When ethics and law are at cross purposes, one must follow the law. That is good corporate governance. It is a fiduciary responsibility that must be met. It is ethical behavior. And, most importantly, it supports the rule of law. If you don't like that ethics and the law are at odds, change the law to suit your ethical purpose. If you can't do that, accept that others' views of what is ethical are at odds with yours. If that is still unsettling, either change your ethical values or work to change others'.
Sorry I have to correct you. Under Australian law (tested in the courts) fiduciary duty (to shareholders) is not considered preeminent over common ethics and the good of society. If a business can be shown to have acted within the law, but with the intended PURPOSE of contravening the SPIRIT of the law than they may still be found guilty of the crime. The cases may be quiet challenging to prosecute but there is precedent in Australia and our laws are cleverly written to this effect. What you say may be true under US law but respectfully is incorrect under Australian law which you are obviously unfamiliar. It is a contravention of Australian law to knowingly circumvent the spirit of the law for the benefit of shareholders - let's be very clear about that.
Sorry I have to correct you. Under Australian law (tested in the courts) fiduciary duty (to shareholders) is not considered preeminent over common ethics and the good of society. If a business can be shown to have acted within the law, but with the intended PURPOSE of contravening the SPIRIT of the law than they may still be found guilty of the crime. The cases may be quiet challenging to prosecute but there is precedent in Australia and our laws are cleverly written to this effect. What you say may be true under US law but respectfully is incorrect under Australian law which you are obviously unfamiliar. It is a contravention of Australian law to knowingly circumvent the spirit of the law for the benefit of shareholders - let's be very clear about that.
In my opinion, you would be hard pressed to show that following the tax law to the letter is unethical. But, that is really not totally material to the discussion.
Apple is a multinational company. They have investors in multiple jurisdictions. Their fiduciary responsibility is defined in the larger sense by the locations within which they are incorporated, the locations wherein they are headquartered for primary taxing purposes, and to a smaller extent by the locations from within which their investors legally purchased shares and the locations within which they physically conduct business. (Operations conducted between the various business arms of a multinational corporation are complex. That is one of the reasons that multi-nationals use multiple incorporated entities to conduct business across national boundaries. There are costs and benefits to doing so. The taxation issue is one of them.)
In other words, your point has less impact on Apple than you might think. Apple is bound to follow written Australian law for business conducted in Australia. However, their ethical considerations extend far beyond Australia. While their may be precedent for your position, whether or not it should or even would apply to Apple in this situation is up to Australian courts to decide... Not for you to pronounce as fact.
Your statements as to the impact on Apple are opinion. As opinion, they do not make my opinions wrong.
As for the court ruling you indicate, I sincerely hope you are wrong. People should not be required to guess what is and is not legal. That is the true impact of what you suggest. Nor should they be subject to the whims and vagaries of ethical opinion laid down by individuals at a trial by jury.
As for common ethics, paying taxes according to the law would be the common ethical standard I would think. As to common good, that would be swayed by opinion and is one which will always be tilted against minorities and fictional persons. That is not fair to all in equal measure and a quite good case could be made that it is not ethical.
So they followed the laws that let them do this. Not avoided taxes illegally like the lede implies.
Yes this shows that the laws need to be changed. But if you look at other companies they likely do the same thing to equally great amounts. Not just Apple. So let's see an unbiased review in the proper context of convincing the Australian government why they need to change the laws to keep at least some of that tax money local.
Haha. I have this feeling Apple will be paying a lot more tax in Australia in the future.
Australia needs Apple a lot more than Apple needs Australia. They could pull out completely and their bottom line would not even hiccup - they are that big.
$8,000,000,000.00 might sound like a lot of money, but that is over 10 years. Apple makes that much elsewhere in minutes. Who cares about Australia? They had better watch out or Apple will just cut them off.
WHAT THEY DID IS ILLEGAL UNDER AUSTRALIAN LAW!!!!!
Nope. Not at all.
…evident the transfer was intended to dodge taxes.
Except that wasn’t the case.
The Australian government (my government) will pursue Apple for this money and there is a very good chance that Apple may have to fork out a multi billion dollar settlement to cover the matter.
