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APPLE: The Ethics of Exploiting Tax Loopholes

Tuesday, May. 21, 2013

Monday, Congressional investigators disclosed a report finding that Apple avoided tens of billions in taxes on overseas earnings through a web of subsidiaries unprecedented in scope and complexity. Among the subsidiaries is Apple Operations International, AOI, which was incorporated in Ireland but is run by top executives in Cupertino. AOI’s income between 2009 and 2012 was $30 billion, yet has not filed tax returns in the past five years. In the US, corporations are taxed depending on where they were incorporated, whereas in Ireland it is dependent on where they are operated and managed. Accordingly, Apple has used the gray area between the two countries tax codes to create a “stateless” corporation exempt from taxes, record keeping requirements, and tax return filings. The panel has not accused Apple of breaking any laws, and Apple is certainly not the only company with similar tax practices. Nonetheless, some argue Apple is failing to pay its “fair share” of taxes to the US and other countries where it generates revenue. Does Apple have an ethical obligation to pay more taxes?

  Kirk: No one has argued that Apple disobeyed the law and no company is obligated to pay more taxes than legally required. However, Apple is exploiting outdated tax laws and the lack of coordination between countries to shield its profits. The result is that Apple pays far less than its “fair share.” Real people suffer when tax revenues are low. Apple’s ethical obligation is to take a public-minded role in the creation of a new tax regime that closes the loophole it’s exploiting.

  Patrick: Apple’s not the problem here: it’s the symptom of a failing tax code. To date, the tax code sets the rules of the game and companies play within them. The tax code needs to consistently adapt and change to companies’ behavior to ensure the desired results are achieved and that the proper incentives for those results are in place. Apple’s ethical failing, in this case, is their reluctance to call it like it is: Tim Cook at Tuesday’s Congressional hearing, “We don’t use tax gimmicks.” If the shoe fits . . .

Apple's Web of Tax Shelters Saved It Billions, Panel Finds

A Framework for Thinking Ethically



Comments Comments

Reinhold Schlieper said on Jan 27, 2014
Big corporations appear to forget that no one's action is isolated. Ultimately, some level of enlightened self-interest should move corporations to give adequate support to institutions that offer the context to the corporation's activity. Apple has nominal headquarters in Ireland, merely because of the low taxes in Ireland. It's part of fundamental honesty to support that state or nation that offers the social context for the corporation, or to support nations and state directly proportional to the corporations work within it. - Like - 1 person likes this.
Patrick Coutermarsh said on Jan 27, 2014
Reinhold, thanks for the comment. I agree, all too often the "community" as a stakeholder gets swept under the rug. While I don't doubt it is in their long run best interest, I think part of the problem is how difficult it is to quantify that long term benefit, coupled with the time horizon of many companies being limited to their next annual report. Whereas quantifying the immediate benefit of incorporation in Dublin, or similar places, is relatively easy to draw up. -Patrick - Like
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