An open letter to Tim Cook in Germany’s biggest daily newspaper accuses Apple of paying a fraction of the tax it should.
Written by the editor-in-chief of Süddeutsche Zeitung, the article comes in the wake of the recently published “Paradise Papers,” which revealed how some of the world’s wealthiest citizens and businesses take advantage of overseas tax havens to protect their money. The German paper was instrumental in breaking the story, as it previously did with the Panama Papers.
“My colleagues and I have long followed the debates in the United States and Europe over the taxation of Apple,” Wolfgang Krach writes. “You, yourself, have often taken a stance on the issue, like you did before the U.S. Senate in 2013. You said at the time that Apple did not ‘depend on tax gimmicks.’ In the Paradise Papers, however, we uncovered information that tarnishes the image of Apple that you try to convey. Questions posed by the Süddeutsche Zeitung and our aforementioned colleagues have gone either unanswered or been met with, at best, tight-lipped platitudes. Why?”
Krach argues that Apple’s “tax optimization,” while legal, is unfair. The reason? The Apple tax strategy draws on the expertise of law firms unavailable to most people.
He then argues that:
“In Germany, Apple is estimated (you don’t publish the exact figures) to have generated revenues in the billions last year — of which it paid 25 million euros in taxes. In other words, only 0.2 percent of the taxes that Apple paid worldwide ended up here. This does not even remotely stand in relation to the percentage of global sales and profits Apple logged in Germany. I’m sure you can appreciate the difficulty we have explaining this to our readers.
But what unsettles me the most is the way in which Apple instructed a law firm to obtain an “official assurance of tax exemption” from the government of a country. Why do you want that? Why do you feel entitled to not pay any taxes in a country? Did you want to make zero-tax status a precondition for establishing tax residency there? What gives you the right to do so?
And what understanding of democracy are we supposed to discern from the question you had this law firm ask? The one about whether the country had a “credible opposition party” or “movement that may replace the current government?” Were you trying to ensure that you would be able to retain tax-free status even after elections or a change in government?”
Apple’s European tax affairs
Critics often take Apple to task for its complex tax structures, particularly in Europe. Last year, the European Union handed Apple a massive tax bill of $17.6 billion, claiming that the company took advantage of illegal state aid that allowed it to route profits through Ireland.
The investigation alleged that Apple paid the equivalent of as little as 0.005 percent on all European profits in 2014. Last month, the European Commission took Ireland to court for failing to collect the money as owed.
Apple has always argued that it pays every cent that it owes, and — in the wake of the Paradise Papers — published a press release titled, “The Facts About Apple’s Tax Payments.”
As a newspaper that helped break stories about tax avoidance, it’s understandable why Süddeutsche Zeitung would criticize Apple’s position. Then again, the newspaper acknowledges that Apple is doing nothing illegal. Doesn’t it make more sense to target the tax laws themselves, rather than companies that use them astutely?