Apple is a profit seeking corporation. Profits we make, we hope to distribute to our shareholders. Paying taxes is an obligation with which we comply, both to the letter and in spirit. We meet such obligations, but not nilly-willy. Our shareholders would not look kindly upon executives who pay more taxes than necessary.
Avoidance of taxes is not illegal. We even enlist the help of tax offices in many countries, like the Netherlands, Ireland and perhaps some countries internationally deemed 'tax havens'. We pay what through mutual understanding with tax offices worldwide is necessary.
If you conclude that you find tax evasion a problem, this would be a political problem, not one of enterprise. No enterprise would knowingly pay to much and no construct of 'corporate social responsibility' could make paying too much alright. We should seek to minimize cost, and we do.
Governments should fix tax evasion, not corporations. It's not my role to point out the obvious, but if you find the VAT customers pay on our products insufficient and were hoping on a larger slice of our 'foreign income': fix your tax code.
I agree that companies are incentivized to pay the least amount of taxes just as they are incentivized to optimize their operating costs in general. I don't think that this letter denies that Apple has a rational reason for avoiding taxes. And I agree that this problem is best fixed by making tax avoidance structurally impossible. Pressuring market actors to voluntarily take actions they are not incentivized to take is not a reliable solution.
But, Tim Cook himself has framed Apple's tax practices in moral/ethical terms. In doing so, Tim Cook began a discussion about the moral/ethical quality of Apple's tax practices. This letter takes part in that conversation. The letter contributes to that conversation by making the very valid point that the moral quality of Apple's tax practices is very poor, according to Tim Cook's own standards. Regardless of the right solution to the problem, this was something that needed to be stated publicly and was stated well in this letter.
It didn’t need to stated publicly to anybody who understands that businesses (maybe most particularly modern corporations, shareholders and investment firms) act on strategies that they believe will make them the most money with the least risk. I’ve never seen anything change that, especially a blog post.
The same goes for when “Tim Cook frames Apple’s business practices as moral/ethical”. You call this marketing and Tim Cook does it everywhere he goes, Congress or not, all day, every day, because he makes a lot of money for it.
If this letter were run on the front page of NY Times, WaPo, Guardian every day for a week, I cannot imagine could make any discernable difference in the business practices.
Occupy Wall Street, which at least for the most part had it’s finger pointed in the right direction, made no measurable impact on, well, anything. We could speculate some long-shot correlations with fringe left political movements like Bernie Sanders but these things remain certain to be ineffective so long as this letter represents the public’s understanding of the problem.
You don't understand how shares work. Shareholders can only benefit from shares in two ways: through speculation about the share price or through dividends. I'm kind of disappointed that I'd have to explain to a man of your stature that money that Apple parks abroad will not benefit the shareholders except in the most indirect ways.
If Apple brought home their overseas funds then it would benefit the US and Apple shareholders in general in two ways:
The taxes paid would go towards infrastructure, education, health care and other items that benefit all people in our society, and by extension also to us shareholders.
Money left over could be used to pay dividends to shareholders or to do tech acquisitions or long term investments in Apple projects which would benefit the shareholders in a more direct fashion.
Having money parked abroad waiting for a tax amnesty that may never happen does not have these positive effects and essentially ties up a lot of Apple capital in ways that are not beneficial to anybody except for the banks that get to lend this money out at prime rates while not paying Apple much of anything.
> Money left over could be used to pay dividends to shareholders or to do tech acquisitions or long term investments in Apple projects which would benefit the shareholders in a more direct fashion.
This assumption is incorrect in a world where the US is only about 40% of Apple's revenue and slowly dropping (eyeballing from [1], happy to be corrected). If you are going to be investing to grow your revenue outside the US, it makes no sense to repatriate the cash generated there already.
Most cash "parked" abroad is being invested in stocks and other financial instruments - and much of it in the US - not kept in a checking bank account. In fact, Apple's "Irish money" is managed by an Apple subsidiary in Reno, Nevada, and is invested in all kinds of assets in the US.
Suppose you, as a random Irish citizen, want to buy a car in the US and just drive around during the 6 months of your tourist B2 visa stay. Should you pay income tax on the money you bring to the US to buy a car? I don't think so. Similarly, should you pay income tax on the money you bring to US to buy some stocks? I don't think so either.
Now, the company that brings the money to invest in the US stocks is just some random Irish company that just happens to be owned by US company Apple Inc.
