Several commentators believe that Apple Inc. (Apple) exemplifies how multinational technology companies have exploited tax codes that were written for an industrial age and are unsuitable for the modern worlds digital economy (Duhigg and Kocieniewski 2012). Some earnings at corporations like Apple are not created from tangible products, but rather from intellectual property, such as the patents on the software that makes electronic equipment operate. In other cases, the merchandise items themselves are digital, such as downloadable music. It takes far less effort for companies with revenue earned primarily from royalties and digital merchandise to transfer earnings to tax haven nations than for companies in other industries, such as retail or automotive. Downloadable software or apps can be sold from any location in the world (Duhigg and Kocieniewski 2013). The increase in digital business creates a problem for legislators worldwide in the regulation of the taxation of multinational corporations; despite the fact that technology is now one of the most important industries, numerous technology corporations are among the least taxed. Even in comparison to other technology firms, Apples tax rates are relatively low. And even though Apple has helped to recreate industrial sectors, sparked business expansion, and has satisfied consumers, it has also designed corporate policies that exploit weaknesses in the tax regulations. Many major companies try to lower taxes. For Apple, the potential tax savings are particularly attractive, as its earnings are so high. Apple has set up corporations in lower tax countries, such as Ireland and the British Virgin Islands, which has helped to reduce its worldwide taxes. These practices are drawing increasing scrutiny from members of the U.S. Senate, foreign governments, and supranational organizations, such as the Organisation for Economic Co-operation and Development Although Apple is headquartered in the United States, the majority of its profits are reported to be from overseas operations. While Apple uses foreign manufacturing companies to make many of its products, most of the companys officers, product engineers, marketing, R&D, and stores are located in the United States. A New York Times article reported that even though 54 percent of Apples long-term assets, 69 percent of its retail stores, and 39 percent of its sales are in the United States, Apples accountants have found legal ways to allocate about 70 percent of its profits overseas, where tax rates are often much lower (Duhigg and Kocieniewski 2012). The basic infrastructure of U.S. international tax policy was established in 1962. The transfer-pricing rules, which allow Apple to earn royalties in low-tax jurisdictions, were reviewed and revised in 1986 (Sapirie 2012). By exploiting weak U.S. transfer-pricing rules, Apple decreases its federal taxes by billions of dollars. The following two sections examine several of the 1. Summarize the global situation and the ethical dilemma of Apple in term of tax? 2. As a consultant to Apple Inc. what alternatives does the company have going forward regarding their tax strategies? 3. What would you recommend to the executive team. 4. What do you recommend the company do about their tax strategies going forward?