Two superb articles on Google, Apple and tax

Philip Stephens in the Financial Times 'gets it' on Google and its boss Eric Schmidt, who has said he is proud of his company's slippery, gymnastic tax-dodging ways, and is 'perplexed' that anyone should question it. Lee Sheppard, writing in Forbes, gets it too - laying out Apple's tax strategies in more detail. First, Sheppard, summarising:

"Apple’s brand halo is slipping. Silicon Valley’s well-known vanity and contempt for government are amply displayed in Apple’s tax figures. Apple, a consumer products company that sells beautifully designed gadgets, pays very little tax anywhere in the world, including the United States.

Apple AAPL +0.8% is playing fast and loose with consumers’ affection for its highly discretionary products, especially in Europe. It is ill-advised for any consumer products company not to pay tax where it sells products. Equally important, Apple’s tax avoidance is also testing the patience of strapped European governments that are looking for ways to get American multinationals to pay tax.
. . .
Even for a jaded tax lawyer used to hokey schemes to avoid taxation, Apple’s arrangements were surprising."

In short, Apple's Foreign sales, which make up 60 percent or so of Apple’s profits, are routed through these Irish subsidiaries -- and taxed nowhere at all.

Ah, says Eric Schmidt of Google, whose company has been subjected to similar scrutiny and criticism - but we are just doing what our shareholders tell us to do: it's our 'fiduciary duty,' he says. This is 'just capitalism," he says, and he's proud of Google's record stripping income out of Britain and many other countries and shoveling it into tax havens.

Eric Schmidt is "perplexed" as to what all the fuss is about.

As we have said on several occasions, Mr. Schmidt needs to get himself an education on tax, and what tax means. He might usefully turn to the Financial Times, and their columnist Philip Stephens, who has nailed it in a column entitled Why Google and Eric Schmidt really don’t care about tax:

thriving societies depend on more than strict adherence to the letter of the law. Communities work because citizens, institutions and, yes, even companies observe norms, conventions and mutual obligations that are nowhere on the statute book.

To suggest that each and every responsibility and duty must be codified in statute is to invite a lurch towards totalitarianism – the micromanagement by an overmighty state of every dimension of our myriad relationships.

There is no law (in Britain at least) that obliges me to join the back of a queue for, say, theatre tickets or a restaurant table rather than infiltrate myself at the front. I suspect, though, that Mr Schmidt would agree that queue-jumping is pretty antisocial.

To be legal, in this instance, is not to be right."

Which is just as we have been saying. Quite right.

And Mr. Stephens goes on: again nailing the issue beautifully.

"Then there is that fiduciary duty. Of course, companies should not pay “voluntary” tax.

But they do not face the binary choice posited by Mr Schmidt. Somewhere between charitable giving to the tax authorities and the setting up of Byzantine pyramids of shell companies in every tax haven known to man and womankind, there is what my lawyer friends call the wholly justifiable use of the tax code to protect shareholders.

The odd thing is that, at times, Google seems to understand that it ought to look beyond the letter of the law. The company boasts about its many “good works” in local communities. Presumably these are consistent with its fiduciary duty?

Which is, again, just as we have been saying. It exposes the fluffy illogic that Mr. Schmidt's arguments rest upon.

And then there's the matter of whether Google has been pushing right up against the boundaries of the law, potentially lying to the tax authorities and to the UK's parliament. There is no duty on any CEO anywhere to do that. Stephens summarises what Reuters found:

"When the company says that the billions in revenues garnered every year by its sales force in Britain are not liable to local tax because technically, the business is “closed” in Dublin, it frankly looks sleazy."

Which, again, is just what we have been saying.

And then there's the small matter of companies writing the tax laws.