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Most of the response to The New York Times‘ takeout 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.