Nobel-Winning Economist: Apple’s Irish tax arrangement is a ‘fraud’

“Joseph Stiglitz, an economic professor at Columbia University and 2001 recipient of the Nobel Memorial Prize in Economic Sciences, has described Apple’s tax arrangements in Ireland as ‘a fraud’ in a recent interview with Bloomberg TV,” Joe Rossignol reports for MacRumors.

Here we have the largest corporation in capitalization not only in America, but in the world, bigger than GM was at its peak, and claiming that most of its profits originate from about a few hundred people working in Ireland — that’s a fraud. A tax law that encourages American firms to keep jobs abroad is wrong, and I think we can get a consensus in America to get that changed. — Joseph Stiglitz

“Under current U.S. laws, Apple is able to shift billions of dollars in profits to Ireland, where it operates multiple subsidiaries, sheltering those earnings from up to a 35 percent corporate tax rate in the United States,” Rossignol reports. “Ireland has a much lower corporate tax rate of 12.5 percent, but Apple is believed to have a sweetheart deal with Ireland that sees it pay less than 2 percent in exchange for creating jobs in the country.”

MacDailyNews Take: There is no “sweetheart deal with Ireland.”

It’s very important that people understand that there was no special deal that we cut with Ireland. We simply followed the laws in the country over the 35 years that we have been in Ireland. If the question is, was there ever a ‘quid pro quo’ that we were trying to strike with the Irish government – that was never the case. We’ve always been very transparent with the Irish government that we wanted to be a good corporate citizen… If countries change the tax laws, we will abide by the new laws and we will pay taxes according to those laws.Apple CFO Luca Maestri

Read more in the full article here.

MacDailyNews Take: Obviously, U.S. corporate taxes are too high.

Under the current U.S. corporate tax system, it would be very expensive to repatriate that cash. Unfortunately, the tax code has not kept up with the digital age. The tax system handicaps American corporations in relation to our foreign competitors who don’t have such constraints on the free flow of capital… Apple has always believed in the simple, not the complex. You can see it in our products and the way we conduct ourselves. It is in this spirit that we recommend a dramatic simplification of the corporate tax code. This reform should be revenue neutral, eliminate all corporate tax expenditures, lower corporate income tax rates and implement a reasonable tax on foreign earnings that allows the free flow of capital back to the U.S. We make this recommendation with our eyes wide open, realizing this would likely increase Apple’s U.S. taxes. But we strongly believe such comprehensive reform would be fair to all taxpayers, would keep America globally competitive and would promote U.S. economic growth.Apple CEO Tim Cook, May 21, 2013


  1. Democrat economic policies always seek to put high taxes on capital. Always. Capital has options. It can be moved to places where it is appreciated, not expropriated. The 50 year gutting of American industry is a direct product of Democrat high tax and massive regulatory burden placed on American business. When you see empty factories, warehouses, storefronts, thank your local and federal Democrats, and their big government partners in the GOP, like Mitch McConnell and John Boehner and Paul Ryan.

    1. That is utter bs. Empty storefronts, factories and warehouses are all due to allowing the free-flow of capitol and investment, as opposed to putting restraints or where it can or can’t go.

      Take a look at your history, where you’ll see the role of disastrous “free” trade policies supported by corporate Democrats as well as Republicans if you’re curious as to why it is that American factories are closing.

    2. kent, you are far too partisan. It renders your opinions meaningless. If you believe that you can pin the “gutting of the American industry” on one political party, then you are a deluded idiot.

      By the way, Bush had eight consecutive years in office and I did not see any reversal in the corporate flight to low wage countries. All we got was two wars, a massively inflated debt and annual deficit, and a massive recession bordering on depression. So much for the partisan BS. Politicians from both major parties suck when it comes to looking out for the average citizen and the country, as a whole.

      1. KingMel – for a King you should learn to read. It would help you not say so many dumbass things. If you could read you would know that I actually blamed both parties. But then, you can’t read. By the way, the Democrat Party is the one that always promotes high taxes. If you don’t know this, you are dumber than an Android phone.

    1. Having been part of a team that was awarded one, knowing several laureates personally and having met several more, as well as having taught a course the topic, I disagree.

      I will say that “The Nobel Memorial Prize in Economic Sciences” is not a Nobel prize. Nobel never included that in his will. Basically, the Swedish central bank decided to throw a bunch of money at the Nobel committee to create it. Presumably to try and elevate their field to the same level of science as Physics, Chemistry and Medicine/Physiology. Proof that money talks.

      The problem with the Economics prize is that economics is a social (soft) science at best. And the difference in the Real World is that one can make predictions and test hypotheses in hard science. We can find a solution to a problem, stop a disease, uncover a mechanism etc. Economists for all their theories beyond basic supply and demand can not tell you if inflation will go up or down next year, tell you the price of gold next week, or predict consumer spending for this month. The term “voodoo economics” for Reaganomics was actually redundant – it’s all voodoo beyond understanding basic human behavior. Hard science has cured many diseases, alleviated the suffering of millions (and caused some along the way, sure). We can point to specifics. Economists can only justify their theories and predictions after the fact. And it’s their spawn that caused the economic meltdown in 2008. Associating soft science with the imprimatur of a Nobel in science is an affront to the scientific establishment.

      The Peace prize is, of course, fairly political, so that does detract from those that honestly merited it. Borlaug, Begin/Sadat, Carter, Walesa, Tutu, Mandela being great examples and Arafat/Rabin/Peres and Kissinger being some of the more dubious.

