Companies throughout the world always try to find loopholes in their respective tax codes to pay less tax. The morality of this act is a totally different quandary suited to a different discussion. The New York Times on Saturday reported that the giant corporate Apple avoided paying billions of dollars in tax by setting up their offices that collect and invest profits in states and countries that have very low and attractive corporate tax rates. Now the New York Times article has pointed out a number of issues, but the issues I mean to discuss here are twofold. First that the taxing system is not in tune with this digital age, the American tax code is based on the concept that a company earns income where value is credited rather than where products are sold, illustrating how modern tax systems have become increasingly ill equipped for an economy dominated by electronic commerce.
Tax avoidance that is ‘Perfecte Legalis’ yet costing the common man in America
The second issue being that while this perfectly legal method of tax avoidance works perfectly well for corporate America the one to pay the price is the common American. The fallout is on the common man. What a state loses in corporate tax is paid out of the common man’s pockets. A lot of states are facing shortfalls in their budgets making them cut health care programs, raise tuition fees etc.
Yet the ironies of it all being that America still needs these giants to fuel the economy and help it on its road to economic recovery.
University of Birmingham, UK