Dear Jacques (i'll stop with the game now ;) - I really emphatise with the social responsibility part of the story. The game Apple is playing with stored cash abroad is abject. Nobody is profiting from that.
But we can agree that it's not the nature of a corporation to pay more taxes than necessary? If people offer you crazy deals: agree. Governments should coordinate not to make crazy offers and perhaps even tit-for-tat those that do.
The social responsibility part is what it is all about. If corporations use their legal and bargaining power to opt-out of the social contract then everybody will lose. There is such a thing as being too big and I firmly believe that most multinationals are no longer playing by the rules in the sense that they violate the spirit of those rules whereever they can by focusing solely on the letter of the rules.
That's a game that may work in the short term but the long term consequences are pretty grave, especially since there seems to be a concentrating effect of such moves where more and more control is ceded to ever fewer companies.
It will be hard enough to maintain a tax base that can keep the lights on in a country as it is with all the change coming our way, creating playing field differences like these between SME's and behemots is going to erode that tax base very quickly.
That depressing truth has a way of manifesting. I'm not quite sure what to feel about it. Our attempts here are futile. We're not going to get any legislation passed.
The fact is, companies can opt out of the social contract. They are big, and they're going to play by different rules. But I don't think that's strange -- that's just life.
It happens in China and Russia. Why should the US, Canada, or Europe be any different?
The only realistic thing I see is if enough employees at a company start an effort then maybe one of the large tech companies can be a leading light in exposing tax loopholes and try to inflict PR damage on other companies that use them.
We are not ants, the users of this board are often really important parts of the largest companies that exist today.
Well, occasionally a bunch of us decide to be fire ants instead, and bite back. Messy but seems to be inevitable given that "profit motive" has no shame to be called upon.
As an individual person, if a law has a loophole, is it ok to exploit that? Say you found a loophole that allowed you to legally get away with murder, is it now ok to commit murder as long as you comply with the loophole? I would argue that what is right and what is legal are never fully aligned, and that the excuse "it was legal" is not a valid defense for committing immoral acts.
Corporations are social constructs, they are entirely made of people. Those people don't stop having a moral imperative to do right by others just by having an employee badge. Just as we require individuals to remain "decent human beings", regardless of what they can legally get away with, we need corporations to remain "decent social citizens". While it is not illegal to maximize profits through tax evasion, it is anti-social, and therefore we shouldn't encourage or applaud that behavior.
Governments should coordinate not to make crazy offers and perhaps even tit-for-tat those that do.
A preferable alternative would be for customers to consider a company's ethics in their purchasing decisions, and to encourage their peers to do the same. If it became socially unacceptable to have a new iPhone because of Apple's choice to pay such a trivial amount of tax (legal or otherwise, that's besides the point) you can be absolutely certain Apple would quickly stop funnelling money to tax havens, and they'd probably have a big marketing drive about how much they care about paying tax to fund better wages and welfare for soldiers, teachers and nurses too.
Social pressure is far more powerful than governments. It's just harder to 'control'.
no, they'd have another smear campaign about the governments interference and get the populus to vote to abolish any kind of taxes just for apple.
and they'd probably succeed as well, considering how delusional and outspoken apple zealots are.
The problem is that there are now so few corporations, that you would actually have to opt out of having a smart phone entirely, since I believe Google probably does similar things (not sure of what the latest is).
That's a quite modern idea, businesses can be socially responsible, but somehow the recent thinking is that they should dodge as much tax as possible because somehow that's their priority.
It's a moral decision to dodge tax, not a requirement that their shareholders can sue over. That's just a (very thin) excuse.
> Having money parked abroad waiting for a tax amnesty that may never happen
Except that, Trump, (who paradoxically hate tech companies) is pushing for this tax amnesty. In that case parking money aboard paid big time for shareholders.
You can safely assume that Trump pushing for a tax amnesty does not have small-time shareholders of public companies in mind. I'd look a little closer at his inner circle where the major beneficiaries of such a move reside.
I'm not discussing who is benefiting from this but the odds of it happening. Also if this benefits Apple shareholders, I doubt this is Trump-clan only.
Trump's score for 'getting things done' is not such that I really worry about this. Maybe if he stopped alienating everybody that this would change but I do not believe he is capable of changing himself in such a fundamental way.
