Reposted from Addicting Info.
Apple, the most profitable company of its kind in the United States, has been dodging taxes in a somewhat interesting way — by declaring subsidiary companies that are “stateless” and saying that they don’t have to pay taxes to any country. While their scheme is, in actuality, much more complicated than that, it demonstrates the basic premise of their tax avoidance setup — gall.
And in cheating both the United States and other nations this way, Apple has profited by billions. Nelson D. Schwartz and Charles Duhigg of The New York Times report,
The investigation is expected to set up a potentially explosive confrontation between a bipartisan group of lawmakers and Timothy D. Cook, Apple’s chief executive, at a public hearing on Tuesday.
Congressional investigators found that some of Apple’s subsidiaries had no employees and were largely run by top officials from the company’s headquarters in Cupertino, Calif. But by officially locating them in places like Ireland, Apple was able to, in effect, make them stateless — exempt from taxes, record-keeping laws and the need for the subsidiaries to even file tax returns anywhere in the world.
“Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven,” said Senator Carl Levin, a Michigan Democrat who is chairman of the Senate Permanent Subcommittee on Investigations that is holding the public hearing Tuesday into Apple’s use of tax havens. “Apple successfully sought the holy grail of tax avoidance. It has created offshore entities holding tens of billions of dollars while claiming to be tax resident nowhere.”
This isn’t that surprising; just a new development in what is becoming a tradition of corporate tax dodging. We shouldn’t blame the corporations, either — their job is to make money, and that’s it. That’s what businesses are designed for, in the end. Therefore, if you provide monetary incentive to take certain actions, such as cheat or dodge taxes, and the punishment for doing such is either too light or completely nonexistent, of course they’re going to do it.
Instead, it is up to us, and by extension, Congress, to become the conscience of such organizations through proper regulation, thus allowing them to profit in a way that benefits the whole, which is the entire idea of capitalism. Regulation is necessary. Key, in fact (is that an economics pun?).
Unfortunately, the last 40 years have seen many small additions and changes to the tax code that have benefitted corporations in ways that were unseen by all except the authors of the legislation and the committees that drafted the recommendations that later formed the way new tax laws are implemented. That’s going to be hard to reform/fix no matter which way you look at it, as the Times goes on to say:
While Apple’s strategy is unusual in its scope and effectiveness, it underscores how riddled with loopholes the American corporate tax code has become, critics say. At the same time, it shows how difficult it will be for Washington to overhaul the tax system.
Plus, there isn’t any reason for Congress to want to change these laws. Although many people in the government recognize the problems, the fact is that they can’t get reelection funding without these people. No candidate, no party, can get into office without campaign funding, and the current way campaign finance laws work ensures that the rich are listened to by the government before the poor are. After all, what good is helping you if they can’t get reelected? Plus, if they don’t stay in Congress, they lose a shot at a post-congressional cushy lobbying job and an order-of-magnitude salary increase. We have to remove these incentives from both the government and corporations to stop profits from coming at the expense of the people. If they aren’t paying taxes, who do you think has to pick up the tab?
UPDATE: Ireland’s Prime Minister has denied Apple has a special tax rate in the country. We will cover the developing story in new articles.