Good luck¡
That money will be used to pay for roads, schools, healthcare and education.
given the tendency of producers to sell at whatever price the market will bear, what will happen to prices in any market the government enters? They have the most money of any organisation, due to taking up to 40% of everyone's income in taxes. So I think those health care costs would be a lot lower if the sellers of health care goods and services knew they were selling to individuals and not the government.
Yes! Because so many fewer could afford it, demand for health care would fall sharply, so they would have to lower prices! And likely, population levels would fall too, further reducing demand and thereby further reducing prices.
I have no issue with a company taking advantage of every tax loophole that governments allow. It is no different from an individual taking advantage of every tax deduction he/she is entitled to under the law. If they are (company or person) break the law, than that is a different situation.
It seems funny though that the media brings up Apple as the primary target here and Google and Microsoft as an afterthought. I doubt these are the only major players in the field.
How about reporting on this kind of stuff when it becomes illegal?
And then Apple would get get sued by its' shareholders for making these voluntary yet 'illegal' payments as it would be a breech of the corporation's fiduciary responsibilities to its' shareholders.
Not if the PR value exceeded the expense. Why do you think Apple installs so much renewable energy? Because it is the cheapest way to power stuff? People LIKE "green" companies and buy their stuff. Being green is a path to increased profits, despite the small extra costs.
So too giving money to charity, like sponsoring big music festivals. So too (maybe) paying a fair amount of income tax.
But it seems obvious that Apple does not think that paying a fair amount of income tax would yield profits in excess of the expense. So they don't do it. Tim knows exactly how this stuff works, believe me...
You are wrong. Australia has laws against tax evasion - in particular it prohibits using transfer pricing arrangement to shift profit overseas. Make no mistake - Apple has broken the law and will be pursued by the Australian government.
The government may not be particularly quick at finding and correcting tax fraud but that does not mean that it was not tax fraud (and illegal) in the first place.
There is no “transfer pricing” here. Transfer pricing would mean that the actually work, or IP, in creating an iPad happened in Australis and was transferred to Ireland or the US. Thats not what happened. Australians bought iPads, and the profits on those sales were declared where they always were declared, that is where the headquarters are. There is a problem in Irish law, but there is ABSOLUTELY NO WAY THAT AUSTRALIA IS OWED ANY PROFIT ON MARGINS OF IPADS AUSTRALIANS ARE BUYING. Australia already gets taxes on sales ( sales tax) and on retail profiles in the stores. Thats all Australia will ever get even if Ireland charges Apple 35% of tax.
If a business can be shown to have acted within the law, but with the intended PURPOSE of contravening the SPIRIT of the law than they may still be found guilty of the crime. The cases may be quiet challenging to prosecute but there is precedent in Australia and our laws are cleverly written to this effect. What you say may be true under US law but respectfully is incorrect under Australian law which you are obviously unfamiliar.
Let me get this straight:
Australia has "cleverly written" laws that find parties "guilty of the crime" even if it is shown that they "acted within the law".
Unless Australia has access to three pre-cogs hooked up in a pool somewhere I have a hard time believing in your interpretation of Australian law. :-)
This article is just another red herring that uses Apple's name to draw attention to itself. You could substitute "Apple" with any one of hundreds or more similarly involved companies and it would not change the relevant facts one iota. Do we really want to argue tax law on a technology site? Talk about mind numbing blather.
Just another case of lazy journalism. Wallpapering Apple logos on pig does not change the fact that it's still a pig.
So they followed the laws that let them do this. Not avoided taxes illegally like the lede implies.
The laws didn't encourage them to do it. Their intent was to avoid taxes and used the law as a measure of how much they could get away with. The law doesn't stop you from sniffing people's seats:
It is no different from an individual taking advantage of every tax deduction he/she is entitled to under the law.
A closer phrase would be that it's no different from an individual billionaire taking advantage of every tax deduction. It is different from a deduction though, deductions are explicit incentives for growth. There is no explicit deduction being used here, Apple used the law against its intent.
