It’s Not Apple’s Responsibility To Pay More Taxes

by Steve Wildstrom   |   April 30th, 2012

Apple logoMost of the response to The New York Timestakeout on how Apple avoids billions of dollars in taxes has implied that Apple is doing something wrong and somehow has a moral responsibility to be paying more. Nonsense. As Arik Hesseldahl wrote at All Things Digital, “The implication the story leaves a reader with — that Apple is somehow doing society a disservice by not paying its fair share of corporate taxes — is simply wrong on many levels.”

Apple actually has a duty to its shareholders, its employees, even its customers to run its business in the most efficient, effective, and ultimately profitable way possible. And that responsibility includes not paying more than is required in taxes.

I have written about taxation for many years and closely followed  the Reagan tax cuts of 1981, their partial repeal on toe corporate side in 1984, and the tax reform debate of 1986. Ridiculous tactics like the “double Irish with a Dutch sandwich,” as described by the Times are nothing new. The 1981 tax bill created a way that money-losing companies could effectively sell their losses at a profit.

It’s fun to pick on Apple these days and the company can certainly afford it. But every well run company has mastered the art of tax avoidance. The moves that benefit individual companies create weird distortions and inefficiencies for the economy as a whole. General Electric, which figured out how to make a fortune off the trade in tax losses in the early 80s, is the past master at it.

The real lesson of the Times story is about the tax code, not Apple. It shows both how badly the law needs fixing and how difficult it will be to fix; every loophole is someone’s billion dollar opportunity.

 

Steve Wildstrom

Steve Wildstrom is veteran technology reporter, writer, and analyst based in the Washington, D.C. area. He created and wrote BusinessWeek’s Technology & You column for 15 years. Since leaving BusinessWeek in the fall of 2009, he has written his own blog, Wildstrom on Tech and has contributed to corporate blogs, including those of Cisco and AMD and also consults for major technology companies.
  • http://kaizenity.blogspot.com/ FalKirk

    I feel like I’m living in bizzaro world where up is down and black is white. Where paying the amount of taxes due is somehow a bad, even and immoral, thing and where creating wealth and jobs and prosperity during one the worst recessions on record is something to be decried rather than something to be applauded.

    Perhaps the sage words of Judge Learned Hand can return us to the rule of law and the world of reason:

    “Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.”

    • benbajarin

      What is perhaps more interesting to me is that for that article Apple gave them detailed information on how they handle their taxes. Why would Apple willingly give them that info after the NYTimes requested it. I am not sure they are legally bound to do so, so I figure that they did it to make a point to showcase how terrible many of our tax laws are. OF course that is not the angle the NY Times took.

      • http://kaizenity.blogspot.com/ FalKirk

        The fact that human beings can even consider it a bad thing that one did not pay more taxes than they were legally required to do simply boggles my mind. The hypocrisy, they impracticality, the sheer irrationality of the position is disturbing, to say the least.

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  • http://profile.yahoo.com/45EZ7LE65KYLANZJFA46QOG4LU Gerald

    What I do not understand is why a supposed reputable news agency would single out just one company. And yet Apple always seems to be singled out. The stories about Foxcon labor issues – Apple. The stories about how iPods cause hearing damage – Apple. Avoiding taxes – Apple. It would be impactful and news worthy if instead of writing just about Apple – maybe bring other companies into the mix. At least Apple incorporates in the USA. Write about all the companies that incorporate in the Cayman or Grand Bahamas to avoid taxes. Instead of just singling out that the iPOD(!!!!) causes hearing damage – write about how loud music can cause hearing loss – and that it’s the personal responsibility of all music listeners to adjust their volume accordingly – it’s not Apple’s responsibility. Instead of writing how Apple allows Foxcon to abuse its workers – maybe write about how many different companies use Chinese labor – that China is a Communi-Capailist society and that this is a Government issue – not Apple. Maybe write how Apple actually does more than most companies to assure safe working conditions and not allow for child labor through audits. I believe everything is a hit piece against Apple due to jealousy – hatred – anti-competitive angle trying to bring Apple down. Its tabloid hackery at it bets.

    • http://kaizenity.blogspot.com/ FalKirk

      It’s not going to stop. Ever. Apple is now the largest (and the fastest growing!) large cap in the world. They have a target on their back and it’s only going to get larger as they get larger.

      I did not follow General Motors, IBM, Microsoft, etc. as closely as I now follow Apple, but I’m sure that they too had to put up with this nonsense. There are unfair advantages to being the largest corporation in the world. There are unfair disadvantages too.

