As I write, here in the UK It is the last day for submitting an Income Tax return for 2016-2017. So tax springs to mind! A great day for more thoughts on Apple and tax.
The first blog diagnosed the problem. Now let’s prescribe the cure.
OK. Here goes.
Corporations these days spend lots of time asking: “Who are our stakeholders?”.
On tax the answer is obvious: Everyone! Everyone is a stakeholder when it comes to corporate taxes.
It’s straightforward. We all share the burden of financing government spending and servicing government debt. If you pay less, I end up having to pay more. Largely we don’t mind paying. Providing what we pay is our fair share and no more.
Increasingly people believe that corporations (and the very well-off) are not paying their fair share. And indeed there is supporting evidence. Just think of the Paradise Papers.
We’re in a post-trust world.
A corporation that wants to gain acceptance as acting with integrity on tax needs to do three things.
Action 1: Describe what you do (and don’t) do. You might say: ‘Publish a Tax Policy’. But that’s a bit hi-falutin’ and abstract. What we really want to know is: ‘Day-by-day how does Apple or any other corporation decide how it acts about tax? What framework of reference does it use?’
Action 2: Publish a country-by-country breakdown of all taxes paid. Until recently the merest suggestion of this induced in corporate tax managers a state of nervous collapse. Recovering from collapse, they offered excuses and warnings: ’It will be too much work. It is too complicated to explain. The public isn’t bright enough to understand it’.
And so it went on.
Then firms started to publish. Rio Tinto was an early adopter. Many other companies have followed suit.
The warnings have proved false. The public has been bright enough to understand. It hasn’t been too complicated to explain. And the work? Well, companies domiciled in OECD countries now have to make detailed country-by-country returns to their national tax authorities.
Bingo! No extra work at all.
If you publish the return on your website. No-one can accuse you of subterfuge, cover-up or lack of transparency. (And if you have confidence in your case, you will want to cite the detail to rebut criticism).
Action 3: Engage and explain With the first two jobs done, a corporation can reference the logic of its policy and show integrity of action through its on-the-ground practice. It can take on critics on the firm ground of fact not the shifting sands of assertion.
Apple stated in response to the New York Times and others:
“…The debate over Apple’s taxes is not about how much we owe but where we owe it. As the largest taxpayer in the world we’ve paid over $35 billion in corporate income taxes over the past three years, plus billions of dollars more in property tax, payroll tax, sales tax and VAT”
That’s 100% right. The debate is about where Apple pays its taxes.
Right now, it is a fight Apple cannot win.
It never will.
Unless that is it adopts the prescription set out above.