes re- tail marketing and sales than for European the rate ofternational many other and tech Apple companies, Sales Interna- but withtax breaksEuropean to nations, keep them some ofin Apple’s the state.50 percent.” replied, according to a video of the markets until 2007. “Downloadsas Ms. are Clausing dif- tional and — other and built tax a glass-encasedanalysts have fac- profitsIn could1996, travel1999 virtuallyand 2000, tax-free for instance,If profits the were evenly divided be- meeting. “That’s why we pay taxes. ferent from tractors or steel because tory amid the green fields of Cork. The through the Netherlands — the Dutch tween the United States and foreign Now, if we can get out of paying taxes, there’s nothing you cannoted, touch, such so it figuresIrish are government often not offered reliable Apple guides tax SandwichCalifornia — L whichegislature made themincreased essen- thecountries, state’s Apple’sre- federal tax bill would I’ll be glad to put up Wi-Fi.” doesn’t matter if your computerto what is actually in breaks paid. in exchange for jobs, according tiallysearch invisible and developmentto outside observers tax andcredit,have permitting increased by about $2.4 billion last He suggested that, if the City Council France or England. If you’reDozens buying of otherto former companies, executives including with knowledge Cisco, of taxhundreds authorities. of companies, includingyear, Apple, he said, to because a larger amount were unhappy, perhaps Apple could from Luxembourg, it’s a relationship Harley-Davidsonthe relationship.and Microsoft, have also set avoidRobert billions Promm, in Apple’s state taxes, controller according in of its to profits legis would- have been subject to move. The company is Cupertino’s larg- with Luxembourg.” But the bigger advantage was that the mid-1990s, called the strategy “the the United States’ higher corporate in- est taxpayer, with more than $8 million An Apple spokesmanup declined Nevada to subsidiariesthe arrangement that bypass allowed taxes Apple into othsend- worst-keptlative analysts. secret in Apple Europe.” has reported cometax savings tax rate. in property taxes assessed by local offi- comment on the Luxembourger states. opera- Hundredsroyalties of onother patents corporations developed in reap Cali- ofIt $412 is unclear million precisely from research how Apple’s and development“Apple, like many other multination- cials last year. tions. similar savingsfornia by locating to Ireland. offices The in transfer Delaware. was in- overseascredits offinances all sorts now sincefunction. 1996. In 2006, als, is using perfectly legal methods to Ms. Wang dropped her suggestion. Downloadable goods illustrate how But some internal, California and simply are unhappy moved funds that fromAp- the companyThen, inreorganized 2009, after its Irish an divi-intensekeep lobbying a significant portion of their profits Cupertino, Ms. Wang said in an in- modern tax systems have become in- one part of the company to a subsidiary sions as unlimited corporations, which out of the hands of the I.R.S.,” Mr. Sulli- terview, has real financial problems. creasingly ill equipped forple an and economy other California-basedoverseas. But as a companies result, some profitshave havecampaign few requirements led by Apple, to disclose Cisco, O fi-racle,van Intel said. and “And when America’s most “We’re proud to have Apple here,” said dominated by electronic commerce.moved financial Ap- were operations taxed at the to Irishtax-free rate ofstates approxi- — nancialother companies,information. the California Legislatureprofitable companiesre- pay less, the gen- Ms. Wang, who has since left the Coun- ple, say former executives, has been particularly sincemately lawmakers 12.5 percent, have rather offered than them at the ducedHowever, taxes tax for experts corporations say that strat- based ineral California public has to pay more.” cil. “But how do you get them to feel particularly talented at identifying legal American statutory rate of 35 percent. egies like the Double Irish help explain Other tax experts, like Edward D. more connected?” tax loopholes and hiring accountants In 2004, Ireland, a nation of less than 5 how Apple has managed to keep its in- Kleinbard, former chief of staff of the Other residents argue that Apple who, as much as iPhone designers, are million, was home to more than one- ternational taxes to 3.2 percent of for- Congressional Joint Committee on Tax- does enough as Cupertino’s largest em- known for their innovation. In the 1980s, third of Apple’s worldwide revenues, ac- eign profits last year, to 2.2 percent in ation, have reached similar conclusions. ployer and that tech companies, in gen- for instance, Apple was among the first cording to company filings. (Apple has 2010, and in the single digits for the last “This tax avoidance strategy used by eral, have buoyed California’s economy. major corporations to designate over- not released more recent estimates.) half-decade, according to the company’s Apple and other multinationals doesn’t Apple’s workers eat in local restaurants, seas distributors as “commissionaires,” Moreover, the second Irish subsidiary corporate filings. just minimize the companies’ U.S. tax- serve on local boards and donate to lo- rather than retailers, said Michael — the “Double” — allowed other profits Apple declined to comment on its op- es,” said Mr. Kleinbard, now a professor cal causes. Silicon Valley’s many mil- Rashkin, Apple’s first director of tax to flow to tax-free companies in the Ca- erations in Ireland, the Netherlands and of tax law at the University of Southern lionaires pay personal state income tax- policy, who helped set up the system be- ribbean. Apple has assigned partial California. “It’s German tax and French es. In its statement, Apple said its “in- fore leaving in 1999. the British Virgin Islands. ownership of its Irish subsidiaries to tax and tax in the U.K. and elsewhere.” ternational growth is creating jobs do- To customers the designation was vir- Apple reported in its last annual dis- Baldwin Holdings Unlimited in the Brit- One downside for companies using mestically, since we oversee most of our tually unnoticeable. But because com- closures that $24 billion — or 70 percent ish Virgin Islands, a tax haven, ac- such strategies is that when money is operations from California.” missionaires never technically take pos- — of its total $34.2 billion in pretax prof- cording to documents filed there and in sent overseas, it cannot be returned to “The vast majority of our global work session of inventory — which would re- its were earned abroad, and 30 percent Ireland. Baldwin Holdings has no listed the United States without incurring a force remains in the U.S.,” the statement quire them to recognize taxes — the were earned in the United States. But offices or telephone number, and its Mr. Sullivan, the former Treasury De- new tax bill. continued, “with more than 47,000 full- structure allowed a salesman in high- However, that might change. Apple, time employees in all 50 states.” tax Germany, for example, to sell com- only listed director is Peter Oppenheim- partment economist who today writes er, Apple’s chief financial officer, who for the trade publication Tax Analysts, which holds $74 billion offshore, last Moreover, Apple has given nearby puters on behalf of a subsidiary in low- Stanford University more than $50 mil- lives and works in Cupertino. Baldwin said that “given that all of the market- year aligned itself with more than four tax Singapore. Hence, most of those lion in the last two years. The company apples are known for their hardiness ing and products are designed here, and dozen companies and organizations