Finally! I love Apple but taxes should be paid. There is a difference between legal and ethical and US companies should begin to understand that. So hopefully others will follow suit.
The difference between legal and ethical is irrelevant in this case. Both Apple and Ireland had an agreement regarding Apple's taxes which was deemed illegal by the EU.
Apple and Ireland can count themselves lucky not to be additionally fined, since the likelihood that Apple's or Ireland's lawyers were unaware of the existing EU state aid laws are very slim.
I used to think this -- but then I heard the argument that if Apple was to behave "ethically" and pay the taxes that technically the law requires that they dont, then the shareholders can sue the company for not acting in their best interest.
Even if the above isn't true (not a lawyer) we cannot rely on ethics alone, it will have to be enforced by law, otherwise nobody will do it
> if Apple was to behave "ethically" and pay the taxes that technically the law requires that they dont, then the shareholders can sue the company
Well yes, but you know there's a shade of gray between engaging in complex, aggressive tax planning schemes and handing out unsolicited donations to the IRS.
A company's board is perfectly within its mandate to say it pays tax for its profits where it is incorporated, when the profits are made (and not delaying foreign profits in a tax havens). Because this is the very normal thing that almost all normal corporations do. The board is just as well within its mandate to say they do it for PR reasons to demonstrate corporate social responsibility.
For example, Nokia during its heyday happily paid a fair share of its taxes in Finland, eventhough they definitely had access and capability for all the tax dodging schemes in the world.
If Nokia had instead gone to the lengths Apple does to cut taxes and invested that money back in the company they might still be thriving as an independent entity today...ultimately generating far more benefit for the Finnish economy over the long run than being a shrinking Microsoft division.
I admit to the irony, but sadly they could have never saved enough profits to turn around the company. They could have at best delayed the inevitable further down the road..
There's another way to twist that: cheating the people out of their government's revenue is a fine way to build up negative goodwill. That has a longer term cost.
There was a recent incident in France in which people protested outside an Apple store for them to "pay their taxes."
Apple wasn't explicitly breaking the law, however customers are entitled to vote with their wallets, and showing their vote will likely have some effect on the company.
I'm not saying that one protest will have a massive impact on Apple's bottom line; just that:
1. protesting is a sign that the tax issue is an area customers care about, and those out protesting are likely a very small minority of those who feel that way.
2. the act of companies' feigned goodwill for a net profit could extend to any area customers care about, including legal vs ethical tax practices.
this is not exactly true, no[0]. The law's intent is to give shareholders a means of legal action if the leadership at a company destroys shareholder value for their own gain.
That's a great argument in theory, but that isn't the way those laws work. The thought experiment is trotted out frequently to justify any type of corporate race to the bottom.
It isn't anything more than a misleading misreading of corporate law.
This supposed legal responsibility to be cut-throat capitalists is somewhat mythical. You can't just give money away without justification. But management has extremely wide discretion in their decision-making. Almost all companies donate to non-profits, for example. Yes, you can argue that it is good for PR. But that argument also works for anything else that someone, somewhere, would consider "ethical behaviour".
Specifically for this case: there is no obligation to establish a super-complicated tax structure to lower your tax rate to 0.5%. Otherwise, 498 of the Fortune 500 would run afoul of it.
We probably can't rely on ethics, or, to use the term I prefer, "integrity" (doing the right thing even when nobody is looking). But that doesn't mean that we cannot fault companies for behaving unethically. If we expect people not to always exploit each others weaknesses in the pursuit of money, why not expect the same from companies? Corporations are people, after all.
> but then I heard the argument that if Apple was to behave "ethically" and pay the taxes that technically the law requires that they dont, then the shareholders can sue the company for not acting in their best interest.
I've never considered central banks printing money to acquire majority interests in public companies in order to compel them to pay their taxes while preventing shareholder actions against them for doing so until this comment.
If Apple wanted to prioritize benefits to its home country (America) by avoiding use of ex-U.S. tax minimization schemes, it need only ask its owners (shareholders) for permission to do that.
