Apple is shifting its tax burden

[Commentary] Apple is in hot water with Congress now because of something it has not done: regularly paid the top U.S. corporate income tax rate of 35 percent on every dollar it earns around the world.

From 2009 to 2012, in fact, Apple managed to avoid taxes on nearly a third of its worldwide net profits, some $30 billion, which were booked to its Irish subsidiaries, according to a report by the U.S. Senate Permanent Subcommittee on Investigations. Apple’s actions “undermine the fairness of the U.S. tax code,” the report says. We would say rather that Apple’s actions demonstrate the unfairness of the tax code — or at least its hopeless complexity. As a tax-law expert witness explained to the subcommittee, everything the company did was arguably legal under U.S. and Irish tax law. Apple’s Irish subsidiary was not registered in the United States, so it owed no tax on this side of the Atlantic; but, under Irish law, Apple was not liable for taxation in Ireland either, since it is not managed and controlled in that country. Actually, most of the money wasn’t taxed anywhere. The Apple case illustrates, seemingly for the millionth time, the need for corporate tax reform, a need already recognized by everyone from the Obama administration’s Treasury Department to the Republican chairman of the House tax-writing committee. There is also broad consensus that reform should consist of closing loopholes in return for lower rates.