Misleading Corporate Tax Talk

The Financial Times ran an article Sunday proclaiming “Apple paid no UK corporation tax in 2012.” The article implies that its tax liability in the UK is somehow tax avoidance by linking it to last month’s hearing in the Senate Permanent Subcommittee on Investigations on Apple’s tax planning. More on that here, here, and here.

However this connection is misleading and here is why:

According to the article: “Tax deduction from share awards to employees helped wipe out the corporate tax liabilities of the UK subsidiaries in the year to September 2012.”

These deductions are in no way profit-shifting, loopholes, or tax avoidance. Rather, they are legitimate deductions that account for the cost of doing business. When a company pays employees, either through wages or stock options, they are legitimately allowed to deduct that compensation.

It is not like this money is never taxed. This compensation is taxed as ordinary income at the individual level. Disallowing this deduction will double tax Apple’s profits.

The article forgets to mention this.

Earlier this year, a similar misleading claim by CTJ stated that Facebook avoided billions using this tax deduction.

Likening this deduction to a loophole serves no purpose but to mislead the public on an already complex issue.