At apple we do the right thing

Opinion: Apple could, and should, do the right thing on tax

— Jun. 11th 2019 6:38 am PT

Apple has long aimed to do the right thing, not just the profitable one, on a great many fronts. On tax avoidance, not so much.

Apple could be the good guy here. It could be the one tech company to take a strong stand on paying its dues, rather than using any loophole it can find to minimize the amount of tax it pays.

That would, I suggest, be consistent with the company’s approach to other areas of corporate responsibility …

Accessibility is a great example. Apple unapologetically admits to shareholders that its investments in this area don’t make financial sense. It spends more money in accessibility R&D than it ever makes back in increased sales. But it does so because it’s the right thing to do. Because it changes lives.

Environmental policy is another area where this is true. Apple does a huge amount of research into using more environmentally friendly materials, uses recycled materials wherever possible and wants to go much further. It manages forests for sustainable packaging. It funds environmental protection schemes. It uses renewable energy itself and supports its suppliers in doing the same thing. Facing kick-back from shareholders who objected to what they considered a waste of money, Apple CEO Tim Cook politely but firmly told them he didn’t care whether it cost the company money.

“We do a lot of things for reasons besides profit motive,” the CEO said. “We want to leave the world better than we found it.”

Anyone who had a problem with that? They should sell their Apple shares. “Get out of the stock,” Cook suggested.

Privacy is another area where this is true. Apple has potential access to some of the most valuable user data in the world. The iDevice-owning demographic is an extremely attractive one to advertisers, and Apple could make a fortune by allowing its use for ad-targeting. But it doesn’t do so because it values customer privacy over profit.

Apple even made the terms of its upcoming Apple Card offering far more consumer-friendly than most cards, including no fees, no penalties, and app-based features to help cardholders minimize interest payments, despite the hit this will mean to the profitability of the card.

Now, cynics would say that the real reason Apple does all of this is because it’s good PR. I don’t personally share that cynicism, but even if you do, it actually doesn’t matter. Apple should do the right thing on tax because it’s the right thing to do, but it would also be great PR.

What is the right thing on tax?

Now, some people would say ‘hold up here – all companies manage their affairs in a tax-efficient way, as do many individuals. Governments create tax breaks for both companies and individuals, and they do so because they want people to take advantage of them.’

So, let me draw distinctions between three things here:

Tax evasion

This one is simple: it’s illegal. It’s fraud. It’s misrepresenting your financial position in order to escape tax that the law requires you to pay. Apple obviously doesn’t do this, and nor do most individuals.

Tax efficiency

This is the other end of the scale. This is companies and people arranging matters to legally and properly take advantage of tax breaks offered to them. For example, if you’re over 65, the US government offers you a bigger standard deduction. Taking that deduction is exactly what you’re supposed to do. If you have dependent children, you can claim tax deductions on day-care costs. If you make a donation to charity, you don’t have to pay the income tax on the amount you donated. If you pay into a 401(k), you can get large tax breaks. You can deduct tax for education, mortgage interest payments, medical expenses, savings, all kinds of things. All perfectly legal, all as the government intended.

Companies, likewise, are fully entitled to tax breaks for things like investments, research, job creation, renewable energy production, childcare provision, creating energy-efficient products and so on. Again, all legal, all perfectly proper.

But we then move into what I consider the sketchy area.

Exploiting tax loopholes

Some call this ‘aggressive tax avoidance,’ but whatever you call it, this is very different from the type of tax efficiency described above. Exploiting loopholes is by definition sketchy. It’s legal, but it’s using tricks – often very convoluted ones – to avoid paying the amount of tax the law intended.

Sometimes the names alone are enough to give a clue as to their complexity. For example, one reportedly used by Google is known as the Double Irish With a Dutch Sandwich. It’s legal (for now), but as sketchy as can be.

What Apple did through its Irish headquarters wasn’t quite in that league, but it was still, in my view, pretty sketchy. Let’s take the example of an iPhone sold in the UK, and look first at what the British government expects to happen – and what would indeed happen with a British company.

• Apple sells an iPhone for £1000, including VAT (sales tax)
• Of that, £167 is VAT, which goes to the taxman, while £833 goes to Apple
• So far, the consumer has paid £167 tax, while Apple has paid nothing
• Apple makes (let’s say) £316 profit on that sale (based on 38% margin)
• Apple pays corporation tax in the UK at 19% = £60

Now let’s look at what apparently happened when Apple’s Irish tax arrangements were in place. Instead of that last bullet-point:

• Apple declares that profit in Ireland, where it had a sweetheart tax deal with a reported effective tax rate of 2.5%
• Apple pays no tax in the UK
• Apple pays corporation tax in Ireland at 2.5% = £7.90

So instead of paying £60 tax in the UK, where the sale was made, Apple paid just £7.90 to a different country.

What would I like Apple to do?

Apple says this about its approach to tax:

Apple pays all that we owe according to tax laws and local customs in the countries where we operate.

Which is, I would argue, technically true but misleading. The amounts owed by law and customs depend on how Apple arranges its tax affairs, and some of its arrangements were most definitely geared to exploiting loopholes in the law.

What I’d like to see is Apple taking a principled stand, and paying the same rates of tax as any local company in each of the countries in which it sells products and services. Which, in the above example, would mean paying £60 in the UK and not £7.90 in Ireland.

