The Apple Tax
The majority of taxpayers, in my experience, are decent, law-abiding citizens, willing to pay their dues. They will probably plan their life to avoid paying more tax than they have to. Not to do that would label them ‘daft’. Having settled on the rules, most taxpayers obey them. I wish governments and central bankers would do the same. They often appear to be devoid of such a policy. No wonder we think less than kindly about them.
Apple was smart but has done nothing illegal in moving its tax base to Ireland. Shareholders think it has done the right thing to try to protect their $200+ billion cash. I am sure the business of transferring the company’s base was not an easy one. I expect it took a lot of time and thought – time that could have been usefully spent on producing the next product. But governments have made tax complex and time must be devoted to understanding it and playing by the rules. Why should the rules then be changed overnight and arbitrarily? And by what definition of fair is retroactive application of such changes permissible?
Ireland may have done something that transgresses the EU rules by using the tax system to effectively rebate money to Apple in exchange for jobs provided by their operations there. If so the legislation was badly drafted. That cannot be laid at Apple’s door nor at the doors of its shareholders. I accept that not all taxpayers are honest. They should be punished if they disobey the law. But to ask a taxpayer to judge what might become the popular view of what taxes ought to be paid and act according to this forecast is unacceptable. Tax authorities have been moving in this direction for some years. Throw the responsibility for the reasonableness of the law onto the ruled and the ruler has the bat and the ball. It’s called dictatorship and we should protest strongly.
Where and when should tax be paid? In the country where the profits are made, obviously. Increasingly, that might be thought to be difficult to identify. International online trading and worldwide courier services enable us to buy where goods plus carriage will be cheapest. But the profits are actually made where the goods or services are produced. So the tax on goods should be charged ex-factory on a credible, provable cost-plus-profit basis.
In the 1940s through the 1960s Britain had a Purchase Tax. It was levied at the factory gate, was very simple, required a tiny number of inspectors and cost almost nothing to collect. When Britain joined the EEC, as it was then, it had to abandon this simple tax and change to Value Added Tax (VAT). Calculating this revolving tax is highly complicated for the payer; policing it costs thousands of times what Purchase Tax cost; the number of inspectors is legion and the pettiness of their work, legendary.
Tax has to be raised; tax has to be paid. It is the job of governments and civil servants to make the rules as simple as possible, to make collection as cheap as possible and to screw up the lives of those trying to earn enough to pay tax, as little as possible.
And to move the goal posts as seldom as possible – and never retrospectively.