..,It seems to me that tax law needs to be simplified and harmonised to a greater degree across borders. Few people voluntarily pay tax they can avoid, and Apple (and others) have mastered tax avoidance by exploiting cross-border differences in tax law.
You could argue taxes should be lower, or some taxes eliminated entirely, fair enough. But it should be the same for all. An American, or Irish company shouldn't have to pay more tax than a multinational with American and Irish branches. It's not just a "fairness" argument, it's also a practical one. Smaller domestic companies shouldn't pay more tax than larger multinational companies with greater revenue..,
I think this issue is just going to expand into a wider discussion involving more companies than Apple and more countries than just the US.
The great challenge in international taxation is the wide divergence in total government-imposed burden or benefit in the country. For example, many European countries impose much higher worker retirement fund contributions than the U.S. does, as well as more mandatory paid holidays and vacations, higher minimum wage, and higher termination payments. The U.S. corporate rate is applied to taxable income after deductions, treatments, and credits that are entirely different from those in Europe. There is no simple way to compare the rate applied in the U.S. to the notional rates of other countries, nor is it fair, since one country may provide work training, cheap leases of property, development of expensive infrastructure (roads, bridges, ports) that another does not. Relative borrowing costs, regulatory burdens, exchange rate volatility, and security costs are also are important variables.
Countries compete for economic activity, and their corporate tax rate---as well as all the other factors I've mentioned---are among the tools they compete with. Today there are many choices multinational companies can make when deciding where to do business--the world is much flatter. If all companies paid the same tax rate regardless of where they operated it would turn the chessboard over, as the removal of an important factor would change the optimum location for each operation.
Each country knows how it can best attract business, and the competition ensures the lowest cost of production and the lowest price, theoretically, to consumers. If Bermuda, which has few natural advantages, wishes to offer low tax rates to attract business to improve its citizens' lives it should be allowed to. If being in Silicon Valley is important to a company, it will deal with a higher rate. Let what is earned in Bermuda be assessed Bermudian rates, and let what is earned in the U.S. be taxed by the U.S.
Some countries will get more tax revenue, and others will get more business and jobs. Let each country decide what it needs more. But if the U.S. loses the competition for a new plant to Bermuda it shouldn't be able to retaliate by imposing its own additional tax on the extra profit from the plant In Bermuda, at least if the profit stays in the Bermudian subsidiary.
There are hundreds of well-understood rules regarding international taxation that bureaucrats, accountants, tax court judges, and lots of lawyers and consultants all over the world have known very well for decades. Sure there are attempts to push the envelope, but there are everyday processes to catch them.
Apple earns a great deal of its worldwide GAAP reported profit in places where it pays low corporate income tax, leading to a disparity between the notional corporate tax rate on U.S.-derived taxable income and the percentage of worldwide GAAP profit that Apple pays. If Apple were to dividend its foreign profits to a U.S.-based corporate entity if would pay tax on that amount, but Apple would rather keep those after-tax profits abroad. Apple now sells twice as much outside the U.S. than in its domestic markets, and it surprises no one that Apple's average tax rate worldwide is not the U.S. rate.
The system isn't broken, and it's been this way for a very long time. When times get tough, and governments need cash, they may reexamine their longstanding policies to boost revenues. When U.S. companies derived most of their income from U.S. customers, and when their operations were almost entirely in the U.S., these questions were not raised.
Tax laws, like most laws, may be either fair or simple, but not both, and fairness is better.
