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Sunday, May 26, 2013

Apple and taxes

A few thoughts about Apple and taxes, to give a balanced perspective.
  • Tax evasion is against the law. Tax avoidance is not. All of us practice tax avoidance every April 15, so let's not be sanctimonious on this topic.
  • There is a legitimate question, however, about the degree and manner of tax avoidance that Apple and some other large corporations are engaging in. I will say in Apple's defense that aside from the sweetheart deal they signed with the Irish government about 30 years ago, Apple is relatively restrained in their pursuit of tax avoidance. Other corporations are much more aggressive.
  • Apple's situation looks bad in the eyes of the public because Apple has accrued an enormous and unjustified cash hoard. Apple has begun to address this.
  • Remember, 30 years ago Ireland had not yet become the "Celtic tiger" economically speaking. The country was desperate for international business, and from their point of view getting a small income from Apple was better than getting nothing. And who knew that Apple would be so successful?
  • Remember also that Apple management has a responsibility to its shareholders to maximize the company's returns, subject to the law. It would be unethical in that sense for Apple management not to avoid taxation.
  • All that said, there can be no doubt that multinational corporate taxation should be tightened up -- and it appears to me that the E.U. will start the process.
  • Most reasonable people would agree that corporations should pay taxes if they make profits. We can debate how high those tax rates should be, but as I have written previously an extreme "soak the rich" policy has been shown to suppress economic vitality.
  • American corporate taxes are in a sorry state that cries for reform. Here are some ideas.