Fundamental Threshold Question
Leaving aside the undeniable and inescapable fact that taxation is theft, which makes this sort of tax avoidance not only NOT "morally questionable," as Hammarbtyp would have it, but perfectly legitimate and even morally OBLIGATORY once fiduciary duty to shareholders is taken into account (more on that in a moment, below), no one has yet remarked on the obvious threshold question of whether income should be taxed at the corporate level in the first place. (Taking the existence of taxes, including income taxes, as given.) It should not. "Income" should not be "recognized" -- and taxed -- until it is paid out to shareholders in the form of dividends.
(It is ironic that, in the United States at least, the people who complain that corporations do not pay enough in taxes tend to be the very same people who complain about the "legal personhood" of corporations. If a corporation is but a legal fiction and not a real person at all, how can it have income?)
Alternatively, if logic and common sense do not prevail, income MAY be taxed at the corporate level. But IF it is, then dividend payments to shareholders should not be counted as part of shareholders' income (for income tax purposes), because the income has already been taxed at the corporate level. Alternatively, if dividends ARE counted as income taxable to the shareholders, then dividend payments should (just like interest payments) be deductible from the corporation's taxable income.
One of these three expedients MUST be taken if double-counting and double-taxation (or more) of income are to be avoided. But the best expedient of the three is simply not to tax the "income" or corporations in the first place.
Why? Because without corporate income taxation, we would not have all these perverse incentives for all this silly gimmickry: investment tax credits (which are crude proxies for proper expensing of capital investment, and which inevitably misdirect capital -- subsidizing the PURCHASE of capital equipment instead of properly treating and taxing income from the EMPLOYMENT of capital equipment), accelerated depreciation and artificial inventory accounting methods (LIFO and the like), the shifting of income from one jurisdiction to another (with a lower tax rate, or none at all) via arbitrary intra-company transfer pricing, and so on. All of these economically counter-productive gimmicks exist because, and only because, governments insist on taxing income prematurely -- before it has actually been paid into the pockets of real human beings.
The urge to criticize Apple, IBM, et al. for what they are doing implicitly presupposes that, as corporations, they SHOULD be paying income tax in the first place. But the best and most economically defensible answer is that they should not. And even if the income of corporations IS taxed (which will inevitably bring with it unseemly and AESTHETICALLY objectionable practices of the sort documented in the article), fairness, logic and economics all dictate that the corporate income tax be integrated with the individual income tax as it presently is not (at least not in any jurisdiction I am aware of).
Economists have known all of this for over 50 years now -- at least since 1962, if not before. Arnold Harberger's seminal 1962 paper on the incidence of the corporate income tax gave rise to a gigantic literature on both the incidence (who actually pays it?) and the efficiency effects of the tax. Short answer: we have no friggin' clue who ACTUALLY bears the brunt or burden of the tax (customers, in the form of higher prices; employees, in the form of reduced wages and/or reduced employment and scale of the business; other suppliers, in the same way as employees; or shareholders -- who in turn may be poor workers or widows invested in pension funds as easily as they may be rich fat-cats), but we know it creates all sorts of perverse incentives for highly inefficient investments and business practices. All of this is well- and long-established, and none of it is controversial.
(There are disputes and qualifications in regard to certain ancillary or subsidiary matters of technical detail, but not in regard to any of the basic principles.)
In the face of all this, the burden is on him who would complain about corporate tax avoidance strategies -- such as the shifting of income from one jurisdiction to another via the rigged pricing of intra-company sales -- to justify the taxation of CORPORATE income in the first place. Why on Earth should Apple, IBM, or any other corporation -- **as distinct from its shareholders** -- pay an income tax rate (average or otherwise) any greater than ZERO?
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Leaving aside the fact that taxation is theft, and therefore ALWAYS immoral, and confining ourselves to economics, I say that the shareholders should pay income tax, but the corporation itself should not.
And even those who disagree with me about abolishing the corporate income tax generally agree that we should do one or the other -- tax income that is earned through corporations at the corporate level OR at the individual level -- but not both. NO ONE defends double-taxation AS SUCH. (Although a few economists try to argue that taxing corporate income and then taxing what's left after corporate income tax a second time, when it is paid to shareholders, somehow isn't really double-taxation at all.)
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P.S. Just in passing, for his pathbreaking analyses of the economics of taxation, and for a variety of other contributions to other subjects (including the economics of monopoly and antitrust law, and international trade theory), Arnold Harberger almost certainly deserves a Nobel Memorial Prize in Economic Sciences. He will never receive it, however, because he had the temerity to advise the government of Chile back when Pinochet was in charge.
Not that his advice on economic policy had anything to do with the policies or practices for which Pinochet is reviled, of course, but some people -- evidently including the Swedes on the Prize Committee -- just think it was too unseemly for Harberger to have anything to do with the dictator.
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In separate posts below I shall address three issues that do not bear directly on the threshold question of whether corporate income should be taxed in the first place, but that came up in the discussion above -- in the comments before my own.