A Bad Apple?
Apple has either been a pariah on the American taxpayer or a savvy corporate entity. In case you didn’t watch the congressional testimony (tornados were destroying parts of Oklahoma that day so you may have missed it), Apple has been avoiding paying tens of billions of dollars in taxes by off- shoring many of its operations. That infuriated Congress.
Well, it infuriated the Democrats on the panel, as their supporters expect them to beat up on businesses: The more successful the business, the bigger the beating. The Republicans were in a bit of a pickle. They wanted to look pro-business, but only pro-tax-paying business. So they fell over themselves thanking Apple for what they do and then bashing them for not paying more taxes. Ultimately, they ended up blaming the tax code, not the company.
Now, when it comes to how to tax off-shore operations of domestic firms, I am no expert. But I’m betting that Apple 1) has hired plenty of experts, and 2) gets audited every year. From what I’ve read, it sounds like they may have found a loophole in tax codes of multiple countries allowing them to pay no taxes on a lot of their income. Whether it is truly a loophole, I’ll let the tax courts decide (I have a hard time depending on Congress to decide anything).
For the moment let us assume, as Apple contends, that the practice is legal. If that is the case, good for them. Last I heard it’s smart for a company or individual to keep taxes low. Goodness knows that if I found such a loophole that 1) my tax experts thought was legal, and 2) saved me money, I would be a fool to ignore it. And if a company that I invest in ever decided to pay more taxes than they needed to just because it “seemed right,” I’d have to rethink my investment.
I agree that it is ludicrous that a company like Apple can get away with paying no taxes on some of their income. But I don’t blame them. I blame whomever wrote the rules that allowed that to happen. They called what Apple did “gimmickry” in the hearing. I completely agree. It’s time for the legal use of gimmickry to end. In order to do that you must change the laws.
In fact, the tax laws are keeping Apple from bringing the cash it has overseas back to the United States. It’s a sizeable amount…over $100 billion (yes, that’s a “b”). But to bring the money “home” they would have to pay domestic taxes on it. If the rate was low enough, that’s exactly what they’d do. But the tax burden is so large that when Apple needed $17 billion to spend here, it was more cost effective to borrow the money rather than cashing out one of their foreign accounts.
Hopefully both sides of the aisle can agree to fix the problem, though I’m not holding my breath.
This article was published under the title "A bad Apple, or just bad tax law?" in the Wichita Falls Times Record News on July 16, 2013.