Apple's taxing problem

New York Times accuses Apple of tax avoidance on a large scale

The New York Times has published an in-depth look at Apple's tax arrangements, which finds that the computing company avoided paying around $2.4bn federal income tax in the US last year. The company paid, worldwide, tax of $3.3bn on profits of $34.2bn, although it does not break down what proportion of that tax is paid in what countries, nor does it detail which years the tax is due to – as Worstall points out, American corporation tax is usually deferred, so some of that tax will actually be on last year's profits rather than this years.

Tax avoidance stories always raise the question of definition. In this case, for instance, much of Apple's tax bill will be naturally reduced by the fact that the company sells 64 per cent of its products outside of its American home, and makes almost everything in China. Since it doesn't have to pay American tax on something made in China and sold in Ireland, it perfectly acceptably reduces its liability.

Yet as with all of these stories, that sort of reduction is not all that the company is doing. Many of their accounting structures seem to be put in place with the sole purpose of abusing the tax laws of multiple nations to pay as little as possible. Take, for example, the accounting technique improbably known as "double Irish with a Dutch sandwich". If Apple sells something in the UK, the profits are accountable to an Irish subsidiary, which then passes them on to a Dutch company taking advantage of European capital mobility, then back to a second Irish company which is technically owned by a company in a country with a 0 per cent corporation tax rate.

On paper, then, the majority of Apple's profits are made outside of the US. Despite the fact that the majority of sales are also made internationally, the NYT points out that:

The majority of Apple’s executives, product designers, marketers, employees, research and development, and retail stores are in the United States. Tax experts say it is therefore reasonable to expect that most of Apple’s profits would be American as well. The nation’s tax code is based on the concept that a company “earns” income where value is created, rather than where products are sold.

Even when profits make it into the United States, Apple still moves them in ways that seem wholly to do with paying lower taxes. The company makes all of its corporate investments through a subsidiary with the pun-tastic name Braeburn Capital, which is based in Reno, Nevada – 200 miles from Cupertino, and with a 0 per cent state corporation tax rather than California's 8.84 per cent.

Apple is far from alone in behaving like this, but the company has managed to retain a remarkably spotless image while growing to become the biggest in the world. They already suffered greatly from the perception that they were callously mistreating their workers in China, and this report could create a problem almost as large.

San Francisco, California. Apple reported a 93 percent surge in second quarter earnings with a profit of $11.6 billion Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

John Moore
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The man who created the fake Tube sign explains why he did it

"We need to consider the fact that fake news isn't always fake news at the source," says John Moore.

"I wrote that at 8 o'clock on the evening and before midday the next day it had been read out in the Houses of Parliament."

John Moore, a 44-year-old doctor from Windsor, is describing the whirlwind process by which his social media response to Wednesday's Westminster attack became national news.

Moore used a Tube-sign generator on the evening after the attack to create a sign on a TfL Service Announcement board that read: "All terrorists are politely reminded that THIS IS LONDON and whatever you do to us we will drink tea and jolly well carry on thank you." Within three hours, it had just fifty shares. By the morning, it had accumulated 200. Yet by the afternoon, over 30,000 people had shared Moore's post, which was then read aloud on BBC Radio 4 and called a "wonderful tribute" by prime minister Theresa May, who at the time believed it was a genuine Underground sign. 

"I think you have to be very mindful of how powerful the internet is," says Moore, whose viral post was quickly debunked by social media users and then national newspapers such as the Guardian and the Sun. On Thursday, the online world split into two camps: those spreading the word that the sign was "fake news" and urging people not to share it, and those who said that it didn't matter that it was fake - the sentiment was what was important. 

Moore agrees with the latter camp. "I never claimed it was a real tube sign, I never claimed that at all," he says. "In my opinion the only fake news about that sign is that it has been reported as fake news. It was literally just how I was feeling at the time."

Moore was motivated to create and post the sign when he was struck by the "very British response" to the Westminster attack. "There was no sort of knee-jerk Islamaphobia, there was no dramatisation, it was all pretty much, I thought, very calm reporting," he says. "So my initial thought at the time was just a bit of pride in how London had reacted really." Though he saw other, real Tube signs online, he wanted to create his own in order to create a tribute that specifically epitomised the "very London" response. 

Yet though Moore insists he never claimed the sign was real, his caption on the image - which now has 100,800 shares - is arguably misleading. "Quintessentially British..." Moore wrote on his Facebook post, and agrees now that this was ambiguous. "It was meant to relate to the reaction that I saw in London in that day which I just thought was very calm and measured. What the sign was trying to do was capture the spirit I'd seen, so that's what I was actually talking about."

Not only did Moore not mean to mislead, he is actually shocked that anyone thought the sign was real. 

"I'm reasonably digitally savvy and I was extremely shocked that anyone thought it was real," he says, explaining that he thought everyone would be able to spot a fake after a "You ain't no muslim bruv" sign went viral after the Leytonstone Tube attack in 2015. "I thought this is an internet meme that people know isn't true and it's fine to do because this is a digital thing in a digital world."

Yet despite his intentions, Moore's sign has become the centre of debate about whether "nice" fake news is as problematic as that which was notoriously spread during the 2016 United States Presidential elections. Though Moore can understand this perspective, he ultimately feels as though the sentiment behind the sign makes it acceptable. 

"I use the word fake in inverted commas because I think fake implies the intention to deceive and there wasn't [any]... I think if the sentiment is ok then I think it is ok. I think if you were trying to be divisive and you were trying to stir up controversy or influence people's behaviour then perhaps I wouldn't have chosen that forum but I think when you're only expressing your own emotion, I think it's ok.

"The fact that it became so-called fake news was down to other people's interpretation and not down to the actual intention... So in many interesting ways you can see that fake news doesn't even have to originate from the source of the news."

Though Moore was initially "extremely shocked" at the reponse to his post, he says that on reflection he is "pretty proud". 

"I'm glad that other people, even the powers that be, found it an appropriate phrase to use," he says. "I also think social media is often denigrated as a source of evil and bad things in the world, but on occasion I think it can be used for very positive things. I think the vast majority of people who shared my post and liked my post have actually found the phrase and the sentiment useful to them, so I think we have to give social media a fair judgement at times and respect the fact it can be a source for good."

Amelia Tait is a technology and digital culture writer at the New Statesman.