Apple Inc. and Alphabet Inc pay taxes at rates much below the S&P Average, according to a latest survey by personal finance website, WalletHub.
Data from the Organization for Economic Cooperation and Development shows that at 39%, the U.S. has the highest corporate tax rate among the 20 most developed economies.
Yet, the average rate of taxation imposed on the 100 biggest S&P corporations was 28.4% in 2014. Apple and Alphabet paid even lower rates – about 25% less – by stashing away their profits on foreign shores, the survey showed.
“One method that multi-national corporations are using to pay lower international taxes is offshore transfer payments,” Jill Gonzalez, an analyst at WalletHub, said.
“This is done by creating foreign subsidiaries to make raw materials or parts in countries with low tax rates. The corporations’ U.S. operations then buy these parts from the overseas units above cost. Thus, the foreign unit makes a large profit, which avoids the U.S. tax rate.”
Apple among Worst Offenders
Earlier in the week, a similar study by the Citizens for Tax Justice also found instances of big U.S. multinationals evading taxes.
Large U.S. corporations are avoiding paying about $620 billion in U.S. taxes by squirreling away almost $2.1 trillion in profits to foreign countries. The Cayman Islands and Bermuda were the most preferred tax-havens.
The report released Tuesday said Apple Inc. was among the “worst offenders.” The tech giant reportedly booked close to $181 billion in offshore income. That allowed the iPhone maker to evade around $59 billion in U.S. taxes.
Apple Inc. has long been accused of using its overseas units to avoid billions of dollars in federal taxes. In 2013, CEO Tim Cook told a Senate hearing that the tech firm pays all the taxes it owes to the country. He further added that bringing its overseas profits back to the U.S. would be a “very expensive” proposition.
Rising Political Heat
Both these reports come at a time when there is a growing movement in Congress to give large multinationals a one-time tax break on overseas profits. New York Democrat Chuck Schumer is taking the lead to repatriate such profits. The resulting windfall, he said, would be used to finance a sweeping infrastructure project.
Corporate tax evasion is also featuring in the presidential race. Donald Trump has called for a one-time repatriation of offshore profits.
“Everybody agrees it should come back,” he said. “The reason companies aren’t bringing it back is the tax is onerous.” Trump suggested a “one-off 10 percent tax” on profits held abroad to bring them back.
Shares of Apple Inc. closed Wednesday at $113.76. Alphabet Inc ended yesterday’s trading at $642.61.