Apple Inc. and Tax Avoidance:
Multinational Corporations and the Game of Loopholes
Phebe Garver
9 September 2015
In 2013, the US government brought forth the findings of their investigation on Apple, Inc.,
in which they raised the question of how much tax may or may not have gone unpaid or
been avoided by Apple. In his article for BBC, Robert Peston explains how and why Apple
relocated their taxable locations: “Apple transferred offshore into low-tax countries the
economic rights to its intellectual property - its valuable and usually patentable knowhow with the result that it avoided around $10bn (£6.5bn) of US tax every year” (Peston,
2013).
Though legally acceptable, Apple’s actions inspired queries into the ethics of practices like
this, especially as signs indicate this to be a growing trend amongst massive multinational
corporations. Peston too points out that Apple’s tax avoidance is indeed part of a growing
trend—specifically for companies that found their start in the US (Peston, 2013). An
important question comes from these queries and lines of reporting: Does Apple’s power
to find and exploit these loopholes negate their need to adhere to a more responsible
corporate strategy? Does the fact that Apple can mean that they should?
This growing practice of subverting taxation will most likely lead to many negative
implications for the future of the global economy. Peston contends that this trend of
multinational corporations finding loopholes lacks logic because "over time it will erode the
very infrastructure of the global economy which allows them to thrive” (Peston, 2013).
Despite the trend of increasing demands for instant gratification, is it ethical to overlook the
consequences of being so parsimonious with profits earned? Does Apple have a
responsibility to uphold any perceived debt to society, or are they beholden only to their
direct stake- and shareholders?
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Theories and Application
From a business standpoint, one could argue that Apple’s power in the market and its
generally untouchable brand allow it to make decisions like this one, decisions that would
be detrimental to a tech company with less command. This tax scandal is only one in a
series of PR hurdles that stretches as far as the company’s history, yet Apple still
maintains its power of consumers and markets. Because of its status, the questions
become less about threat of financial repercussions and more about social responsibility.
From the time of Apple’s conception to its current mammoth status, CSR theories and
practices have changed, and one wonders if Apple too has managed to adapt with those
changing expectations. Two points of view will be explored: that of Colin Fisher and his
exploration of “ethical ambiguity”—and more specifically the way in which it is handled—
and that of utilitarianism.
Ethical Ambiguity in CSR Models
In Colin Fisher’s chapter for Reframing Corporate Social Responsibility, he discusses
corporations and the way in which they frame and implement their CSR models. In his
article, he discusses “four broad approaches” to CSR implementation, one of which looks
at the how the “modern view is that by accepting its broad CSR responsibilities [a]
company will prosper both financially and in terms of enhancing its reputation” (182,
Fisher, 2010). This modern view is contrasted to a “classical view which “takes a
minimalist view of CSR” (182, Fisher, 2010). He further goes on to explore how
“[acceptance] of ethical ambiguity is unusual in organisations,” despite the fact that “moral
uncertainty is inevitable and… should not be hidden behind a façade of take it or leave it
options” (187, Fisher, 2010).
Indeed Apple has many statements and guidelines for public view on their site—discussing
everything from how they expect their employees to conduct business to statements on
their efforts to become more sustainable. But these are broad and relatively vague
statements that are more often than not based upon their historical decisions (Apple,
2015). Additionally, there is no clear and current mission statement or business plan that
enumerates the ethical guidelines that steer their corporate practices.
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They have precise codes of conduct laid out plainly for individuals within their corporation,
but no guidelines clearly laid out regarding their wider, corporate aims to uphold socially
responsible practices.
Fisher insists that ethical ambiguity is inevitable, but should a company that spends so
much time outlining the ways in which its employees conduct business find the time to
outline the way the corporation itself will conduct business on a global economic scale?
Does Apple’s current untouchable status allow them more flexibility in their ethical
ambiguity?
