International Economics: IB Economics

This story's been running for as long as Brexit has - and in this instance, an EU lawyer is of the view that Apple should pay 13 billion euros in tax, having unlawfully avoided paying it previously. 

It highlights the difference between tax avoidance (legal) and tax evasion (illegal). Apple are, of course, claiming that what they've done is legal. However, I've consistently argued that even if legal, such behaviour is highly unethical, and, indeed, I think that about most forms of tax evasion - even though it's legal. If you can afford to spend large sums of money on tax lawyers, you are, to my mind, admitting that you should be paying more tax. 

Something for Economics and Business Management students alike: Apple is planning to make its new iPhone 14 handsets in India, as it looks to diversify away from China.

Lots to think about here - location, multiplier effects, diversification, the implications for Apple's supply chain an organisational structure. But you might also think about whether political pressure has also played a role as the US government looks to discourage its firms in the high tech sector from engaging with China. 

It seems that we are on the verge of agreement between G7 nations about the need for, and nature of a tech tax. However, until a deal is concluded, there are still grounds for caution. 

And so it begins - as I said it would - Ireland becomes the first country to come out and state that it's not going to comply with the President Biden initiated moves to raise the rate of corporate taxation, arguing that as a sovereign nation such a move will cost it 20% of its tax revenues.

The problem is that even though Ireland's headline rate of corporation tax is 12.5%, because the global tax system hasn't kept pace with digital innovation, the effective rate of tax faced by companies like Apple is less than 1%. 

Economic theory is sometimes a good way of understanding the world at large, you know...

Just remember "We're All in this Together" - unless, of course, your on of the Big Tech firms, with the possible exception of Apple - who've done astoundingly well from the past few months.

Proof that the imposition of tariffs is far from a zero-sum game, with those imposing the tariffs winning at others' expense. I suspect that's what the President thinks they are.

However, Apple have gone on record as saying that further tariffs on China would be counter-productive and give a competitive advantage to their rivals, suggesting that the distributional effects of protectionism are far from straightforward.

A microcosm of the global economy, or more China-specific than that?  Either way, Apple's woes are such that people are concerned about what the portents of this for the year ahead. 

I covered this story when it broke and used it to discuss the difference between tax evasion and tax avoidance. However, now it appears that Apple has settled its outstanding tax bill for 14 billion euros.

Of course, the irony is that the Irish government challenged the initial European Commission ruling against Apple, in essence, saying that they didn't want Apple to pay. The sum, of course, is in excess of the annual Irish healthcare budget, so that's quite an opportunity cost...

A consequence of the US-China trade war is the need for US companies to seek out alternative sources of supply for components, although I think that Apple will stop short of reshoring the manufacturing of iPhones.

In this instance, they've agreed to join forces with US chip-maker, Broadcom to develop components for 5G phones in the US; it seems as though the age of hyperglobalisation is dead? Is this a good thing for economic welfare?

The BBC's take on the proposed minimum global corporate tax rate. 

Are G7 nations likely to reach agreement on tax avoidance, and the use of tax havens, particularly by the tech giants, in the run up to this summer's Cornish G7 summit? 

Certainly, this Guardian article suggests this possibility. 

I have relatively little to say about this, other than: it's about time. 

The big tech firms have, it is true, brought an awful lot of benefits. However, they've been able to free ride on technological developments generated by the public sector, harvest data at zero cost, in a way that discriminates against consumers and avoid tax to a ridiculous degree. 

Instead of lionising Sergei Brin, Larry Page, Mark Zuckerberg et al shouldn't we be vilifying them for not paying their dues to society? 

Tax avoidance? Nothing for you to see here, officer. 

The EU's second highest court have ruled that the tech giant isn't going to have to pay over 13 billion euros in back taxes to the Irish government. This ruling overturns an earlier judgment in favour of the European Commission. Remarkably, the Irish government sided with Apple, and were happy to turn down the taxes, which are equivalent to two-thirds of its healthcare budget. 

Apple claims that it is happy to pay taxes, but the amount that it pays is equivalent to 0.05% of its revenues, something it justifies by the fact that the supposed Irish head office exists only on paper. Ethical business practices? 

Has the worm turned as far as the tech sector is concerned?

It might seem so, given that Apple has paid the French government nearly £440m in back taxes last year. One wonders whether it is going to extend this largesse to all of the countries in which it operates?

It makes our £136m look like a paltry sum in comparison.

Part of the trade war?

This article looks at how the Chinese authorities might have tried blocking the import of iPhones by enforcing patent law on the software associated with the phones, and how Qualcomm the chip-maker has won an injunction overturning the original order.

A long running saga might be drawing to a close with the news that the appeal by Apple and Eire, against the EU judgment that the former had been offered illegal tax breaks by the latter is due to be heard in the Autumn.

It's a chance to remind yourself of the difference between tax avoidance and tax evasion, and working out which is legal and which isn't.