Apple Inc. has found a new way to make billions of dollars. A company with a treasure trove of over $150 billion in cash is proving the old saying that the rich just keep getting richer.
Although no one is accusing Apple Inc of any skullduggery they are questioning how they can feel it is morally right to borrow billions of dollars at very low interest rates that assure them of making even more money and not paying a dime in tax.
How they did it is the subject of a US Senate permanent subcommittee that hopes to air it findings on Tuesday when CEO Tim Cook takes the witness stand. Apparently they were able to exploit very subtle loopholes in the tax codes of Ireland and the United States to make it work.
In effect they found a way to pay only the local taxes in Ireland that they were required to pay and then that small window allowed them to avoid any income tax on more than $74 billion dollars worth of income over the last four years. Apple Inc was quick to point out that they are one of the largest taxpayers in the US with well over $6 billion paid to the IRS for profits made in 2012.
Senator John McCain (R., Ariz.) felt that Apple wasn’t telling the whole story. He claimed that while the company is one of the biggest tax payers in the US it is also “one of the largest tax avoiders”.
International tax law is an extremely complicated issue. Most corporations that are headquartered overseas are not subject to US income tax unless their primary base is domiciled on US soil. All of the subsidiaries that are being challenged are in fact domiciled in Ireland and what Apple Inc is doing is legal.
Remember only tax evasion is against the law, tax avoidance is not illegal and Apple is doing nothing illegal, the only question is whether it is really immoral?
I guess it depends on which side of the market you are on, the one receiving the money or the one paying it!