profits would be taxed at Singaporean, has also donated $50 million to an Afri- while traveling. the patents were created in California, urging Congress for a “repatriation holi- rather than German, rates. can aid organization. In its statement, Finally, because of Ireland’s treaties that number should probably be at least day” that would permit American busi- nesses to bring money home without Apple said: “We have contributed to The Double Irish owing large taxes. The coalition, which many charitable causes but have never includes Google, Microsoft and Pfizer, sought publicity for doing so. Our focus In the late 1980s, Apple was among has hired dozens of lobbyists to push for has been on doing the right thing, not the pioneers in creating a tax structure the measure, which has not yet come up getting credit for it. In 2011, we dramati- — known as the Double Irish — that al- for vote. The tax break would cost the cally expanded the number of deserving lowed the company to move profits into federal government $79 billion over the organizations we support by initiating a tax havens around the world, said Tim next decade, according to a Congres- matching gift program for our employ- Jenkins, who helped set up the system sional report. ees.” as an Apple European finance manager Still, some, including De Anza Col- until 1994. Fallout in California lege’s president, Mr. Murphy, say the Apple created two Irish subsidiaries philanthropy and job creation do not off- — today named Apple Operations In- In one of his last public appearances set Apple’s and other companies’ deci- before his death, Steven P. Jobs, Apple’s sions to circumvent taxes. Within 20 chief executive, addressed Cupertino’s minutes of the financially ailing school Protecting Profits City Council last June, seeking approval are the global headquarters of Google, to build a new headquarters. Facebook, Intel, Hewlett-Packard and The iEconomy Most of the Council was effusive in its Cisco. Articles in this series are examining praise of the proposal. But one council- “When it comes time for all these challenges posed by increasingly global- woman, Kris Wang, had questions. companies — Google and Apple and ized high-tech industries. How will residents benefit? she Facebook and the rest — to pay their ONLINE: A statement from Apple on asked. Perhaps Apple could provide fair share, there’s a knee-jerk resist- its tax practices, its financial free wireless Internet to Cupertino, she ance,” Mr. Murphy said. “They’re philo- documents from various nations and suggested, something Google had done sophically antitax, and it’s decimating in neighboring Mountain View. the state.” previous articles in the series. PETER D SILVA FOR THE NEW YORK TIMES a “See, I’m a simpleton; I’ve always “But I’m not complaining,” he added. nytimes.com/ieconomy Brian Murphy, center, head of De Anza College in Cupertino, Calif., says the had this view that we pay taxes, and the “We can’t afford to upset these guys. big tech firms are “philosophically antitax, and it’s decimating the state.” city should do those things,” Mr. Jobs We need every dollar we can get.”

Lottery Numbers New Jersey Pick 3 — 584 Much Fodder for Obama at White House Journalists’ Event New Jersey Pick 4 — 3787 April 28, 2012 — 3, 10, 27, By PETER BAKER tel ballroom, or “what Mitt Rom- bull is delicious.” (Even Michelle they only offered 30.” New Jersey Cash 5 31, 32 ney would call a little fixer-up- Obama looked askance at that The dinner has long since Midday New York Numbers WASHINGTON — President Connecticut Midday 3 — 241 Obama poked fun at himself, Con- per.” He noted that he and Mr. one.) morphed from a gathering of — 741; Lucky Sum — 12 — 4514 gress, the Secret Service, the me- Romney both have degrees from He took a jab at Congress, journalists and their sources into Midday New York Win 4 — Connecticut Midday 4 dia and particularly his rival Mitt Harvard University, but the Re- thanking lawmakers who “took a a peculiar ritual marrying Wash- 9422; Lucky Sum — 17 publican has two. “What a snob,” break from their exhausting ington, New York and Hollywood April 27, 2012 Romney on Saturday night, New York Numbers — 953; Mr. Obama joked. And he said af- schedule of not passing any laws cultures and celebrities. mocking his Republican oppo- Lucky Sum — 17 New York Take 5 — 4, 10, 19, nent as a fuddy-duddy rich guy ter his own appearance on Jim- to be here tonight.” He teased In addition to the president and 29, 37 my Fallon’s show this week, Mr. Secretary of State Hillary Rod- the usual array of cabinet secre- New York Win 4 — 2341; who travels with his dog in a cage Lucky Sum — 10 Mega Millions — 2, 5, 45, 46, strapped to the roof of the family Romney “asked if he could get ham Clinton, who was photo- taries, senators, House members — 5, 10, 13, 47; mega ball, 37 car. some equal time on ‘The Merv graphed dancing and drinking a and television pundits, boldfaced New York Pick 10 14, 27, 29, 32, 38, 40, 48, 56, 66, Connecticut Daily — 815 Delivering the traditionally Griffin Show.’” beer at a club during a visit to Co- names spotted at this year’s din- 67, 69, 72, 73, 74, 76, 77, 78 Connecticut Play 4 — 8710 comic remarks at the annual Appearing before the official lombia. “She won’t stop drunk- ner included George Clooney, White House Correspondents’ entertainer of the evening, Jim- texting me from Cartagena,” the Lindsay Lohan, Goldie Hawn, Midday New Jersey Pick 3 — Connecticut Cash 5 — 6, 9, 16, Association dinner, the president my Kimmel, Mr. Obama also took president said. Claire Danes, Kim Kardashian, 692 19, 22 seemed to enjoy needling Mr. aim at a couple of other Repub- And of course, he ribbed his Diane Keaton and others. Midday New Jersey Pick 4 — Connecticut Classic Lotto — Romney just days after the gen- lican critics. Noting the presence own security detail after the Just last year, the dinner 8972 10, 13, 16, 19, 25, 40 eral election contest effectively of Newt Gingrich, who plans to prostitution scandal involving the played a cameo role in the raid got underway. The highlight was drop out of the Republican race Secret Service on that same trip that led to the death of Osama bin a spoof Romney ad showing the next week, Mr. Obama called out, to Colombia, declaring that he Laden. When he showed up at the former governor at the door of “Newt there’s still time, man!” had to leave early because “I dinner, Mr. Obama had just given Air Force One with a dog cage on And he took aim at Sarah Palin, have to get the Secret Service the order for the helicopter in- top of the aircraft. mocking her famous line from the home in time for their new cur- cursion into Pakistan to burst Families are off limits, Mr. 2008 convention as well as Re- few.” into a compound where the Al Obama declared. “Dogs, howev- publican criticism of him for eat- Mr. Kimmel also went after the Qaeda leader was suspected of er, are apparently fair game,” he ing dog meat while a boy in Indo- Secret Service during his routine. living. But he smiled and joked said. nesia. “What’s the difference be- “I have a lot of Secret Service his way through the dinner, and a Mr. Obama pointed out that he tween a hockey mom and a pit jokes,” he said. “I told them for ballroom full of journalists had no was speaking in a cavernous ho- bull?” Mr. Obama asked. “A pit $800 I wouldn’t tell them, but clue what was about to happen. but operating in other states or nations. Legisla- nies acted similarly. If Apple volunteered to pay tive analysts say the change will eventually cost more in taxes, it would put itself at a competi- the state government about $1.5 billion a year. tive disadvantage, they argued, and do a disser- Such lost revenue is one reason California vice to its shareholders. now faces a budget crisis, with a shortfall of Indeed, Apple’s decisions have yielded more than $9.2 billion in the coming fiscal year benefits. After announcing one of the best quar- alone. The state has cut some health care pro- ters in its history last week, the company said grams, significantly raised tuition at state uni- it had net profits of $24.7 billion on revenues of versities, cut services to the disabled and pro- $85.5 billion in the first half of the fiscal year, posed a $4.8 billion reduction in spending on and more than $110 billion in the bank, accord- kindergarten and other grades. ing to company filings. C M Y K Nxxx,2012-04-29,A,023,Bs-BK,E3 Apple declined to comment on its Nevada operations. Privately, some executives said it A Global Tax Strategy was unfair to criticize the company for reduc- Every second of every hour, millions of

