Isn't "apple tax" the duty they charge on cider?
OK, there is much in the news on Apple and the tax they are due to pay in Ireland, or not. They are appealing. The letter from Apple was interesting.
So not really debating that issue itself much, but more of a general issue I see on companies finding legal means (or are they made illegal retrospectively?) to reduce the tax they pay. As a business, one of the things that bugs me a lot is when people talk of companies paying no tax when in fact they are referring to paying no (or little) corporation tax (in a specific country in which they trade).
The reason that annoys me is that I know, as a business owner, that we pay lots of tax in lots of ways, and corporation tax is just one of those, not even the biggest. My company does a lot of R&D and as a result we manage to reduce our corporation tax quite a bit. Whilst we had spotted this, it really only happened when Alex managed to engage some consultants that are good at this (MPA group). I hope we don't get the same grief from people saying we are not paying our fair share of tax as a result.
At the end of the day companies do pay a lot of other taxes apart from corporation tax, and one of those is VAT. This is where a heated debate arose with my friends on who pays the VAT!
My view on this is pretty clear, and a result mainly of my failed economics module that I did at uni. There are a lot of taxes that relate to what a business does. You cannot argue that Apple, in what they do, have not caused a lot of VAT to be paid. The VAT actually gets paid mostly where the companies trade and sell their goods. The fact companies can effectively divert their corporation tax to other countries, that may charge less, is one of the big gripes people have - tax not paid where the company is making its money, but VAT is where the company makes its money.
Now, the issue I had with my argument is that "VAT is paid by the customer and not the company", as it is added to the price and the company is simply collecting it and handing it over. I do not entirely agree!
Who "pays" a tax?
The issue I have is down to who "pays" a tax. This is not as easy as it sounds!
One simple way to work out who pays a tax is to work out who is better off if the tax did not exist. That shows who exactly has been burdened by the tax, and so who really "pays" that tax in the end.
Now, with VAT, you could say that if VAT did not exist, your iPhones would sell at the ex-VAT price. Apple would be no better off, but the end customers would be. So the end customers are the ones that pay the VAT.
But equally you could say that the market can bear a price for an iPhone, and if no VAT existed then Apple could charge the same final price. The end users would be no better off, but Apple would be. So clearly the tax is a burden on Apple - they pay the VAT.
The problem is that this is hypothetical, unless VAT was abolished and we waited a while, we would never know the final outcome. In practice, it is reasonable to expect that a market price would be found that was somewhere in between, so the VAT ultimately has been paid by final customer and by Apple in some part. The exact ratio is not something we can really know.
What you can say for sure is that Apple are responsible for all of that VAT getting paid. It is, after all, a "Value Added" tax, a tax on the "value add" that Apple have created, and is money going to a government because of Apple and what they do.
Is VAT special?
The other point is that VAT is seen as special because of the way it is accounted, as a separate thing "collected" from the end user and handed to the government. This makes people dismiss it as a tax not paid by the company by by the consumer - not as clear cut as I explain above.
But my argument here is that VAT is not special. All of the above points, where one could expect the price to drop by the tax no longer in play, or one could expect the price to be the same and Apple pocket the amount they would have paid in tax. All of that applies to any tax, whether corporation tax, council tax, stamp duty, fuel tax, employers national insurance, or so on.
However it is accounted for - at an economics level - a tax is diverting money from the profit that could be made and sending it to a government. Without that competition may mean a lower price, or same price and more profit for the company, or more likely somewhere in-between. So both pay in some part for that tax, whatever that tax is.
VAT is not special!
Apple have created a lot of tax at various levels in different countries, not just the corporation tax they may have paid in one country, but all of the employment and property taxes in the country they employ people and the VAT in the countries they sell things. This should not be dismissed.
Tax burdens us all, consumers and businesses. Businesses actually have a legal obligation to act in the best interests of their members, and so try and pay as little as they (legally) can. End users usually have the same incentive.
It will be interesting to see how the Apple case pans out in the long run though.