Wednesday, May 29, 2013

Very Easily Solved Problem

Washington Post tells how Apple has avoided paying corporate income tax in both the U.S. and Ireland:

Apple Operations International is registered in Cork, Ireland, but has “no physical presence at that or any other address,” according to the report. Indeed, the corporate entity has existed for 30 years and apparently never had a single employee. Of the three people on its board, all Apple employees, two live in California; 32 of its last 33 board meetings took place in Cupertino, and the Irish director participated in seven of them. Its assets are managed by a Nevada company, and held in bank accounts in New York.

It falls in a strange loophole: Because it is not managed and controlled in Ireland, that nation does not tax its earnings, even at the low Irish corporate income tax rate. And because it is not registered in the United States, it has owed no American taxes. It would be a little like an individual living in America and earning a living from investments in Ireland and thus being able to avoid paying taxes to either government—a strategy that decidedly would not work, by the way.

My first reaction when I read that was indeed to think "can I do that too", formally registering myself in Ireland (or some other country) while physically remaining in Sweden, and thereby avoid paying taxes by telling the Swedish tax authorities I don't have to pay them anything because I am registered in Ireland and the the Irish tax authorities I don't have to pay them anything because I've never been to Ireland, But I am pretty sure that it wouldn't work as the Swedish tax authorities wouldn't be fooled by my Irish "registration".

Which is why I find it so strange that some people have concluded that it is somehow impossible to stop this form of tax avoidance from Apple, and other large corporations. All that needs to be done is to treat them like they treat individuals, which is to say to tax them based on where they conduct their operations.

The fact that tax authorities allow Apple and other big businesses get away with things normal people wouldn't get away with illustrate that Ayn Rand's (who I think overall was a great philosopher) assertion that "Big business is America's most persecuted minority" was and is completely out of touch with reality. Far from being "persecuted", Apple and most other big businesses receive priviligies from the government in the form of direct subsidies, absurd tax loopholes and regulations that benefit them, using their lobbyists, their lawyers and their market power.


Blogger Kapitalist said...

It's the James Taggarts who have seen to it that there are loopholes like this, which unintentionally even the Henry Reardens can use.

Without any tax planning, government takes almost half of all profit dividens (in Sweden at least). Tax planning is as important as all other corporate activities taken together.

3:52 PM  
Blogger Allen said...

Maybe I'm being a dolt but I don't understand the problem. Ireland has __chosen__ to not tax companies in certain ways. They still have other means they do tax them. This is not a loophole.

Sure, there's some "shell" company. But it's not as though Apple as a whole doesn't contribute. They have 4,000+ workers in Ireland. If nothing else, they're buying things in Ireland and paying VAT.

IIRC Ireland's corporate tax revenues have grown 8-fold in constant dollars since Apple set this company up. We may disagree with Ireland's precise tax policies but in general it seems to me the end result has worked rather well.

7:34 PM  
Blogger stefankarlsson said...

Allen, first of all, if taxation of corporations is wrong then one should set the tax rate at zero for everyone, not have ridiculous loopholes for a few favored companies and high tax rates for others, as that create big distortions.

And secondly everyone who makes productive efforts pay some taxes. The difference is that Apple and many other big businesses pay less, while receiving more subsidies and benefiting from favorable regulations.

8:00 PM  

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