8 ms·

Dear Herr Krach, thank you for your letter. I think you misunderstand how business works. Apple is a profit seeking corporation. Profits we make, we hope to d

by wjnc 9y ago

Dear Herr Krach, thank you for your letter. 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 ;)

jarym 9y ago
Tax evasion IS illegal, tax avoidance is not. That's a legal point that's worth keeping in mind.
- wjnc 9y ago
  Darn, I mixed them up. Fixed it. 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..
  - jacquesm 9y ago
    You also mis-spelled political.
mrleinad 9y ago
"Evasion of taxes is not illegal" Yes. Yes it is.
- deleted 9y ago
  [deleted]
- pmlnr 9y ago
  I wanted to say the same thing. It is.
bauerd 9y ago
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?
- fastball 9y ago
  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.
  - dontreact 9y ago
    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.
    - fastball 9y ago
      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.
crummy 9y ago
Tim Cook doesn't always act at the whim of his shareholders, though: http://articles.latimes.com/2014/mar/01/business/la-fi-tn-apple-tim-cook-shareholders-meeting-20140301 http://articles.latimes.com/2014/mar/01/business/la-fi-tn-ap... > 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."
- whym 9y ago
  Not all the shareholders oppose it. The image of the company "doing the right thing" would be favorable to its shareholders. In fact, the same article suggests that apparently many of them agree with Cook: > "If that's a hard line for you," Cook continued, "then you should get out of the stock." > As Danhof sat back down, the audience applauded.
blowski 9y ago
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.
barrkel 9y ago
So, should Apple start selling cigarettes if that raises the profit rate? Perhaps move into prostitution in countries where it is legal? Legality is a red herring.
- wjnc 9y ago
  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.
  - barrkel 9y ago
    Since governments make the rules, I propose let governments fix the rules. I agree. Which means that opinion pieces (what ought) cannot be argued against using legal arguments (what is).
jacquesm 9y ago
Dear Tim, 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. best regards
- wjnc 9y ago
  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.
  - jacquesm 9y ago
    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.
PhasmaFelis 9y ago
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".
- walshemj 9y ago
  No ethics does not mean just following the rules The definition is "moral principles that govern a person's behaviour or the conducting of an activity" A LE person is not ethical because they follow the rules - to use a DnD Trope
  - PhasmaFelis 9y ago
    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.
maxhallinan 9y ago
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.
- gt_ 9y ago
  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.
beberlei 9y ago
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.
ZeroGravitas 9y ago
How does this fit into other areas where Apple brands itself as going beyond what is merely not illegal, and sets a high bar for itself?
_pmf_ 9y ago
> 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.
alkonaut 9y ago
> 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.
andrepd 9y ago
You can find a loophole that lets you get away with murder, but that doesn't make it any less imoral, or you any less of a murderer.
simias 9y ago
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.
trgv 9y ago
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.
slivym 9y ago
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.
rbehrends 9y ago
Dear Mr. Cook, 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. Best regards, Wolfgang Krach (equally fictitiously) [1] https://en.wikipedia.org/wiki/Stakeholder_(corporate) https://en.wikipedia.org/wiki/Stakeholder_(corporate) [2] http://www.dcgk.de/en/code/current-version/management-board.html http://www.dcgk.de/en/code/current-version/management-board.... [3] https://ec.europa.eu/taxation_customs/business/company-tax/common-consolidated-corporate-tax-base-ccctb_en https://ec.europa.eu/taxation_customs/business/company-tax/c...

by wjnc 9y ago

jarym 9y ago

Tax evasion IS illegal, tax avoidance is not. That's a legal point that's worth keeping in mind.

wjnc 9y ago
Darn, I mixed them up. Fixed it. 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..
- jacquesm 9y ago
  You also mis-spelled political.

mrleinad 9y ago

"Evasion of taxes is not illegal" Yes. Yes it is.

deleted 9y ago
[deleted]
pmlnr 9y ago
I wanted to say the same thing. It is.

bauerd 9y ago

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?

fastball 9y ago
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.
- dontreact 9y ago
  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.
  - fastball 9y ago
    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.

crummy 9y ago

Tim Cook doesn't always act at the whim of his shareholders, though: http://articles.latimes.com/2014/mar/01/business/la-fi-tn-apple-tim-cook-shareholders-meeting-20140301 http://articles.latimes.com/2014/mar/01/business/la-fi-tn-ap... > 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."

whym 9y ago
Not all the shareholders oppose it. The image of the company "doing the right thing" would be favorable to its shareholders. In fact, the same article suggests that apparently many of them agree with Cook: > "If that's a hard line for you," Cook continued, "then you should get out of the stock." > As Danhof sat back down, the audience applauded.

blowski 9y ago

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.

barrkel 9y ago

So, should Apple start selling cigarettes if that raises the profit rate? Perhaps move into prostitution in countries where it is legal? Legality is a red herring.

wjnc 9y ago
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.
- barrkel 9y ago
  Since governments make the rules, I propose let governments fix the rules. I agree. Which means that opinion pieces (what ought) cannot be argued against using legal arguments (what is).

jacquesm 9y ago

Dear Tim, 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. best regards

wjnc 9y ago
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.
- jacquesm 9y ago
  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.

PhasmaFelis 9y ago

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".

walshemj 9y ago
No ethics does not mean just following the rules The definition is "moral principles that govern a person's behaviour or the conducting of an activity" A LE person is not ethical because they follow the rules - to use a DnD Trope
- PhasmaFelis 9y ago
  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.

maxhallinan 9y ago

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.

gt_ 9y ago
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.

beberlei 9y ago

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.

ZeroGravitas 9y ago

How does this fit into other areas where Apple brands itself as going beyond what is merely not illegal, and sets a high bar for itself?

_pmf_ 9y ago

> 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.

alkonaut 9y ago

> 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.

andrepd 9y ago

You can find a loophole that lets you get away with murder, but that doesn't make it any less imoral, or you any less of a murderer.

simias 9y ago

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.

trgv 9y ago

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.

slivym 9y ago

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.

rbehrends 9y ago

Dear Mr. Cook, 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. Best regards, Wolfgang Krach (equally fictitiously) [1] https://en.wikipedia.org/wiki/Stakeholder_(corporate) https://en.wikipedia.org/wiki/Stakeholder_(corporate) [2] http://www.dcgk.de/en/code/current-version/management-board.html http://www.dcgk.de/en/code/current-version/management-board.... [3] https://ec.europa.eu/taxation_customs/business/company-tax/common-consolidated-corporate-tax-base-ccctb_en https://ec.europa.eu/taxation_customs/business/company-tax/c...