There is no “transfer pricing” here. Transfer pricing would mean that the actually work, or IP, in creating an iPad happened in Australis and was transferred to Ireland or the US. Thats not what happened. Australians bought iPads, and the profits on those sales were declared where they always were declared, that is where the headquarters are.
"ASI (Apple Sales International, Ireland) purchased the finished goods from the manufacturer in China and then resold them to an Apple retail store in Australia, with ASI taking ownership of the products while in transit to Australia, then reselling them at a substantial profit to the Apple retail entity upon arrival.
In 2009 ASI’s accounts filed with ASIC show it paid $US7.5 billion ($8.4 billion) to Chinese manufacturers who build Apple’s products, before turning around to resell these products to Apple subsidiaries in Australia and other countries for $US12.3 billion. ASI pocketed the $US4.8 billion price mark-up as its gross operating profit, which is its gross margin."
Apple Australia is incorporated in Australia so they would be due taxes on profits they make in Australia. What they do is buy marked up products from Apple's Irish subsidiary so it looks like their costs are higher than they are. Apple's Irish subsidiary is then liable for the tax on the profit made by selling to their Australian subsidiary. However, their Irish subsidiary has no tax residency.
Australia needs Apple a lot more than Apple needs Australia. They could pull out completely and their bottom line would not even hiccup - they are that big.
$8,000,000,000.00 might sound like a lot of money, but that is over 10 years. Apple makes that much elsewhere in minutes. Who cares about Australia? They had better watch out or Apple will just cut them off.
It's obvious that you're trying to represent an arguably silly viewpoint that you don't personally support.
Perfectly legal. Shouldn't be. Offshoring has been around and has stunk since long before Apple made it out of the minor leagues. Somehow it never got addressed because the largest offenders always seemed to be the 'big oil' companies who people somehow expect to be evil. The issue never really gained a lot of attention, and lawmakers are always happy to turn a blind eye for a PAC contribution.
When Exxon Mobil was in front they were getting the heat for it. Apple fans didn't notice, mostly because Exxon isn't Apple. Now Apple is the biggest offender and they get the heat.
Apple hasn't done anything wrong, but hopefully enough attention gets drawn to the issue that our politicians fix it. And by fix it I mean fix the laws, not hold hearings pretending it is the evil corporations fault for legally maximizing profits.
Ireland obviously benefits tremendously from this. US corporations, and others, get all the benefits of being US based. They use our roads, our people, are defended by our military, and benefit tremendously from higher education system. When they have an international trade dispute, they clog and congest the US court system, not the Irish one, with appeal after appeal. All those things cost money, and US taxpayers (and I'm sure Aussies, Brits, Germans etc respectively) it stinks when some of the entities benefitting the most from them are percentage wise paying the least.
I disagree. Apple are largely taking advantage of the EU. If Europe consisted of politically and economically independent countries, then Apple would be obliged to pay whatever tax those countries set. But because the EU treats many European countries as one state, Apple can take advantage of this.
I disagree. Apple are largely taking advantage of the EU. If Europe consisted of politically and economically independent countries, then Apple would be obliged to pay whatever tax those countries set. But because the EU treats many European countries as one state, Apple can take advantage of this.
Corporations all do that. It may be problematic and grant the largest businesses an unfair advantage, but it needs to be dealt with via updated laws. As Frood pointed out, Apple just happens to be big enough to attract attention. I would add that Apple clamors for press attention, so it happens to include negative attention when they engage in something that should be admonished.
Comments
Sorry I have to correct you. Under Australian law (tested in the courts) fiduciary duty (to shareholders) is not considered preeminent over common ethics and the good of society. If a business can be shown to have acted within the law, but with the intended PURPOSE of contravening the SPIRIT of the law than they may still be found guilty of the crime. The cases may be quiet challenging to prosecute but there is precedent in Australia and our laws are cleverly written to this effect. What you say may be true under US law but respectfully is incorrect under Australian law which you are obviously unfamiliar. It is a contravention of Australian law to knowingly circumvent the spirit of the law for the benefit of shareholders - let's be very clear about that.
