"Legal" is Not a Synonym for "Ethical"

It appears that we need a refresher course in the difference between "legal" and "ethical", at least from reading a lead story in today's New York Times by Nelson Schwartz and Charles Duhigg on the "web of tax shelters" that allowed Apple to escape from billions of dollars in US tax payments.

The US tax code may have Byzantine rules that encourage gaming the system, and I'm sure that Apple will argue that keeping its taxes as low as possible was the responsible thing for the company to do for its shareholders.

But if I am going to pick one of two short-hand phrases about taxation by which to live, I'll go with the late Supreme Court Justice Oliver Wendell Holmes ("Taxes are the price we pay for a civilized society") over the also-late but unlamented Leona Helmsley ("Only the little people pay taxes"). Apple apparently went with the Queen of Mean.

Schwartz and Duhigg explained:

Even as Apple became the nation’s most profitable technology company, it avoided billions in taxes in the United States and around the world through a web of subsidiaries so complex it spanned continents and went beyond anything most experts had ever seen, Congressional investigators disclosed on Monday....

... [They] found that some of Apple’s subsidiaries had no employees and were largely run by top officials from the company’s headquarters in Cupertino, Calif. But by officially locating them in places like Ireland, Apple was able to, in effect, make them stateless — exempt from taxes, record-keeping laws and the need for the subsidiaries to even file tax returns anywhere in the world. 

The investigators are not claiming that Apple broke any laws, nor is it the only major corporation using all kinds of arcane schemes to keep its tax bill as low as possible. But Apple's "gimmicks" and "schemes" (words used by US lawmakers) were on a whole new scale. The Times journalists quote a University of Southern California law professor on the Apple strategy: "There is a technical term that economists like to use for behavior like this: Unbelievable chutzpah." I might have used a stronger term.

Corporate tax avoidance on this scale encourages those of us who pay our own fair share -- willingly or not! -- to feel like chumps.

Meanwhile, technology companies like Apple are lobbying hard for changes in immigration legislation to permit them to hire more foreign engineers and computer scientists due to the (alleged) lack of sufficient US talent. But it is taxes that pay for long-term research and development, that support the colleges and universities that train engineers and other scientists, that underwrite the infrastructure that delivers products from the port (since most while designed in the US, are built elsewhere) to the retail stores.

Legal, sure (although I'd like to see these rules changed!). Ethical? Not hardly.