Global Taxation of High-Tech Firms — States, Federal Government and Foreign Countries are Losers.

Apple is the latest high-tech corporation targeted by the press for its aggressive tax strategies that leave states, the federal government and foreign countries with less tax payments than from traditional corporations such as Wal-Mart.

Apple routes its transactions trough no-income tax states such as Nevada as well as low-income countries globally. This is made more possible because of the digital nature of its products and intangible income (such as license fees).

The impact is not only on the U.S. and other countries but on cash-strapped states facing budget stress. “How Apple Sidesteps Billions in Taxes.” New York Times (April 29, 2012).

The question that emerges is whether or not the issue of global taxation of multinationals will become a serious issue this election season.

This is a serious question of corporate tax policy.  The issue of global taxation of multinationals raises the general issue of corporate responsibility owed to states and countries where companies do business. 

Global tax avoidance by high-tech multinationals and others impact local governments and national governments. The policy solution calls for new U.S. legislation and global cooperation (G-20 and OECD) to attack tax havens and bank secrecy responsible for distortion of tax and income flows. 

Will the presidential nominees and Congress confront this issue this year or next? Not very likely, but perhaps.

About Stuart Malawer

Distinguished Service Professor of Law & International Trade at George Mason University (Schar School of Public Policy).
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