Yes, this would cost the company money; doing the right thing often does. But Apple chooses that path in many areas and tells shareholders they can sell up if they don’t like it. Given that taxes are what pay for things like schools and hospitals – as well as the roads Apple uses to get its iPhones into the stores and the police force that prevents people just wandering into Apple Stores and helping themselves – I’d like Apple to take the same moral high ground with taxation. Don’t just do what the law allows you to get away with: do what’s right.

That’s my view; what’s yours? Please take our poll and share your thoughts in the comments.

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About the Author

Ben Lovejoy

Ben Lovejoy is a British technology writer and EU Editor for 9to5Mac. He’s known for his op-eds and diary pieces, exploring his experience of Apple products over time, for a more rounded review. He also writes fiction, with two technothriller novels, a couple of SF shorts and a rom-com!

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Tim Cook to Apple Employees in New Video: ‘At Apple, We Do the Right Thing’

Apple executives today sent a company wide email to employees asking them to review Apple’s Business Conduct Policy, reports 9to5Mac. The policy reportedly details how employees should behave both in and outside of the company while representing Apple, covering topics like personal investments, workplace relationships, and policies on public speaking, press inquiries, and endorsements.

The email included an iBooks version of the Business Conduct Policy and a video from Tim Cook (video text below), which gives an inside look at company values.

As Dr. Martin Luther King once said, the time is always right to do what’s right. At Apple, we do the right thing. Even when it’s not easy. If you see something that doesn’t meet our standards, speak up. Whether it’s a quality issue or a business practice, if it affects Apple’s integrity, we need to know about it.

In the email, sent by SVP and General Counsel Bruce Sewell, Apple reminds employees that its policies are based on core values of «honesty, respect, confidentiality, and the critical obligation of every Apple employee to adhere to legal principles like antitrust and anti-corruption laws.»

I am writing to ask you to do something very important — set aside a little time to review Apple’s Business Conduct Policy. It explains in very clear terms how you are expected to conduct yourself with our customers, business partners, government agencies, and fellow employees. We expect every Apple employee to understand and comply with these rules.

While it is unclear whether there was a particular incident that spurred the email and video to employees, Apple has had ongoing trouble with product and information leaks. Apple has always been a secretive company, and last year, Tim Cook even promised to «double down» on secrecy when it came to products.

Despite Cook’s efforts, multiple Apple products in recent months have leaked early, with prototype shells and parts for the iPad Air, the iPhone 5s, and the iPhone 5c appearing well ahead of their fall launches.

Update: The original video has been removed, but the text from Tim Cook can still be found above.

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Apple founder Steve Wozniak backs right-to-repair movement

Apple co-founder Steve Wozniak has issued a passionate endorsement of the right-to-repair movement, despite the company’s opposition.

The movement wants laws passed to guarantee users access to information and parts to repair their own devices.

«We wouldn’t have had an Apple had I not grown up in a very open technology world,» Mr Wozniak, its co-founder with Steve Jobs in the 1970s, said.

«It’s time to recognise the right to repair more fully.»

‘Extremely dangerous’

Existing right-to-repair rules in Europe and the US are limited to appliances and vehicles, respectively.

And right-to-repair advocates say Apple is one of the fiercest opponents to expanding the legislation to cover consumer electronics.

It allows repairs by its own authorised technicians only and does not generally provide spare parts or repair information.

And it has reportedly engaged lobbyists to persuade lawmakers repairing devices can be extremely dangerous.

But Mr Wozniak, 70, said: «Companies inhibit [the right to repair] because it gives the companies power, control, over everything.

«It’s time to start doing the right things.»

Mr Wozniak made his comments in an impassioned nine-and-a-half-minute reply to a request from right-to-repair campaigner Louis Rossmann on Cameo, a site that allows ordinary people to pay celebrities for a short message.

«This one has really gotten to me,» he said.

«When starting Apple, I could never afford a teletype for input or output.

«They cost as much as two cars.»

But he knew how TVs worked and had access to schematics — so he built his own solution to turn his TV into an early computer monitor for the Apple I.

«I didn’t have to afford something I could never afford,» he said.

«I wasn’t restricted from anything that kept me from building that computer and showing the world that the future of personal computers is going to be a keyboard and a TV.

«That all came from being able to repair things, and modify them, and tap into them yourself.»

He also credited an open platform with the success of the Apple II, which he said had shipped with schematics and designs.

It had been, he said, the only source of profits at Apple for the company’s first decade.

«So why stop them? Why stop the self-repair community?» he asked.

«How was Apple hurt by the openness of the Apple II?»

Mr Wozniak left Apple in the mid-80s but revealed in an interview last year he was still technically an employee, receiving a weekly paycheque of about $50 (ВЈ36) out of «loyalty» despite having no role in the running of the business.

‘Creative minds’

He also had much to say about the value of open technology for education.

«You could repair a lot of things at low cost — but it’s even more precious to know that you did it yourself,» he said.

And he spoke of the «motivation and joy» of young people learning to write software and develop hardware «to prove to themselves they’ve got a little special skill in the world», adding it was «very motivating for creative minds, believe me — that’s how I grew up».

Earlier this year, Mr Rossman began trying to raise $6m to get the right to repair passed into law by a direct-ballot initiative.

So far, he has raised $750,000.

And he has now posted a video asking for direct involvement and a donation from Mr Wozniak, saying other interested donors were waiting for a figurehead to «go first» before donating large amounts.

Apple has been contacted for comment.

US President Joe Biden is widely expected to announce some form of executive order on the topic in the coming days — as pressure also mounts from officials in Europe.

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