> Money left over could be used to pay dividends to shareholders or to doa tech acquisitions or long term investments in Apple projects which would benefit the shareholders in a more direct fashion.
I don't have an opinion on their tax strategies but the money saved is not sitting in a box waiting for amensty. It is used to fund R&D and acquisitions. Though they can offset or sell the results to an offshore Apple entity so that they pay lower taxes.
> The taxes paid would go towards infrastructure, education, health care and other items that benefit all people in our society, and by extension also to us shareholders.
This assumes, of course, that governments can spend the money as efficiently as Apple.
It depends on the definition of efficient. Apple's et al would be obligated to invest for the benefit of shareholders; a small minority of the broader population.
On the other hand, in theory, the government invests - and often simply spends (read: little concern for any sort of return) - for the broader good.
On a personal note: What confuses me is when outfits like Apple complain about the quality of workers, yet avoid taxes. Taxes that could, at least in theory, be used for edu. That's hypocritical, and (to me) counter productive.
> Danhof had spoken earlier in the meeting, criticizing Apple's connection to trade industry groups that believe people are causing global warming. Later, Danhof asked Cook if he would promise to commit to projects that help the environment or fulfill other social justice aims only if they also help Apple's bottom line.
> Cook seemed to be trying not to jump out of his seat.
> "When we work on making our devices accessible by the blind, I don't consider the bloody ROI" (return on investment), Cook said.
> "When I think about doing the right thing," he said, "I don't think about an ROI."
> "If that's a hard line for you," Cook continued, "then you should get out of the stock."
I'm not sure what your argument is. Is it (a) that tax avoidance is morally justified, (b) morally justified only in the business context or (c) not of concern, because the business and the moral are two separate contexts?
I think tax avoidance is morally justified. EDIT: Better phrasing - I think tax avoidance is not a moral problem. Laws are a moral problem, and tax avoidance is not against the law. /EDIT
The entity making the tax code (the government) and the entity that collects taxes (the government) are one in the same. If the government wants me, as an individual or business, to pay taxes at a certain rate X, they should write the tax code so that I need to pay taxes at X%.
I don't think it's anyone's moral responsibility to pay a certain percentage in taxes. From a moral perspective, people have different ideas about what percentage they should pay. If I'm a small business owner, I might believe that my contribution of providing employment to 50 people is enough, without having any moral obligation to pay taxes on top of that.
Or, I could be a hugely wealthy investment banker. I make $1mil a year. But I don't feel morally obligated to pay 30% in taxes because every year I give $300,000 dollars to charity instead. Or this one time I made a $500,000 endowment for the arts.
Taxes and morals are too separate to be linked so easily.
And I think that it is morally justified that I should be able to use roads, send my kids to school, and drink water that has been paid for by all those not smart enough or earn billions enough to avoid paying taxes. I think it is morally right that I shouldn't pay my fair share because I and my other well heeled chaps can lobby governments in some small country to pay 25 times less tax than others. I think it is morally right to do whatever I want as long as it is legal (in some country I can influence) regardless of how much it costs others. In short I think it is morally justified to be legally and unconscionably unfair to others.
Sir, in short, your moral arguments are non sequitur.
My point is that this isn't about morality. Taxes are not a moral problem. Tax evasion is a moral problem because breaking the law is a moral problem.
I don't think forcing people to pay any amount of money (taxes) is moral. Is it good for society? Yes. Is it moral? Who knows? How are you so easily making moral judgements when morality is so subjective?
I find the idea of forcing my morality on anyone else repugnant, except in the case where all parties have agreed to the moral code (laws).
I'll quote the first sentence from your post, "I think tax avoidance is morally justified."
But more broadly, laws are not always moral. If you equate laws with being moral (or equitable which is hopefully a subjunct matter), then personally I think your view of the world is far more black and white than reality.
In my view morality (and part of which is equality) should lead to legality not the other way around.
I don't think laws are moral. I think that, in a functioning democracy, laws are dictated by whatever views are currently held to be moral by the largest portion of participants in the democracy. Laws are what the largest proportion of people in a pure democracy have agreed is moral. If you think laws are consistently being put into place that don't reflect the morality of the populace, then you have an issue with your democracy, and that needs to be sorted out first.
I personally do not believe in objective morality. I'm not religious and without believing in a prime mover I think that's a very hard claim to make.
