Apple's vast profits are deserved, but the scale of the tech giant's tax avoidance demands an international response


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Given its success at generating shareholder value, and the ubiquity of its “i” products, perhaps Apple should rebrand itself “iProfit Inc”. It would certainly be justified; the highest profits recorded by any public company in the history of capitalism is quite an achievement.

Unlike the oil giants and others who have made, and sometimes still make, lots of money, Apple’s returns are not artificially high because of inflated commodity prices or a monopoly position. Apple is in a highly competitive marketplace; its products are desired and desirable; and it has made personal computing, especially through its iPad tablet, accessible – not least to older users bamboozled by other devices. Not always a true pioneer, Apple has often taken existing products, such as the smartphone, and improved, if not perfected them. That was the genius of Steve Jobs, and indeed the firm he created and his successors in leading it. 

Apple has certainly come a long way since near bankruptcy a couple of decades ago. At that time it was Microsoft that seemed ready to eat the world. Then, Microsoft decided to take a stake in Apple simply to keep its principal rival in personal computer systems going. For if Apple disappeared, Microsoft was concerned that the US competition authorities would take a much closer interest in its market dominance. Bill Gates of Microsoft and Steve Jobs of Apple declared a more competitive future, and Microsoft duly took its share of Apple in 1997, for about $150m. This was sold about a decade ago, as Apple’s new results started to re-establish the brand; had Microsoft held on to the shares they would now be worth $21.86bn (£14.41bn).

Apple’s new-found strength and Microsoft’s relative weakness today proves another point; that no business behemoth dominates for ever. As has been much remarked, before Microsoft it was IBM and ITT who were the technological giants, virtual sovereign states with revenues as large as national economies and the political power to match. We do not hear very much about their overweening influence today. In our own time, in our own backyard, only recently it was Tesco that was the vampire squid of the British high street; now it cannot pay its shareholders a dividend. General Motors was once the engine of America, until it needed fixing by the federal government. BP is hardly the force it was; nor are many of the once-mighty investment banks – pace Lehman Brothers. And so on.

Still, for as long as Apple is the supremely profitable machine it has become, it should pay its fair share in taxes. Like all large transnational corporations, Apple makes the best of what its lawyers and tax accountants come up with in wheezes to minimise the tax bill. Yet Apple, like those other companies that have come in for such criticism, has a simple moral obligation to pay a fair share of its profits in taxation in the territories in which it generally makes those profits. Corporate social responsibility is much more discussed than practised, and that is to the long-term benefit of no one.

Realistically, too, governments need to do more than cajole corporations. The same sort of international co-operation that has ended some abuses of tax havens for individuals should be extended to corporate tax affairs. Profit is not a dirty word, but neither is tax. International rules and conventions can be framed that allow for tax competition and freedom of movement of capital as well as protecting the tax base. The international community can use sanctions against small territories that abuse their position. The world is worried about inequality, and companies such as Apple need to pay heed to that just as acutely as they listen to their customers.