Apple use GAAP as a standard to calculates its effective tax rate using information in its publicly available annual reports. However, the focus were to turn the Apple’s federal tax returns and the taxes Apple actually paid to the U.S. treasury each year to fall substantially. According to Apple, the company actually paid only 30 percent of current federal tax provision in 2011 federal taxes which is around $2.5 billion, resulting $4.4 billion less than the total tax provision included in the company’s 2011 annual statement. Legitimate reasons may exist for differences between a corporation’s financial statements and its tax returns. In all three years, Apple reported much higher provisions for tax on its annual report than it did on its federal tax return for the same year. Moreover, the differences widened substantially over the three-year period, expanding from a 2009 difference of $1.4 billion to a 2011 difference of $4.4 billion. Tax payments of $1.6 billion, $1.2 billion, or even $2.5 billion produce effective tax rates well below the statutory tax rate.
As a subsidiary of Apple, ASI indeed have reported their annual tax return income tax in Ireland. However, the amount of income tax paid is comparable to the amount of income they earn. For, example in 2010, ASI only pay income tax of about 7 million USD
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Under the contract, ASI obtain the rights to produce and market of the Apple products in Europe and Asia. However, because they have ownership of separated intangible assets, ASI does not have to pay royalties to Apple. Although the right to manufacture and market in Apple’s subsidiary in Ireland significantly “separate” from the fact that the whole of R&D performed in the America, legal ownership of intellectual property rights remain at Apple Inc. located in the