To not believe in objective morality, I'm assuming because you are not religious or maybe because it is too difficult to "pin down", to me seems to lack intellectual rigour and displays a lack of social empathy. Morality, even aside from the religious back and forth, is a difficult and nuanced subject but that is not to say that it lacks a strong core that most reasonable people believe in (even apart from religious beliefs). Organised social empathy, along with advanced intellect (the ability to conceptualise the subjective and objective aspects of morality), are probably the biggest fundamentals of human nature that separates us from other species on this planet. In my opinion giving those fundamentals short shrift only denigrates yourself.
Without a higher power you're left with diads that are impossible to resolve logically.
For example, "the ends justify the means" vs "the ends do not justify the means".
Two people can believe in some ultimate social good (your version of "objective morality"). That doesn't mean they'll get there in the same way (my version of "objective morality").
> I think that, in a functioning democracy, laws are dictated by whatever views are currently held to be moral by the largest portion of participants in the democracy.
Unfortunately, "participants" turns out to be decided by lobbying influence, not votes.
Most people who aren't murderers, and a few who are. Are you saying that murder is not wrong?
BTW, please don't troll. If you're just asking, "Who says murder is wrong?" to be rhetorical or make a point, don't. Instead, make your point explicitly in the first place, so that we can move forward in the discussion. I'm not interested in playing games, but I am interested in seriously discussing the topic.
So, either you think murder is wrong, or you don't--or you think that sometimes it is and sometimes it isn't, which boils down to isn't. So which is it?
Is killing in self-defense murder? If not why not?
If yes, how are they "objectively" wrong?
If you're a pacifist that believes all killing is wrong, fair enough. But that doesn't make your standards "objective". There are shades of grey to all morality, you pretending otherwise does you no service.
The same applies in this case. Having popular opinion on your side does not make your morality "objective". That's not how this works.
fastball - Who says [murder] is wrong?
explainplease - Most people who aren't murderers, and a few who are. Are you saying that murder is not wrong?
I'm sorry if I took your response of "many people think this" as a serious response. You are not giving me much else to work with, I'm afraid. You have also failed to answer any of my subsequent questions about murder and killing. And if you can't answer my questions about murder, which apparently is such an easy moral issue for you, then how can you possibly think you have a handle on the nuance of taxation?
You're the one dodging questions here. You imply that you think murder isn't wrong, but you decline to define it. You raise strawman questions about "killing" when I specifically asked about murder.
It's very simple: do you think murder is wrong? Yes or no?
If your answer is yes, then we can talk about the definition of murder as opposed to war, justified homicide, etc.
If your answer is no, then we can talk about objective morality, and why it wouldn't be ok for me to kill you just because I feel like it--i.e. why there is objective morality, because if there isn't, then there is no moral reason for me not to kill you and take all your stuff whenever I feel like it.
> I'm sorry if I took your response of "many people think this" as a serious response. ... And if you can't answer my questions about murder, which apparently is such an easy moral issue for you.
You literally asked, "Who says murder is wrong?" I literally answered the question. Your question was obviously rhetorical, yet pointless, because you didn't make a point by asking it. So I then asked the relevant, next, serious question, to move the discussion forward. You then declined to answer it, instead making silly personal attacks, as if performing for an audience. Note, BTW, that I haven't said anything about taxation.
It seems to be you who is not interested in seriously discussing objective morality, yet it is you who raised the topic, and you obviously know that most people disagree. Therefore you seem to be trolling. A shame, because it could be an interesting conversation.
Please prove me wrong by taking the conversation seriously now.
My initial, poorly fleshed-out question was a measured response to your initial, poorly fleshed-out question. I was giving your question the response it deserved. If you wanted a more thoughtful response, you probably should've gone with something a bit more thoughtful than:
"I don't believe in objective morality."
"HA! WHAT ABOUT MURDER?! GOTCHA!"
What about murder? Explain, please. What about murder do you think so beautifully proves objective morality that you don't need to do anything except mention it? If anyone is trolling, if the burden of proof is on anyone, it's you. At the risk of "putting words in your mouth", you seem to be claiming that there is an objective morality. I am saying "I see no evidence to support that claim, and therefore reject it". My rejection does not then require evidence to support it.
If you really want me to spell it my thinking for you: I have no reason to believe in an objective morality, because the only things I think are objective in this universe are related to physical laws of nature, which happened by random chance. From there, I see no reason to link these physical and random laws with our human understanding of morality. If there was a prime mover that created these physical laws and ordered the universe, and was therefore "above" my conception of the universe, presumably any moral code this prime mover laid down would be "objective". However, I do not believe in such a being.