Apple is a multinational company. They have investors in multiple jurisdictions. Their fiduciary responsibility is defined in the larger sense by the locations within which they are incorporated, the locations wherein they are headquartered for primary taxing purposes, and to a smaller extent by the locations from within which their investors legally purchased shares and the locations within which they physically conduct business. (Operations conducted between the various business arms of a multinational corporation are complex. That is one of the reasons that multi-nationals use multiple incorporated entities to conduct business across national boundaries. There are costs and benefits to doing so. The taxation issue is one of them.)
In other words, your point has less impact on Apple than you might think. Apple is bound to follow written Australian law for business conducted in Australia. However, their ethical considerations extend far beyond Australia. While their may be precedent for your position, whether or not it should or even would apply to Apple in this situation is up to Australian courts to decide... Not for you to pronounce as fact.
Your statements as to the impact on Apple are opinion. As opinion, they do not make my opinions wrong.
As for the court ruling you indicate, I sincerely hope you are wrong. People should not be required to guess what is and is not legal. That is the true impact of what you suggest. Nor should they be subject to the whims and vagaries of ethical opinion laid down by individuals at a trial by jury.
As for common ethics, paying taxes according to the law would be the common ethical standard I would think. As to common good, that would be swayed by opinion and is one which will always be tilted against minorities and fictional persons. That is not fair to all in equal measure and a quite good case could be made that it is not ethical.
Yes this shows that the laws need to be changed. But if you look at other companies they likely do the same thing to equally great amounts. Not just Apple. So let's see an unbiased review in the proper context of convincing the Australian government why they need to change the laws to keep at least some of that tax money local.
Haha. I have this feeling Apple will be paying a lot more tax in Australia in the future.
Australia needs Apple a lot more than Apple needs Australia. They could pull out completely and their bottom line would not even hiccup - they are that big.
$8,000,000,000.00 might sound like a lot of money, but that is over 10 years. Apple makes that much elsewhere in minutes. Who cares about Australia? They had better watch out or Apple will just cut them off.
From there, Apple's still untaxed profit can be sent to the Caribbean or Cayman Islands.
According to this document:
http://www.apple.com/pr/pdf/Apple_Testimony_to_PSI.pdf
"Apple does not hold money on a Caribbean island, does not have a bank account in the Cayman Islands, ... "
Nope. Not at all.
Except that wasn’t the case.
Good luck¡
Nah.
given the tendency of producers to sell at whatever price the market will bear, what will happen to prices in any market the government enters? They have the most money of any organisation, due to taking up to 40% of everyone's income in taxes. So I think those health care costs would be a lot lower if the sellers of health care goods and services knew they were selling to individuals and not the government.
Yes! Because so many fewer could afford it, demand for health care would fall sharply, so they would have to lower prices! And likely, population levels would fall too, further reducing demand and thereby further reducing prices.
Why don't we do this?
It seems funny though that the media brings up Apple as the primary target here and Google and Microsoft as an afterthought. I doubt these are the only major players in the field.
How about reporting on this kind of stuff when it becomes illegal?
And then Apple would get get sued by its' shareholders for making these voluntary yet 'illegal' payments as it would be a breech of the corporation's fiduciary responsibilities to its' shareholders.
Not if the PR value exceeded the expense. Why do you think Apple installs so much renewable energy? Because it is the cheapest way to power stuff? People LIKE "green" companies and buy their stuff. Being green is a path to increased profits, despite the small extra costs.
So too giving money to charity, like sponsoring big music festivals. So too (maybe) paying a fair amount of income tax.
But it seems obvious that Apple does not think that paying a fair amount of income tax would yield profits in excess of the expense. So they don't do it. Tim knows exactly how this stuff works, believe me...
You are wrong. Australia has laws against tax evasion - in particular it prohibits using transfer pricing arrangement to shift profit overseas. Make no mistake - Apple has broken the law and will be pursued by the Australian government.
The government may not be particularly quick at finding and correcting tax fraud but that does not mean that it was not tax fraud (and illegal) in the first place.