      I think Apple may be built to weather this and I actually think they’ll be able to handle it better under Cook than they would have under Jobs. Jobs was mercurial, obsessive, obstinate, politically incorrect. Cook seem to be very pragmatic. If I had my druthers, I’d go back to Jobs in a heartbeat. Since I don’t have that option, Cook seems like exactly the right man in the right place at the right time.

      Apple has always provided tremendous value to their customers and their customers have reciprocated with tremendous customer loyalty. Apple isn’t hated like an Exxon. They aren’t tolerated like Microsoft. They aren’t endured like GM and Microsoft. Apple is respected, even revered. Never did they need that reservoir of good will more than they do now.

      The slings and arrows outrageous fabrications will not stop, they’ll only get worse. Fortunately, so long as Apple keeps engendering good will by making excellent products, the public will stand behind them. Which is good. Because that will prevent the NY Times and nattering nabobs of negativism from stabbing Apple in the back.

  • Dick Applebaum

    I forget who said it:’

    “Tax evasion is a crime… tax avoidance is a responsibility”

  • Freddo27

    I could not agree more!

    I am curious whether any of the New York Times writers or management claim any deductions on their federal or state taxes…if so, I think they should immediately cease that practice, and instead try to pay at the highest rate possible for the good of society.

  • Peter

    Even the comments to the article reflect the understanding that this is more about the tax code than Apple, so it is quite hyperbolic to state that most of the reaction to the article slams Apple. However, there is a distinction between a moral responsibility and a fiduciary duty and we should never back away from those discussions under any circumstances regardless if the company just happens to make everyone’s favorite gadget. Even a high school student can tell you that a company’s main objective is to maximize its profit and the point of the story was to highlight the ways that an enormously successful company utilizes tax law to its advantage, so people will question whether this is appropriate. Tax reform will be an issue in this election and Apple just posted ridiculous numbers. This is a timely article, not a dump on Apple. People legitimately question the political argument that we need to continue to reduce the tax rates on corporations and the wealthy when people like Bruce Bartlett have noted that the reductions do not create jobs. An article like this adds to that timely discussion and challenges people to think about the ways that corporations and others take advantage of the laws. This is not to say that they are demons, but are we supposed to just put our heads in the sand and not explore the issue? Frankly, I find the hesitance to critically analyze Apple to be a much more disturbing undercurrent than the fabricated piling on. Next we’re going to say, listen everyone uses similar labor practices in China, so why even mention it? It sounds silly because it is.

  • lairdp

    While nobody likes enjoys taxes, I don’t buy the argument that there’s no moral or ethical responsibility to pay taxes. As adults who live in the real world, we should recognize that things have to be paid for. We, as citizens that benefit from the United States functioning, have a responsibility to pay for the country to function. If the tax code becomes merely a system to scam, with people having no feeling that they have a responsibility to make the country function, the system becomes dysfunctional and our country stops working. As a citizen, I am proud that we have roads, schools, police men, fire men, etc., that work for us and give us a standard of living that few on the planet can match This means that we have a responsibility to pay our fair share, and a responsibility to remove “scam” tactics from our tax codes so that honest taxpayers aren’t penalized for their honesty. We used to look down on people funneling their income through tax dodges, and that’s as it should be.

    • Christian

      This positional is highly wishful. Essentially what you’re saying is your sense of duty and responsibility is so great that you would still pay taxes even if there was no code to compel you to do so. That is doubtful. Regardless of the current tax code, are you paying enough? Did you know you can give more to the IRS. Here’s the form to help pay down the debt: https://www.pay.gov/paygov/forms/formInstance.html?agencyFormId=23779454

      No, a tax is something forced upon the citizens of a country. There is no duty in it–it is REQUIRED to pay. The more government takes, the greater the burden on the people. If there are legal ways of reducing your tax bill you should do it (such as deductions, incorporating in a state with no taxes, etc). Don’t like it? Change the law.

  • Viswakarma

    The New York Times finds that yellow journalism pays!!!

  • Danielonrazz

    Dear Steve,

    You are so of the mark it is hardly funny.

    Apple deserves all the picking it can get. Not because of social justice but because of the hypocrisy of its principles. They all advocate social justice, leftist agenda and donations to the democratic party.

    Then they try to not pay taxes as much as they can.

    Same with Google and other sanctimonious companies, all telling us how we should all pay our fair share yet they spend millions to avoid paying theirs.