If you have a logical argument for objective morality without a higher power, lay it on me. But "what about murder?" is not an argument. I feel like I'm beating a dead horse here, but just to be clear: plenty of people and cultures have felt morally comfortable with what you probably think of as murder. Please stop wasting our time if that's all you have.
Thank you, that is the kind of serious response I was hoping for (although a bit less snark would be nice, but, of course, without morality, what does it matter?).
I agree with you: without a higher power, there is no logical reason for objective morality. The closest that one may come is a purely utilitarian argument that society benefits as a whole if people refrain from actions such as murder, and that such societal benefits then pass to an individual who chooses to refrain from them. But, of course, that does not necessarily preclude an individual committing murder in a certain case if he calculates the benefit to himself to exceed that of refraining, if he thinks he can get away with it.
So, then, my question is this: if a person wants to commit murder for purely selfish reasons (e.g. revenge, financial, power, etc), would it be acceptable to you? If you were the only witness, would you turn him in and testify against him?
If there was only a single government in the world that would be true but really there are many governments making and collecting taxes, and their tax codes interact in unexpected ways. At this point I truly believe that it's not possible for a single government to unilaterally avoid such "optimizations" without some help from large multinational corporations leading the charge to coordinate tax codes across countries. I think letters like this are pressuring Apple, which has already claimed to be more morally inclined, to try to help in that effort.
You're not thinking simply enough. Watch - I'm going to write a tax code:
If you are a business and sell a product or service in my country, you need to pay X% in taxes on that sale.
If you live in my country, you need to pay Y% in income tax.
You get the idea. The issue isn't that making a loophole free tax code is super difficult. The issue is that every country thinks they can capture more mindshare/businesses/what have you if they have loopholes. The hard part isn't writing a tax code. The hard part is convincing all necessary parties in a democracy that it's good for them.
Ok great now I'm going toe the lines of the definitions of "sell", "product", and "service" to the point where even though in spirit the sales are all happening in your country, technically they aren't so you can't tax me for them. So again your country is fine if it's the only one in the world, but there only needs to be a single country in the world which lets me get away with fewer taxes and then I can avoid paying yours.
I agree that the hard part is coordination, but I stand by my belief that we will never see change on this issue unless a major multinational company decides to take it on for PR reasons. Which will only happen if there is pressure from the government, media and consumers.
The second one: Taxes are not moral for a corporation, they are a cost and a compliance concern. A world where even tax seeking corporations do not hold tax offices to the letter of the law and the deals they make is a lot more messy than one where corporations follow a clear line: min(Tax | Law abiding). Governments should fix this. I would call this the Peter Drucker way of looking at this.
Morality (let's call it CSR) is a corporate concern. All for that. UN-goals etc. I would mainly point to suppliers, environment, customers as options for corporations to act morally within their functioning as a business. Morality-via-tax argument is second order at best. Who knows if the taxes are justly spend?
I no longer believe that it's possible for a single government to fix this. There is too much money in the game, the tax codes of multiple countries interact in too many complex ways, and I've already lived through multiple such tax loophole games being shut down by governments (most recently the double irish) only for new ones to crop up. I believe we will _never_ see change on this issue unless at least 1 large multinational steps up to the plate to help in spotting/closing loopholes. We need to, as citizens (or maybe as employees if applicable), try to pressure the ever fewer and ever larger corporations to assist in this.
What if governments of large countries such as Germany (or the whole EU) would base the corporation tax simply on the total profit, divided by the revenue share of the country?
For large public multinational corporations it is very easy to approximate how much they should pay in any country, when you just wouldn't accept the transfer pricing tricks that they use to move the profits around.
That is what they argue now, they argue their margin in EU is almost zero. But because they transfer costs internally in any way they like (abusing the IP laws that they need to do business in the first place), they can make the profit appear in any country they want.
If countries want to stop missing out on these taxes, I think they should just stop accepting the whole argument. If companies really accept lower margins in some country, they can also afford to pay a bit more taxes.
Does this work for non-tech companies or other companies who really do have different margins in different countries? How do you decide who to enforce it for?
The argument is that the focus is on the companies when the problem lies within rule-making. We cannot expect entities to obey rules that aren't there, whether these entities are individuals or companies.
