Thursday May 23, 2013

Apple CEO Timothy Cook went before the Senate Permanent Subcommittee on Investigations Tuesday in what was a total mismatch -- Apple is popular and Congress is not. It is clear, however, that Apple gamed the system to avoid paying as much as $9 billion in taxes in 2012, and while it has done nothing illegal, that doesn’t mean that what it is doing is right.

To avoid the federal corporate tax rate of 35 percent on profits made overseas, Apple stashes as much as $102 billion, more than any other company, in countries with friendlier tax rates. Mr. Cook declared before the committee that "Wherever we are, we’re an American company," a statement that doesn’t bear up under scrutiny. Apple incorporated five companies in Ireland, all of them at the same address in the city of Cork, to take advantage of favorable tax laws. Three of the companies do not have tax residency in Ireland, which means they don’t pay taxes there or in the United States.

"Apple is exploiting an absurdity," assessed committee Chairman Carl Levin, a Michigan Democrat. In another absurdity, Apple has stashed all of its intellectual property rights, like patents, in Irish subsidiaries, and when other Apple divisions make use of those rights they pay royalties to the subsidiaries on the sales. Apple pays Apple, and taxes are avoided.

Mr. Cook lobbied Tuesday for lowering the tax rate on profits made overseas, and it is clear that Apple’s money won’t be leaving Ireland unless and until that change comes about.


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While doing so would bring some money home, there would be huge losses of tax revenue gained from companies that are not currently dodging taxes on profits made overseas as Apple is. Plainly, Mr. Cook doesn’t see that as his problem, and neither do Apple stockholders, who lit up CNN’s web site Tuesday with "atta boys’" praising the CEO for taking it to the senators.

Like all corporations, Apple has a fiduciary responsibility to keep profits high and taxes low for shareholders, a legal tenet that encourages short-term financial gain over the long-term financial health of the corporation, and by extension the economy. That is the recipe that triggered the Wall Street crash and ensuing recession of four years ago. The combination of absurd tax loopholes, shareholder greed and corporate irresponsibility has hurt the United States dearly, and unless there are significant changes and reforms, it will again.