THE NEW YORK TIMES NATIONAL SUNDAY, APRILing 29, 2012its tax bill when thousands of otherØØ compaN - times each23 day, in living rooms and at cash reg- isters, consumers click the “Buy” button on iTunes or hand over pay- more than $110 billion in the bank, ac- Shrinking Corporate Tax Rates cording to company filings. ment for an Apple product. Corporate profits are far bigger now than ... and corporate tax rates have fallen. And with that, an international A Global Tax Strategy they were in 1977, the year Apple was incorporated ... financial engine kicks into gear, Every second of every hour, millions moving money across continents of times each day, in living rooms and at Total United States The reported effective cash registers, consumers click the corporate profits corporate tax rate in the blink of an eye. While Apple’s “Buy” button on iTunes or hand over payment for an Apple product. Reno office helps the company avoid And with that, an international finan- $2.0 trillion $1.8 50% state taxes, its international subsid- cial engine kicks into gear, moving trillion money across continents in the blink of iaries — particularly the company’s 40 an eye. While Apple’s Reno office helps 1.5 assignment of sales and patent roy- the company avoid state taxes, its in- alties to other nations — help reduce ternational subsidiaries — particularly 30 23% the company’s assignment of sales and 1.0 taxes owed to the American and oth- patent royalties to other nations — help Reported Adjusted for 20 er governments. reduce taxes owed to the American and inflation corporate other governments. taxes For instance, one of Apple’s 0.5 For instance, one of Apple’s subsid- 10 subsidiaries in Luxembourg, named iaries in Luxembourg, named iTunes S.à r.l., has just a few dozen employees, iTunes S.à r.l., has just a few dozen according to corporate documents filed employees, according to corporate in that nation and a current executive. ’77 ’80 ’85 ’90 ’95 ’00 ’05 ’10 ’77 ’80 ’85 ’90 ’95 ’00 ’05 ’10 The only indication of the subsidiary’s documents filed in that nation and presence outside is a letterbox with a CITY OF CUPERTINO, VIA ASSOCIATED PRESS a current executive. The only indi- lopsided slip of paper reading “ITUNES Some tax experts say that Apple moves more profits offshore than appears justified by SARL.” its operations, which are largely in the United States. And overseas, technology cation of the subsidiary’s presence Luxembourg has just half a million companies pay particularly low taxes. outside is a letterbox with a lopsid- residents. But when customers across Europe, Africa or the Middle East — Apple vs. Apple What American industries pay in taxes abroad ed slip of paper reading “ITUNES and potentially elsewhere — download 2011 domestic foreign SARL.” Mining 32.0% a song, television show or app, the sale Share of employees is recorded in this small country, ac- Textiles 24.4 Luxembourg has just half a mil- 72% 28% cording to current and former execu- Food manufacturing 23.4 lion residents. But when customers tives. In 2011, iTunes S.à r.l.’s revenue Retail trade 22.5 Number of retail stores exceeded $1 billion, according to an Ap- Construction 21.5 across Europe, Africa or the Middle ple executive, representing roughly 20 68% 32% Printing and related 18.4 East — and potentially elsewhere — percent of iTunes’s worldwide sales. Utilities 17.2 Long-term assets The advantages of Luxembourg are Real estate 16.8 download a song, television show or simple, say Apple executives. The coun- 54% 46% Wood products 16.7 app, the sale is recorded in this small try has promised to tax the payments Overall 15.6 collected by Apple and numerous other Sales Apparel 14.6 country, according to current and tech corporations at low rates if they 39% 61% Chemical mfg. 13.1 former executives. In 2011, iTunes route transactions through Luxem- Agriculture 12.2 bourg. Taxes that would have otherwise Apple’s allocation of profits Services 11.7 2006 S.à r.l.’s revenue exceeded $1 billion, Finance 11.3 gone to the governments of Britain, 30% 70% according to an Apple executive, APPLE, VIA ASSOCIATED PRESS Computer and France, the United States and dozens of 8.7 Last June, Steven P. Jobs, then the chief of Apple, top, introduced plans for a electronic product representing roughly 20 percent of other nations go to Luxembourg in- manufacturing stead, at discounted rates. new corporate campus, above, to the City Council of Cupertino, Calif. Resi- iTunes’s worldwide sales. “We set up in Luxembourg because of dents disagree on whether the company pays its fair share. Sources: Bureau of Economic Analysis; company reports; American Tax Policy Institute THE NEW YORK TIMES The advantages of Luxembourg the favorable taxes,” said Robert Hatta, who helped oversee Apple’s iTunes re- tail marketing and sales for European ternational and Apple Sales Interna- with European nations, some of Apple’s 50 percent.” replied, according to a video of the markets until 2007. “Downloads are dif- tional — and built a glass-encased fac- profits could travel virtually tax-free If profits were evenly divided be- meeting. “That’s why we pay taxes. ferent from tractors or steel because tory amid the green fields of Cork. The through the Netherlands — the Dutch tween the United States and foreign Now, if we can get out of paying taxes, there’s nothing you can touch, so it Irish government offered Apple tax Sandwich — which made them essen- countries, Apple’s federal tax bill would I’ll be glad to put up Wi-Fi.” doesn’t matter if your computer is in breaks in exchange for jobs, according tially invisible to outside observers and have increased by about $2.4 billion last He suggested that, if the City Council France or England. If you’re buying to former executives with knowledge of tax authorities. year, he said, because a larger amount were unhappy, perhaps Apple could from Luxembourg, it’s a relationship the relationship. Robert Promm, Apple’s controller in of its profits would have been subject to move. The company is Cupertino’s larg- with Luxembourg.” But the bigger advantage was that the mid-1990s, called the strategy “the the United States’ higher corporate in- est taxpayer, with more than $8 million An Apple spokesman declined to the arrangement allowed Apple to send worst-kept secret in Europe.” come tax rate. in property taxes assessed by local offi- comment on the Luxembourg opera- royalties on patents developed in Cali- It is unclear precisely how Apple’s “Apple, like many other multination- cials last year. tions. fornia to Ireland. The transfer was in- overseas finances now function. In 2006, als, is using perfectly legal methods to Ms. Wang dropped her suggestion. Downloadable goods illustrate how ternal, and simply moved funds from the company reorganized its Irish divi- keep a significant