The distinction has to be made between what is lawful and what is moral. The law is a system that we all have to comply to (which may or may not be perceived as moral), morals are subjective and built on experience, environment, etc. Laws are often made with current/major moral views in mind.
Tax evasion is clearly perceived as not moral, but it's lawful. We cannot expect companies (or individuals) to obey moral rules, since it's kinda unsolvable (morals being subjective). On the other hand, we can expect them to obey law.
Again, focusing on companies in this case is pointless and unproductive, no matter how shocking it is. Governments like to criticize tax evasion, but they are the only ones who could do something about it. We have to go after them.
I think the argument is stronger than that. It's not that tax avoidance is morally justified, it's that corporations have a fiduciary responsibility as stewards of their shareholders' investment to maximize the return on that investment (within the bounds of what the law allows). That includes reducing costs and, yes, that includes reducing tax burden.
Tax avoidance within the bounds of the law is not just morally justified - it's morally required.
(For the record, I think tax avoidance is a major problem, especially because large corporations end up being the only ones who can afford the accountants, lawyers, and international subsidiaries to facilitate it. Small business ends up getting shafted. But the way to solve it isn't to whine about Apple doing what Apple is supposed to do. The fix is to reform the tax code.)
You can't equate a fiduciary duty with a moral obligation. It is legal for a firm to outsource manufacturing to a sweatshop in a country with lax child labour laws, but I don't think many people would argue that it's moral to do so.
The law is not the arbiter of morality.
But I do agree that the solution is to fix the tax code. And to implement better international tax treaties.
Sometimes I wish I could compartmentalize my decision-making process like this. I can't though. Actions usually have moral implications totally apart from their legality, and these implications seem at least as important as the legal side of things.
In terms of closing tax loopholes: tax loopholes are like vulnerabilities in software. They will always exist despite the best effort of lawmakers (programmers, in this analogy). The difference is that lawyers (hackers) don't go to jail for finding and exploiting loopholes.
In my opinion the root of this problem is the legal profession. The practice of law seems almost irreparably broken to me. Money should not have relevance in a courtroom, but it obviously does, it always has, and it will continue to. I have no clue how to fix this, but I think it's a huge problem in liberal western democracies whether it's patent trolling, Apple/X megacorp employing an army of layers to avoid paying taxes, or Harvey Weinstein/Bill Cosby committing sexual assault/rape over and over again without ever visiting a jail cell.
> Paying taxes is an obligation with which we comply, both to the letter and in spirit.
That is the problem though isn't it? Following the tax code to the letter and not the spirit. E.g. paying internal royalties to companies via Ireland and Cayman is not following the tax laws other than to the letter.
If laws can't be changed to actually extract taxes by the spirit of the law "Sorry facebook we don't like how you transferred royalties to the cayman islands via that double Irish setup, so that'll be $5B for your business in our country please", then we completely failed to make laws.
From a business POV I agree about using every means available to reduce taxes and companies must use every means at their disposal for the sake of their shareholders.
BUT as a small business owner I have no chance to get even remotely to the 1-7% tax rate that apple has, instead I look at my 32,5% tax rate and cannot help feeling angry, because I could really put that difference to very good use.
This practice of international tax scheming only benefits the already big companies, the ones that have the least problems of all entities to actually pay taxes.
Local news in the Netherlands is that our tax office gave Proctor and Gamble a few hundred million dollar tax windfall, by error. I don't look angrily upon P&G. They asked for a deal and got a super sweet one. It's the tax offices that mess this stuff up. One European tax office that coordinates these taxes and ruling could solve a lot. Then the mess would be, which country gains the taxes / profits and all hell in European government rightly ensues..
how you conduct business at home is obviously between you, the American government, and the American people. I said as much in my original letter. But if you're doing business abroad in Germany, it may serve you well to remember that Germany is not a shareholder economy, but a stakeholder [1] economy. Maximizing shareholder profits is not the only thing a corporation is supposed to care about.
As the German Corporate Government Code states, for example: "The Management Board assumes full responsibility for managing the company in the best interests of the company, meaning that it considers the needs of the shareholders, the employees and other stakeholders, with the objective of sustainable value creation." [2]
Obviously, we're talking about largely unenforceable social norms here, though it raises the question as to whether you're really acting within the spirit of the law. More importantly, where social norms are increasingly bypassed and subverted, statutory change tends to follow. For example, corporate tax avoidance mechanisms have revived discussion about the EU's Common Consolidated Corporate Tax Base (CCCTB) [3], which you may find considerably less profitable than your current setup.
