Apple paid roughly zip to New Zealand Inland Revenue—that country’s taxing authority—over ten years, even while selling $4.2 billion in merchandise in the country. The practice is scrupulously legal—and therefore OK in the eyes of many. I, however, don’t think it’s right.
The Situation
Apple is a world leader in structuring its global operations so that profits are accounted for in low-taxing districts, regardless of where its products were actually sold. Apple pays enormous taxes in the U.S.—it’s the largest taxpayer in its home country—but it pays next to nothing in most parts of the world.
As stated above, these practices are assuredly legal. At the very least, Apple’s tax practices have survived intense scrutiny from countries where Apple pays little or no taxes. The closest thing to a legit legal challenge to Apple’s practices has been questioning from grandstanding U.S. Senators and a most-likely-to-fail complaint against Ireland by the European Union.
To that end, Apple Australia issued this statement to The New Zealand Herald:
Apple aims to be a force for good and we’re proud of the contributions we’ve made in New Zealand over the past decade. Because our products and services are created, designed and engineered in the US, that’s where the vast majority of our tax is paid.
All Politics (and Sales) Are Local
At least some New Zealand politicians aren’t having it. Green Party co-leader James Shaw told The Herald:
It is absolutely extraordinary that they are able to get away with paying zero tax in this country. I really like Apple products – they’re incredibly innovative – but it looks like their tax department is even more innovative than their product designers.
That’s the thing. Companies with local operations should pay their fair share of taxes to local taxing districts. Roads, schools, services—all of these things are used to support Apple and its employees. All of these things support each and every Apple sale to local residents. Apple should pay its fair share to support the things that make those sales possible.
I’ve made this argument before, and plenty of people disagree with me. To them, Tim Cook has a fiduciary responsibility to maximize profits for its shareholders, the end. The same is true for every other CEO of American corporations large and small.
Next: Do the Right Thing, Apple’s Good, and Final Thoughts
Yes all this looks to be quite a ‘shock’ to NZ parliament 🙄
https://taxpolicy.ird.govt.nz/tax-treaties
Clearly others here know way better than the parliament 🙄
https://taxpolicy.ird.govt.nz/tax-treaties/role-double-tax-agreements
So much fun. 😀
And yet I’m still right and you’re still wrong. No bother by the way. 😀
Oops – John, not Peter. I don’t resile from anything else I said.
Kheit (you don’t deserve a title; neither am I going to call you Peter any more):
You barrelled in with all the charm and perspicacity of an Australian cricket captain or, dare I say it, a tangerine “reality” TV “star”.
– no you don’t. That’s pathetic rhetoric.
See above. Sarcastic, unnecessary, unpleasant teka. (I used a Te Reo Mäori word; it would have been censored otherwise).
You have said that you are ignorant about New Zealand. This is palpably clear.
1) Apple is incorporated in New Zealand, with offices in Auckland and Wellington. Under the Companies Act, Apple’s duties are to the company itself, its employees, its customers (via the Consumer Guarantees Act and the Fair Trading Act), and much further down, if at all, to its shareholders. What the situation is in the US is of no relevance.
2) New Zealand has a representative democracy, where we get to vote for parties that represent our interests. Many parties. (Virtually) Every vote counts. If you gave a damn about anything other than your own selfish views, you might like to take a look at that.
3) This has raised a lot of interest in New Zealand. There is widespread concern, especially after Matt Nippert’s exposure of (particularly) Apple’s tax avoidance, and there is a chance that it will have an effect on the general election later this year.
Don’t bother replying. I don’t care for you.
Bryan, there comes a point after reading this time and again I have to ask: What are you doing about it?
Who are you complaining to? A bunch of people who come to a website called The Mac Observer that are Apple fans to begin with? Even if there are people here who agree with you, what are you doing and what would you like people to do?
It’s like the boy who cried “Wolf!” one too many times. You are screaming into the proverbial hollow tube. What you are getting out is a form of an echo. To put it like my late mother used to: Stop kvetching and start stretching. What are you doing other than kvetching in so many words? Have you contacted your local representatives that control your state finances? How about your members of congress? Sure, they may be bought and sold by the lobbyists, but you can have an effect on them.
As a small business owner, I am not sure I agree or disagree. I know I do not get the same tax breaks as the larger companies but I also know that when I have a problem, standing on a platform and screaming is not going to help. I’ve been to Annapolis (my state capital) to speak with my representatives. I’ve told them personally what my concerns are for both my business and the changes in the laws that they are proposing to help but will hurt me in the long run. I’ve learned to stop kvetching and I am stretching out to work with the people who are making the laws.
My challenge to you is what will you do to start stretching? To start to make an impact? Otherwise, to borrow a quote from Macbeth, it’s all “full of sound and fury signifying nothing.”
@Laurie, in other words, I’m right. Since it’s “difficult” you can get some money or no money from them. That’s the deal your representatives chose to take. And now the public “knows” we look forward to your voting the politicians in the “RULING” and voted in party, out for your agenda now. Want to make a bet?
I love that you “disagree” with shareholder responsibility being ruled out by you. I’m sure that is of great police to the corporate officers when a shareholder suit is lobbed on them. I’m sure your post will totally put that in perspective during the law suit. Glad we have you on record as defender of truth and justice that is TOTALLY relevant to the real world. 🙄
John Kheit:
Politely: It is clear, as you say, that you know absolutely nothing about New Zealand. Up until Matt Nippert disclosed Apple’s tax avoidance, the extent of it was not known by the voting public. As the Labour Party leader Andrew Little has said, the ruling National Party has been asleep at the wheel over tax: Stuff. Labour itself has been lax in the past in stopping this, but National has had nine long years and still done nothing.
