A useful reminder of the importance of intellectual property in this modern world – Apple’s older iPhones have been withdrawn from sale in Germany over allegations of breaches of Qualcomm’s patents. That this might be getting a little absurd could be true but it’s very useful proof that intellectual property isn’t just a method of tax dodging as more than one tax campaigner insists.
That contention is what underlies a possible mistake in proposed changes to the global taxation system. Even, a large amount of the complaining about the current one. We see it often enough. Facebook has sales of £x in the UK but pays only £y in taxation in the UK. Or Google shifts everything through Ireland, or even Apple itself. The whinge being made is that the value is added where the customers are, where the money is handed over – this is not true. The value has been created where the work was done to create the system. Often enough these days that’s in the US therefore whatever taxes should be levied are those under whatever the US tax system is.
As this row about IP shows:[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Apple is to stop selling older iPhone models at its stores in Germany after losing two patent cases brought by a chip manufacturer, the company has announced. A Munich court ruled that the smartphone maker and its subsidiaries breached a European patent held by Qualcomm. [/perfectpullquote]
Qualcomm was originally set up on the back of US government money – a research grant from Darpa in fact. Even if we do accept Mariana Mazzucato’s error that government should get that cash back it should still be the US one, no? Why should any European government be able to tax that IP?[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]This is the third lawsuit Qualcomm has fired Apple’s way, and the second one that it won. Prior to the Germany case, Qualcomm had secured a ban on iPhones in China. Apple has since promised a software update that would allow it to continue selling in the country.[/perfectpullquote]
Now, whether the IP really is being nicked is another matter, these cases aren’t over by any means as yet. But we are still seeing this value in IP, aren’t we? Something that is more than just where the iKit itself is being sold?[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]The extraordinary action follows a bitter fight between Apple and Qualcomm for the past two years over Intel-made wireless broadband modems, which Qualcomm says infringe six of its patents. In 2016, Apple started using a mix of Qualcomm and Intel radio modems in its smartphones, rather than exclusively Qualcomm parts, much to the latter’s rage.[/perfectpullquote]
Think on the implication of this a little. A US company is suing another US company over payments to intellectual property. We’ve even a ban on selling kit which appears to breach those IP provisions – something that’s a reduction in value to Apple. So, IP does have value. We must therefore have a taxation system which properly allocates that IP value to the geographic jurisdiction where that IP resides.
Note that proposed international taxation systems, like country by country reporting, proportional allocation, unitary taxation, entirely dismiss this obvious concern. And yet, and yet, we’ve proof here that IP is important and has value….