The boys from County Cork: Why Obama is right to seek to end tax expatriatism

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Of all the Irish companies I know of, I think Apple ( AAPL ) is probably my favorite. If the name of Apple Computer doesn't conjure shamrocks in your mind, or if something about that sentence appears to conflict with history as you know of it from various Steve Jobs biopics, you are probably not alone. In fact, to become Irish, all Apple did was create subsidiaries, register them in Cork, Ireland, then funnel profits through those subsidiaries. Why do this? Because doing so gave Apple an effective tax rate of 3.7%.

Did I call Apple an Irish company? Sorry, that's not true. Though registered in Cork, Apple's subsidiaries are not registered as existing in the Republic of Ireland , or any other country. Don't ask me how that could be possible, ask a member of Dáil Éireann. I'm not complaining that the Republic of Ireland chose to concoct this scheme (though the EU will likely have something to say about it soon.) If Ireland changes its policy, some other country will set up something similar.

It is the duty, therefore, of the US legislature to change our own tax laws so that Apple, and other companies that do what Apple has done, will still have to pay taxes in the U.S. President Obama has made it clear that he agrees, and the effort is being spearheaded by Treasury Secretary Jacob J. Lew, who, on July 15, wrote the following in a letter to US legislators:


"We should prevent companies from effectively renouncing their citizenship to get out of paying taxes. We should not be providing support for corporations that seek to shift their profits overseas to avoid paying their fair share of taxes."

Perhaps the logic and justice of these words is self-evident, but if not, here is why Lew and Obama are right: companies that sell to U.S. markets, that take advantage of American safety and security, that ship their products on our fine roadways, that enjoy the protection of our courts… these companies benefit from government expenditures as much, and more so , in many cases, than private citizens. They certainly enjoy these benefits to a greater extent than do smaller companies which must compete with them, but which aren't large enough, rich enough, or corrupt enough to escape US taxes. The status quo should outrage all who believe in a free and fair markets. By allowing these companies to skirt our tax laws, we are increasing the tax burden on everyone else and adding to our national debt. That should outrage conservatives. The money the US never received from Apple could also now be spent to clothe, feed and educate America's influx of child refugees; that should outrage liberals.

Our country is being cheated, and any lack of outrage-on anyone's part-is outrageous.

By the way, for Apple, the money gained from the Irish (Corkish?) tax scheme, has done nothing but pile up. A few pennies have been returned to shareholders, but Apple has made no effort to distribute its gains to its own workers. By raising wages, they could… oh, who am I kidding? This ploy is for the ultra, ultra rich. Its total immorality has the weight of a wisp of smoke next to the weight of all those beautiful zeroes.

Rupert Murdoch has emerged as the stern face of those seeking to block any change to the current tax system. Speaking of zeroes…

Julian Close has been a business writer since the first day of the twenty-first century, having written for PRA International and the United Nations Department of Peacekeeping. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. He became a stockbroker in 1993, but now works for Fresh Brewed Media and uses his powers only for good. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC .


This article was originally published on MarketIntelligeneCenter.com



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Taxes

Referenced Stocks: AAPL

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