Offshore Tax Shelters A Problem For Apple, But Not The Only One

Congress has been getting up in Apple’s face about its offshore tax havens, but is it a problem for the brand?

I think it is, because a brand is the sum of a company’s parts. A brand is what a company believes and what a company does; therefore, Apple’s brand is tarnished via its tax avoidance problem, whether the moves are technically legal or not.

tim-cook-congress-testify-apple

According to CNET, “Congressional investigators released a report last week documenting how Apple had reduced its tax bill by tens of billions of dollars through the use of a legal, albeit complicated, network of offshore subsidiaries. The report said that between 2009 and 2012, Apple had at least $74 billion in offshore cash that went untaxed.”

Tim Cook replied, “We don’t depend on tax gimmicks. We don’t move intellectual property offshore and use it to sell our products back to the United States to avoid taxes… We don’t stash money on some Caribbean island.”

True. Ireland is nowhere near Cuba or Jamaica.

Richard Harvey, a Villanova University law professor, told the hearing that his analysis showed Apple shifted 64 per cent of its 2011 income into Ireland into a “shell corporation” which had “no employees, no real activity, basically an entity on paper.”

As far as I am concerned, Apple has more than tax issues on its hands. “Designed in California” isn’t all that Apple can be. “Designed and manufactured in California” is more like it, especially given that Apple has already established a premium price point.

Apple was created to change the world, and their products have a role in this. But Apple can actually change the world by rejecting offshore assembly of its products. As Samsung and others come on strong, I don’t think Apple’s prices, nor their market share, will hold for much longer. Manufacturing in American changes that for good.

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About David Burn

Native Nebraskan seeking the perfect pale ale in the Pacific Northwest. Copywriter and brand strategist at Bonehook. Co-founder and editor of AdPulp.