portion of their profits Cupertino, Ms. Wang said in an in- modern tax systems have become in- one part of the company to a subsidiary sions as unlimited corporations, which out of the hands of the I.R.S.,” Mr. Sulli- terview, has real financial problems. creasingly ill equipped for an economy overseas. But as a result, some profits have few requirements to disclose fi- van said. “And when America’s most “We’re proud to have Apple here,” said dominated by electronic commerce. Ap- were taxed at the Irish rate of approxi- nancial information. profitable companies pay less, the gen- Ms. Wang, who has since left the Coun- ple, say former executives, has been mately 12.5 percent, rather than at the However, tax experts say that strat- eral public has to pay more.” cil. “But how do you get them to feel particularly talented at identifying legal American statutory rate of 35 percent. egies like the Double Irish help explain Other tax experts, like Edward D. more connected?” tax loopholes and hiring accountants In 2004, Ireland, a nation of less than 5 how Apple has managed to keep its in- Kleinbard, former chief of staff of the Other residents argue that Apple who, as much as iPhone designers, are million, was home to more than one- ternational taxes to 3.2 percent of for- Congressional Joint Committee on Tax- does enough as Cupertino’s largest em- known for their innovation. In the 1980s, third of Apple’s worldwide revenues, ac- eign profits last year, to 2.2 percent in ation, have reached similar conclusions. ployer and that tech companies, in gen- for instance, Apple was among the first cording to company filings. (Apple has 2010, and in the single digits for the last “This tax avoidance strategy used by eral, have buoyed California’s economy. major corporations to designate over- not released more recent estimates.) half-decade, according to the company’s Apple and other multinationals doesn’t Apple’s workers eat in local restaurants, seas distributors as “commissionaires,” Moreover, the second Irish subsidiary corporate filings. just minimize the companies’ U.S. tax- serve on local boards and donate to lo- rather than retailers, said Michael — the “Double” — allowed other profits Apple declined to comment on its op- es,” said Mr. Kleinbard, now a professor cal causes. Silicon Valley’s many mil- Rashkin, Apple’s first director of tax to flow to tax-free companies in the Ca- erations in Ireland, the Netherlands and of tax law at the University of Southern lionaires pay personal state income tax- policy, who helped set up the system be- ribbean. Apple has assigned partial California. “It’s German tax and French es. In its statement, Apple said its “in- fore leaving in 1999. the British Virgin Islands. ownership of its Irish subsidiaries to tax and tax in the U.K. and elsewhere.” ternational growth is creating jobs do- To customers the designation was vir- Apple reported in its last annual dis- Baldwin Holdings Unlimited in the Brit- One downside for companies using mestically, since we oversee most of our tually unnoticeable. But because com- closures that $24 billion — or 70 percent ish Virgin Islands, a tax haven, ac- such strategies is that when money is operations from California.” missionaires never technically take pos- — of its total $34.2 billion in pretax prof- cording to documents filed there and in sent overseas, it cannot be returned to “The vast majority of our global work session of inventory — which would re- its were earned abroad, and 30 percent Ireland. Baldwin Holdings has no listed the United States without incurring a force remains in the U.S.,” the statement quire them to recognize taxes — the were earned in the United States. But offices or telephone number, and its Mr. Sullivan, the former Treasury De- new tax bill. continued, “with more than 47,000 full- structure allowed a salesman in high- However, that might change. Apple, time employees in all 50 states.” tax Germany, for example, to sell com- only listed director is Peter Oppenheim- partment economist who today writes er, Apple’s chief financial officer, who for the trade publication Tax Analysts, which holds $74 billion offshore, last Moreover, Apple has given nearby puters on behalf of a subsidiary in low- Stanford University more than $50 mil- lives and works in Cupertino. Baldwin said that “given that all of the market- year aligned itself with more than four tax Singapore. Hence, most of those lion in the last two years. The company apples are known for their hardiness ing and products are designed here, and dozen companies and organizations profits would be taxed at Singaporean, has also donated $50 million to an Afri- while traveling. the patents were created in California, urging Congress for a “repatriation holi- rather than German, rates. can aid organization. In its statement, Finally, because of Ireland’s treaties that number should probably be at least day” that would permit American busi- nesses to bring money home without Apple said: “We have contributed to The Double Irish owing large taxes. The coalition, which many charitable causes but have never includes Google, Microsoft and Pfizer, sought publicity for doing so. Our focus In the late 1980s, Apple was among has hired dozens of lobbyists to push for has been on doing the right thing, not the pioneers in creating a tax structure the measure, which has not yet come up getting credit for it. In 2011, we dramati- — known as the Double Irish — that al- for vote. The tax break would cost the cally expanded the number of deserving lowed the company to move profits into federal government $79 billion over the organizations we support by initiating a tax havens around the world, said Tim next decade, according to a Congres- matching gift program for our employ- Jenkins, who helped set up the system sional report. ees.” as an Apple European finance manager Still, some, including De Anza Col- until 1994. Fallout in California lege’s president, Mr. Murphy, say the Apple created two Irish subsidiaries philanthropy and job creation do not off- — today named Apple Operations In- In one of his last public appearances set Apple’s and other companies’ deci- before his death, Steven P. Jobs, Apple’s sions to circumvent taxes. Within 20 chief executive, addressed Cupertino’s minutes of the financially ailing school Protecting Profits City Council last June, seeking approval are the global headquarters of Google, to build a new headquarters. Facebook, Intel, Hewlett-Packard and The iEconomy Most of the Council was effusive in its Cisco. Articles in this series are examining praise of the proposal. But one council- “When it comes time for all these challenges posed by increasingly global- woman, Kris Wang, had questions. companies — Google and Apple and ized high-tech industries. How will residents benefit? she Facebook and the rest — to pay their ONLINE: A statement from Apple on asked. Perhaps Apple could provide fair share, there’s a knee-jerk resist- its tax practices, its financial free wireless Internet to Cupertino, she ance,” Mr. Murphy said. “They’re philo- documents from various nations and suggested, something Google had done sophically antitax, and it’s decimating in neighboring Mountain View. the state.” previous articles in the series. PETER D SILVA FOR THE NEW YORK TIMES a “See, I’m a simpleton; I’ve always “But I’m not complaining,” he added. nytimes.com/ieconomy Brian Murphy, center, head of De Anza College in Cupertino, Calif., says the had this view that we pay taxes, and the “We can’t afford to upset these guys. big tech firms are “philosophically antitax, and it’s decimating the state.” city should do those things,” Mr. Jobs We need every dollar we can get.”

