At long last Apples is receiving high profile attention for its tax avoidance. It is the biggest tax avoider in the world and arises because the US legislation has a loophole that means Uncle Sam doesn’t tax every piece of income everywhere in the world.
Instead, the US only taxes profits created in the US and profits that are brought into the US. Apples have employed armies of clever accountants to suggest perhaps not sending their profits to the US to be taxed a second time unless it is needed there.
As the FT reports this morning:
US congressional investigators on Monday accused Apple of avoiding paying billions in taxes around the world by exploiting loopholes and using Irish subsidiaries that are not tax residents of any country.
The Senate permanent subcommittee on investigations released a 40-page report on Apple’s international tax structure ahead of a hearing that will shine a harsh political spotlight on the US technology group.
“Apple sought the Holy Grail of tax avoidance,” said Carl Levin, the Democrat who chairs the panel and will lead the hearing. “It has created offshore entities holding tens of billions of dollars, while claiming to be tax resident nowhere.”
The accusation inevitably focuses on the use of the bog-snorkelling tax haven of choice, Ireland which is said to be the home of the Holy Grail. Tim Cook, CEO of Apples, is a nut on tax avoidance and he has Apples are desperately searching for countries to be non-resident in.
The sums involved are staggering: the company has more than $100 billion in tax havens in cash stored in a hollowed-out volcano. It has also invested about $500 million in diamonds into creating a super-reflective satellite which can direct a focused beam of energy at any point on the Earth.
According to pro-profligacy group, Uncut the UK, all this money should be taxed in the UK.
Now this is, without doubt, incentivised by the US tax system which only taxes profits in the US when disunrepatriated (repatriated is a misnomer as the profit never was there in the first place) to that country. This encourages US companies to abuse the law in other states by investing money in that state. Such investment is morally repugnant, whether saved in a bank, made in passive investments or actively invested in jobs, working capital and infrastructure.
What’s Apples’ solution? Tim Cook is apparently one of many CEOs lobbying for US companies to be allowed to bring this cash back into the US tax free on the basis that:
“the profits are made elsewhere and taxed elsewhere. Oh, and the law currently offers all businesses a clear choice and do you think we are stupid?”*
I sincerely hope the US resists that temptation. Rewarding the world’s largest companies for being successful and allowing them to invest resources in the USA would be a morally repugnant idea. And it would remove that incentive for stockpiling cash deposits outside the US.
So that’s all terrible then.
It’s almost as terrible as companies like Starbucks who actually pay profits back to the US and are rightly lambasted for doing so because it reduces their tax payable elsewhere. Given the choice, they should pay tax over here in the UK (regardless of where the economic activity takes place) and then also pay tax on the same profit in the US. It is the only moral option.
Basically, we don’t like multinationals. Whatever they do will be immoral because they are fundamentally immoral. All the employment and innovation they produce are just a smokescreen because The State would quite easily step in and fill the void left by their abolition.
Come on, The State has an excellent track record of running innovative and successful businesses and has vast experience of managing large technology budgets. We just need A State of Courage to make it a reality.
That’s why the US has to resist these pernicious calls to change a tax policy that is detrimental to the US and the rest of the world.
* This is another quote where I have taken the liberty of translating what the person said or just made it up to fit what I think they said.