There is no “transfer pricing” here. Transfer pricing would mean that the actually work, or IP, in creating an iPad happened in Australis and was transferred to Ireland or the US. Thats not what happened. Australians bought iPads, and the profits on those sales were declared where they always were declared, that is where the headquarters are. There is a problem in Irish law, but there is ABSOLUTELY NO WAY THAT AUSTRALIA IS OWED ANY PROFIT ON MARGINS OF IPADS AUSTRALIANS ARE BUYING. Australia already gets taxes on sales ( sales tax) and on retail profiles in the stores. Thats all Australia will ever get even if Ireland charges Apple 35% of tax.
If a business can be shown to have acted within the law, but with the intended PURPOSE of contravening the SPIRIT of the law than they may still be found guilty of the crime. The cases may be quiet challenging to prosecute but there is precedent in Australia and our laws are cleverly written to this effect. What you say may be true under US law but respectfully is incorrect under Australian law which you are obviously unfamiliar.
Let me get this straight:
Australia has "cleverly written" laws that find parties "guilty of the crime" even if it is shown that they "acted within the law".
Unless Australia has access to three pre-cogs hooked up in a pool somewhere I have a hard time believing in your interpretation of Australian law. :-)
Just another case of lazy journalism. Wallpapering Apple logos on pig does not change the fact that it's still a pig.
The laws didn't encourage them to do it. Their intent was to avoid taxes and used the law as a measure of how much they could get away with. The law doesn't stop you from sniffing people's seats:
http://www.telegraph.co.uk/news/newstopics/howaboutthat/1906799/I-did-sniff-colleagues-chair-admits-politician.html
It doesn't mean the law encourages you to go around doing it nor should people be congratulated when they do it.
A closer phrase would be that it's no different from an individual billionaire taking advantage of every tax deduction. It is different from a deduction though, deductions are explicit incentives for growth. There is no explicit deduction being used here, Apple used the law against its intent.
http://www.afr.com/p/technology/cracking_the_apple_tax_code_CvOq1Ut248VX6QkybMcfCP
"ASI (Apple Sales International, Ireland) purchased the finished goods from the manufacturer in China and then resold them to an Apple retail store in Australia, with ASI taking ownership of the products while in transit to Australia, then reselling them at a substantial profit to the Apple retail entity upon arrival.
In 2009 ASI’s accounts filed with ASIC show it paid $US7.5 billion ($8.4 billion) to Chinese manufacturers who build Apple’s products, before turning around to resell these products to Apple subsidiaries in Australia and other countries for $US12.3 billion. ASI pocketed the $US4.8 billion price mark-up as its gross operating profit, which is its gross margin."
Apple Australia is incorporated in Australia so they would be due taxes on profits they make in Australia. What they do is buy marked up products from Apple's Irish subsidiary so it looks like their costs are higher than they are. Apple's Irish subsidiary is then liable for the tax on the profit made by selling to their Australian subsidiary. However, their Irish subsidiary has no tax residency.
Australia needs Apple a lot more than Apple needs Australia. They could pull out completely and their bottom line would not even hiccup - they are that big.
$8,000,000,000.00 might sound like a lot of money, but that is over 10 years. Apple makes that much elsewhere in minutes. Who cares about Australia? They had better watch out or Apple will just cut them off.
It's obvious that you're trying to represent an arguably silly viewpoint that you don't personally support.
No.
The Kerry citation is not an example of selfishness.
I agree.
The selfishness comment was in reference to his heart attack.
I disagree. Apple are largely taking advantage of the EU. If Europe consisted of politically and economically independent countries, then Apple would be obliged to pay whatever tax those countries set. But because the EU treats many European countries as one state, Apple can take advantage of this.
I disagree. Apple are largely taking advantage of the EU. If Europe consisted of politically and economically independent countries, then Apple would be obliged to pay whatever tax those countries set. But because the EU treats many European countries as one state, Apple can take advantage of this.
Corporations all do that. It may be problematic and grant the largest businesses an unfair advantage, but it needs to be dealt with via updated laws. As Frood pointed out, Apple just happens to be big enough to attract attention. I would add that Apple clamors for press attention, so it happens to include negative attention when they engage in something that should be admonished.
The world is fortunate to be full of so many people willing to tell others what to do with their money.