I think Apple has enough market power to put shareholder return and tax benefits to its nation of origin at similar priorities. It would be interesting to see what Apple's shareholders would say, if asked.
That’s not really true, if it ever was. These days, officers and directors are quite insulated from law suits like that. The decision to pay more than you have to has to reach a level of just lighting money on fire, not taking less conservative tax positions.
Activist shareholders are the bigger source of risk.
> then the shareholders can sue the company for not acting in their best interest.
Sure, this COULD happen, but it is so rare to happen that it is incredibly unlikely. And has there even been a case of shareholders suing for a company not evading taxes enough? I doubt it, since all companies DO NOT do this.
We cannot rely on corporate ethics, that much is obvious.
But we can still make damn sure we expect ethical behaviour, and lobby for change where we can, and make our displeasure known through our purchasing habits and more direct communication.
I don't see this as an ethical issue on the part of Apple (or, for that matter, any other taxpayer). I don't think anyone does any soul-searching about their tax deductions, nor should they. The soul-searching happens when we decide what the taxes and deductions are in the first place.
US corporations will finally be more competitive on their effective income tax rates, with such nations as: Britain, Ireland, Sweden, Norway, Finland, Canada, China, Switzerland, Czech, Taiwan, Egypt, Estonia, Iceland, Israel, Italy, South Korea, the Netherlands, Turkey, Portugal, Romania, Russia, Singapore, Spain, Vietnam, Thailand and so on.
All of those nations have significantly lower effective rates.
That's not accurate. Considering the enormous loopholes, corporations in the US actually pay something comparable to these other developed countries. The average company pays something between 12% [1] and 22% [2] -- much less than the ostensible tax rate. (See also [3,4].) Now we have nearly all the same loopholes and a lower base rate: a simple recipe for disaster.
This is ignorant and misleading, the only reason effective rates are lower than 35% is because of tax deferral, specifically for foreign earnings. Taxes on those foreign earnings are still owed when repatriated, but it would be foolish to repatriate them when companies would have to pay over 40% in both state and federal taxes, and their shareholders an additional 20%+ on any dividends.
Most countries don't tax their companies foreign earnings at all, so the rates don't even compare.
The real corporate income tax rate should be zero. There is no reason to tax investment, it's hugely counterproductive. Raise the capital gains and dividend tax rates to personal income tax rates, and eliminate corporate income taxes, you've eliminated double taxation and restored progressively to our tax system.
There is zero reason an 80 year old retiree living on a fixed income should be paying over 60% in taxes on her Apple dividends.
A lower tax rate is a boon to small and mid sized US companies that make up the majority of the economy and don't have the financial scale or international presence needed to take advantage of those loopholes. These companies compete daily against foreign firms, and against US conglomerates. I don't see how your comment counters the parent's argument that this a good thing for international competitiveness.
Corporate income taxes are a double layer of taxes on investment. Investment is good, and lower taxes means more investment.
Apple's shareholders are currently subject to 40%+ total tax rates on dividends paid from US profits, and 60%+ total tax rates on dividends paid from foreign profits. Lowering the portion that's corporate income tax rates makes these rates far more reasonable.
First of all, nothing has been settled. This is just escrow, both Apple and Ireland are appealing.
Second, what Apple did was both legal and ethical. It had $200B in cash that it had already paid taxes on to the countries where it was earned. Ireland offered them a near zero tax rate on the interest it would earn if they deposited it in Irish banks. That was a great deal for Ireland, and a good deal for Apple, and hurt no one.
It hurt whatever country didn't participate in Ireland's race to the bottom, and would have been Apple's preferred base of operations when ignoring tax issues.
It hurts because it adds to the already big amount of inequality in this country (Ireland). Me, as a software engineer, I am pretty much accommodated economically but you should see the amount of junkies and homeless people in this town. It is shocking.
Apple and Ireland can count themselves lucky not to be additionally fined, since the likelihood that Apple's or Ireland's lawyers were unaware of the existing EU state aid laws are very slim.