Utilitarianism in Multinational Corporations
In considering the validity of Apple’s case, utilitarianism lends a fitting ethical base for
weighing the morality of their actions. According to Crane and Matten’s definition of
utilitarianism, “an action is morally right if it results in the greatest amount of good for the
greatest amount of people affected by the action” (Crane and Matten, 101, 2010). It is
important to highlight that Crane and Matten also further deconstruct utilitarianism into act
(wherein the details specific to a certain case are the only details upon which focus is
turned) and rule (wherein the case details are compared to other cases and a generalised
outcome is inferred from the inherent trend) (Crane and Matten, 104, 2010). Act
utilitarianism will be better suited to the task of observing the case of Apple specifically.
So within utilitarianism theory, who are those who are being positively affected by Apple’s
choices, and are they a majority of those being affected for good or worse? To be
considered in this situation are the shareholders, the stakeholders, and the general
consumer. The most obvious benefactors from an increased profit are the shareholders.
Money Apple saves from paying less in taxes can go directly back into the company, and
those that have financial stake in the company will see the positive results.
Similarly, the stakeholders—employees, their families, customers—also stand the chance
to benefit from the increased profit margin. There is the potential for higher salaries and
better benefits and for lower prices. Though how far these profits will actually make it down
into the company is a completely different discussion, it is worth noting that based on
reports about and coverage on Apple as an employer would indicate that the lowest rungs
of the ladder—arguably those who most need to see those increased profits—are unlikely
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to see any of the additional cash. It is also unlikely that Apple will consider decreasing its
hefty price tags in lieu of such increased profitability—why should they decrease their
prices when they can command so much higher? These speculations say nothing about
the potential for good though, and Apple’s increased cash flow does allow it ample
opportunity to help its employees and customers considerably.
On the other hand, consumers in general may be losing out on this deal, as Apple puts
less of its profits than anticipated back into the economy. As Peston described earlier, this
trend is an irresponsible gamble with the world economy. The potential for crisis is too high
in a world full of corporations looking out for their bottom lines. However, when considering
Apple’s case individually, the impact they might have on the economy is too little to
consider this one instance to be instigator of crisis.
Conclusion
Apple’s actions are, in the end, woefully predictable. The corporation must make a profit to
continue their business, and they are doing so at the highest possible rate. However,
Peston explains there may yet be implications for Apple’s actions: “Surely the essence of
Apple's brand is that its products make all of us more productive, in play or work. So for
Apple to be seen as the world's greatest accumulator of cash that seemingly has little
productive use may not be adding lustre to its image” (Peston, 2013). Apple’s marketing
team no doubt would wish to avoid the expectation of Apple being predictably conniving.
As unfathomable as it currently is, there is a distant threat that at some point the
consumers will become fully disenchanted with Apple and shift their buying power to a
more worthy company.
As explored earlier in Fisher’s modern view on CSR implementation, Apple could benefit
from simply making better choices that allow them to “prosper both financially and in terms
of enhancing its reputation,” even with their current market standing. Much like the threat
the larger trend of tax avoidance poses to the global economy, Apple faces that threat of
ultimate obsolescence.
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To insist that Apple has some greater responsibility to maintaining a higher level of
business practice seems idealistic and out of place in a world of bottom lines—but of
course they do. Of course one of the most powerful brands in the world has the
responsibility to make more ethical decisions that can help to build a better society.
Additionally, making more socially responsible choices is simply good business practice in
the information age, an age where even the most opaque walls can be made transparent
by those vigilant pursuers of secrets and private information. If Apple cannot be motivated
to make more socially responsible choices for the benefit of society, then they should at
least consider making more socially responsible choices for the sake of their own
reputation.
In light of the case of Apple and the growing trend of putting CSR second to profits, the
questions about implications now shift in nature, looking instead to the future: Do
corporations have a responsibility to act less like money generating machines and more
like morally-guided individuals in light of the trend of socially responsible corporate
practices? While discussing “the virtue question and the objectivist question” in motivation
to correct moral issues, Colin Fisher insists that the two are linked: “Companies seldom
have a single motivation; virtue and interests make a powerful combination” (202, Fisher,
2010). Though Apple is arguably not able to pursue both equally currently, the best of both
worlds may yet be possible.
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