But it’s hard to do anything about it – these large multi-nationals (and it’s of course it’s not just Apple) shuffle their tax dealings around the world until they find a spot where they have the least tax obligations. It’s whack-a-mole. Until the voters and tax-payers where they are not paying their fair share know about it and decide that this is not acceptable and force their governments to enact laws to stop it, these companies will continue to do it. But voting for or against a party is a binary choice – it’s possible but rare to make that vote in a particular way on a single issue.
As for the companies responsibility for their shareholders overriding all others, I reject that as Friedmanesque ideology. It’s a cop-out. If companies want to do business in this country, they must follow New Zealand’s laws. And they can profit from it – there’s huge good will in being a good corporate organisation. Cartoon
Corporations have no business worrying about what is “right” and what isn’t in this matter.
Their obligation to shareholders is to do what is legal. To do anything else lands them in hot water. If they fail to obey the absolute scrupulous letter of the law they will have government agencies after them, costing the company more. If they choose to not take advantage of every law as written, if the choose to pay a “fair” amount” or “what is right” then they will have a shareholder revolt on their hands which will cost the company more. They might even get the SEC after them. Either way Apple is doing exactly what they as a publicly traded corporation have to do. They have no wiggle room in this regard.
@john kheit Hahaha, thanks to TMO’s resident lawyer and contrarian for weighing in on this.
Bryan, are you sure this is accurate? Even if Apple if Apple isn’t paying certain taxes such as corporate income tax to New Zealand, its sales are almost certainly taxed via the GST. If the GST is 15%, then the tax on $4.2B would be some $630 million, certainly not “zero.”
Bryan, I feel the issue is the same type of one that people complain about Apple not bringing back foreign profits back into the country. If people want different rules, then the government needs to change them. I don’t agree with not paying taxes. By all means support the locals. It seems that in many cases the common people are the least concern when governments make these tax laws and loopholes for corporations. There is another question, if Apple pays more taxes in a country, do they raise prices like they have in UK after Brexit referendum? Then what is the cause of that — possibly less sales, and then the net effect is less money
I think you are pointing at the wrong party. Apple didn’t write the rules/laws/tax rate. Those laws/rules were written by your politicians. Apple cannot change those rules. The politicians can.
How much should Apple contribute? 10%? 15? Everyone is going to give a different answer.
Shouldn’t there at least be some guidelines? – there are – it’s called the tax guidelines. And Apple is doing exactly what those guidelines say.
Apple is a private entity and is answerable to its shareholders. The politicians on the other hand, are answerable to YOU
You can’t change Apple. You *can* change politicians.
Bryan, could you be more thorough? What exactly is Apple’s corporate footprint in NZ? What corporate taxes are they “avoiding”? Are we just talking about retail sales profits? If the later is the case then Alan and Kiwi answered that moral objection. You cannot be arguing that Apple should be paying Corporate profit taxes in every country an Apple product is sold. I would think the board would fire Cook for doing something like that.
New Zealand collects a large (15%, if I recall) GST sales tax on every purchase. That is, NZ collects significant taxes for every Apple product sold in NZ. The real question has nothing to do with how and where taxes are collected, but how much. 15% is partially from retail markups, and is paid more directly by the consumer than a direct corporate tax, but the real question is how much total taxes should NZ be enriched by Apple business in NZ. Perhaps it should be a lot more, but I have no problem with what route the money takes to get to the government.
As a New Zealander I’m pretty sure this is an incomplete picture of Apple’s tax payment in NZ. While they may be using the law to avoid paying taxes on profits here as they do elsewhere there is also a little thing called Goods and Services Tax which is applied to all their products at the rate of 12.5%. So sales of their products here do contribute to the NZ’s government’s coffers as opposed to the claims of zero contribution made in the article.
Apple along with many others whilst following the rules may be legally right but it’s certainly not ethically right. The problem is the rules and the people who make them, the politicians. They could stop this tomorrow if the agreed to change the system but there’s too many interests, too much corruption involved. Given the apathy of the electorate this will never change.
Well I’ll give you a hint without knowing anything about New Zealand. Your lawmakers made laws like that. Either the majority of folks are actually OK with that and that’s why you have those lawmakers, or you need to convince or remove and elect other lawmakers to do what most people like. That’s my out of left field speculation.
Most loopholes, here and abroad, on taxes aren’t really accidental. They are enacted purposefully. Ireland new darn well what deal it was cutting.
Perhaps NZ didn’t, but if the law has been that way for multiple years, I’d guess that the govt knew what it was doing, and had its reasons.
I don’t know where the previous response is coming from. I would say amusing at very least. As a NZ RN I pay close to $1000 in tax. Locally owned businesses pay tens of thousands a month in tax to support the infrastructure that is quote “systemically underfunded”. Yet many overseas cooperations come here and literally take billions of dollars away from the economy by manipulating loopholes In the tax laws. The rest as to why this continues to be legal is completely beyond me and many of us here in New Zealand
Totally disagree. If Apple is following the law, then kudos to them.
Further, Bryan, the page views/ads this story, this website, and podcasts from it go to many other states where you guys do not pay taxes, yet TMO derives beneficial income from activities in all those states, and yet pays 0 taxes there. So I know it’s perfectly legal, and why I have no problem with it myself, since you don’t think such things are right, I look forward on your report of paying supplemental and non-necessary taxes there. 😀