The global reputation of many behemoth multinationals has been tarnished by their dubious international tax arrangements. Among the worst offenders are Apple, Google and Starbucks. From 2009 to 2011 Apple alone managed to avoid taxes on $44 billion of its global profits. An Australian Financial Review investigation reveals since 2002 Apple has only paid $193 million in Australian tax, whilst recording $27 billion of sales over that period. It begs the question: how can such a well-known multinational, like Apple, engage in blatant tax avoidance within Australia’s sophisticated tax system?
The annual release by Apple of yet another ‘must-have’ iPhone – or in this case possibly two depending on your definition of ‘new’ – is an occasion that conduces many to reflect on whether it’s time they upgraded their mobile device.
Last time, I shared with you the story of Phoebus – a 20th century cartel that sought to fix light bulb prices as well as harm product innovation with reduced longevity. Doing so would mean strong demand for replacement products, and fortified sales volumes. Since those early days though, some economic literature has surfaced to formally analyse the rationale behind planned obsolescence in imperfectly competitive markets. With this understanding in mind, we find that there are plenty of remarkable examples of planned obsolescence today.
The technology sector- what’s a firm to do?
Hot off the heels of the recent Apple vs. Samsung trial in the U.S. there has been heated discussion over what implications this ruling will have on the future of technology companies. While Apple walked away from the trial with a definitive victory and another $1.05 billion to add to its already overweight piggy-bank, could this triumph actually be a curse in disguise?
“It is no longer economically viable to continue manufacturing here.” These are words which we have become increasingly desensitized to, and now expect from large companies in many industries. Resentment towards the faceless foreign factory workers who stole our jobs has largely died down, and has been replaced by arguments over how best to protect those remaining jobs (think, car subsidies).