As we reported previously, Tim Cook and two other Apple executives appeared before Congress earlier this week to discuss Apple's tax practices. The focus of the hearing centered on how Apple manages to keep the bulk of its foreign earned...
As we reported previously, Tim Cook and two other Apple executives appeared before Congress earlier this week to discuss Apple's tax practices. The focus of the hearing centered on how Apple manages to keep the bulk of its foreign earned cash overseas and what might be done to incentivize Apple to bring that cash back to the U.S.
In an op-ed piece in the New York Times today, columnist Joe Nocera misconstrues the events which took place at the hearing and proceeds to characterize Tim Cook as a liar who, according to Nocera, learned how to create a 'reality distortion field' from Steve Jobs.
I'm not sure if Nocera watched the entire hearing, but I did, and many of his characterizations of the events which took place are skewed at best, if not downright false.
Let's dive in.
On Tuesday, despite the overwhelming evidence presented by the Senate Permanent Subcommittee on Investigations that Apple engaged in dubious tax avoidance gimmicks, Cook claimed that Apple never resorted to tax gimmickry.
First off, given that the tax experts brought in by Congress testified that Apple's tax strategy doesn't run afoul of International Law, I fail to see how the evidence presented by the Senate Subcommittee overwhelmingly proves that Apple engaged in dubious tax avoidance gimmicks.
Call it semantics if you will, but Apple's tax mechanisms are set up in such a way as to minimize the company's overall tax liability, all within the confines of the law. As easily as one can call it tax gimmickry, another could just as quickly and accurately call it tax compliance.
Cook said, "We pay all the taxes we owe - every single dollar." He added that Apple had never shifted any of its American profits to an offshore tax haven when, in fact, that is basically what it has done, routing tens of billions in pretax profits to a shell corporation in Ireland that exists solely to avoid taxes in the United States. He even said that the low taxes Apple pays overseas is on the profits of its overseas sales. Not to put too fine a point on it, but this was a flat-out lie.
On this point, Nocera has his facts completely backwards.
In its prepared testimony to Congress, Apple also emphasized that it has never shifted any of its American profits to offshore tax havens. This is true, despite Nocera's curious assertion to the contrary.
What Cook is saying here is pretty simple. Every single dollar Apple earns in the United States is taxed. Further, Apple, in no way whatsoever, moves any of its profits earned in the States abroad as to avoid paying U.S. taxes.
Regardless of what you think about Apple's tax setup with respect to its foreign earned income, Apple has not routed any of its American profits overseas. While some companies may engage in such behavior, not one iota of evidence presented even hints that Apple does any such thing.
That said, Cook's assertion that the low taxes Apple pays overseas is on the profits of its overseas sales is accurate. Nocera calls this a flat-out lie but conveniently neglects to explain why or how.
Instead, he proceeds to talk about how folks in the Senate hearing were eating out of Cook's hand.
In other words, Cook spent Tuesday claiming that the sun was setting when it was actually rising, and, predictably, by the time the hearing had ended, most of the senators were agreeing with him. Senator John McCain, the committee's ranking Republican, who had earlier labeled Apple "a tax avoider," was soon swooning over Apple's "incredible legacy."
Again, I watched the entire hearing and to say that most of the senators were agreeing with Cook simply isn't true. The notion that McCain came out guns ablazin' against Apple, only to be left swooning over Apple's legacy is misguided.
The fact of the matter is that Senators John McCain and Carl Levin pulled no punches with Apple. They went after Apple hard, asked extremely tough questions, and often times, really put Apple's panel of executives