Equally obviously, such legislation may not pass. But the more aggressively multinational companies pursue tax avoidance schemes, even if perfectly within the letter of the law, the more support legislators will have for enacting statutes that counter such schemes.
Apple could certainly do that. Prostitution is legal in many jurisdication. They can go for any market they want. But in the Peter Drucker-line of the argument, that is a false flag.
This is a nice example of philosophy of law. Usually morality and legality overlap pretty much and follow each other over time. In this case (tax) morality and legality seem to grow apart over time without anyone fixing this. Since governments make the rules, I propose let governments fix the rules.
The aspect of acting responsibly asks firms for something else. Act responsibly within what you (as a firm) normally do. I for one cannot understand the minds of people within the cigarette-industry. The firm I work for invests many billions for customers (insurance) and has a firm line: no guns, no tobacco. I guess no oil is just too hard at the moment, although I have a feeling in a few years things could (should imho!) be different.
I completely agree that it's naive to expect big corporations to selflessly pay more taxes. It's never going to work.
But it's not really up to individual countries' tax code either. The problem is that you have a global race to the bottom with these companies, they'll move to the countries with the lowest tax rates. See the current competition for which city will end up hosting Amazon's new complex.
At the very least the solution has to come from the European Union. We need to figure out a better to unify our tax codes and retaliate against multinationals that don't pay their fair share of taxes. We need to stop this competition between member states that leaves all of us poorer in the end.
I'm sure the EU is capable of coercing Apple and friends into paying more taxes, as long as it's united. This is clearly not the case at the moment and that's the problem SZ should work on, not begging foreign multinationals to please pay more taxes.
Apple is the largest corporation in the world by market cap. It does not find itself drifting like a plastic bag in the wind. Apple spends over $5m per year on lobbyists. A sum that no regular business would be able to afford - a form of influence on government that is fundamentally exclusively available to megacorporations like Apple. That's in the US alone where Apple already has extremely favourable tax conditions.
Apple is not guilty of tax avoidance, Apple is guilty of paying legislators to change laws in a way that is fundamentally incompatible with democracy. At a time when the US Federal government is running a deficit Apple's lobbying spending has reached record highs and legislation to reduce corporate taxes are proposing record low rates.
Land of the expensive, home of silent CEO hiding from questions about dodgy tax affairs.
As consumers, we can use the market to pressure companies into paying a fairer amount of tax. As voters, we can use the government. As wealthy citizens, we can do both.
> Paying taxes is an obligation with which we comply, both to the letter and in spirit.
No. You're following it to the letter only, and that's the problem.
> Governments should fix tax evasion, not corporations.
Globalization has ensured that multinational corporations cannot be dealt with by national governments. You know it well, since you worked hard for decades to make it so, Timmy.
There's maybe an interesting illustration here of the difference between morals ("do the right thing") and ethics ("follow the rules"). A lot of people like to emphasize that they've "acted ethically", knowing that people will misunderstand that as "I did the right thing" when they actually mean "I did everything I could technically get away with".
That may be what you and I mean by it. I've been to enough corporate ethics seminars to know that when corporations talk about "ethics," they mean something much narrower.
I think you misunderstand how business works.
Apple is a profit seeking corporation. Profits we make, we hope to distribute to our shareholders. Paying taxes is an obligation with which we comply, both to the letter and in spirit. We meet such obligations, but not nilly-willy. Our shareholders would not look kindly upon executives who pay more taxes than necessary.
Avoidance of taxes is not illegal. We even enlist the help of tax offices in many countries, like the Netherlands, Ireland and perhaps some countries internationally deemed 'tax havens'. We pay what through mutual understanding with tax offices worldwide is necessary.
If you conclude that you find tax evasion a problem, this would be a political problem, not one of enterprise. No enterprise would knowingly pay to much and no construct of 'corporate social responsibility' could make paying too much alright. We should seek to minimize cost, and we do.
Governments should fix tax evasion, not corporations. It's not my role to point out the obvious, but if you find the VAT customers pay on our products insufficient and were hoping on a larger slice of our 'foreign income': fix your tax code.
Kind regards, TC ;)