Lottery Numbers New Jersey Pick 3 — 584 Much Fodder for Obama at White House Journalists’ Event New Jersey Pick 4 — 3787 April 28, 2012 — 3, 10, 27, By PETER BAKER tel ballroom, or “what Mitt Rom- bull is delicious.” (Even Michelle they only offered 30.” New Jersey Cash 5 31, 32 ney would call a little fixer-up- Obama looked askance at that The dinner has long since Midday New York Numbers WASHINGTON — President Connecticut Midday 3 — 241 Obama poked fun at himself, Con- per.” He noted that he and Mr. one.) morphed from a gathering of — 741; Lucky Sum — 12 Connecticut Midday 4 — 4514 gress, the Secret Service, the me- Romney both have degrees from He took a jab at Congress, journalists and their sources into Midday New York Win 4 — dia and particularly his rival Mitt Harvard University, but the Re- thanking lawmakers who “took a a peculiar ritual marrying Wash- 9422; Lucky Sum — 17 publican has two. “What a snob,” break from their exhausting ington, New York and Hollywood April 27, 2012 Romney on Saturday night, New York Numbers — 953; Mr. Obama joked. And he said af- schedule of not passing any laws cultures and celebrities. mocking his Republican oppo- Lucky Sum — 17 New York Take 5 — 4, 10, 19, nent as a fuddy-duddy rich guy ter his own appearance on Jim- to be here tonight.” He teased In addition to the president and 29, 37 my Fallon’s show this week, Mr. Secretary of State Hillary Rod- the usual array of cabinet secre- New York Win 4 — 2341; who travels with his dog in a cage Lucky Sum — 10 Mega Millions — 2, 5, 45, 46, strapped to the roof of the family Romney “asked if he could get ham Clinton, who was photo- taries, senators, House members — 5, 10, 13, 47; mega ball, 37 car. some equal time on ‘The Merv graphed dancing and drinking a and television pundits, boldfaced New York Pick 10 14, 27, 29, 32, 38, 40, 48, 56, 66, Connecticut Daily — 815 Delivering the traditionally Griffin Show.’” beer at a club during a visit to Co- names spotted at this year’s din- 67, 69, 72, 73, 74, 76, 77, 78 Connecticut Play 4 — 8710 comic remarks at the annual Appearing before the official lombia. “She won’t stop drunk- ner included George Clooney, White House Correspondents’ entertainer of the evening, Jim- texting me from Cartagena,” the Lindsay Lohan, Goldie Hawn, Midday New Jersey Pick 3 — Connecticut Cash 5 — 6, 9, 16, Association dinner, the president my Kimmel, Mr. Obama also took president said. Claire Danes, Kim Kardashian, 692 19, 22 seemed to enjoy needling Mr. aim at a couple of other Repub- And of course, he ribbed his Diane Keaton and others. Midday New Jersey Pick 4 — Connecticut Classic Lotto — Romney just days after the gen- lican critics. Noting the presence own security detail after the Just last year, the dinner 8972 10, 13, 16, 19, 25, 40 eral election contest effectively of Newt Gingrich, who plans to prostitution scandal involving the played a cameo role in the raid got underway. The highlight was drop out of the Republican race Secret Service on that same trip that led to the death of Osama bin a spoof Romney ad showing the next week, Mr. Obama called out, to Colombia, declaring that he Laden. When he showed up at the former governor at the door of “Newt there’s still time, man!” had to leave early because “I dinner, Mr. Obama had just given Air Force One with a dog cage on And he took aim at Sarah Palin, have to get the Secret Service the order for the helicopter in- top of the aircraft. mocking her famous line from the home in time for their new cur- cursion into Pakistan to burst Families are off limits, Mr. 2008 convention as well as Re- few.” into a compound where the Al Obama declared. “Dogs, howev- publican criticism of him for eat- Mr. Kimmel also went after the Qaeda leader was suspected of er, are apparently fair game,” he ing dog meat while a boy in Indo- Secret Service during his routine. living. But he smiled and joked said. nesia. “What’s the difference be- “I have a lot of Secret Service his way through the dinner, and a Mr. Obama pointed out that he tween a hockey mom and a pit jokes,” he said. “I told them for ballroom full of journalists had no was speaking in a cavernous ho- bull?” Mr. Obama asked. “A pit $800 I wouldn’t tell them, but clue what was about to happen. are simple, say Apple executives. The country encased factory amid the green fields of Cork. has promised to tax the payments collected by The Irish government offered Apple tax breaks Apple and numerous other tech corporations in exchange for jobs, according to former execu- at low rates if they route transactions through tives with knowledge of the relationship. Luxembourg. Taxes that would have otherwise But the bigger advantage was that the ar- gone to the governments of Britain, France, the rangement allowed Apple to send royalties on United States and dozens of other nations go to patents developed in California to Ireland. The Luxembourg instead, at discounted rates. transfer was internal, and simply moved funds “We set up in Luxembourg because of the from one part of the company to a subsidiary favorable taxes,” said Robert Hatta, who helped overseas. But as a result, some profits were oversee Apple’s iTunes retail marketing and taxed at the Irish rate of approximately 12.5 per- sales for European markets until 2007. “Down- cent, rather than at the American statutory rate loads are different from tractors or steel because of 35 percent. In 2004, Ireland, a nation of less there’s nothing you can touch, so it doesn’t mat- than 5 million, was home to more than one-third ter if your computer is in France or England. If of Apple’s worldwide revenues, according to you’re buying from Luxembourg, it’s a relation- company filings. (Apple has not released more ship with Luxembourg.” recent estimates.) An Apple spokesman declined to comment Moreover, the second Irish subsidiary — on the Luxembourg operations. the “Double” — allowed other profits to flow Downloadable goods illustrate how mod- to tax-free companies in the Caribbean. Apple ern tax systems have become increasingly ill has assigned partial ownership of its Irish sub- equipped for an economy dominated by elec- sidiaries to Baldwin Holdings Unlimited in the tronic commerce. Apple, say former execu- British Virgin Islands, a tax haven, according tives, has been particularly talented at identify- to documents filed there and in Ireland. Bald- ing legal tax loopholes and hiring accountants win Holdings has no listed offices or telephone who, as much as iPhone designers, are known number, and its only listed director is Peter Op- for their innovation. In the 1980s, for instance, penheimer, Apple’s chief financial officer, who Apple was among the first major corporations lives and works in Cupertino. Baldwin apples to designate overseas distributors as “commis- are known for their hardiness while traveling. sionaires,” rather than retailers, said Michael Finally, because of Ireland’s treaties with Rashkin, Apple’s first director of tax policy, who European nations, some of Apple’s profits could helped set up the system before leaving in 1999. travel virtually tax-free through the Nether- To customers the designation was virtual- lands — the Dutch Sandwich — which made ly unnoticeable. But because commissionaires them essentially invisible to outside observers never technically take possession of inventory