Apple has ranked as the highest valued company in the world for years. In a bid to avoid paying its share for government services, which help keep the American and European economies stable for companies like Apple, Apple had allegedly made a special deal with Ireland to reduce its European tax burden to 2%. Although many argue international businesses should only be taxed where they earn their profits, Apple is also deferring US tax payments, which provides Apple with a monetary benefit akin to an interest-free loan not enjoyed by other US taxpayers, by declining to repatriate its overseas earnings. Apple has, however, utilized the US Treasury, at the expense of US taxpayers, in its defense against a $14.5 billion tax judgment.
To prevent free riders from utilizing “intra-national” competition to suppress tax rates and tax revenue to unsustainable levels, European Union members have agreed to bar tax-advantages and other state-aid that is not available to all businesses. Doing so prevents EU countries from undermining each others’ regulatory and tax capacity. This is similar to how commerce between the States in the United States is supposed to be protected. European Union members have also agreed to enforce this prohibition by requiring member nations to reclaim any taxes that should have been paid. These are the rules. The US Treasury should defend against the unfair targeting of US-based companies, but it must also hold companies like Apple accountable for taxes owed.
Although the US tax code is in need of serious reform and US-based companies hold around $2.4 trillion overseas to avoid paying nearly 40% in taxes, individual US taxpayers with federal, State, local, Social Security, and Medicare taxes, among other taxes, are subject to a tax rate higher than 40%. If any individual US taxpayer earns enough to fall in the top tax bracket, the rules say they pay the highest rate, which business face. These are the rules. As it is, individuals cannot write-off their expenses nor can they utilize numerous other tax advantages businesses enjoy. When taxpayers like Apple do not have to follow the same rules, it means others have to pay more. Like all components of the legal system, tax laws should be crafted to secure the needs of the nation then evenly applied to everyone.
The US Treasury has supposedly interceded on behalf of Apple and other companies, because any judgment against the US-based transinternational corporation would reduce Apple’s US tax burden. It is likely Apple would seek to convert any judgment into foreign tax credits, thereby reducing Apple’s US tax burden. Should Apple ever repatriate the money it has earned outside of the US, it would assuredly owe significantly less in US tax dollars thanks to any European Commission judgment. Such a huge judge, and subsequent reduction in Apple’s US tax burden, could even encourage Apple to repatriate it overseas profits sooner than later. Like all capitalist entities, Apple will do whatever is most economically advantageous for Apple, which will assuredly deprive the US of tax revenue.
Instead of fighting the European Commission, the US, the nations of European, and businesses like Apple should join forces to make government more effective and efficient, so US tax rates can be reduced in a fiscally responsible, sustainable manner that ensures Apple will continue to enjoy the protection of the US government, at a reduced cost, and access to European markets. The role of government in the economy is to foster a stable environment that nurtures prosperity for all. Like the financial services sector, i.e. Wall Street, the government does not create wealth, but the services provided by government do help the economy function. Instead of undermining the role government plays in the economy for their short-term advantage, affluent individuals and businesses need to help government do a better job.
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