Apple's "ITax": "[It] isn't alchemy; it's accountancy"

Apple’s Right, Corporate Income Tax Should Be Killed: Pulitzer Prize-Winnng Tax Expert

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Many economists and tax experts, and of course CEOs, have pushed for more drastic change – like eliminating the corporate income tax altogether.

 “I think it would make the system much simpler,” says Pulitzer Prize-winning tax expert David Cay Johnston. He spoke to The Daily Ticker's Aaron Task and Henry Blodget as Cook went head-to-head with Congress.

Johnston says killing the corporate income tax outright would immediately spur growth, investment and hiring. Plus, eliminating the tax would reduce the number of tax loopholes and make a lot of the corporate lobbying in DC moot. One proponent of far-reaching tax reform is Sen. Rand Paul, R-Ky. The anti-tax hawk – and tea party favorite – told the Senate subcommittee to apologize to Cook and Apple executives.

"If anyone should be on trial here it should be Congress ... for creating a bizarre and byzantine tax code," said Paul. "If you want to assign blame, this committee needs to look in the mirror and see who created that mess." That “mess” is still the tax law of the land. If Cook’s reform efforts gain steam, maybe they could call it the iTax.

The Apple Tax Diversion - Senators beat up a U.S. success for following the tax laws they wrote.

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Mr. Levin unveiled the results of his months-long investigation into Apple's corporate taxes and accused the American business success of employing "alchemy" and "gimmickry" to lower its tax bill. What Mr. Levin did not do was present any evidence of anything illegal or even inappropriate. He did prove that Apple has smart accountants and tax lawyers.

Mr. Levin is outraged that Apple subsidiaries in Ireland pay little or no corporate income tax on profits generated from Apple's international sales. Ireland has a laudably low corporate tax rate of 12.5% to attract jobs and capital, but it turns out that for certain corporations controlled by entities outside Ireland, the deal gets better.

The Apple units are based in Ireland, so U.S. law does not consider them to be U.S. corporations subject to U.S. corporate tax. But since they are managed and controlled by Apple in the U.S., Irish law doesn't consider them Irish companies and thus they are also not subject to the 12.5% Irish corporate tax. This isn't alchemy; it's accountancy. 

...... None of this required a Senate "investigation" to discover because Apple is constantly inspected by the IRS and other tax authorities. These tax collectors are well aware of Apple's corporate structure, which has remained essentially the same since 1980. An Apple executive said Tuesday that the company's annual U.S. tax return adds up to a stack of paperwork more than two feet high.

We wonder what the Irish think of the spectacle of an American Senator expressing outrage that an American company doesn't pay enough Irish taxes. As Wisconsin Republican Ron Johnson pointed out on Tuesday, Americans are better off when U.S. companies pay less in taxes to foreign governments.

That includes Americans who are invested in Apple through their mutual and pension funds. And it includes Apple's U.S. workers who benefit when the company is able to sell more iPhones and iPads overseas. Roughly 50,000 of Apple's 75,000 employees are in the U.S.

It's also amazing to behold Democrats who routinely claim that high tax rates don't matter to business behavior denouncing a business for engaging in behavior to avoid paying higher tax rates. Which brings us to the real scandal that Mr. Levin has exposed: the folly of America's corporate tax code.

Comment: The Facts:

• Congress made the tax code complex. It is complex for individuals and it is manyfold more complex for corporations!
• Has Apple broken the law? Nope! They have followed the law and explored all the loopholes available to them. I do that when I pay taxes. I minimize every tax by taking every deduction!
• The complexities introduce many inefficiencies into the economy: Accountants, Auditors, Agents, Lobbyists, et cetera. 
• All corporate income taxes are passed invisibly onto consumers.