and tax authorities. — which would require them to recognize taxes Robert Promm, Apple’s controller in the — the structure allowed a salesman in high-tax mid-1990s, called the strategy “the worst-kept Germany, for example, to sell computers on be- secret in Europe.” half of a subsidiary in low-tax Singapore. Hence, It is unclear precisely how Apple’s overseas most of those profits would be taxed at Singa- finances now function. In 2006, the company porean, rather than German, rates. reorganized its Irish divisions as unlimited cor- porations, which have few requirements to dis- The Double Irish close financial information. In the late 1980s, Apple was among the pio- However, tax experts say that strategies like neers in creating a tax structure — known as the the Double Irish help explain how Apple has man- Double Irish — that allowed the company to move aged to keep its international taxes to 3.2 percent profits into tax havens around the world, said Tim of foreign profits last year, to 2.2 percent in 2010, Jenkins, who helped set up the system as an Ap- and in the single digits for the last half-decade, ple European finance manager until 1994. according to the company’s corporate filings. Apple created two Irish subsidiaries — to- Apple declined to comment on its operations day named Apple Operations International and in Ireland, the Netherlands and the British Vir- Apple Sales International — and built a glass- gin Islands. C M Y K Nxxx,2012-04-29,A,023,Bs-BK,E3

THE NEW YORK TIMES NATIONAL SUNDAY, APRIL 29, 2012 ØØN 23 more than $110 billion in the bank, ac- Shrinking Corporate Tax Rates cording to company filings. Corporate profits are far bigger now than ... and corporate tax rates have fallen. A Global Tax Strategy they were in 1977, the year Apple was incorporated ... Every second of every hour, millions of times each day, in living rooms and at Total United States The reported effective cash registers, consumers click the corporate profits corporate tax rate “Buy” button on iTunes or hand over payment for an Apple product. And with that, an international finan- $2.0 trillion $1.8 50% cial engine kicks into gear, moving trillion money across continents in the blink of 40 an eye. While Apple’s Reno office helps 1.5 the company avoid state taxes, its in- ternational subsidiaries — particularly 30 23% the company’s assignment of sales and 1.0 patent royalties to other nations — help Reported Adjusted for 20 reduce taxes owed to the American and inflation corporate other governments. taxes 0.5 For instance, one of Apple’s subsid- 10 iaries in Luxembourg, named iTunes S.à r.l., has just a few dozen employees, according to corporate documents filed in that nation and a current executive. ’77 ’80 ’85 ’90 ’95 ’00 ’05 ’10 ’77 ’80 ’85 ’90 ’95 ’00 ’05 ’10 The only indication of the subsidiary’s presence outside is a letterbox with a CITY OF CUPERTINO, VIA ASSOCIATED PRESS lopsided slip of paper reading “ITUNES Some tax experts say that Apple moves more profits offshore than appears justified by SARL.” its operations, which are largely in the United States. And overseas, technology Luxembourg has just half a million companies pay particularly low taxes. residents. But when customers across Europe, Africa or the Middle East — Apple vs. Apple What American industries pay in taxes abroad and potentially elsewhere — download 2011 domestic foreign Mining 32.0% a song, television show or app, the sale Share of employees is recorded in this small country, ac- Textiles 24.4 72% 28% cording to current and former execu- Food manufacturing 23.4 tives. In 2011, iTunes S.à r.l.’s revenue Retail trade 22.5 Number of retail stores exceeded $1 billion, according to an Ap- Construction 21.5 ple executive, representing roughly 20 68% 32% Printing and related 18.4 percent of iTunes’s worldwide sales. Utilities 17.2 Long-term assets The advantages of Luxembourg are Real estate 16.8 simple, say Apple executives. The coun- 54% 46% Wood products 16.7 try has promised to tax the payments Overall 15.6 collected by Apple and numerous other Sales Apparel 14.6 tech corporations at low rates if they 39% 61% Chemical mfg. 13.1 route transactions through Luxem- Agriculture 12.2 bourg. Taxes that would have otherwise Apple’s allocation of profits Services 11.7 2006 Finance 11.3 gone to the governments of Britain, 30% 70% APPLE, VIA ASSOCIATED PRESS Computer and France, the United States and dozens of 8.7 Last June, Steven P. Jobs, then the chief of Apple, top, introduced plans for a electronic product other nations go to Luxembourg in- manufacturing stead, at discounted rates. new corporate campus, above, to the City Council of Cupertino, Calif. Resi- “We set up in Luxembourg because of dents disagree on whether the company pays its fair share. Sources: Bureau of Economic Analysis; company reports; American Tax Policy Institute THE NEW YORK TIMES the favorable taxes,” said Robert Hatta, who helped oversee Apple’s iTunes re- tail marketing and sales for European ternational and Apple Sales Interna- with European nations, some of Apple’s 50 percent.” replied, according to a video of the markets until 2007. “Downloads are dif- tional — and built a glass-encased fac- profits could travel virtually tax-free If profits were evenly divided be- meeting. “That’s why we pay taxes. ferent from tractors or steel because tory amid the green fields of Cork. The through the Netherlands — the Dutch tween the United States and foreign Now, if we can get out of paying taxes, there’s nothing you can touch, so it Irish government offered Apple tax Sandwich — which made them essen- countries, Apple’s federal tax bill would I’ll be glad to put up Wi-Fi.” doesn’t matter if your computer is in breaks in exchange for jobs, according tially invisible to outside observers and have increased by about $2.4 billion last He suggested that, if the City Council France or England. If you’re buying to former executives with knowledge of tax authorities. year, he said, because a larger amount were unhappy, perhaps Apple could from Luxembourg, it’s a relationship the relationship. Robert Promm, Apple’s controller in of its profits would have been subject to move. The company is Cupertino’s larg- with Luxembourg.” But the bigger advantage was that the mid-1990s, called the strategy “the the United States’ higher corporate in- est taxpayer, with more than $8 million An Apple spokesman declined to the arrangement allowed Apple to send worst-kept secret in Europe.” come tax rate. in property taxes assessed by local offi- comment on the Luxembourg opera- royalties on patents developed in Cali- It is unclear precisely how Apple’s “Apple, like many other multination- cials last year. tions. fornia to Ireland. The transfer was in- overseas finances now function. In 2006, als, is using perfectly legal methods to Ms. Wang dropped her suggestion. Downloadable goods illustrate how ternal, and simply moved funds from the company reorganized its Irish divi- keep a significant portion of their profits Cupertino, Ms. Wang said in an in- modern tax systems have become in- one part of the company to a subsidiary sions as unlimited corporations, which out of the hands of the I.R.S.,” Mr. Sulli- terview, has real financial problems. creasingly ill equipped for an economy overseas. But as a result, some profits have few requirements to