Political crap says Apple's Cook on tax dodging - is he lying?
In a Friday advance release of a snippet of an interview to be aired in the United States by the CBS 60 Minutes program on Sunday, a rattled Tim Cook, CEO of Apple, calls claims of overseas tax dodging "political crap" and he criticises the US Congress for maintaining a corporate income tax system that was designed for the industrial age not the current digital age.
Charlie Rose, the interviewer, says that many in Congress believe Apple is engaged in a scheme to pay little or no taxes on $74bn in overseas revenue — this is a reference to a US Senate subcommittee report in 2013 on profit shifting by the electronics giant into Irish shell companies, while paying no tax anywhere, on most of it. Cook says:
That is total political crap. There is no truth behind it. Apple pays every tax dollar we owe. We pay more taxes in this country than anyone.
In 2013 in congressional hearings on a US Senate subcommittee report on how Apple had shifted billions in profits into Irish shell companies, paying no tax anywhere on most of it, the Apple chief went on the attack and rejected compelling evidence of tax avoidance.
CBS says Apple pays more tax than other companies because its makes the most money of any corporation on its ubiquitous products that are best sellers around the world. Two-thirds of Apple's revenue comes from overseas says Cook. Like most US multinational corporations, Apple keeps that overseas income in foreign subsidiaries, to avoid US taxes.
Cook says he would "love to" repatriate it but he can't "because it would cost me 40% [in taxes] to bring it home. And I don't think that's a reasonable thing to do," he says. "This is a tax code, Charlie, that was made for the industrial age, not the digital age. It's backwards. It's awful for America. It should have been fixed many years ago. It's past time to get it done." Video clip
"We pay all the taxes we owe – every single dollar," Cook said in 2013 at congressional hearings on a US Senate subcommittee report. "We don't depend on tax gimmicks" — this was a lie, unless we get bogged down on what is commonly understood as a gimmick!
US company tax is complicated; what can be published as the actual or effective rate in a fiscal or financial year, does not usually correspond with the annual tax return i.e what tax is paid, and there is a big audience for deception including the vested interests.
Apple's published effective rate in 2015 was 26% but the actual rate was about 15%; the foreign rate on two-thirds of total income of $72.5bn rose from 2% in 2012 to 6% in 2015. Pfizer claimed its rate was 25.5% but the reality was 7.5%.
The US corporate tax regime was last subject to a significant overhaul in 1986 and different US industry sectors have their own agenda on what loopholes they would wish to keep while also seeking a cut in the headline rate of 35%.
There are common sense definitions of words and terms, and there is corporate speak to mask the grubby details of tax avoidance.
Edmund Burke (1729-1797), the renowned Irish-born parliamentarian and political thinker, in 1796 wrote one of his letters on the French Revolution that were published as 'Letters on a Regicide Peace.' Oeconomy was the archaic spelling of economy.
In this crisis I must hold my tongue, or I must speak with freedom. Falsehood and delusion are allowed in no case whatever: but, as in the exercise of all the virtues, there is an oeconomy of truth. It is a sort of temperance, by which a man speaks truth with measure that he may speak it the longer. But, as the same rules do not hold in all cases, what would be right for you, who may presume on a series of years before you, would have no sense for me, who cannot, without absurdity, calculate on six months of life.
Apple had cash or near equivalents of $206bn at the end of last September — most of it is held in US banks even though $180bn is technically held overseas.
When Tim Cook says he would "love to" repatriate foreign profits, what he doesn't say is that unless the tax rate was zero or ultra low, he would have no interest in doing so in respect of most of it.
The biggest deception is that Cook is in effect masking the truth that Apple has been profit shifting from both the United States and other markets to tax havens — it's not "political crap" to recognise the truth.,
Apple has 66,000 employees in the US from a total full-time equivalent global payroll of 110,000.
More than two-thirds of the money Apple’s iTunes makes outside North America goes through the group’s Luxembourg holding company where it is not taxable, thanks to an intra-group fees agreement signed in 2008, tax documents obtained by The Australian Financial Review in 2014 show.
To paraphrase a line from Shakespeare's Hamlet, Tim Cook doth protest too much!
Charlie Rose also raised the issue of encryption technology, and manufacturing products in China.
Pic on top: Tim Cook, Apple CEO, on a visit to the Trinity College, Dublin, Ireland campus, 11 Nov, 2015