The issue is not capitalism and existing law, but the interpretation and enforcement of the law. The issue is that we have removed rational judgement from legal proceeding with regards to tax law. Its clearly demonstrable that Apple is not following the spirit of US tax law, but simply sidestepping the law by offshoring its money in this way. Does anyone with more legal expertise know of a more concise way of expressing this? Could the state simply sue apple and if they win then this establishes a new precedent for not offshoring money to dodge taxes?
- The US federal government cannot sue someone for not following the spirit of the law. Thankfully.
- Per Justice Learned Hand: "Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant."
- "Offshoring" isn't the right word, because it implies that the money was in the US and moved offshore. In fact the money is from product that was sold outside of the US, and the money is remaining outside the US.
- This is really crazy sounding, but can individual or a group of individuals sue a corporation for what they view as an attempt to sidestep the law in civil court? Since the burden of proof is different in civil court?
- Did Justice Learned Hand make this statement with this type of scenario in mind where the amounts of money are on the level of an entire small country? Isn't he just talking about private citizens?
- The point is just that they didn't pay taxes, either to Ireland or to the US. To the extent that they could have paid those taxes to the US government, its still dodging taxes.
- No, in order to sue you must have standing, which in a super short version means that the plaintiff has to be really close to the harm, not a bystander who witnesses something.
- Obviously Apple did not not exist when Justice Hand said that, but I think he would be fine with it. Apple is complying with the letter of the law, and their responsibility on that issue goes no further. Apple is in no way obligated to pay more than what the law requires. If there is a problem with the tax law, then it is up to congress to address that.
- I guess I am less bothered by it than you are. Apple paid what it owed under the law. A lot of corporations pay 0 tax because they are set up as pass-through entities, like S Corps. Is it OK to set up a S Corp for tax reasons?
Then really I guess we need to work harder to change the letter of the law. I was under the impression when I started the conversation that the tax havens were more of a loophole or ambiguity in the law and that you could prevent this behavior by showing intent to dodge taxes but apparently it is a long standing explicit component of the law. Id be happy to read up more on the existing laws if you would be willing to provide links
I do not have any links, the best I can say is that these pieces usually reward close reading and diagramming of the facts.
My understanding (as a person who has taken a couple tax law classes) is that it isn't an explicit law but a combination of things, all of which are reasonable, which yields what could be said to be a surprising result:
- companies pay taxes on profits
- profits = revenue - expenses
- It is OK to expense licensing of IP
- It is OK to sell IP to a subsidiary
So Apple creates a subsidiary in Jersey, transfers IP to that company, then charges the Irish subsidiary fees which are more or less equal to the revenue for selling the phones. In this way the Irish subsidiary makes no profit, so there is nothing to tax. All the profit goes to Jersey, which happens to have no tax.
It needs to be said that the money is stuck there, if Apple wants to get at the money then it would in fact be taxed depending on where it goes. So it is not even really dodging taxes, but more like delaying when they get paid (hoping for a better tax rate in the future, I suppose).
I am not even sure if US law is to blame here, it seems like the EU is the one that is upset at Apple, and Jersey is under EU law not US law.
This is not an explicit letter of the law. If they are creating a web of complex interactions to avoid paying tax at what point do we throw up our hands and call a spade a spade and say that its clear that they are just avoiding paying a tax.
I would say that its the "with some maneuvering" that we should re-evaluate as a society. If you can demonstrate clearly (and I think its clear to everyone here that they are dodging taxes) that they are attempting to sidestep the law even though its technically legal, then we should pursue precedents that prevent this.
Where would that end? How could anyone be confident that their actions would not land them in jail, if following the letter of the law did not guarantee safety, and judges or juries could decide that their interpretation of the "spirit" of the law was enough to result in a guilty verdict?
Im not a legal person so I apologize, but how does intent play into this then. If Im climbing with someone and I accidentally drop them and they die, then I have to show that my intent wasn't to murder them right? Can't you make the same argument here, the crime is that apple didn't pay the full taxes it owed the government don't they still have to prove that their intent wasn't dodging taxes?
If the state charges you with murder, the state has to prove beyond a reasonable doubt that you intended to kill. You don't have to prove anything. And that's the way it should be.
So why can't this be a scenario of the state charging Apple with tax evasion and the state proving beyond a reasonable doubt that this was their intention?
It's not evasion. They're paying everything they're legally required to pay. If the state proves that they didn't pay what was required by law, they'll pay it, with penalties.
To the extent of the law as it currently exists, but for the artificial scenario they have created the law is ambiguous and we shouldn't expect the law to be exhaustive of every possible permutation. We should be able to use common sense judgement to say they are clearly creating these complex scenarios to just avoid paying taxes.