disclose fi- van said. “And when America’s most “We’re proud to have Apple here,” said dominated by electronic commerce. Ap- were taxed at the Irish rate of approxi- nancial information. profitable companies pay less, the gen- Ms. Wang, who has since left the Coun- ple, say former executives, has been mately 12.5 percent, rather than at the However, tax experts say that strat- eral public has to pay more.” cil. “But how do you get them to feel particularly talented at identifying legal American statutory rate of 35 percent. egies like the Double Irish help explain Other tax experts, like Edward D. more connected?” tax loopholes and hiring accountants In 2004, Ireland, a nation of less than 5 how Apple has managed to keep its in- Kleinbard, former chief of staff of the Other residents argue that Apple who, as much as iPhone designers, are million, was home to more than one- ternational taxes to 3.2 percent of for- Congressional Joint Committee on Tax- does enough as Cupertino’s largest em- known for their innovation. In the 1980s, third of Apple’s worldwide revenues, ac- eign profits last year, to 2.2 percent in ation, have reached similar conclusions. ployer and that tech companies, in gen- for instance, Apple was among the first cording to company filings. (Apple has 2010, and in the single digits for the last “This tax avoidance strategy used by eral, have buoyed California’s economy. major corporations to designate over- not released more recent estimates.) half-decade, according to the company’s Apple and other multinationals doesn’t Apple’s workers eat in local restaurants, seas distributors as “commissionaires,” Moreover, the second Irish subsidiary corporate filings. just minimize the companies’ U.S. tax- serve on local boards and donate to lo- rather than retailers, said Michael — the “Double” — allowed other profits Apple declined to comment on its op- es,” said Mr. Kleinbard, now a professor cal causes. Silicon Valley’s many mil- Rashkin, Apple’s first director of tax to flow to tax-free companies in the Ca- erations in Ireland, the Netherlands and of tax law at the University of Southern lionaires pay personal state income tax- policy, who helped set up the system be- ribbean. Apple has assigned partial California. “It’s German tax and French es. In its statement, Apple said its “in- fore leaving in 1999. the British Virgin Islands. ownership of its Irish subsidiaries to tax and tax in the U.K. and elsewhere.” ternational growth is creating jobs do- To customers the designation was vir- Apple reported in its last annual dis- Baldwin Holdings Unlimited in the Brit- One downside for companies using mestically, since we oversee most of our tually unnoticeable. But because com- closures that $24 billion — or 70 percent ish Virgin Islands, a tax haven, ac- such strategies is that when money is operations from California.” missionaires never technically take pos- — of its total $34.2 billion in pretax prof- cording to documents filed there and in sent overseas, it cannot be returned to “The vast majority of our global work session of inventory — which would re- its were earned abroad, and 30 percent Ireland. Baldwin Holdings has no listed the United States without incurring a force remains in the U.S.,” the statement quire them to recognize taxes — the were earned in the United States. But offices or telephone number, and its Mr. Sullivan, the former Treasury De- new tax bill. continued, “with more than 47,000 full- structure allowed a salesman in high- However, that might change. Apple, time employees in all 50 states.” tax Germany, for example, to sell com- only listed director is Peter Oppenheim- partment economist who today writes er, Apple’s chief financial officer, who for the trade publication Tax Analysts, which holds $74 billion offshore, last Moreover, Apple has given nearby puters on behalf of a subsidiary in low- Stanford University more than $50 mil- lives and works in Cupertino. Baldwin said that “given that all of the market- year aligned itself with more than four tax Singapore. Hence, most of those lion in the last two years. The company apples are known for their hardiness ing and products are designed here, and dozen companies and organizations profits would be taxed at Singaporean, has also donated $50 million to an Afri- while traveling. the patents were created in California, urging Congress for a “repatriation holi- rather than German, rates. can aid organization. In its statement, Finally, because of Ireland’s treaties that number should probably be at least day” that would permit American busi- nesses to bring money home without Apple said: “We have contributed to The Double Irish owing large taxes. The coalition, which many charitable causes but have never includes Google, Microsoft and Pfizer, sought publicity for doing so. Our focus In the late 1980s, Apple was among has hired dozens of lobbyists to push for has been on doing the right thing, not the pioneers in creating a tax structure the measure, which has not yet come up getting credit for it. In 2011, we dramati- — known as the Double Irish — that al- for vote. The tax break would cost the cally expanded the number of deserving lowed the company to move profits into federal government $79 billion over the organizations we support by initiating a tax havens around the world, said Tim next decade, according to a Congres- matching gift program for our employ- Jenkins, who helped set up the system sional report. ees.” as an Apple European finance manager Still, some, including De Anza Col- until 1994. Fallout in California lege’s president, Mr. Murphy, say the Apple created two Irish subsidiaries philanthropy and job creation do not off- — today named Apple Operations In- In one of his last public appearances set Apple’s and other companies’ deci- before his death, Steven P. Jobs, Apple’s sions to circumvent taxes. Within 20 chief executive, addressed Cupertino’s minutes of the financially ailing school Protecting Profits City Council last June, seeking approval are the global headquarters of Google, to build a new headquarters. Facebook, Intel, Hewlett-Packard and The iEconomy Most of the Council was effusive in its Cisco. Articles in this series are examining praise of the proposal. But one council- “When it comes time for all these challenges posed by increasingly global- woman, Kris Wang, had questions. companies — Google and Apple and ized high-tech industries. How will residents benefit? she Facebook and the rest — to pay their ONLINE: A statement from Apple on asked. Perhaps Apple could provide fair share, there’s a knee-jerk resist- its tax practices, its financial free wireless Internet to Cupertino, she ance,” Mr. Murphy said. “They’re philo- documents from various nations and suggested, something Google had done sophically antitax, and it’s decimating in neighboring Mountain View. the state.” previous articles in the series. PETER D SILVA FOR THE NEW YORK TIMES a “See, I’m a simpleton; I’ve always “But I’m not complaining,” he added. nytimes.com/ieconomy Brian Murphy, center, head of De Anza College in Cupertino, Calif., says the had this view that we pay taxes, and the “We can’t afford to upset these guys. big tech firms are “philosophically antitax, and it’s decimating the state.” city should do those things,” Mr. Jobs We need every dollar we can get.”