  2. If it’s “fraud” it’s legal “fraud.” So-called “experts” like Joseph Stieglitz instantly lose credibility with things like the sweetheart deal attack when all he had to do was research his unprofessional stupidity. I’ve never heard anyone say that all of Apple’s profits originate from “a few hundred people” working in Ireland. What disingenuous specious hogwash! Desperate to make a point with nothing substantive to back up his lame diatribe. Hey Joe, got an agenda much? Facts don’t suit your point of view? Then lie like a dog! Works for analcysts.

  3. As Judge Learned Hand write in a 1934 decision:

    “Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.”

  4. You would think that someone of his stature would actually back it up with facts…you know…like his reason for receiving the Nobel price in economics. And, that’s just for starters. Here, he provides nothing but an opinion. You know what the saying goes about opinions…

  5. American individual taxpayers (and thats the middle class folks) have been raped and pillaged by the corporate America (Including APPLE)! Truth is intellectual property was sold into these low rate tax jurisdictions in the ’90’s (Yes during Bill Clinton’s presidential years), and this was how the tax revenue was generated to “balance the budget” during Bill Clinton’s terms. Since the initial sale of intellectual property (a one time event) , these corporate behemoths have been paying royalties from the US to these intellectual property owning entities in Ireland and other low tax regimes effectively shielding earnings from US TAX. And of course, they under valued the intellectual property assets they sold, and overvalue the same intellectual property royalties they shield from US Tax.

    Now MDN, if those revenues had been flowing into the US Treasury, we might ALL be enjoying lower tax rates today.

    Lets face it, the US has the most costly military in history, and without it, all those US corporations wouldn’t be doing squat amount of business on a global scale because most of the world (middle east and asia) would be in civil wars or those populations otherwise enslaved, or they would be trying to compete with a viciously nationalistic China that would have already taken over Japan, Korea, Philippines, and others. Good luck with that Microsoft, Apple, Amazon, Facebook, Ford, General Motors, General Electric, Boeing. The Board of Directors, CEO’s are terribly lacking in their responsibility to the Country under whose leadership they are able to compete in a global marketplace.

    BTW, anyone see any Chinese companies selling their IP to Ireland? Hasn’t happened and won’t.

      1. I won’t disagree that government spending is always the least efficient, however, the debt runup and transfer of taxes to the working middle class has hurt this country immensely. Not recognizing the cost of our leadership to stabilize the world and not recognizing how these companies have succeeded as a result of the US leadership is what is so concerning.

        Hopefully mankind will be able to turndown the nationalistic and religious fervor and realize it’s about the Human Race, and will treat each other on a more equitable basis with respect and compassion.

  6. When discussing taxation I often tell people that it is my feeling that 38% of my income taken in fees, fines, levies and taxes of all sorts and redistributed to whomever or whatever, by threat of violence (which is what our system does) is basically slavery. For at least 38% of my life I am working as a slave to the U.S. government and other taxing authorities.

    “The practice, from week to week, of openly robbing me of all my earnings, kept the nature and character of slavery constantly before me. I could be robbed by indirection, but this was too open and barefaced to be endured. I could see no reason why I should, at the end of each week, pour the reward of my honest toil into the purse of any man.” – Frederick Douglass

  7. While it is true that US corporate tax rates as listed are high, effective rates are low. The whole lobbying & campaign contribution system that runs our Congress and increasingly our State Legislatures, is carving out tax exemptions for companies and sometimes entire industries. Some states have even entered agreements to rebate the personal income taxes collected not to the individual- to the employer.

    There is plenty of corruption on both sides of the aisle, but the Republicans have pulled off the feat of having common citiens bitching about corporate tax rates when they are personally paying higher taxes as an individual. Nothing says tool like a guy making $65k bitching about the high taxes corporations pay when many pay no tax at all. General Electric is especially good at dodging taxes- a company that claimed Old Glory when they lined up for TARP money, but claims in discussions to be an “international” compny hindered by America.

    I think individuals and companies alike should pay taxes in the country where that income was earned- otherwise a sale in Germany should only be subject to German taxation. That is not how the tax laws read currently and Apple is filtering money through Ireland to avoid taxes elsewhere.

    Finally, I never hear any of the Conservatives complaining about the way American expatriates are doubly taxed. Meanwhile both Trump and Clinton use overseas tax shelters to dodge US taxes.

    1. Not only are the true (post-exemption and credit) corporate tax rates much lower than the nominal rate, but a head-to-head comparison of income tax rates ignores the key fact that the USA uniquely relies on income (and capital gains) taxes as its dominant revenue source. Most other countries depend on Value Added Taxes and such.

      As a result, the USA ranks somewhere like 32d out of the 34 top industrial nations in terms of taxes in relation to Gross Domestic Product. It is simply not true that Americans have higher taxes than other residents of the industrialized world… although nobody thinks that their own taxes are too low. The issue with the taxes on American business (and individuals) is fairness, not total tax burden.

      I think what Dr. Stiglitz is trying to point out is that the current multinational tax system is no system at all. It rewards creative tax accounting schemes that ignore business reality. Nobody thinks that Apple generates most of its European profits in Ireland, so why is it allowed to pay most of its taxes there (rather than the places where the profits are generated)? He isn’t saying that the scheme is a “fraud” in the sense of “criminal,” but in the sense of “utterly fictitious.”

      We need an international tax system that actually is a system, with fairness and equal treatment to all the parties concerned. Nobody can possibly think that the current arrangements provide that.

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