Apple’s ubiquitousness is very well illustrated — either amusingly or alarmingly — by two parallel news-story arcs of the past few days. We were treated this weekend to a comprehensive reveal of the “worst-kept secret” in international corporate dealings: Apple’s systematic and legal evasion of billions of dollars in US taxes. The New York Times calls for a reevaluation of how outdated tax codes, “written for an industrial age” in which products were primarily physical, should be rewritten for the digital age. An iPhone app can be sold from any country — and, as the Times finds, those sold in more easterly continents are often sold through Luxembourg, tax-evasion central.
This piece came just a few days after Apple reported a record-best second fiscal quarter, announcing a rise in earnings of 94 percent, to $11.6 billion. Its quarterly revenue was up to $39.9 billion, from $24.7 billion in 2011. One is almost numbed to the figures: that quarter, Apple sold 35.1 million iPhones (representing 88 percent growth over last year’s Q2) and 11.8 million iPads (a whopping 151 percent growth). This news has not, it’s fairly safe to say, made significant waves: it’s expected, given the company’s growth pattern over at least the past five or ten years. Given the timing of the tax-evasion piece, it’s interesting to see just how much power these figures have to change the conversation.
Apple came back with an official response to the Times, of course. It begins by asserting that Apple has “created an incredible number of jobs in the United States,” and that “Apple’s international growth is creating jobs domestically.” This is certainly true. They note that developers in the States create iPhone apps that are then sold around the world — but the issue the Times points to is not the creation of jobs, but the owing of billions of dollars in taxes to the U.S. (and the French, British, German, and so on) government. It’s a clever way to give this ethical issue a populist spin: Apple’s using the type of rhetoric that has been successful, in an election year, in making lower taxes on corporate gains seemingly equal more freedom and more jobs for individuals. “When America’s most profitable companies pay less,” says Martin A. Sullivan, a former Treasury Department economist who recently released a study on Apple’s federal taxes, “the general public has to pay more.”
Many other tech companies are growing massively and using similar tactics — rerouting profits through subsidiaries in countries with lower tax rates — that they’ve learned, so to speak, directly from Apple. The disparity between tax rates on companies in the digital sphere, who can easily use such methods, and those who sell physical products is significant — Apple’s was 9.8 percent last year, versus Wal-Mart’s 24 percent. Each figure, says the Times, is representative of tech and non-tech rates, respectively.
But does the existence of these tax loopholes justify tech companies’ using them to the tune of so many billions of dollars? It seems that structures set up before the digital age can no longer fully address the capabilities and responsibilities of digital-centric entities. With the speed at which the tech industry is advancing, this is something we can’t wait to address.