Apple reported in its last annual disclo- now a professor of tax law at the University of sures that $24 billion — or 70 percent — of its Southern California. “It’s German tax and French Much Foddertotal $34.2for billion Obama in pretax profitsat White were earned House tax and tax Journalists’ in the U.K. and elsewhere.” Event Lottery Numbers New Jersey Pick 3 — 584 abroad, and 30 percent were earned in the Unit- One downside for companies using such New Jersey Pick 4 — 3787 April 28, 2012 — 3, 10, 27, By PETER BAKER tel ballroom, or “what Mitt Rom- bull is delicious.” (Even Michelle they only offered 30.” New Jersey Cash 5 ed States. But Mr. Sullivan, the former Treasury strategies is that when money is sent overseas, it 31, 32 ney would call a little fixer-up- Obama looked askance at that The dinner has long since Midday New York Numbers WASHINGTON — PresidentDepartment economist who today writes for the cannot be returned to the United States without Connecticut Midday 3 — 241 Obama poked fun at himself, Con- per.” He noted that he and Mr. one.) morphed from a gathering of — 741; Lucky Sum — 12 trade publicationRomney both Tax have Analysts, degrees saidfrom thatHe “given took a jabincurring at Congress, a new taxjournalists bill. and their sources into Connecticut Midday 4 — 4514 gress, the Secret Service, thethat me- all of the marketing and products are de- Midday New York Win 4 — dia and particularly his rival Mitt Harvard University, but the Re- thanking lawmakers However,who “took athata peculiarmight ritualchange. marrying Apple, Wash- which 9422; Lucky Sum — 17 publican has two. “What a snob,” break from their exhausting ington, New York and Hollywood April 27, 2012 Romney on Saturday signed night, here, and the patents were created in holds $74 billion offshore, last year aligned itself New York Numbers — 953; Mr. Obama joked. And he said af- schedule of not passing any laws cultures and celebrities. mocking his Republican California, oppo- that number should probably be at with more than four dozen companies and or- Lucky Sum — 17 New York Take 5 — 4, 10, 19, nent as a fuddy-duddy rich guy ter his own appearance on Jim- to be here tonight.” He teased In addition to the president and 29, 37 least 50 percent.”my Fallon’s show this week, Mr. Secretary of Stateganizations Hillary Rod- urgingthe Congress usual array for of cabineta “repatriation secre- New York Win 4 — 2341; who travels with his dog in a cage Lucky Sum — 10 Mega Millions — 2, 5, 45, 46, strapped to the roof of the familyIf profitsRomney were “asked evenly if he divided could get betweenham Clinton, the whoholiday” was that photo- wouldtaries, permit senators, American House membersbusinesses — 5, 10, 13, 47; mega ball, 37 car. United Statessome equal and time foreign on ‘The countries, Merv graphed Apple’s dancing to andbring drinking money a homeand television without pundits, owing largeboldfaced taxes. New York Pick 10 14, 27, 29, 32, 38, 40, 48, 56, 66, Connecticut Daily — 815 Delivering the traditionallyfederal taxGriffin bill Show.’” would have increased beerby aboutat a club duringThe acoalition, visit to Co- whichnames includes spotted atGoogle, this year’s Microsoft din- Appearing before the official lombia. “She won’t stop drunk- 67, 69, 72, 73, 74, 76, 77, 78 Connecticut Play 4 — 8710 comic remarks at the $2.4 annual billion last year, he said, because a larger and Pfizer, has hiredner dozens included of George lobbyists Clooney, to push White House Correspondents’ entertainer of the evening, Jim- texting me from Cartagena,” the Lindsay Lohan, Goldie Hawn, Midday New Jersey Pick 3 — Connecticut Cash 5 — 6, 9, 16, Association dinner, the presidentamount ofmy its Kimmel, profits Mr. would Obama have also tookbeen subjectpresident to said. for the measure, Clairewhich Danes, has not Kim yet Kardashian, come up for 692 19, 22 seemed to enjoy needlingthe Mr.Unitedaim States’ at a couple higher of other corporate Repub- incomeAnd oftax course, vote. he The ribbed tax his breakDiane would Keaton cost and others.the federal gov- Midday New Jersey Pick 4 — Connecticut Classic Lotto — Romney just days after therate. gen- lican critics. Noting the presence own security ernment detail after $79 the billionJust over lastthe next year, decade, the dinner accord- 8972 10, 13, 16, 19, 25, 40 of Newt Gingrich, who plans to prostitution scandal involving the eral election contest effectively“Apple, like many other multinationals, is us- played a cameo role in the raid got underway. The highlight was drop out of the Republican race Secret Service oning that to asame Congressional trip that led report. to the death of Osama bin a spoof Romney ad showinging theperfectlynext week, legal Mr. methods Obama calledto keep out, a significantto Colombia, declaring that he Laden. When he showed up at the former governor at the doorportion of of“Newt their there’s profits still time,out ofman!” the handshad of to the leave earlyFallout because in California “I dinner, Mr. Obama had just given Air Force One with a dog cageI.R.S.,” on Mr.And Sullivan he took aimsaid. at “AndSarah Palin,when America’shave to get the SecretIn one Service of his thelast order public for appearances the helicopter before in- top of the aircraft. mocking her famous line from the home in time for their new cur- cursion into Pakistan to burst Families are off limits,most Mr. profitable2008 convention companies as well pay as less, Re- thefew.” general his death, Steven intoP. Jobs, a compound Apple’s chief where executive, the Al Obama declared. “Dogs, howev-public haspublican to pay criticism more.” of him for eat- Mr. Kimmel alsoaddressed went after Cupertino’s the Qaeda leaderCity Council was suspected last June, of er, are apparently fair game,” heOthering tax dog experts, meat while like a boyEdward in Indo- D. Kleinbard,Secret Service duringseeking his routine.approvalliving. to build But a henew smiled headquarters. and joked said. former chiefnesia. of“What’s staff theof thedifference Congressional be- “I have Joint a lot of SecretMost Service of the Councilhis way throughwas effusive the dinner, in its and praise a Mr. Obama pointed out that he tween a hockey mom and a pit jokes,” he said. “I told them for ballroom full of journalists had no was speaking in a cavernousCommittee ho- bull?” on Mr. Taxation, Obama asked.have “Areached pit $800 similar I wouldn’t of tellthe them, proposal. but clueBut what one was councilwoman, about to happen. Kris conclusions. Wang, had questions. “This tax avoidance strategy used by Apple How will residents benefit? she asked. Per- and other multinationals doesn’t just minimize haps Apple could provide free wireless Internet the companies’ U.S. taxes,” said Mr. Kleinbard, to Cupertino, she suggested, something Google had done in neighboring Mountain View. ating jobs domestically, since we oversee most of “See, I’m a simpleton; I’ve always had this our operations from California.” view that we pay taxes, and the city should do “The vast majority of our global work force those things,” Mr. Jobs replied, according to a remains in the U.S.,” the statement continued, video of the meeting. “That’s why we pay taxes. “with more than 47,000 full-time employees in all Now, if we can get out of paying taxes, I’ll be glad 50 states.” to put up Wi-Fi.” Moreover, Apple has given nearby Stanford He suggested that, if the City Council were University more than $50 million in the last two unhappy, perhaps Apple could move. The com- years. The company has also donated $50 million pany is Cupertino’s largest taxpayer, with more to an African aid organization. In its statement, than $8 million in property taxes assessed by lo- Apple said: “We have contributed to many chari- cal officials last year. table causes but have never sought publicity for Ms. Wang dropped her suggestion. doing so. Our focus has been on doing the right Cupertino, Ms. Wang said in an interview, thing, not getting credit for it. In 2011, we dramat- has real financial problems. “We’re proud to ically expanded the number of deserving organi- have Apple here,” said Ms. Wang, who has since zations we support by initiating a matching gift left the Council. “But how do you get them to feel program for our employees.” more connected?” Still, some, including De Anza College’s pres- Other residents argue that Apple does ident, Mr. Murphy, say the philanthropy and job enough as Cupertino’s largest employer and that creation do not offset Apple’s and other compa- tech companies, in general, have buoyed Cali- nies’ decisions to circumvent taxes. Within 20 fornia’s economy. Apple’s workers eat in local minutes of the financially ailing school are the restaurants, serve on local boards and donate to global headquarters of Google, Facebook, Intel, local causes. Silicon Valley’s many millionaires Hewlett-Packard and Cisco. pay personal state income taxes. In its state- “When it comes time for all these companies ment, Apple said its “international growth is cre- — Google and Apple and Facebook and the rest — to pay their fair share, there’s a knee-jerk re- Additional reporting was contributed by Keith sistance,” Mr. Murphy said. “They’re philosophi- Bradsher in Hong Kong, Siem Eikelenboom in cally antitax, and it’s decimating the state.” Amsterdam, Dean Greenaway in the British “But I’m not complaining,” he added. “We Virgin Islands, Scott Sayare in Luxembourg can’t afford to upset these guys. We need every and Jason Woodard in Singapore. dollar we can get.” n